ANNUAL REPORT DULUXGROUP EMPLOYEES SUPERANNUATION FUND

Transcription

1 2017 ANNUAL REPORT DULUXGROUP EMPLOYEES SUPERANNUATION FUND

2 2016/17 IN REVIEW Welcome to the Annual Report for members of DuluxGroup Super (ABN ). It was a positive year for the Fund, with overall favourable market conditions contributing to solid investment performance. Despite a year of global political uncertainty, share markets produced good gains over the 2016/17 financial year. The Fund s property holdings also produced solid results. The investment performance for DuluxGroup Super s options that are more heavily invested in shares was strong. Considering Australia s current low inflation rate (CPI increased by 1.9% for the year), these returns for the year mean significant real growth in your savings for retirement. However, as share markets went from strength to strength, bond market returns were relatively flat and Australia s interest rates remained at historic lows. This affected those options that are weighted more towards income assets, particularly fixed interest and cash. We remain focused on helping members prepare for the future. Should you have any questions about your super you can contact the DuluxGroup Super Helpline on CLICK BELOW TO READ MORE 5 When can you access your super? 6 Defined benefit or accumulation super which is best for you? 7 Review our performance 10 How we invest your super 18 Super developments 20 Running DuluxGroup Super 22 Financials Call the DuluxGroup Super helpline on if you have a question The information in this document is general information only and does not take into account your particular objectives, financial circumstances or needs. It is not personal or tax advice. Any examples included are for illustration only and are not intended to be recommendations or preferred courses of action. You should consider obtaining professional advice about your particular circumstances before making any financial or investment decisions based on the information contained in this document. Information on tax and superannuation legislation is current as at the date of publication and may change. Issued by Towers Watson Superannuation Pty Ltd (ABN , AFSL ), as Trustee of the DuluxGroup Employees Superannuation Fund (ABN ), MySuper Authorisation number Preparation of this Annual Report was completed on 15 September Contact us

3 A year of growth 3 Markets performed well contributing to solid growth for your super Past performance is not necessarily a reliable indicator of future performance. Pre-packaged investment options and asset class options Investment returns for the year to 30 June 2017 Assertive Plus 13.57% Assertive 11.49% Peer fund comparison # 11.84% Active Balanced* 9.79% Peer fund comparison # 10.53% Conservative 4.87% Peer fund comparison # 5.28% Australian Shares 13.04% International Shares 15.01% Diversified Fixed Interest 1.63% Cash 1.79% Account-Based Pension section Aggressive 15.49% Assertive 10.51% Balanced 10.17% Cautious 7.73% Conservative 5.56% Cash 2.19% Defined Benefit section** 7.96% Note: Investment returns are after tax, investment fees and indirect costs and an administration fee that has varied over time but is currently 0.150% p.a. No tax is payable on the income from investments in the Account-Based Pension section. * This is the option for MySuper members. ** If you are a Defined Benefit member, see page 9 to learn how investment performance affects your benefits in DuluxGroup Super. # Based on SuperRatings Pty Ltd s Fund Crediting Rate Survey, median returns (SR50 Growth (77-90) Index, SR50 Balanced (60-76) Index and SR50 Capital Stable (20-40) Index), published on 19 July 2017, compared with DuluxGroup Super s Assertive, Active Balanced and Conservative options respectively), SuperRatings statistics are not financial product advice; independent professional advice should be obtained before making any financial decisions.

4 Financial strength DuluxGroup Super s assets rose by 6.4% to $316.6 million Focused on you We are helping 2,127 DuluxGroup Super members save for the future. 4 Find what you need Our new website is easy to navigate When can you access your super? See page 5 to learn when you can get access to your super.

5 WHEN CAN YOU ACCESS YOUR SUPER? 5 So there is as much as possible in your super account for your retirement, the Government limits when and how you can access your super. You cannot generally take your super benefit as cash until you have retired * after reaching your preservation age. Your preservation age depends on when you were born. This table will allow you to work out your preservation age. Date of birth Preservation age Before 1/7/ /7/1960 to 30/6/ /7/1961 to 30/6/ /7/1962 to 30/6/ /7/1963 to 30/6/ /7/1964 or later 60 You can access your super savings in cash after you have reached age 65 regardless of whether you are working (Defined Benefit members do not have this option). You may also access your super on reaching your preservation age but before being retired by rolling over part or all of your benefit into a transition to retirement pension see the Guide to Account-Based Pensions on In some limited circumstances, you may be able to access your super early, for example: Incapacity: you suffer a permanent incapacity. Terminal medical condition: you have a terminal illness and are given two years or less to live. Severe financial hardship: you aren t able to meet living expenses while receiving Government benefits. Compassionate grounds: you need to pay for medical treatment while seriously ill, and certain other circumstances. The longer you are able to leave your money in the superannuation system, the more time you have to grow your super before you stop working. * Conditions apply. Refer to the Product Disclosure Statement for more information available on

6 DEFINED BENEFIT OR ACCUMULATION SUPER WHICH IS BEST FOR YOU? 6 Are you a Defined Benefit member? DuluxGroup Super provides some members with defined benefit style super*. Does defined benefit, rather than accumulation-style, super still suit your needs? Remember, your situation and needs will change over time. It s a good idea to periodically compare the benefits and choices that would be available to you under each style of super, to ensure your current choices continue to be the most appropriate for you. For instance, in DuluxGroup Super s Accumulation section, you would have access to additional features such as greater flexibility in contributions, more investment choice and insurance options. However, you would no longer have the option of a lifetime pension and you would bear all the investment risk on your super. As part of your super review, you may benefit from discussing your situation with a licensed financial adviser. This can be helpful if you are not sure about what style of super is best for you. They can help you get on track to meet your personal goals and individual circumstances. If you would like to know more about transferring to the Accumulation section, call the DuluxGroup Super Helpline on to ask the Fund Administrator for an information pack containing: A Benefit Projection Statement, which will compare your projected benefits in DuluxGroup Super s Defined Benefit section with your projected benefit if you were to transfer to the Accumulation section (based on specified assumptions); An About your super choices booklet which compares the benefits and features of the two sections of the Fund; A Product Disclosure Statement containing detailed information about the Accumulation section s features and benefits; and A Defined Benefit to Accumulation Transfer Form for you to complete should you decide that you wish to transfer. Of course, if you prefer to remain a Defined Benefit member, that s fine too. If you are unsure of your super arrangement, please refer to your latest Benefit Statement or contact the Helpline. * This article has been written specifically for Defined Benefit members of the Fund. This section of the Fund is closed to new members.

