Annual Report. Tip Top Superannuation Plan

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1 Look inside to see: how your super is performing where your super is invested how your Plan works super news Tip Top Superannuation Plan 1

2 Introduction The Trustees present the for the Tip Top Superannuation Plan (the Plan ) for the year ended 31 March This report contains information about the management and performance of the Plan and an overview of other superannuation related issues that may be of interest to members. As you can see from the table on the following page, it has been a challenging 12 months, particularly for the Plan s Growth and Balanced Funds. While returns are a little disappointing, it pays to keep in mind that this is not isolated to just our Plan. With the exception of low-risk, longerterm investments, most will have struggled to provide solid returns in the face of global financial uncertainty. You ll find a more detailed explanation about the current investment environment and how this has affected the Plan s investments on page 4. As mentioned in last year s, changes affecting the tax on employer contributions to most superannuation arrangements came into effect from 1 April For full details of these changes, please refer to the 2011, or visit the Plan s website, If you haven t already, we urge you to take a look at the Plan s new website. As well as a clean and contemporary look, the new site features an easy to use click through site map on each page. If you regularly use internet banking, you ll see the similarities and find the site easy to navigate your way through. Once you ve signed in with your member number and PIN, you can click on your super amount, account summary, transaction history, and a number of other account details. It s an easy way to keep an eye on your super. You can make changes to your account, let us know if your address has changed and keep up with the latest super news. There have been a number of changes to the Trustees of the Plan recently. During the year Raymond Booker, Karen Duffy, Angela French and Gareth McDonald were all appointed as new Trustees. They replace Phillipa Glass, Graham McInnes and Steven McVey who resigned as Trustees during the year. Following the end of the Plan year Caroline Jackson also resigned as a Trustee of the Plan. I would like to take the opportunity to welcome our new Trustees to this important role, and thank Phillipa, Graham, Steven and Caroline for all their hard work and commitment as Trustees of the Plan. We hope that you will find this useful. As always, we are pleased to welcome new members and answer any questions you may have about the Plan or the. Please don't hesitate to get in touch with any of the Trustees. You will find our contact details on page 7. Tim Appleton Chair of Trustees 2

3 See how your super is performing Compare your Plan s performance The table below compares the earning rate allocated to Members Accounts for each of the past five years: Year Fund Earning Rate Earning rates calculated during the year When a member leaves the Plan during the year, an interim interest rate is applied for the period from the previous 1 April. During the Plan year the Trustees changed the way in which interim interest rates are calculated. Previously, interim rates were calculated to reflect the earnings of the Plan s assets from 1 April up to the end of each month as required. In order to ensure fewer discrepancies between the interim rate to 31 March and the annual earning rate they are now calculated on a quarterly basis Growth Fund 2011 Growth Fund 2010 Growth Fund 2009 Growth Fund 2008 Growth Fund Average rate over 5 years Growth Fund -2.15% 0.82% 3.31% 6.40% 5.67% 4.51% 19.10% 12.86% 6.77% % % -0.36% -6.04% -2.15% 2.19% -1.72% 0.90% 3.28% The table below shows the earning rates that would have been credited at the end of each quarter to the benefits payable to members who became entitled to a benefit during the year for each Fund within the Plan. As at Conservative % Balanced % Growth % 30 June % -1.44% -2.95% 30 September % -6.18% % 31 December % -3.52% -8.34% 31 March % 0.87% -2.10% Note: The actual earning rates applied to the benefits payable are calculated on a weekly basis. The rates shown above are calculated at the end of each quarter. Once the annual financial statements have been audited, the March interim earning rates are adjusted to take into account actual investment earnings, tax and expenses and the Trustees declare the final earnings rate to be applied to Members Accounts. As a result, the rates for the quarter to 31 March 2012 as shown above differ from the earning rates shown elsewhere in this report. Note past performance is not a reliable indicator of future performance. Please note past performance is not a guide to future performance. For an explanation of the reasons behind this year s investment returns, please turn to page 4. 3

