The Universal Super Scheme - MLC

Annual Report of
The Universal
Super Scheme
For the Year Ended 30 June 2007
THIS REPORT APPLIES TO: THE EMPLOYEE RETIREMENT PLAN

Important notes
In this report
The Scheme
'we', 'us', 'our', 'Trustee'
Plan
MLC
means The Universal Super Scheme
means MLC Nominees Pty Limited
means The Employee Retirement Plan
means MLC Limited
• This report is issued by the Trustee of the Scheme.
• The Plan is managed by MLC on behalf of the Trustee.
• Benefits under the Plan are provided through life insurance
policies issued by MLC and, therefore, the following
information is not included in this report:
– audited Scheme accounts
– abridged financial information
– auditor’s report
– statement of assets, and
– details of investments having a value in excess of
5% of the total assets of the Plan.
• The Annual Report for members comprises this report and
the ‘Statement of Account’ for the period ending 30 June 2007.
• Professional indemnity insurance has been arranged to protect
the Trustee against any losses which could occur as a result of a
claim against it for breach of professional duty.
• Any advice in this communication has been prepared without
taking account of your objectives, financial situation or needs.
Because of this you should, before acting on any advice in
this communication, consider whether it is appropriate to your
objectives, financial situation and needs.
• Preparation date: 15 August 2007
MLC Nominees Pty Limited
ABN 93 002 814 959
AFSL 230702
RSE L0002998
The Universal Super Scheme
ABN 44 928 361 101
R1056778
SFN 281440944
MLC Limited
ABN 90 000 000 402
AFSL 230694
Plan SPIN Number
MLC0193AU

From the Chairman
On behalf of the Trustee, I am pleased to present
the 2007 Annual Report for your Plan, a part of
The Universal Super Scheme.
Complementing this Annual Report is your annual
Statement of Account.
There have been huge changes to superannuation in
Australia, with many of the Federal Government's
2006 Budget announcements being implemented on
1 July 2007. We encourage members to think carefully
about the impact the changes will have on them.
By obtaining expert advice, members can maximise
the amount available to them in retirement.
You will find a summary of the key changes to
superannuation in this report and other important
information about your Plan, including investment
performance information to 30 June 2007.
We would like to take this opportunity to thank you for
your continued support throughout the past year.
Geoff Webb
Chairman
MLC Nominees Pty Limited
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Contents
News and information 3
New superannuation rules 3
New anti-money laundering and counter-terrorism measures 6
Enhancement to the Investment Facility 6
Automatic upgrade in insurance benefits 7
Consistent processes regarding transfers to an Eligible Rollover Fund 7
New custodian 7
About your investment 8
Strategy and objectives 8
Derivatives 8
How earnings are reflected in your account 9
Eligible Rollover Fund 10
Surcharge assessment for prior years 11
Investment profiles 12
How to contact us
Back cover
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News and information
This section of the Annual Report provides you
with information about some of the changes and
enhancements that have occurred to the Plan and
an update on key developments in superannuation
legislation during the financial year.
New superannuation rules
Many of the Federal Government’s reforms to
superannuation took effect from 1 July 2007. Below, we
have provided a snapshot of some of the more significant
changes and recommend you speak to your financial
adviser for a comprehensive assessment of how these and
other changes may impact you. You can also find more
information at www.australia.gov.au/bettersuper.
• Tax–free benefits from age 60: From 1 July,
members aged 60 and over will pay no tax on
payouts (lump sum or income) from the Scheme.
• Ability to stay in superannuation for longer:
You will no longer be required to draw down your
benefits upon reaching age 65 and ceasing work or
when you reach age 75.
• Removal of Reasonable Benefit Limits: Lump sum
benefits will no longer be subject to limits above
which higher tax rates apply. Similarly, pensions paid
to those under age 60 will qualify for a full 15% tax
offset on the taxable portion (rather than a reduced
tax offset based on any excess). However, limits on
contributions will apply as set out below.
• Limits on the amount you can contribute each
year: There are now limits on how much can
be contributed for or by you to superannuation
each year.