7 REVIEW OUR PERFORMANCE 7 The table below shows DuluxGroup Super s investment returns. Your super performance will fluctuate each year depending on how the investment markets perform. Super returns can be either positive or negative. In most cases though, super is a long-term investment. The investment returns since the Fund commenced in 2011 are likely to better indicate your super s performance. Detailed returns are also provided on your Benefit Statement and the most recent returns are available by logging into the Member Centre at A snapshot of DuluxGroup Super s returns Past performance is not necessarily a reliable indicator of future performance. Pre-packaged investment options and asset class options 1 Jul 16 to 30 Jun 17 1 Jul 15 to 30 Jun 16 1 Jul 14 to 30 Jun 15 1 Jul 13 to 30 Jun 14 1 Jul 12 to 30 Jun 13 Five-year compound average net return (per year) Compound average return since inception *** (per year) Assertive Plus 13.57% 3.19% 11.39% 16.28% 19.90% 12.72% 9.98% Assertive 11.49% 3.53% 9.63% 14.52% 16.75% 11.09% 8.97% Active Balanced* 9.79% 3.41% 8.81% 13.08% 15.31% 10.00% 8.27% Conservative 4.87% 3.72% 5.34% 7.60% 8.23% 5.94% 5.64% Australian Shares 13.04% 3.92% 7.18% 17.74% 20.43% 12.29% 9.23% International Shares 15.01% -1.34% 22.45% 18.91% 26.06% 15.80% 12.13% Diversified Fixed Interest 1.63% 4.86% 4.32% 6.03% 4.40% 4.24% 4.95% Cash 1.79% 1.78% 2.12% 2.61% 3.29% 2.32% 2.60% Account-Based Pension section Aggressive 15.49% 2.49% 11.96% 19.07% 24.23% 14.41% 11.36% Assertive 10.51% 4.21% 9.65% 17.09% 20.87% 12.31% 9.98% Balanced 10.17% 3.19% 10.13% 15.46% 18.72% 11.41% 9.46% Cautious 7.73% 3.48% 8.26% 11.96% 14.39% 9.10% 8.00% Conservative 5.56% 3.18% 6.41% 9.18% 9.71% 6.78% 6.48% Cash 2.19% 2.19% 2.57% 3.10% 3.88% 2.78% 3.08% Defined Benefit section** 7.96% 3.58% 7.17% 10.57% 12.27% 8.27% 7.17% Note: Investment returns are after tax, investment fees and indirect costs and an administration fee that has varied over time but is currently 0.150% p.a. plus, from 1 July 2013 to 30 June 2016, an allowance to build up the Fund s Operational Risk Financial Requirement (ORFR) reserve. However, no tax is payable on the income from investments in the Account-Based Pension section. No allowance for the Fund s ORFR has been made from the investment returns of the Defined Benefit section. To learn more about the ORFR reserve, see page 12. * This is the option for MySuper members. ** If you are a Defined Benefit member, see page 8 to learn how investment performance affects your benefits in DuluxGroup Super. *** DuluxGroup Super commenced on 1 July 2011, so the returns shown are the compound average returns since that date.

8 8 Investment market update Despite significant political uncertainty, returns for shares over 2016/17 were strong and volatility remained subdued. Global trade and investment regained momentum, driven by strengthening investment in advanced economies, increased trade flows with China, and improved demand from commodity-exporting economies. Strong share market returns were experienced with all but one of the MSCI developed market country indices delivering double digit returns. The UK was the exception and delivered the weakest return for the year, returning 9.9%. As share markets went from strength to strength, bond market returns were relatively flat, with increasing global growth and inflation leading to rising bond yields in key markets. In the US, investors responded favourably to the election victory of Republican candidate Donald Trump, ushering in a period of growth in share markets. Despite finishing the financial year with some mixed economic data, the US experience was largely positive for the year. In Europe, the political environment was generally improved by the end of the financial year when compared to its rocky start immediately post Brexit. The French rallied behind centrist candidate Emmanuel Macron, denying the nationalist candidate, Marine Le Pen, who campaigned on a protectionist agenda which threatened to erode the relationship between France and the EU. Over the financial year the Euro Stoxx 50 Index returned 20.1% (in local currency terms), more than regaining losses experienced over the previous year. In its September 2016 meeting the Bank of Japan launched a new form of monetary easing where it set a cap of 0% on the 10-year bond yield and vowed to overshoot its 2% inflation target. It also maintained its extensive Japanese Government Bond repurchasing program and held the interest rate at -0.1%. Despite remaining significantly below the 2% inflation target, the measures were effective at returning the nation to positive inflation territory. In China, it was a solid and largely uneventful financial year from an economic perspective, with annualised growth coming in at 6.9% year on year (as at March 2017), a marginal increase over the 6.7% expansion in the year prior. One of the most notable developments for Chinese financial markets was the decision from the MSCI to include some China A-Shares in their share market indices, signalling a positive further step towards the opening up of the Chinese share market and its global integration. Australian economic indicators were largely positive for the financial year. However, while political uncertainty reigned at home and abroad, markets were largely unmoved. The Australian share market had its least volatile year in 16 years. The Australian economy outperformed its forecast and delivered annualised GDP growth of 1.7% for the year (as at March 2017), marking 103 quarters without two consecutive negative periods, generally regarded as the longest stretch of positive growth of any developed nation. The Reserve Bank of Australia (RBA) decided to cut the official cash rate in August 2016 to a record low of 1.5%, stating that the reduced rate was adequate to generate sustainable economic growth and to maintain inflation in its target range. The RBA maintained rates at 1.5% for the rest of the financial year, citing mixed domestic economic signals, particularly concerns around the labour and housing markets. Australian shares, as measured by the S&P/ASX 300 Index, returned 13.8%, compared to 0.9% and 5.6% for the previous two financial years, respectively. The main detractor from performance was Telecommunication Services, which was the only sector to experience a negative annual return. The Australian dollar experienced its lowest volatility in 27 years relative to the US dollar. The Australian dollar rose over the year, despite the US dollar s strength following the Presidential election, to end at US cents (up from US cents). Over the same period the Australian dollar also strengthened against the currencies of its major trading partners, with the Trade Weighted Index ending the year at 65.5 (up from 62.5 from last year). Both Australian and international bond yields climbed over the course of the financial year, with significant upward shifts occurring in October 2016 and June The Australian 10 Year Government bond yield finished 0.6% higher than in June last year at 2.6%, while the US 10 Year Government bond yield climbed 0.8% (to 2.3%) over the same period. Australian cash, as measured by the Bloomberg AusBond Bank Bill Index, returned 1.8% for the year, down from 2.2% last year. Australian bond markets delivered almost flat performance for the year, with the Bloomberg AusBond Composite Index returning 0.2%, compared to 7.0% for the last financial year. Global fixed interest performance was marginally above Australian fixed interest, with the Barclays Global Aggregate Index (hedged to AUD) returning 0.5% for the financial year, down significantly from 9.3% for the previous year. Note: This investment commentary does not constitute advice. All investment figures quoted relate to before-tax performance of the relevant industry benchmark Willis Towers Watson. All rights reserved.