4 Your investments Who manages the investments? The Plan s assets are invested by AMP Capital Investors in their AIF funds. As a member of the Plan you can choose to invest in one or more of three different investment funds: Growth Fund Each investment fund has a different level of risk associated with it. As a general rule, the higher the risk level, the better the expected longterm returns. This risk level generally becomes proportionately greater as the amount invested in local and international shares and property increases. In general terms the (with around 25% of funds invested in growth assets such as shares and property and the remainder in income assets such as fixed interest and cash) can be described as a low risk fund. The (around 60% of funds invested in growth assets) can be described as a medium risk fund and the Growth Fund (around 90% of funds invested in growth assets) can be described as a high risk fund. The graph below shows the actual percentage of each of the funds allocated to income and growth assets as at 31 March % 28% The investment environment for the year to 31 March 2012 Against the backdrop of global political and financial shocks, the financial year to 31 March 2012 was a bumpy ride for investors it is clear that there is no quick solution to some countries debt problems, which plagued markets for most of the year. Not surprisingly, international shares had a tough 12 months, falling very sharply in the first six months. This was followed by tentative signs of improvement which gained momentum in the final quarter, following the proposed Greek bailout and an agreement by Euro zone finance ministers to increase the size of their rescue fund. Improving employment, manufacturing data and consumer data out of the US and indications that the US Federal Reserve would maintain its low interest rate environment to the end of 2014 also contributed to the share market rally. Trans-Tasman shares posted a relatively solid return, thanks to New Zealand shares which held up well, despite flattening slightly in the final quarter. Australian shares had a more difficult time, with stocks relating to mining and resources weakening later in the year, based on fears of a slow down in China, a strong Australian dollar and the softening domestic economy. The more defensive nature of property stocks saw both international and Trans-Tasman property provide better returns than the broader share market. Until the final quarter, investors concerns about the sovereign debt crisis resulted in strong demand for fixed interest investments, pushing prices up and interest rates down. Returns from this sector then flattened slightly, as easing concerns about sovereign debt made growth assets (shares and property) start to look more appealing again. 37% 63% Cash posted a moderate return as the pace of the economic recovery fell short of expectations and the Reserve Bank left its official cash rate unchanged at 2.5%. Growth Fund 8% 92% 0% 20% 40% 60% 80% 100% Income Assets Growth Assets The returns achieved by each investment fund will fluctuate depending on market conditions especially share and property markets. History shows that shares and property tend to produce significantly greater returns in the long term than more conservative cash and fixed interest assets. However, the markets can be volatile, as the last few years have shown. Since the end of the Plan year, share markets have fallen again on renewed fears that Greece may need to default on its debt and exit the Euro zone. Global economic growth is expected to remain muted for some time yet, with the emerging economies such as China and India expected to provide the strongest growth. Consequently, short-term investors or those nearing retirement may wish to focus on more stable investment options. Long-term investors will be in a better position to ride out the ups and downs of share markets and may therefore like to consider an option with more focus on growth. 1 1 This information is intended for general guidance only and is not personalised to you. It does not take into account your particular financial situation or goals. It is not financial advice or a recommendation. We recommend that you read the Investment Statement and take financial advice before making any investment decisions. 4