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Concessional contributions – These include
employer contributions (including salary sacrifice
contributions) and personal contributions for which
you are claiming a tax deduction.
Age on last day of
the financial year
Less than 50 $50,000 1
Limit pa
Concessional contributions
50 and over $100,000 (only mandated employer
contributions can be made from age 75) 2
Non-concessional contributions – these most commonly
include personal after tax (undeducted) contributions
and spouse contributions.
Age on the first day
of the financial year
Less than 65
65 and over but
less than 75
Limit pa
Non-concessional contributions
$150,000 1 per annum or a
3 year limit of $450,000 1
$150,000 1
75 and over Not eligible to make non‐concessional
contributions
1 This limit applies from 2007/2008 and will be indexed
periodically. Once triggered, the ‘3 year’ non-concessional limit
is not indexed.
2 This limit is not indexed and will apply up to 30 June 2012.
From 1 July 2012, the indexed $50,000 limit will apply.
Significant additional taxes are payable if you exceed
the limits. Also, if these limits are exceeded, in
some circumstances we will be required to reject the
contribution and return it to you.
• Age and work test for those over 65: If you are aged
65 or over, you will need to meet a work test before
contributions can be made to your account. Spouse
contributions cannot be accepted once you are aged
70 or over. If you are aged 75 or over, only compulsory
employer contributions can be accepted.
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• Adverse implications if we do not have your Tax
File Number (TFN): During May, we mailed to many
members asking them to provide their TFN. If we
do not yet have your TFN, you should provide it to
us. Although you are not legally required to provide
your TFN, the consequences of us not having it can
be significant.
For example, we cannot accept certain contributions
made by you or on your behalf unless we have
your TFN. The only exception to this rule relates to
employer contributions which would be subject to an
additional tax if we don’t have your TFN.
To provide your TFN, please contact MLC on 132 652.
• Changes that will impact how death benefits may
be paid to certain beneficiaries: Your beneficiaries
may be able to commence or continue a pension at
the time of your death. However, if the beneficiary is
your child, they must be:
– under age 18
– between the age of 18 and 25 and either
financially dependent upon you, or in an
interdependency relationship with you, or
– disabled
at the time of your death. If a child does not meet
the conditions above, death benefits can only be paid
as a lump sum.
In addition, any death benefit pension which
commences to be paid to a child after 30 June 2007
must cease when the child reaches age 25, unless the
child is disabled.
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New anti-money laundering and
counter-terrorism measures
In December 2006, the Australian Government
introduced the Anti-Money Laundering and
Counter‐Terrorism Financing Act 2006.
As superannuation funds are covered by the Act, we
will be establishing new procedures to comply with
our obligations as these become effective over the next
18 months. These procedures include:
• verifying your identity when you withdraw money
from your account, and
• reporting suspicious matters to the Australian
Transaction Reports and Analysis Centre (AUSTRAC)
and potentially to other third parties. Where such
reporting takes place, we are prohibited by law
from notifying the impacted member(s) that this
has occurred.
If you do not provide us with proof of your identity
when requested, we may be unable to provide you with
certain services or complete certain requests, such as a
withdrawal of money from your account.
Enhancement to the Investment Facility
In January 2007, the Investment Facility’s allocation to
property securities was moved to a 100% global strategy.
Previously, the property securities strategy was 75%
Australian and 25% global.
MLC believes the Investment Facility will benefit from
the higher long-term return potential and greater
diversification of global property securities when
compared to the Australian property securities market.
The exposure to foreign currencies, resulting from
holding global property investments, is passively hedged
back to the Australian dollar. This strategy aims to
reduce most of the risks from currency exposure.
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Automatic upgrade in insurance benefits
From 1 July 2007, any member aged 50 to 55 who has
death and total and permanent disability insurance
cover within the Plan will have their cover increased to
$7,000 at no extra cost. Previously, members aged 50 to
54 were covered for $6,350 and members aged 50 were
covered for $4,000.
This change will allow the Plan to comply with Fund
Choice minimum insurance requirements.
