2011-12 Northern Territory Government and Public … · Web viewAnnual Report 2011-12 34 34 Annual...

N O R T H E R N T E R R I T O R Y G O V E R N M E N T A N D P U B L I C A U T H O R I T I E S ’ S U P E R A N N U AT I O N S C H E M E

Annual Report2011-12

Published by the Department of Treasury and Finance

© Northern Territory Government 2012

Apart from any use permitted under the Copyright Act, no part of this document may be reproduced without prior written permission from the Northern Territory Government through the Department of Treasury and Finance.

ISSN: 1032-1241

Northern Territory Superannuation Office Postal address:GPO Box 4675Darwin NT 0801

Location:Level 5, Cavenagh House38 Cavenagh Street, Darwin

Freecall: 1800 631 630Telephone: (08) 8901 4200Facsimile: (08) 8901 4222Website: ww w .nt.g o v .au/ntt/super Email: ntsuperan n u a [email protected] o v .au

Northern Territory Government and Public Authorities’ Superannuation Scheme (NTGPASS)1st Floor Cavenagh House, 38 Cavenagh Street DARWIN NT 0800

Postal Address GPO Box 4675 DARWIN NT 0801Tel 08 8901 4200 Fax 08 8901 4222

The Honourable Robyn Lambley MLA TreasurerGPO Box 3146Darwin NT 0801

Dear TreasurerIn accordance with the provisions of section 43 of the Superannuation Act, we are pleased to provide to you:

• the report of the Commissioner of Superannuation and the Superannuation Trustee Board on the operation and management of the Northern Territory Government and Public Authorities’ Superannuation Scheme for the financial year ended 30 June 2012; and

• the audited financial statements of the Northern Territory Government and Public Authorities Employees’ Superannuation Fund for the financial year ended 30 June 2012.

Yours sincerely

John MontagueCommissioner of Superannuation 28 September 2012

Kathleen RobinsonChairperson, Superannuation Trustee Board 28 September 2012

Northern Territory Government and Public Authorities’ Superannuation Scheme

Annual Report 2011-12 1

Table of ContentsAbout this Annual Report 2

Report of the Commissioner of Superannuation 3 and the Superannuation Trustee Board

Highlights 4

Year in Review 4

Output Performance 9

Future Priorities 9

Fund Performance 10

Investments 12

Scheme Performance 20

Governance 26

Financial Statements 33Overview of the Financial Statements 34

Independent Auditor’s Report to the Trustee Board 35

Statement by the Superannuation Trustee Board 37

Statement of Net Assets 38

Statement of Changes in Net Assets 39

Notes to the Financial Statements 40

Summary of the Report of the Actuarial Investigation 54 of the Scheme


6 Annual Report 2011-12

Objectiv

e Quick Guide to

theAnnual Report

Reporting Requirements

About this Annual ReportWelcome to the Northern Territory Government and Public Authorities’ Superannuation Scheme (NTGPASS) Annual Report. NTGPASS was established by the Superannuation Act and provides superannuation benefits foreligible persons employed by the Northern Territory Government. NTGPASS commenced operation on 1 October 1986 and was closed to new members on 9 August 1999.

The objective of this Annual Report is to provide information on the operations of NTGPASS to the Treasurer, as the Minister responsible for superannuation matters, and to members and other interested parties. This includes new developments and future directions of NTGPASS as well as the management, financial condition and investment performance of the Northern Territory Government and Public Authorities Employees’ Superannuation Fund (the fund).

This report of the Commissioner of Superannuation and the Superannuation Trustee Board provides an overview of the operation and management of NTGPASS and the fund’s investment performance during 2011-12. This section also includes information about the members of the Superannuation Trustee Board and the Superannuation Review Board and their activities during the year.