9 Returns on your super Accumulation members Your accounts receive the actual investment return for your chosen option(s) after allowing for tax, investment fees and indirect costs, and an administration fees (currently 0.150% per year). A small deduction was also made between 1 July 2013 to 30 June 2016 to build up the Fund s ORFR reserve. If you are an Account-Based Pension member, your actual returns are calculated in the same way, except there is no tax on the investment returns earned by Account-Based Pensions. Investment returns can be positive or negative. Defined Benefit members Your defined benefit is generally not affected by investment returns. This benefit is instead linked to your salary at or near retirement. Investment returns are applied to your additional voluntary contribution and rollover accounts. Your accounts receive the actual investment return for your chosen option after allowing for tax, investment fees and indirect costs, and an administration fee (currently 0.150% per year). A small deduction was also made between 1 July 2013 to 30 June 2016 to build up the Fund s ORFR reserve. If you joined the Orica Defined Benefit Super Fund before 1 July 1992, you have an Accumulation Guarantee applying to your benefit. The benefit you receive is therefore the greater of a defined benefit or an accumulation benefit. For the purposes of calculating your accumulation benefit, investment returns at the declared rate of the Fund s defined benefit assets apply. The Trustee sets the declared rate for DuluxGroup Super s defined benefit assets applicable to Accumulation Guarantee benefits after considering the net investment return for the year and the Fund s crediting rate policy. The current policy is to set the declared rate as equal to the net investment return earned by the Fund s defined benefit assets after allowing for tax, investment fees and indirect costs, and an allowance of 0.150% per year for administration fees. Rates may be positive or negative. The Defined Benefit section of DuluxGroup Super is closed to new members. Note: surcharge payments (if any) are deducted from members benefits. If you leave during the year Investment returns are calculated each month. If your super is paid out before monthly investment returns have been calculated, or if you switch investment options, an interim earning rate will be used. The interim earning rates are based on the daily unit price of each of DuluxGroup Super s investment options. These interim rates will cover the period from the previous date that investment earnings were declared until the date your benefit is paid (or your transfer request is processed). Defined Benefit members: When you leave employment, all of your benefit will be transferred to DuluxGroup Super s Retained Benefits section. Here, the defined benefit component of your benefit will be invested in the Cash option while your additional voluntary contributions and rollovers (if any) will continue to be invested in your chosen investment option (or Active Balanced option if you have never made an investment choice). Your benefit will continue to be invested in this manner until you change your investment option, transfer your benefit from DuluxGroup Super or are paid your benefit from the Fund. SUPER BYTES Asset classes: These are different types of investments e.g. shares, property, fixed interest and cash. Growth assets: Returns from growth assets come from the change in the asset s value (such as an increase in share prices) and the income from the investment (such as dividends). Shares, property, infrastructure and hedge funds are common examples of growth assets. Returns are generally higher than other assets over the longer term but will be negative from time to time. Income assets: These assets include cash, corporate debt and fixed interest. Their market value can also fluctuate, but usually with less volatility than is the case with growth assets. 9

10 HOW WE INVEST YOUR SUPER 10 DuluxGroup Super has a number of investment options for you to choose from, each with its own investment objective and strategy. There are four pre-packaged investment options (Assertive Plus, Assertive, Active Balanced and Conservative) and four asset class options (Australian Shares, International Shares, Diversified Fixed Interest and Cash). If you don t choose an option, your super will be invested in DuluxGroup Super s Active Balanced option, which is the MySuper option or the Pension Balanced option if you are a standard Account-Based Pension member. For Account-Based Pension members, there are six investment options for you to choose from (see pages 15 to 16). If you are an Accumulation member or an Account-Based Pension member, you can choose how your entire super is invested. If you are a Defined Benefit member, you only have investment choice for your additional voluntary contributions and rollover accounts. We know that it is important for you to find the most appropriate investment choice for your circumstances. If you wish to change how the Trustee invests your super, you should go to www. duluxgroupsuper. com. au and log into the Member Centre to make the change. Alternatively, you can download either the Application & Change Form: Accumulation Members, the Defined Benefit Super Choices Form or the Account-Based Pension Application & Change Form, as appropriate for your category of membership. Consider obtaining financial advice before making any changes see page 19 for how to find a financial adviser. Our investment objectives Investment objectives are specific goals that the Trustee sets for the performance of the Fund and each investment option. They are not intended as forecasts or guarantees of future investment returns. In general, the Trustee aims to: Invest DuluxGroup Super s assets prudently as permitted by the Trust Deed and by superannuation law; Invest across a diverse range of assets; Ensure that DuluxGroup Super is able to make benefit payments to members when they are due; and Monitor the performance of the Fund s investment managers to ensure they exercise integrity, prudence and professional skill in fulfilling the investment tasks delegated to them. See pages 13 to 16 to learn more about the specific investment objectives for each investment option. Our investment strategy An investment strategy is the plan the Trustee follows to achieve the objectives of an investment option. Each investment option has its own investment strategy. See pages 13 to 16. Investment managers The Trustee appoints professional investment managers to manage DuluxGroup Super s investments. These managers and their products may be changed from time to time without prior notice to, or consent from, members. DuluxGroup Super s investment managers at 30 June 2017 are listed on page 11. JANA Investment Advisers Pty Ltd (JANA) (ABN , AFSL ) is the investment adviser to DuluxGroup Super. JANA is jointly owned by the NAB and employees of JANA, with majority ownership held by the employees. JANA is a specialist provider of tailored investment advice to major superannuation funds and other institutional investors. JANA s role is to assist the Trustee in establishing appropriate long-term investment objectives and strategies for DuluxGroup Super and to implement these strategies. This includes appointing, monitoring and where appropriate, terminating, the investment management companies who are responsible for the investment of DuluxGroup Super s assets. The Trustee currently invests DuluxGroup Super s assets across a number of unit trusts. Each trust covers a specific investment sector. The majority of trusts adopt a multi-manager approach whereby the trust comprises a number of specialist investment managers. The table on page 11 lists the trusts, the individual managers and the Fund s holding in each. The Trustee also has direct holdings in three unlisted property funds and an infrastructure fund. These are also listed. SUPER BYTES Trust Deed: This legal document sets out the rules relating to the establishment and operation of the Fund.