Consistent processes regarding transfers
to an Eligible Rollover Fund
We have introduced a consistent approach across our
superannuation products in respect of when members
may be transferred to an Eligible Rollover Fund. The
conditions are set out on page 10.
New custodian
Following a review of its operations, MLC has appointed
NAB Custodian Services, a division of the National
Australia Bank Limited, to act as sole custodian for its
investment operations. It is expected that NAB Custodian
Services will assume the custodian responsibilities from
State Street Australia over the next 12 months.
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About your investment
Strategy and objectives
Investment objective
The investment objectives of the Investment Facility and
the Benefit Protection System are set out on pages 12–13.
Investment strategy
We invest in a policy issued by MLC. MLC in turn
invests your money in the Investment Facility and the
Benefit Protection System (as applicable).
Derivatives
The Trustee does not invest directly in derivatives.
However, investment managers within the Investment
Facility may use financial derivatives.
Derivatives may be used by investment managers to:
• reduce risk
• reduce transaction costs
• take advantage of opportunities to increase returns
• increase market exposure, as long as the total
exposure is not greater than that possible if
derivatives were not used, and
• reduce market exposure (ie shorting), as long as
appropriate assets are held to offset the short exposure.
MLC sets rigid guidelines regarding the use of
derivatives which cover, among other things, liquidity
requirements and limits on investment managers’
exposures. The investment managers and MLC regularly
monitor these guidelines.
Derivatives will not be used in a way that is contrary to
regulatory requirements.
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How earnings are reflected in your account
An interest rate is calculated annually and applied
to your investment in the Plan (the Declared Rate).
This interest rate is applied to your daily account
balance during the 12-month period to 30 June and the
resulting (interest) amount is allocated to your account
effective 30 June. Any interest earned on money
invested in the Benefit Protection System is credited
to the Investment Facility.
If you withdraw all of your benefit during the year, an
‘Interim Rate’ is calculated and applied to your daily
account balance before your benefit is paid. This Interim
Rate is set with the intention to reflect the year to date
earnings and, as a result, may differ from the Declared
Rate calculated effective 30 June.
For more information on how these interest rates are
calculated, and how your investment is valued, refer
to the current Product Disclosure Statement or call
MLC on 132 652.
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Eligible Rollover Fund
We may transfer your benefit to an Eligible Rollover
Fund (ERF) in circumstances where a contribution has
not been made within a 12 month period, and:
• your account balance is below $500 and you have no
life insurance provided through the account, or
• you have life insurance and your account balance
falls below $200.
Please note, a member cannot be transferred out of the
Scheme within 12 months of joining.
Benefits may also be transferred to an ERF if you become
a ‘lost member’, which means:
• one piece of communication sent to you has been
returned unclaimed, or
• we have never had your address details, or
• you joined from another superannuation fund as a
lost member.
We will advise you of our intention to transfer your
benefit to an ERF in writing at your last known
address and will proceed with transferring your benefit
if you don’t respond with details of an alternative
superannuation fund within the given timeframe.
If we transfer your benefit to an ERF:
• you will cease to be a member of the Scheme
• you will no longer receive regular reports from the
Scheme
• your insurance cover (if any) will cease and the ERF
may not offer insurance benefits in the event of death
or disablement
• you may be charged an exit fee, if applicable
• the ERF may have a different fee structure, and
• the ERF may have different investment strategies
and objectives.
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The ERF currently used by the Scheme is:
The Australian Eligible Rollover Fund
Jacques Martin Administration and Consulting Pty Ltd
Locked Bag 5429
Parramatta NSW 2124
Telephone: 1800 677 424
Fax: (02) 9947 4411
To find out more about the Australian Eligible Rollover
Fund, you should contact the administrator at the
above address to obtain a copy of the current Product
Disclosure Statement.
To provide us with updated address details, call MLC
on 132 652.
Surcharge assessment
for prior years
The superannuation surcharge will generally be
deducted from your account if the Scheme receives
from the Australian Taxation Office (ATO) a surcharge
assessment on your behalf for prior years. If you have
taken a lump sum or pension, the ATO may send you a
surcharge assessment for you to pay.