Financial statements provided include the audited Statement of Net Assets, Statement of Changes in Net Assets and Notes to the Financial Statements as at 30 June 2012.The Superannuation Act requires, within six months of the end of each financial year, that:

• the Commissioner of Superannuation provides a report to the Treasurer on the operation and management of NTGPASS;

• the Superannuation Trustee Board provides a report to the Treasurer on its operations during the year and audited financial statements in respect of the fund; and

• the Treasurer tables the reports, together with the financial statements and the Auditor-General’s report of the audit, in the Legislative Assembly within six sitting days of receiving the reports.

Report of the Commissioner

of Superannuation and the

Superannuation Trustee Board



Fund Performance

Superannuation Changes

Superannuation Reform Project


Fund

Performance

Superannuatio

nReform Project

HighlightsDespite periods of volatility, most NTGPASS investment options recorded positive investment returns in 2011-12. The fund’s return for the default superannuation Growth option was 1.08 per cent and the pension Growth option was 0.69 per cent.

The 2012 Commonwealth Budget introduced several changes including reduction in concessional caps and the co-contribution payment, as well as continuation of the pension drawdown relief.

Stage 2 of the project to review the administration of Northern Territory superannuation schemes continues. Legislation to formalise the composition of the Superannuation Trustee Board has been introduced and the remaining legislative changes are expected to progress during 2012-13.

The composition of the Superannuation Trustee Board was expanded to nine members representing three schemes: NTGPASS; the Northern Territory Police Supplementary Benefit Scheme (NTPSBS); and the Legislative Assembly Members’ Superannuation Scheme (LAMS).

Year in Review2011-12 was a year of two parts, with poor returns in the first half and the second half showing signs of improvement. Most NTGPASS options recorded a positive investment return for the year. The NTGPASS growth option returned1.08 per cent for superannuation accounts and 0.69 per cent for pension accounts.

As previously reported, the administration of the Territory’s public sector superannuation schemes is under review. The purpose is to simplify administration of NTGPASS and the Northern Territory Supplementary Superannuation Scheme (NTSSS), and improve efficiencies in operating the Northern Territory Government Death and Invalidity Scheme (NTGDIS).

With Stage 1 complete, work has progressed on Stage 2 of the Reform Project.This stage of the project involves a number of changes, including:

• expanding the Superannuation Trustee Board (STB);

• modernising three schemes (NTGPASS, NTSSS and NTGDIS);

• replacing the Superannuation Review Board with the Superannuation Complaints Tribunal; and

• amalgamating Northern Territory superannuation legislation for all schemes (except the Judges scheme) into one Act.

Legislation has been introduced for the expansion of the STB. The process of drafting legislation for the remaining Stage 2 changes is underway. Revised legislation is anticipated to be completed towards the end of this year.



Legislative Amendments

Superannuation Changes

A number of amendments were made to the Superannuation Act and the Superannuation Regulations to formalise changes approved as part of the reform project. Changes primarily related to trustee arrangements, increasing the membership of the Superannuation Trustee Board to nine members effective from 27 April 2012.

The Commonwealth Budget was released on 8 May 2012 and made several changes to current superannuation arrangements. Announcements included:

• 25 per cent reduction in minimum account-based pension drawdown continues for 2012-13;

• the concessional contribution cap will be $25 000 for individuals of all ages until 30 June 2014;

• reduced tax concession for contributions from people earning over$300 000; and

• a reduction of the maximum co-contribution payment and reduction in the upper income threshold.

The key changes relating to superannuation are outlined in detail below.Pension drawdown reliefThe Commonwealth previously introduced measures to allow pensioners to halve the minimum pension they must draw down for 2008-09, 2009-10 and 2010-11. Minimum pension amounts were reduced by 25 per cent for 2011-12 and this reduction will continue in 2012-13.Contribution capsConcessional contributions are contributions made from before-tax income such as salary sacrifice contributions and employer contributions made by the government when members exit the scheme, which are concessionally taxed at 15 per cent.

The annual cap for these contributions will be $25 000 for people of all ages until 30 June 2014. It is proposed that from 1 July 2014, those people over the age of 50 who have less than $500 000 in superannuation will be subject to a cap of $50 000. Details of how the $500 000 balance will be determined are still subject to consultation. Any contributions that exceed the caps are subject to additional tax.