11 DuluxGroup Super s investment managers at 30 June Investment managers % of Fund Investment managers % of Fund Investment managers % of Fund Australian Shares 23.35% JANA Core Australian Share Trust 14.05% Balanced Equity Management Pty Ltd Solaris Investment Management Ltd Concise Asset Management Limited FIL Limited JANA High Alpha Australian Share Trust 7.57% Cooper Investors Pty Ltd Ubique Asset Management Pty Ltd BT Investment Management (Institutional) Limited JANA Small Caps Australian Share Trust 1.74% Fairview Equity Partners Pty Ltd Invesco Australia Limited International shares 22.83% JANA Passive Global Share Trust 4.84% Vanguard Investments Australia Ltd JANA Passive Global Share Trust (Hedged) 4.52% Vanguard Investments Australia Ltd JANA Core Global Share Trust 0.48% Acadian Asset Management LLC Janus Capital Management Ltd Schroders Investment Management Australia Limited JANA Core Global Share Trust (Hedged) 0.45% Acadian Asset Management LLC Janus Capital Management Ltd Schroders Investment Management Australia Limited JANA Emerging Markets Share Trust 3.12% Delaware Investments Australia Neuberger Berman Australia Pty Limited JANA High Alpha Global Share Trust 9.42% Carnegie Asset Management Fondsmaeglerselskab A/S Harding Loevner LLC Pzena Investment Management LLC Sands Capital Management LLC Tweedy, Browne Company LLC Property 13.18% JANA Global Property Trust 0.20% Morgan Stanley Investment Management Limited Resolution Capital Limited AMP Capital Diversified Property Fund 5.91% DEXUS Wholesale Property Fund 5.44% Charter Hall Prime Office Fund 1.63% Alternatives 16.76% JANA Select Opportunities Trust 9.83% BlackRock Inc Redpoint Investment Management Pty Ltd Fischer Francis Trees & Watts Inc Insight Investment Management (Global) Limited Loomis Sayles & Company LP Oaktree Capital Management, L.P. Shenkman Capital Management Inc JANA Low Correlation Strategy Trust 6.02% JANA Investment Advisers Pty Ltd AMP Capital Community Infrastructure Fund 0.91% Diversified Fixed Interest 11.34% JANA Diversified Fixed Income Trust 9.69% PIMCO Australia Pty Limited UBS Asset Management (Australia) Limited Franklin Templeton Investments Australia Limited Fischer Francis Trees & Watts Inc Insight Investment Management (Global) Limited Loomis Sayles & Company LP Wellington Management Company, LLP JANA All-Maturity Diversified Debt Trust 0.70% Amundi Asset Management Antares Capital Franklin Templeton Investments Australia Limited Fischer Francis Trees & Watts Inc Insight Investment Management (Global) Limited Goldman Sachs Group Inc Loomis Sayles & Company LP PIMCO Australia Pty Limited UBS Asset Management (Australia) Limited Wellington Management Company, LLP JANA Short-Maturity Diversified Debt Trust 0.95% Antares Capital Fischer Francis Trees & Watts Inc Insight Investment Management (Global) Limited Goldman Sachs Group Inc Loomis Sayles & Company LP UBS Asset Management (Australia) Limited Wellington Management Company, LLP Cash 12.54% JANA Cash Trust 12.54% Antares Capital Total % SUPER BYTES Investment objective: This is a fund s investment goals. A fund s investment objectives are usually set in terms of risk and return. For example, a fund might aim to achieve returns that exceed the rate of inflation by a set amount. Asset allocation: The distribution of investments across various asset classes (such as shares, property, fixed interest and cash).

12 Other investment information Derivatives The Trustee does not invest directly in derivatives. DuluxGroup Super does, however, invest in the JANA Select Opportunities Trust. Within this trust, one or more of the underlying managers may use derivatives to assist them in achieving DuluxGroup Super s investment objectives. DuluxGroup Super s other investment managers only use derivatives for risk-control purposes or to more efficiently shift asset allocations. Investment managers are required to have risk management processes in place in relation to the use of derivatives and the purposes for which they are used. Each year, the Trustee obtains confirmation from JANA that the managers have complied with their risk management processes. JANA also has a comprehensive Derivatives Policy. Deferred tax assets Super funds normally pay tax on capital gains. If the Fund experiences capital losses (which can arise, for example, due to falls on share markets), super funds are allowed to accumulate the tax benefits associated with those losses and use them to offset the tax on future capital gains. Australian Accounting Standards require that future tax benefits will be recognised only to the extent that it is likely that future taxable gains will be available to utilise the capital losses. In order to prudently manager the Fund s tax position, the Trustee has imposed a limit on the level of taxation benefits arising from these capital losses. At 30 June 2017, the level of the Fund s tax losses was within the limit set by the Trustee. The Trustee is therefore recognising the whole of the Fund s tax losses as a Fund asset. Actuarial review DuluxGroup Super s financial position is reviewed by the actuary at least every three years. The actuary then makes recommendations to DuluxGroup on the appropriate level of future contributions needed to maintain members benefits. At 30 June 2017 the assets of the Fund were insufficient to cover benefits if all members had resigned voluntarily at that date. This is known as an unsatisfactory financial position. The actuary is in the process of conducting a review of the funding arrangements effective 1 July 2017 and will recommend a contribution program to DuluxGroup to ensure the Fund returns to a satisfactory position. Reserves The Trustee does not maintain investment reserves. However, it does maintain an Operational Risk Financial Requirement (ORFR) reserve as described below. Operational Risk Financial Requirement (ORFR) reserve From 1 July 2013, super funds have been required to set aside financial resources to address operational risks. The Trustee has established an ORFR reserve equal to 0.25% of the value of members vested benefits for this purpose. The reserve has been funded in two ways. For accumulation-based benefits, the reserve was funded by setting aside a small portion of the Fund s investment earnings each year to 30 June The reserve is invested in the Active Balanced option. For defined benefits, the reserve was funded by setting aside amounts from the Fund s defined benefit assets. These amounts are invested in the same manner as the Fund s defined benefit assets. Now that the desired level of 0.25% has been reached, the Trustee monitors the reserve to ensure that it remains close to this level. Should the reserve fall below a predetermined shortfall limit, the Trustee will enact a plan for its replenishment. Level of reserve As at 30 June ORFR reserve % of vested benefits % ($805,685) % ($737,400) % ($354,338) 12