5 Investments by members The graph below shows, in dollar terms, the way in which members have chosen to invest among the three fund options available during the year ended 31 March 2012: Investment in Funds Amount in dollars $3,500,000 $3,000,000 $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $0 Grow th Fund Conservative Fund Investment Portfolio The following pie charts show how assets were allocated for each of the three Funds in the Plan as at 31 March 2012: Trans-Tasman Shares Int'l Shares Property NZ Fixed Interest Int'l Fixed Interest Cash 6% 25% 18% 4% 18% 29% 13% 5% 15% 19% 38% 10% Growth Fund 3% 5% 20% 13% 59% What are the investment objectives? When is the investment portfolio suitable? What is the level of risk of this investment portfolio? 1 1 Growth Fund 1 To outperform cash To outperform the Consumer To achieve a return over a three investments, as measured by Price Index (CPI) by at least 2% year period that exceeds CPI by the First NZ Capital Bank Bill p.a. after tax and fees over a at least 3% p.a. after tax and Index, by 1% p.a. three year period expenses When the member: Wishes to preserve accumulated savings When the member: Seeks a conservatively mixed portfolio of assets Requires potential for some capital growth over time Risk of capital loss is low Moderate High When the member: Is able to withstand a variation (both positive and negative) in returns Seeks a mixed portfolio of domestic and overseas shares Requires potential for capital growth over time 1 This information is intended for general guidance only and is not personalised to you. It does not take into account your particular financial situation or goals. It is not financial advice or a recommendation. We recommend that you read the Investment Statement and take financial advice before making any investment decisions. 5

6 How your Plan works Your Plan is run by the Trustees according to its governing legal document, the Trust Deed and super laws. At 31 March 2012, the Trustees were: Tim Appleton (Chair) Kathryn Bell Raymond Booker Karen Duffy Angela French Caroline Jackson Gareth McDonald Katherine Turner Trustee changes during the year On 9 June 2011 Philippa Glass, Graham McInnes and Steve McVey resigned as Trustees of the Plan. Raymond Booker, Angela French and Gareth McDonald were appointed as Trustees of the Plan. On 24 November 2011 Karen Duffy was appointed as a Trustee of the Plan. Trustee changes following year-end On 12 July 2012 Caroline Jackson resigned as a Trustee of the Plan. Trust Deed amendments The Trust Deed has not been amended since the date of the last. Trustees certification The following is provided in accordance with the Superannuation Schemes Act 1989 as at 31 March The Trustees: 1. state that, except as noted below, all the contributions required to be made to the Plan in accordance with the Trust Deed have been made; 2. certify that all the benefits required to be made from the Plan in accordance with the terms of the Trust Deed have been paid; 3. certify that the market value of the assets of the Plan at the close of the financial year exceeded the total value of the benefits that would have been payable had all members of the Plan ceased to be members at that date and had provision been made for the continued payment of all benefits being paid to members and other beneficiaries as at the close of the financial year; 4. certify that fee increases in relation to the Trustees, administration manager, investment managers, the promoter and any other person who charges a fee for services in relation to the Plan have not been unreasonable. During the year, the Trustees completed their review of members contributions to the Plan to ensure that they were being made in accordance with the Trust Deed. Every member whose contributions were not paid in accordance with the Trust Deed has been advised and a plan has been put in place either to pay contributions which had not been paid directly or to recover any overpayment. Additional complying superannuation fund disclosures As at 31 March 2012 The market value of the Plan s assets subject to complying fund rules is $526,158 relating to 44 members. The value of withdrawals subject to complying fund rules totals $106,771. For and on behalf of the Trustees: Tim Appleton Angela French Additional information required under the Securities Act No Trustee, promoter or manager of the Plan, or any director of that promoter or manager has, during the 5 years preceding 31 March 2012 been adjudged bankrupt or insolvent, convicted of any crime involving dishonesty, prohibited from acting as director of a company, or placed in statutory management or receivership; 2. Not more than 10% of the value of the Plan s assets (calculated in accordance with generally accepted accounting practice) was, at any time during the year preceding 31 March 2012, represented directly or indirectly by any securities that were issued by a superannuation trustee, manager, or custodian of the Plan (or any associated person of any of them); 3. No legal proceedings or arbitrations that may have a material adverse effect on the Plan were pending at 31 March 2012; 4. The Trustees state that in their opinion neither the value of the Plan s assets relative to its liabilities (including contingent liabilities) nor the ability of the Plan to pay its debts as they become due in the normal course of business have materially and/or adversely changed since 31 March 2012; 5. Under the terms of offer required by Clause 7 of the Securities Act (Employer Superannuation Schemes) Exemption Notice 2004, Fonterra Brands (Tip Top) Limited (the Company ) was required to incur costs for the year ended 31 March 2012 and these costs were incurred. Membership The changes to the Plan s membership during the year are shown in the table below: Opening membership as at 1 April New members 46 Withdrawals/Resignations (26) Deaths (1) Retirements (2) Financial Hardship (4) Ill-Health (1) Retrenchments (1) Total membership as at 31 March