People with incomes over $300 000 will have the tax on concessional contribution increased from 15 per cent to 30 per cent. This measure is effective from 1 July 2012, but its administration is yet to be finalised.

In addition to salary sacrifice contributions, for members of a defined benefit superannuation scheme such as NTGPASS, a notional amount of employer contributions, known as notional taxed contributions, are treated as concessional contributions and count towards the concessional cap.

As previously reported, the Commonwealth’s policy intent on concessionalcaps was that the limit would not include the employer component of unfunded schemes such as NTGPASS. While resolution of this matter has been pending for a number of years, recent communication indicates this matter may be resolved shortly. Until formal advice is received from the Commonwealth, it is



Stronger Super

recommended that members take into account the notional taxed contribution to ensure their salary sacrifice contributions do not exceed the concessional cap. The notional taxed contribution has been determined by the NTGPASS actuary to be 9.6 per cent of contribution salary.

Non-concessional contributions are contributions made from after-tax income such as NTGPASS compulsory member contributions, spouse contributions and Commonwealth co-contributions.

The annual cap of $150 000, or $450 000 over three years for those aged under 65, will continue to apply to these contributions.Co-contributionsPersonal contributions to a superannuation account made by individuals within specified income thresholds ($31 920 and $61 920 for 2011-12) may attract a Commonwealth co-contribution. The upper income threshold has been reduced to $46 920 for 2012-13 and the rate of superannuation co-contribution has been reduced to 50 per cent of contributions up to $1000 in any financial year.

The Commonwealth Stronger Super reforms continued to evolve during the year.Reforms include:

• the creation of a new, simple, low-cost default superannuation product called ‘MySuper’;

• a package of measures called ‘SuperStream’ that will attempt to make the processing of everyday transactions easier, cheaper and faster; and

• measures to strengthen the governance, integrity and regulatory settings of the superannuation system, including in relation to self-managed superannuation funds.

The Stronger Super Peak Consultative Group, comprising representatives of peak industry, employer, employee and consumer groups, met throughout 2011. The group provided broad, high-level advice on the design and implementation of the reforms. Separate working groups provided more technical input on each of the key components of the reforms.

The timing of different aspects varies:

• the use of tax file numbers as primary account identifiers started on 1 July 2011;

• superannuation funds will be able to offer a MySuper product from 1 July 2013; and

• most measures in the broader SuperStream package will be in place by 1 July 2015.

The timing of the commencement of measures relating to governance, integrity and other regulatory settings will be determined following consultation with the industry.

The Commonwealth is consulting with state and territory governments to determine which of these changes will apply to public sector superannuation schemes, such as NTGPASS.



Anti-Money Laundering and

Counter-Terrorism Financing

Member Education

Memberships

The Commonwealth Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF) imposes a range of governance and operational obligations designed to combat money laundering and terrorism financing activities.

The main governance and operational obligations require compliance with an AML/CTF program, which includes a detailed risk assessment, member identification requirements, staff training and due diligence programs, as well as the maintenance of a range of records and regular reporting to the Australian Transaction Reports and Analysis Centre (AUSTRAC).

The AML/CTF program implemented in early 2008 is reviewed annually and updated as appropriate. An annual compliance report is submitted to AUSTRAC by the end of March each year.

The Superannuation Office aims to provide informative material to assist members in understanding their NTGPASS entitlements, as well as superannuation in general.

Information is available through a range of publications including forms, fact sheets and information books, as well as our website content, covering our products such as investment options and pensions. Information is kept up to date and new items are developed as required.