13 DuluxGroup Super s pre-packaged investment options Accumulation members (and from 1 July 2017, Transition to Retirement members) 13 About the option Assertive Plus Assertive Investment objective Achieve an expected rate of return (net of investment fees and tax) that exceeds the rate of inflation (CPI) by at least 4% per year over each seven-year period. Achieve an expected rate of return (net of investment fees and tax) that exceeds the rate of inflation (CPI) by at least 3.5% per year over each seven-year period. Investment strategy Invests mainly in Australian and international shares and property. Invests mainly in Australian and international shares and property, with around 15% in defensive alternatives and fixed interest investments. How the option was invested at 30 June % 2.5% 3.5% 2.4% 3.5% 2.5% 2.4% 2% 3% 2% 3% 3% 4% 11.1% 15.2% 14.8% 11.1% 9.8% 15.2% 30.9% 38.9% 39.2% 7% 6% 31.2% 7% 30.9% 38.9% 15.1% 14.9% 39.9% 39.9% 40.1% 15.1% 30.9% 30.9% 31.1% Benchmark and asset allocation ranges Benchmark Asset allocation range 51% C 36% to 66% 34% FI 24% to 44% 12% DA 0% to 20% 3% GA 0% to 10% 0% P 0% to 5% 0% IS 0% to 5% 0% AS 0% to 5% Benchmark Asset allocation range 42% 27% to 57% C 28% 18% to 38% FI 12% DA 0% to 20% 3% GA 0% to 10% 7% P 0% to 15% 8% IS 0% to 20% 0% AS 0% to 15% Australian shares International shares Property Growth alternatives Defensive alternatives Diversified fixed interest Cash

14 About the option Investment objective Investment strategy How the option was invested at 30 June Benchmark and asset allocation ranges Active Balanced (option for MySuper members) Achieve an expected rate of return (net of investment fees and tax) that exceeds the rate of inflation (CPI) by at least 3% per year over each five-year period. Invests mainly in Australian and international shares and property, and has around 30% in defensive alternatives, fixed interest and cash investments. Conservative Achieve an expected rate of return (net of investment fees and tax) that exceeds the rate of inflation (CPI) by at least 2% per year over each three-year period. Invests mainly in fixed interest, cash and defensive alternative investments, with about 30% in shares and property % 9.5% 10.4% 8.1% 8.1% 8.3% 8% 25.3% 8.7% 25.3% 30.1% 30.9% 10% 10% 11.2% 11.1% 7% 6% 7.1% 25.4% 24.4% 6.3% 25% 12% 25.9% 11% 13.2% 13.8% Benchmark Asset allocation range 36% 25% to 55% 24% 5% to 30% 10% 0% to 20% 3% 0% to 10% 7% 0% to 15% 15% 5% to 40% 5% 0% to 25% Benchmark Asset allocation range 12% 5% to 25% 8% 0% to 20% 10% 0% to 20% 3% 0% to 10% 7% 0% to 15% 40% 20% to 60% 20% 0% to 40% 14 DuluxGroup Super s asset class options Accumulation members Asset class option Australian Shares International Shares Diversified Fixed Interest Cash Investment objective Achieve a long-term (net of tax and fees) rate of return that exceeds the S&P/ASX 300 Index measured over rolling four-year periods. Achieve a long-term (net of tax and fees) rate of return that exceeds the net of tax return of the MSCI World (excluding Australia) Index, over rolling four-year periods Achieve a long-term (net of tax and fees) rate of return that exceeds the net of tax return of the composite benchmark (comprising 50% UBSA Composite Bond Index/50% Barclays Capital Global Aggregate Index [Hedged]), over rolling two-year periods. Outperform the net of tax return of the UBS Bank Bill Index each year. Investment strategy (at 30 June 2016 and 30 June 2017) Invests 100% in Australian shares. Invests 100% in international shares. This option has full currency exposure i.e. there is no currency hedging. Invests 100% in fixed interest investments in both domestic and international markets. All international fixed interest is fully hedged to the Australian dollar. Invests 100% in cash. Australian shares International shares Property Growth alternatives Defensive alternatives Diversified fixed interest Cash

15 Your investment options Standard Account-Based Pension members 15 About the option Pension Aggressive Pension Assertive Pension Balanced Investment objective Achieve a return (net of investment fees) that exceeds the rate of inflation (CPI) by at least 6% per year over rolling five-year periods. Achieve a return (net of investment fees) that exceeds the rate of inflation (CPI) by at least 4.5% per year over rolling five-year periods. Achieve a return (net of investment fees) that exceeds the rate of inflation (CPI) by at least 3.5% per year over rolling three-year periods. Investment strategy How the option was invested at 30 June Invests mainly in Australian and international shares, with around 10% in property and 11% in growth alternatives. Invests mainly in Australian and international shares, property and growth alternatives, with around 20% in defensive alternatives and fixed interest investments. Invests mainly in growth assets like shares, property and growth alternatives (70%), with the remainder (30%) invested in income assets like fixed interest, cash and defensive alternatives % 5.8% There was There was 9.1% 8.9% x% no money in no money in this option at this option at 25.8% 26.2% 15.0% 21.6% 15% 22.4% 16.1% 15.9% 30 June % 30 June % 11% 14% 11.1% 22.8% 22.8% 41% 10.1% 27.8% 9.9% 28.1% 10.2% 9.9% 10% 10% Benchmark and asset allocation ranges Benchmark Asset allocation range 46% 30% to 60% Benchmark Asset allocation range 30% 15% to 45% Benchmark Asset allocation range 26% 10% to 40% 33% 15% to 45% 23% 10% to 40% 18% 5% to 35% 10% 0% to 20% 10% 0% to 20% 10% 0% to 20% 11% 0% to 30% 17% 0% to 30% 16% 0% to 30% 0% 0% to 15% 12% 0% to 25% 12% 0% to 30% 0% 0% to 20% 8% 0% to 30% 18% 0% to 40% 0% 0% to 15% 0% 0% to 20% 0% 0% to 25% Australian shares International shares Property Growth alternatives Defensive alternatives Diversified fixed interest Cash