If you have any questions about:
• how the ATO has calculated an amount of surcharge
in relation to your superannuation account, or
• details of income thresholds and amounts to which
the surcharge is applicable
please contact the ATO on 13 10 20.
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Investment profiles
Information current as at 30 June 2007
Past performance is not indicative of future performance. The value
of an investment may rise or fall with changes in the market.
Investment
option
Objective Asset allocation 1
Investment
Facility
Benefit
Protection
System
Aims to provide
returns that exceed the
increase in the cost
of living over five year
periods as measured
by the Consumer Price
Index (CPI).
Risk level:
Moderate
Aims to provide
a level of return
similar to cash rates
and a high level of
capital security. MLC
guarantees that the
capital will not fall
before the deduction
of fees and taxes.
Risk level:
Low
Strategic asset allocation
30% Debt assets
• 15% Australian debt
assets
• 15% Global debt assets
70% Growth assets
• 31% Australian shares
• 16% Global shares
(unhedged)
• 10% Global shares
(hedged)
• 6% Global
private markets 3
• 4% Global property
securities
• 3% Long-term absolute
return strategy
• 100% Cash and short-term
securities
Corresponding footnotes can be found on page 14
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Performance
Returns to 30 June (% pa)
Single year
‘07 ‘06 ‘05 ‘04 ‘03
5 year
Ex FlexiSuper 2
for balances
above $1,000
Ex FlexiSuper 2
for balances
below $1,000
Other TERP
for balances
above $1,000
Other TERP
for balances
below $1,000
13.55 13.45 12.00 12.35 0.00 10.10
0.00 0.00 0.00 0.00 1.40 0.30
13.55 13.45 11.70 12.05 -0.30 10.00
0.00 0.00 0.00 0.00 1.40 0.30
Ex FlexiSuper 2
for balances
above $1,000
Ex FlexiSuper 2
for balances
below $1,000
Other TERP
for balances
above $1,000
Other TERP
for balances
below $1,000
4.40 4.10 3.70 3.90 4.20 4.10
0.00 0.00 0.00 0.00 4.20 0.80
4.40 4.10 3.70 3.90 4.20 4.10
0.00 0.00 0.00 0.00 4.20 0.80
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Footnotes
1 For the Investment Facility, the asset allocation shown is the
strategic asset allocation. MLC maintains a strategic (long term)
asset allocation by regularly rebalancing the portfolio. For the
Benefit Protection System, the actual asset allocation is shown.
2 Members transferred from National FlexiSuper on 1 January 2002
and any member who has since joined an employer plan between
1 January 2002 and 30 June 2006 who was transferred from
National FlexiSuper.
3 The actual allocation to global private markets may be different to
that shown as building a diversified global private markets portfolio
can take time, and the availability of suitable investments tends to
fluctuate. To ensure the Investment Facility is fully invested, any
amounts not invested are allocated to global shares with foreign
currency exposures hedged to the Australian dollar. Current asset
allocations are available at mlc.com.au
Notes specific to performance
All performance figures quoted are net of tax and Management Fees
but before Account Keeping Fees. In 2003, no Management Fees
were charged for the Investment Facility for balances below $1,000.
The returns represent historical performance only.
None of MLC Nominees Pty Limited, MLC Limited, National Australia
Bank Limited or other member company in the National Australia
Group or appointed investment managers guarantee the capital value
or performance of the Plan, other than the Benefit Protection System,
which is guaranteed by MLC Limited only.
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How to contact us
MLC Service Centre
For more information call the
MLC Service Centre from anywhere
in Australia on 132 652 or
contact your financial adviser.
Website
For details on MLC’s investment
process, unit prices, services
and other products visit
mlc.com.au
Postal address
The Manager
The Employee Retirement Plan
P0 Box 1315
North Sydney NSW 2059
Address complaints to:
The Manager
MLC Complaint Resolutions
PO Box 200
North Sydney NSW 2059
Registered office
Ground Floor, MLC Building
105–153 Miller Street
North Sydney NSW 2060
53882 MLC 08/07