Superannuation Office staff are happy to talk to members over the phone or in person through arranged appointments. Please note that we cannot provide personal financial advice. You are encouraged to seek the services of a qualified professional.WebsiteThe Superannuation Office website is regularly updated for investment returns, ‘what’s new’ information and changes made to forms and fact sheets. In the past year, a number of forms and fact sheets were updated. New forms wereadded to advise change of pension details and claim death benefits and a new fact sheet added to explain anti-detriment payments.SeminarsThe Superannuation Office, with assistance from MLC Implemented Consulting (MLC) and Centrelink, conducted seminars in March 2012 in Darwin,Casuarina, Palmerston, Alice Springs and Katherine. The Superannuation Office component of the presentations can be viewed on the Seminar page of our website.

Several other presentations were provided to work groups on request.Annual ReportThis annual report is available electronically, via website download or email, to minimise the impact on the environment. Summarised information is produced in the Report to Members and is sent to each member with their annual personal Member Information Statement.Association of Superannuation Funds of Australia (ASFA)ASFA is a national not-for-profit and non-political organisation that represents the interests of superannuation funds, trustees and members. ASFA is the peak



Administration

Education and Training

industry body for Australia’s superannuation funds. It undertakes extensive analysis and research on superannuation and provides education and professional development courses for trustees and fund administrators. ASFA hosts an annual national conference, which is attended by board members and senior staff of the Superannuation Office.

ASFA also hosts various superannuation discussion groups throughout Australia. The Northern Territory discussion group meets each month and meetings are attended by Superannuation Office staff and representatives from superannuation funds, financial planning organisations, the Australian Securities and Investment Commission and Centrelink. Meetings include presentationson topical issues and ASFA executives provide updates on superannuation policy issues by telephone. The group has facilitated ASFA educational seminars in Darwin and provides an important forum for discussions on topical superannuation issues.Australian Institute of Superannuation Trustees (AIST)AIST is an independent professional body and a registered training organisation offering a range of services for the superannuation industry, including professional development, national and international training, events, compliance services and member support.

The board members and senior staff from the Superannuation Office continued their membership of AIST. As members of AIST, board members and staff receive discounted prices for training and events. AIST has included the Northern Territory in its calendar of professional development seminars and provides training in Darwin. AIST held the second Communities of Interest meeting in Darwin in October 2011, a forum to raise issues of concern with AIST. In addition, a board member attended the annual Conference of Major Superannuation Funds hosted by AIST.Online member information statementsThe annual member information statement provides key information to members about their member accumulation account and defined benefit. Member information statements from previous years can be viewed online by current Territory Government employees. Members must have access to ePASS to view the available information.

In the future, it is intended that active members will be able to choose between having their current year’s statement posted to them or viewed online.

The Superannuation Office employs 23 full-time staff and also provides work and development opportunities for students and graduates through Treasury’s entry-level programs. The complexity and technical aspects of superannuation mean that ongoing professional development and education for board members and staff is a high priority.

Educational seminars and short courses attended during the year include:

• ASFA 2011 National Conference;

• Government Superannuation Funds Meeting;

• MLC Implemented Consulting Conference;



• AIST: Working with the Superannuation Complaints Tribunal;

• ASFA Roadshow: The rubber hits the road;

• ASFA SuperStream workshop;

• Giving and Receiving Feedback;

• Cross Cultural Awareness; and

• CSA: Business Disaster Recovery.

The following summary reports on the progress of priorities identified for 2011-12.

Output PerformancePriorities for 2011-12 Results in 2011-12

Continue Stage 2 of the Superannuation Reform Project to formalise the composition of the new STB, establisha mechanism for a second tier reviewof appeals, and simplify NTGPASS and NTSSS through the establishment of a single benefit system.

In progress – legislation has been introduced for the expanded STB representation and work will continue on the remaining legislative amendments during 2012-13.

Continue to progressively introduce electronic retention of records throughout the Superannuation Office, including member records.

Ongoing – Work continued with scanning of approximately 4000 creditor member records. Electronic retention of various records will continue as part of continuous business improvement practices.

Proceed with changes resulting from Stronger Super, as they impact on Northern Territory superannuation schemes.

In progress – discussions are continuing with the Commonwealth to determine the extent these changes will apply to public sector schemes.