16 16 About the option Pension Cautious Pension Conservative Pension Cash Investment objective Achieve a return (net of investment fees) that exceeds the rate of inflation (CPI) by at least 2% per year over rolling three-year periods. Achieve a return (net of investment fees) that exceeds the rate of inflation (CPI) by at least 1% per year over rolling three-year periods. To outperform, after fees, the UBS Bank Bill Index. Investment strategy How the option was invested at 30 June Invests around 50% in growth assets like shares, property and growth alternatives, and around 50% in income assets like fixed interest, cash and defensive alternatives. Invest mainly in fixed interest, cash and defensive alternatives, with the remainder (30%) in shares, property and growth alternatives. Invests 100% in cash % 7.1% 10.1% 13.9% 28.1% 13.9% 14.5% 9.5% 10% 27.9% 9.8% 14.5% 14.2% 9.5% 14.1% 10% 19.1% 8.9% 5% 7.5% 40.1% 12.5% 39.9% 18.9% 9.1% 7.5% 12.5% 5% 100% 100% Benchmark and asset allocation ranges Benchmark Asset allocation range 17% 0% to 30% Benchmark Asset allocation range 10% 0% to 20% Benchmark Asset allocation range 100% 100% 11% 0% to 30% 7% 0% to 20% 10% 0% to 20% 5% 0% to 15% 12% 0% to 30% 8% 0% to 20% 15% 0% to 30% 13% 0% to 30% 35% 0% to 50% 47% 0% to 60% 0% 0% to 30% 10% 0% to 40% Australian shares International shares Property Growth alternatives Defensive alternatives Diversified fixed interest Cash

17 DuluxGroup Super s Defined Benefit section JANA, as DuluxGroup Super s investment adviser, assists the Trustee to determine how the Fund s defined benefit assets are invested by nominating a long-term neutral or benchmark asset allocation position for these assets. Depending on how investment markets are performing, the investment outlook and DuluxGroup Super s financial position (among other considerations), JANA and the Trustee may agree on a short-term asset allocation that differs from the long-term benchmark. Investment objective Actual asset allocation At 30 June 2017 The key investment objective for the defined benefit pool of assets is to achieve a return (net of investment fees and taxes) that exceeds the rate of inflation (CPI) by at least 3% per year over each five-year period. 17 The current long-term benchmark and the short-term target allocation for DuluxGroup Super s defined benefit assets are shown in the table below. 17.4% 18.7% Asset class Long-term benchmark Short-term target allocation Australian shares 30% 20% International shares 15% 20% Property 15% 13% Growth alternatives 0% 4% Defensive alternatives 10% 10% Fixed interest 20% 15% Cash 10% 18% 13.9% 18.4% 11.6% 15.7% 4.3% At 30 June % 18.6% 10.4% 19.5% 13.1% 19.3% Australian shares International shares Property Growth alternatives Defensive alternatives Diversified fixed interest Cash 3.7%

18 SUPER DEVELOPMENTS 18 Budget 2017 snapshot Superannuation featured in this year s Federal Budget with two proposals aimed at improving housing affordability linking back to superannuation: A First Home Super Saver Scheme which lets first home buyers use the super system as a way to save extra money for a deposit on a first home; and Encouraging over 65 s to downsize their home and put some of the proceeds into super. This is intended to free up larger homes for younger families. How do these contributions work? Before-tax contributions Tax at 15% is deducted from your contribution when it is paid into the super fund. Amounts you contribute count toward your concessional contributions cap. This cap is $25,000 per year for everyone. Amounts above the cap will attract higher tax. The cap includes your employer s contributions (or notional contributions for Defined Benefit members). Read on for more details. It is important to remember that these are currently proposals and must be passed by Parliament before they become law. Additional conditions may also apply. First Home Super Saver Scheme When is the Scheme scheduled to start? Starting from 1 July 2017, it is proposed that you can make voluntary contributions to your super fund and be able to access these savings starting from 1 July Super contributions are usually preserved in the super system until you reach your preservation age or satisfy another condition of release. Members wanting to take advantage of this Scheme should check that it is legislated before making contributions, to avoid the possibility of losing early access to savings. How much can be saved? You can save up to $15,000 per year. The maximum savings under the Scheme are limited to $30,000 of voluntary contributions in total. Amounts invested are deemed to receive earnings equal to the 90 day Bank Bill rate plus 3% p.a. To see how you might benefit from the First Home Super Saver Scheme, use the Government s online estimator at What type of contributions can be made? You can make contributions from: Before-tax salary; or After-tax salary. Withdrawals from super under this Scheme are taxed at marginal rates less a 30% tax offset. After-tax contributions There is no tax on these contributions when you pay them into the super fund or when they are withdrawn, although the earnings will be taxed. These contributions count towards your non-concessional contributions cap. From 1 July 2017, the cap is $100,000 per year with the ability to bring forward up to two future years of limits. Contributing money from home sale to super What does this proposal involve? This measure, proposed to start from 1 July 2018, will allow eligible people to contribute up to $300,000 from the sale of a home into super. Couples can put in $300,000 each. Who is able to participate in this? You need to be over age 65 and selling your principal place of residence. You must have owned the home for at least ten years. What is the advantage of this proposal? People over age 65 normally face a number of restrictions to putting money into super. Generally you need to be between age 65 and 74 and able to satisfy a work test. Over age 75, you are not eligible to contribute. The Government proposes to remove the restrictions so those over age 65 who downsize their home are able to make these specific contributions to their super. Also, under new rules from 1 July 2017, non-concessional contributions can generally only be made if your total superannuation balance is less than $1.6 million. However, it is proposed that this rule will not apply to downsizing contributions.