7 Are your nominated dependants up to date? The application form you completed when you joined the Plan included a section for you to nominate the person (or people) you would like the Trustees to consider to receive any death benefit from the Plan. (Note that this excludes any balances in your Locked-In Accounts, which must by law be paid to your estate.) It is important that you keep your nomination(s) up to date if your personal circumstances have changed. To advise the Trustees of any changes to your dependants, please complete and return the form included with this report. Privacy Act Your personal information may be held by and, when necessary, passed between the Company, the Trustees and the Plan s professional advisers for the purposes of the Plan. If you wish to check or amend your personal information please contact the Administration Manager. Statement of Investment Policy and Objectives A copy of the Plan s investment policy and objectives is available free of charge by contacting the Trustees. The Trust Deed allows the Trustees to amend the policy and objectives as they see fit. Copies of the Trust Deed are also available from the Trustees. Complaints procedure As required by law, the Trustees have registered with an independent disputes resolution scheme. The Trustees have selected the scheme operated by Financial Services Complaints Limited (FSCL) and approved by the Ministry of Consumer Affairs. All complaints should initially be sent to: Catherine Abrahall Complaints Officer Tip Top Superannuation Plan PO Box 722 Shortland Street Auckland. The procedure is that the Complaints Officer will investigate any letters received and respond (in writing) within 40 days. If you are not satisfied by the Complaints Officer s response, you may refer the matter to FSCL by ing info@fscl.org.nz or calling FSCL on Alternatively you may write to FSCL at: Financial Services Complaints Limited 45 Johnston Street, P O Box 5967 Lambton Quay Wellington Address for correspondence The Trustees welcome enquiries or suggestions from members. Any correspondence should be addressed to: The Trustees of the Tip Top Superannuation Plan c/- Fonterra Brands (Tip Top) Ltd P O Box 722 Shortland Street Auckland Phone: Fax: Your Plan has these advisers The Trustees appoint independent professionals to provide specialist services to keep the Plan working smoothly. These are: Administration Manager Mercer (N.Z.) Limited P O Box 1849 Wellington Auditor: KPMG P O Box 996 Wellington Insurer: Tower Life Tower Group Services Limited P O Box 370 Auckland Investment Manager: AMP Capital Investors New Zealand Limited P O Box 3764 Wellington Solicitor Minter Ellison Rudd Watts 125 Queen Street Auckland Full details of how to access the FSCL scheme can be obtained on their website 7