Finalise an anti-detriment policy in line with contemporary practices.

Achieved – An anti-detriment policy has been implemented and relevant publications are available to assist claimants.

Refocus effort to reduce the number of accounts where benefits have remained unclaimed for a lengthy period.

Ongoing – work continued to reunite members with their benefit.

Future Priorities• Superannuation Reform Project – continue Stage 2 of the reforms to

amalgamate the Northern Territory schemes into one Act, establish a second tier review of appeals mechanism and simplify NTGPASS and NTSSSthrough the establishment of a single benefit system.

• Commonwealth reviews – continue to work with the Commonwealth and other jurisdictions to consider Stronger Super changes and their impact on Northern Territory superannuation schemes.

• Lost members and unclaimed monies – refocus effort to reduce the number of accounts where benefits have remained unclaimed for a lengthy period.

Investment Option2012

%2011 5-Year 10-Year Since

% Average Average InceptionSuperannuationManaged Cash1

Conservative2

Cautious2

Growth (default)3

Assertive2

Aggressive2

PensionManaged Cash1

Conservative4

Cautious5

Growth4

Assertive6

Aggressive4

3.864.863.861.080.06

- 1.77

4.565.323.780.69

- 0.33- 2.29

4.13 - - 3.715.89 3.01 - 3.017.24 2.03 - 2.038.43 - 0.58 4.98 8.048.81 - 1.19 - - 1.199.79 - 2.68 - - 2.68

4.91 - - 4.246.95 - - 4.338.68 - - 3.12

10.11 - - 0.5410.29 - - 2.4511.87 - - - 2.10


10

Annual Report 2011-12

2011-12 Investment

Returns

Table 1: 2011-12 Investment Returns

Fund PerformanceNervous market conditions in 2011-12 caused most NTGPASS investment options to experience periods of positive and negative returns. Overall, most NTGPASS options ended the year with a positive result. The NTGPASS Growth option returned 1.08 per cent for superannuation accounts and 0.69 per cent for pension accounts. These returns are above the median return (as reported by Super Ratings) for growth options (77 to 90 per cent growth assets), of-0.95 per cent and 0.45 per cent for balanced options (60 to 76 per cent growth assets).

As Member Investment Choice was introduced in 2007, five-year average returns are able to be calculated for the first time for several superannuation options (Conservative, Cautious, Assertive and Aggressive) in addition to the superannuation Growth (default) option. The results are mixed over this period of significant volatility. The Growth option remains the only option that has been available for the full 10 years, with a return of 4.98 per cent over 10 years and8.4 per cent since inception.

Table 1 details the fund’s superannuation and pension investment returns for 2011-12, as well as the average annual return (compound average effective rate of net earnings) since each option commenced. Options have been introduced at different times since 2007 and this information is provided in note form. The returns indicated below assume investment in that option for the full year.

Commencement dates: (1) March 2009; (2) July 2007; (3) 1986; (4) April 2008; (5) June 2008; (6) March 2010.

NTGPASS pensions commenced in early 2008. MLC manages both NTGPASS superannuation and pension funds, but they are held in separate accounts.The same investment options are offered with the same target asset allocation, however, the actual allocations do vary. Superannuation funds are taxed at15 per cent while pension funds are tax exempt. A combination of these factors



and market conditions results in differing returns across the two accounts.

2012 2011 2010 2009 20085-Year

Average% % % % %

Investment return 1.08 8.43 12.89 - 15.27 - 7.36CPI 1.20 3.60 3.10 1.50 4.50Real rate of return - 0.12 4.66 9.50 - 16.52 - 11.35

%-0.58 2.77

Change in Assets 2012 2011 2010 2009 2008

Net assets at beginning of year Investment revenueMember contributions and rollovers Territory contributionsBenefits and other expensesNet assets

$M 736.6 10.6

106.1 67.9

-170.3750.9

$M $M $M $M654.4 532.5 615.1 662.558.3 68.1 - 100.2 - 51.2

110.8 106.4 76.7 91.759.6 38.2 50.1 63.7

- 146.5 - 90.8 - 109.2 - 151.6736.6 654.4 532.5 615.1


12


NTGPASS members are further advantaged as the Territory Government meets the cost of administering the scheme. The Trustee has also negotiated favourable investment management fees, on average 0.48 per cent, which is low for professional funds management.