19 Will sale proceeds contributed to super count towards the Age Pension assets test? Yes, any change in your superannuation balance will count towards the assets test for the Age Pension. Do these contributions count toward any caps? Contributions from downsizing will not count toward your annual non-concessional contributions cap. Contributions will count towards the new $1.6 million cap on the amount that can be held in pensions where earnings are exempt from tax. New super rules from 1 July 2017 After some revisions, the Federal Government s superannuation reform package was legislated late last year. Many of the reforms, which were first announced in the 2016 Budget, are aimed at higher income earners. Here is a summary of some of the main changes from 1 July Lower limits on contributions The Government has reduced the amount of contributions each year that can receive concessional tax treatment. If you go over these limits, higher tax applies. Concessional contributions Concessional contributions to super such as before-tax salary sacrifice, employer and notional contributions (for Defined Benefit members) will be limited to $25,000 per year regardless of age. Non-concessional contributions Non-concessional contributions (generally after-tax contributions) to super will be limited to $100,000 per year. Members under age 65 may be able to bring forward up to two future years of limits. This accommodates members who want to make larger non-concessional contributions. Contact your financial adviser if you are thinking of doing this as conditions apply. Account-Based Pensions restricted Need financial advice? Investment earnings in Account-Based Pension investments were previously not taxed and the balance you could invest in an Account-Based Pension was unlimited. From 1 July 2017 there are two new changes: A new transfer balance cap of $1.6 million will be put on the amount you can have in total in standard pension accounts from 1 July From that date, if your total pension account balances are larger, the excess needs to be moved back into a super account or withdrawn in cash. From 1 July 2017, investment earnings on transition to retirement pension accounts will be taxed at up to 15%. A transition to retirement pension allows you to phase into retirement after your preservation age by accessing some of your super as a pension even though you are still working. Rules on tax rebate for spouse contributions relaxed Changes from 1 July 2017 mean that more people will be eligible to claim a tax rebate on after-tax contributions they make to their spouse s super fund. Spouse covers married, de facto and same sex partners. Previously, the maximum tax offset of $540 per year is available if you contribute $3,000 for a spouse whose income is under $10,800. The rebate reduces gradually and is not payable once your spouse earns $13,800 or more. From 1 July 2017, while the tax offset of $540 is unchanged, the amount your spouse can earn and still be eligible for the tax offset has increased. The full tax offset amount will be claimable if your spouse earns $37,000 or less and will cut out once they earn $40,000 or more. If you could do with some guidance to help you plan for your future, consider speaking with a licensed financial adviser. Towers Watson Australia Pty Ltd offers financial planning services through qualified financial planners: call (03) Alternatively, you can contact the Financial Planning Association of Australia at or by calling You can also find information about working with a financial adviser by downloading the Government s guide, Financial advice and you, from gov. au. Hover over the Calculators & resources tab, click on Publications, then scroll down to the Investing category. 19

20 RUNNING DULUXGROUP SUPER 20 How is DuluxGroup Super managed? A Trustee, with input from the Policy Committee, manages DuluxGroup Super and uses several advisers who provide their services to the Fund. Half of the members of the Policy Committee are elected by members of the Fund. Who is your Trustee? A Trustee company, Towers Watson Superannuation Pty Ltd (ABN , AFSL ) is responsible for managing the Fund. It has been licensed to act as a Trustee by the Australian Prudential Regulation Authority (APRA), the prudential regulator of super funds in Australia. Towers Watson Superannuation Pty Ltd is a subsidiary of Towers Watson Australia Pty Ltd (ABN , AFSL ) who also acts as Administrator (via an outsourced arrangement), actuary and secretary to the Fund. See Who advises DuluxGroup Super? to the right for more information. How to contact the Trustee DuluxGroup Super C/- Mr Andrew Hawthorn Towers Watson Superannuation Pty Ltd Level 23, 55 Collins Street Melbourne VIC 3000 (03) (03) andrew.hawthorn@willistowerswatson.com What is a Policy Committee? A Policy Committee ensures that the interests of members and the Company are represented in the management of the Fund. The Committee comprises eight members half appointed by the Company and half elected periodically by members. At 30 June 2017, the Policy Committee members were: Company-appointed Sue Benefield Ken Graham Rick Hillman John Watt Member-elected Daniel Adams Peter Helm Rod Vockler Ollie Wynhoven Indemnity insurance Clayton, Victoria Clayton, Victoria Clayton, Victoria Independent Rocklea, Queensland Glynde, South Australia Clayton, Victoria Clayton, Victoria The Trustee is currently covered by a Trustee Professional Indemnity insurance policy that protects the Fund s assets from a legal liability to the extent allowed by law and the policy conditions. Who advises DuluxGroup Super? The following organisations provide specialist services to the Trustee. Consultant and actuary Administrator Investment consultant Investment custodian Legal adviser External auditors Insurer SUPER BYTES Towers Watson Australia Pty Ltd Towers Watson Australia Pty Ltd (outsourced to Link Super Pty Limited (ABN ) a Corporate Authorised Representative (No ) of Pacific Custodians Pty Limited (ABN , AFSL )) JANA Investment Advisers Pty Ltd National Australia Bank Limited Lander & Rogers Deloitte, KPMG MetLife Insurance Limited Policy Committee: The Policy Committee monitors the overall management of a super fund. It provides members with an avenue to have their issues raised with the Trustee and a means for member feedback to filter through to the Trustee. The Policy Committee is made up of equal representation from the employer and members.