8 Financial Summary Statement of Changes in Net Assets $ $ Investment Activities Net Investment Gains 173, ,410 Other Income 344, ,195 Net Investment Gains 518, ,605 Less Other Expenses Administration and Actuarial Fees 60,874 53,842 Auditor's Remuneration - Audit Fees 12,177 6,907 Auditor's Remuneration - Tax Agent Fees 19,317 2,250 Group Life Premiums 117,520 85,028 Legal Fees 40,680 - Trustees' Indemnity Insurance 3,013 - Other Expenses 1,912 2,993 Total Other Expenses 255, ,020 Change in Net Assets before Taxation and Membership Activities 263, ,585 Income Tax Expense 56,208 73,082 Change in Net Assets after Taxation and before Membership Activities 207, ,503 Membership Activities Member Contributions 592, ,023 Member Tax Credits 21,850 21,297 Employer Contributions 566, ,424 Less Benefits Paid 1,079,677 1,652,695 Net Membership Activities 100,537 (403,951) Net Increase in Net Assets during the year 307, ,552 Statement of Net Assets Assets Financial Assets - At Fair Value Through Profit or Loss 6,045,500 5,812,073 Current Assets 107,784 22,909 Total Assets 6,153,284 5,834,982 Less Liabilities Benefits Payable 8,613 - Contributions Refundable 7 - Sundry Creditors 25,035 23,042 Total Liabilities 33,655 23,042 Net Assets Available to Pay Benefits 6,119,629 5,811,940 Vested Benefits* 5,349,292 4,984,783 Statement of Cash Flows Net Cash Flows from/(utilised by) Operating Activities 114,414 (136,081) Net Cash Flows (used in)/from Investing Activities (125,000) 138,700 Net (Decrease)/Increase in Cash Held (10,586) 2,619 Cash at the Beginning of Year 22,184 19,565 Cash at the End of Year 11,598 22,184 * Vested Benefits are benefits payable to members or beneficiaries under the conditions of the Trust Deed, on the basis of all members ceasing to be members of the Plan at balance date. 8

9 Financial Statements A summary of the Plan s audited financial statements for the year ended 31 March 2012 which were authorised for issue by the Trustees on 10 August 2012 is shown on page 8 of this. The summary financial statements have been extracted from the full audited financial statements dated 31 March 2012 which were authorised on 10 August The summary financial statements have been prepared in accordance with FRS-43 Summary Financial Statements. The full financial statements have been prepared in accordance with generally accepted accounting practice and they comply with New Zealand equivalent to International Financial Reporting Standards (NZ IFRS). The Plan has made an explicit and unreserved statement of compliance with NZ IFRS in Note 2 of its full financial statements. The financial statements are presented in New Zealand dollars because that is the currency of the primary economic environment in which the Plan operates. The summary financial statements cannot be expected to provide as complete an understanding as provided by the full financial statements of changes in net assets, net assets and cash flows of the Plan. A copy of the full financial statements can be obtained, free of charge, from the Plan's administration manager. The Plan is a profit orientated entity. The auditor has examined the summary financial statements for consistency with the audited financial statements and has issued an unmodified opinion on both the summary financial statements and the full financial statements. 9

10 Independent auditor s report on the summary financial statements To the members of Tip Top Superannuation Plan The accompanying summary financial statements on pages 8 to 9, which comprise the summary statement of net assets as at 31 March 2012 and the summary statements of changes in net assets and cash flows for the year then ended and notes, are derived from the audited financial statements of Tip Top Superannuation Plan (''the plan'') for the year ended 31 March We expressed an unmodified audit opinion on those financial statements in our report dated 10 August The summary financial statements do not contain all the disclosures required for full financial statements under generally accepted accounting practice in New Zealand. Reading the summary financial statements, therefore, is not a substitute for reading the audited financial statements of Tip Top Superannuation Plan. Trustees' responsibility for the financial statements The trustees are responsible for the preparation of a summary of the audited financial statements, in accordance with FRS-43 Summary Financial Statements. Auditor s responsibility Our responsibility is to express an opinion on the summary financial statements based on our procedures, which were conducted in accordance with International Standards on Auditing (New Zealand) (ISA (NZ)) 810 Engagements to Report on Summary Financial Statements. Our firm has also provided other services to the plan in relation to taxation. These matters have not impaired our independence as auditor of the plan. The firm has no other relationship with, or interest in, the plan. Opinion In our opinion, the summary financial statements have been correctly extracted from the audited financial statements of Tip Top Superannuation Plan for the year ended 31 March 2012, and the information reported in the summary financial statements is consistent, in all material respects, with the audited financial statements, in accordance with FRS-43 Summary Financial Statements. 10 August 2012 Wellington 10