Table 2 illustrates the net return over the last five years for the default (Growth) option after taking account of the effect of inflation, as measured by the consumer price index (CPI). The five-year average is calculated as a compound average in line with Corporations Regulations.

Table 2: Investment Returns After Inflation

ote: Real rate of return = I n v estment retu r ns – CPI 1 + CPI

The negative returns in 2007-08 and 2008-09 have offset positive returns in recent years, with a five-year average annual return after inflation of-3.26 per cent per annum.

Net Assets

Table 3: Five-year Summary of Net Assets as at 30 June

Market PerformanceFrom an investment perspective, 2011-12 was a year of two parts with poor returns in the first six months and signs of recovery over the last six months. Investment markets were adversely affected by concern regarding the ability of countries such as Greece to service their debt, combined with signs that China’s pace of economic growth was starting to slow. Overall, it was a year when good news was hard to sustain and investors remained very cautious. Australian stocks dropped 7 per cent for the financial year to 30 June 2011, while unhedged global shares fell approximately 2 per cent. The Australian dollar generally maintained its position against most major currencies.

Net assets represent the value of the fund after taking into account contributions, investment returns, benefit payments and other expenses made throughout the year. Table 3 details the net assets of the fund over the last five years.

During the year, net assets increased from $736.6 million to $750.9 million, partly due to an increase of around $10 million in the market value of investments.



Investment

Returns

Investment

Choices

InvestmentsNo reserve is held and the net earnings of the fund are distributed among members to the extent possible.

Returns for superannuation accounts are calculated and applied weekly, while pension accounts are calculated and applied monthly. The current and historical NTGPASS investment returns are published on the NTGPASS website.

Members have six investment options from which to choose. Members are able to change (switch) the option in which their accumulation account is invested.

Superannuation members can choose one option for their account balance and another option for their future contributions. Where superannuation membersdo not choose an investment option, their member accounts continue to be invested in the default (Growth) option. Pension members are required to choose at least one investment option as there is no default option for the pension product, but can choose up to six.

The majority of NTGPASS superannuation members remain in the Growth investment option. Table 4 shows the distribution of member funds across investment choices for member accounts as at 30 June 2012.

Table 4: Member Investment Choice

Investment OptionSuperannuation Accounts

% of fundsPension Accounts

% of funds

Managed Cash 5.33 21.29Conservative 4.45 15.45Cautious 4.75 20.30Growth (default) 80.95 39.74Assertive 2.14 0.76Aggressive 2.38 2.46Total 100 100Note: Includes creditors who have ceased employment but not claimed their benefit.

A total of 295 requests for superannuation account investment switches and 24 requests for pension account switches were processed during the year.

In developing the investment options, the Trustee has determined a pre-mixed asset allocation for each option containing a different mix of growth assets (property and shares) and defensive assets (fixed interest and cash).

To improve diversity and reduce risk, a low correlation and a multi-asset strategy were introduced into most superannuation options in 2011-12. The board will look at introducing these strategies into the pension portfolio when the opportunity arises.

Each investment option has its own return and risk objective to assist members to choose the investment option with the asset allocation that best suits their personal circumstances and tolerance towards investment risk.


14


The return objective is the net return (that is, after fees and taxes) that theoption is expected to achieve above the rate of inflation (as measured by the increase in CPI) over rolling five-year periods. For example, the return objective for the Growth option is expected to be at least 3 per cent higher than inflation, when measured over a five-year period.

The risk objective is expressed as an average number of years before theoption is expected to have a negative return. For example, the Growth option is expected, on average, to have a negative return once in every four years.