21 How can you resolve any problems or concerns? Although our aim is to ensure that DuluxGroup Super s level of service meets your expectations, sometimes problems may arise. If you have an enquiry or complaint, you should contact the Fund Administrator (see the back page for contact details). Privacy-related enquiries should also be directed to the Fund Administrator. The Trustee has a formal process for reviewing enquiries and complaints if you are not satisfied with the response you receive. To make a formal enquiry or complaint, please obtain an Enquiry or Complaint form from the Fund Administrator or from www. duluxgroupsuper. com.au. The Trustee will respond to you within 90 days. You can request the Trustee s reasons for its decision on your complaint. A copy of the Trustee s Enquiries and Complaints Policy is also available from DuluxGroup Super s website. If you are not happy with how the Trustee handles your enquiry or complaint, you may contact the Superannuation Complaints Tribunal, an independent body set up by the Federal Government to settle your concerns in such cases. The Tribunal can be contacted by phone on or by at info@ sct. gov. au. The Tribunal, however, cannot consider some complaints, for instance, those that concern the management of the Fund as a whole. Time limits also apply to certain complaints that are related to total and permanent disability claims as well as to complaints about objections to the payment of death benefits. If your complaint is regarding any of these issues, please contact the Fund Administrator or refer to the Tribunal s website on as soon as possible for further information. You can direct complaints about your privacy that have not been resolved to your satisfaction to the Office of the Australian Information Commissioner (OAIC). The OAIC can be contacted at or enquiries@ oaic.gov.au. What will happen if you leave? If you leave your employer or choose another super fund, the Fund Administrator will get in touch to find out how you would like to receive your super benefit. In the meantime, your super will be transferred to DuluxSuper s Retained Benefits section automatically when you cease employment, where it will remain invested in your chosen investment option(s) or the Active Balanced option if you are a MySuper member and did not make an investment choice. Your benefit will stay in the Retained Benefits section until you provide the Fund Administrator with instructions for payment of your benefit. If you re a former Defined Benefit member, the defined benefit portion of your benefit will be invested in the Cash option. It will remain invested in the Cash option until you provide the Fund Administrator with alternative investment instructions. Your additional accounts (containing any additional voluntary contributions and rollovers you have made) will continue to be invested in your chosen investment option (or the Active Balanced option if you did not make an investment choice). Investment returns applied to your additional accounts may be positive or negative. You can roll over your super into another fund of your choice, providing it is a complying superannuation fund under law. If you choose this option, the Fund Administrator will ask you details of your new fund. If the fund you have nominated won t accept your benefit, the Trustee may roll your benefit over to an Eligible Rollover Fund (ERF). The ERF nominated by the Trustee is: AUSfund Locked Bag 5132 Parramatta NSW 2124 Phone: admin@ausfund.net.au Contact: The Administrator Once your benefit is transferred to the ERF, you stop being a member of DuluxGroup Super and no longer have any rights under the Fund. You will then need to contact the ERF directly about your benefit. You can also obtain the ERF s Product Disclosure Statement using the contact details above. The investment and crediting rate policy of the ERF will be different to those that applied in DuluxGroup Super. Also, the ERF will not offer any insurance cover. You should seek advice from a licensed financial adviser about whether the ERF is a suitable investment for you. Do you need to provide proof of identity? Before you withdraw a benefit from DuluxGroup Super, you will need to establish your identity by providing certified copies of certain documents. The Trustee may also require additional identification information to verify your identity from time to time. In some cases, the Trustee may have to disclose information about you to the Australian Transaction Reports and Analysis Centre (AUSTRAC). Due to the sensitive nature of the information, the Trustee is not permitted to inform you when this happens. Need to know more? Other information about your benefits such as your choices for contributions, investments and insurance levels are available at www. duluxgroupsuper.com.au. Refer to your Product Disclosure Statement. A number of documents, such as the Trust Deed and various Trustee policies are also available on the website or by calling the DuluxGroup Super helpline on SUPER BYTES Product Disclosure Statement (PDS): The PDS is the main disclosure document for new members of superannuation funds. A copy of the Fund s PDS is available from the Fund s website. 21

22 FINANCIALS 22 A summary of DuluxGroup Super s unaudited financial accounts for the year to 30 June 2017 is set out to the right. The audit is expected to be finalised by 30 September The audited financial accounts and auditor s report will be available on request from the DuluxGroup Super helpline on after that date. Change in net assets during the year Net assets at the start of the year (30 June 2016) 297,439,537 Plus income Contributions 18,807,616 Investment income 29,573,668 Investment fee rebates 220,497 Interest 35,445 Rollovers 9,021,327 Proceeds from insurance policies 189,953 Less outgoings Benefits paid (31,837,863) Investment expenses (76,066) Insurance premiums (459,251) General expenses and charges (1,123,449) Income tax expense (5,183,582) Net assets at the end of the year (30 June 2017) 316,607,832 Statement of net assets Investments AMP Capital Community Infrastructure Fund 2,778,946 2,796, $ $ 2017 $ AMP Capital Diversified Property Fund 17,592,052 18,288,806 DEXUS Wholesale Property Fund 15,034,682 17,050,479 Charter Hall Prime Office Fund 4,356,022 5,117,383 JANA Global Property Trust 372, ,165 JANA All-Maturity Diversified Debt Trust 1,309,345 2,129,435 JANA Diversified Fixed Income Trust 31,795,235 28,553,540 JANA Short-Maturity Diversified Debt Trust 1,916,054 2,865,608 JANA Cash Trust 41,254,592 38,792,654 JANA Core Australian Share Trust 40,827,719 41,792,920 JANA Small Caps Australian Share Trust 5,509,720 4,605,058 JANA High Alpha Australian Share Trust 20,895,472 21,686,581 JANA High Alpha Global Share Trust 21,837,242 24,867,295 JANA Passive Global Share Trust 14,216,054 13,591,258

23 23 Investments JANA Passive Global Share Trust (Hedged) 13,582,100 11,881,691 JANA Core Global Share Trust 804,962 1,388,290 JANA Core Global Share Trust (Hedged) 800,270 1,344,061 JANA Select Opportunities Trust 22,486,536 29,746,115 JANA Emerging Markets Share Trust 9,065,062 8,989,287 JANA Low Correlation Strategy Trust 17,988,535 18,873,557 Current assets Cash and cash equivalents 2,978,884 6,083,400 Investment income receivable 10,910,393 18,466,314 Deferred tax assets 908, ,148 Current liabilities Taxation payable (1,525,156) (2,500,670) Trade and other payables (256,184) (521,239) Net assets at the end of the year (30 June) 297,439, ,607,832 Current assets include amounts in the Fund s bank account. All contributions due at 30 June 2017 have now been paid to the Fund $ 2017 $

24 CONTACT US If you have any queries about DuluxGroup Super or any of the information in this Annual Report, contact: The Fund Administrator DuluxGroup Super PO Box 1442 Parramatta NSW