Table 5 details the return and risk objective and the pre-mixed asset allocation for each of the six investment options as at June 2012.


16




Return and Risk Objectives

2011-12 is the first year that risk and return objectives are measurable for superannuation options (in addition to the Growth option) indicated below. For the options which can be measured over the five-year period, return objectives have not been met, while the risk objective has only been met for the Growth option.

Table 6: Risk and Return Investment OptionObjectives Managed Cash

Return Objective

5-Year average

Objective Met Risk Objective Result

Objective Met

CPI + 0.5% N/A N/A low probability N/A N/AConservative CPI + 2.0% 3.11% No 1 in 7 years N/A N/A

Cautious CPI + 2.5% 2.27% No 1 in 4.5 years 2 in 5 years

No

Growth (default) CPI + 3.0% - 0.05% No 1 in 4 years 3 in 26 years Yes

Assertive CPI + 3.5% - 0.57% No 1 in 3.5 years 2 in 5 years

No

Aggressive CPI + 4.0% - 1.86% No 1 in 3 years 3 in 5 years

No

Figure 1: Rolling Five-year Real Return

Growth OptionThe majority of members’ accounts are invested in the Growth (default) option, which allocates approximately 75 per cent of the invested amounts to growth assets (shares and property) and 25 per cent to defensive assets (cash and fixed interest). As noted in Table 5, the Trustee’s return and risk objective for this option is to achieve a net return greater than CPI plus 3 per cent over rolling five-year periods and to limit the probability of a negative return to one year in every four years, on average. The key drivers to achieve the objective are the strategic asset allocation (to growth versus defensive assets) and the performance of the underlying investment markets in which these assets are invested.

Figure 1 shows performance against the return objective for the Growth option over the life of the NTGPASS fund. It illustrates that, when measured on this basis, the fund has met the return objective for the majority of the time. However, returns were not sufficiently strong in recent years to offset the negative returns in 2007-08 and 2008-09, and as a result the performance target was not met in 2011-12.

Real return (above CPI) % 12

10

8

6

4

2

0

- 2

- 41991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012


18


Figure 2: Frequency of Negative Return

Figure 2 shows performance against the risk objective for the Growth option over the life of the NTGPASS fund, demonstrating that the fund has exceeded expectations, with only three negative returns in 26 years.

Return %

20

15

10

5

0

- 5

- 10

- 15

- 20

Investment Manager Structure

Year to 30 June

In 2005, following a select tender process, MLC was appointed to provide advice on investment issues and to manage the fund’s investment portfolio.

In its role as consultant to the board, MLC advises the board on investment objectives and strategies, and selects and monitors investment managers who manage the funds. MLC appoints investment managers with complementary styles across different asset classes such as international and Australianshares, property and fixed interest securities. This style of management creates a well-diversified portfolio that helps minimise risk to produce positive long-term returns.

Another function performed by MLC is portfolio re-balancing, to bring the actual asset mix in line with the target allocation. MLC aims to keep the actual asset allocation of each investment option in the fund within plus or minus 5 per cent of the board’s target allocation. The asset allocation ranges are continually monitored by the board to ensure they are within the board’s targets.

As at 30 June 2012, MLC’s investment structure utilised 37 investment managers (excluding the multi-manager private market investments). MLC’s managershold around 2000 bonds and are invested in shares in around 1500 different companies across 60 industries and in over 40 countries.

During the year MLC announced a merger with JANA Investment Advisers (JANA). While MLC has owned JANA since 2000, the two organisations have operated independently. This merger will bring the two organisations together under the JANA name and will create the largest implemented consulting firm in Australia with some $24 billion under advice. The major initial benefit willcome from the increased research and investment capabilities of the combined organisation.

There will be no changes to NTGPASS products or services as a result of this merger but the scheme will benefit from the broader range of technical and analytical skills.



Performance Review

Investment Governance

In line with good governance practices, the STB engaged Cumpston Sarjeant Pty Ltd to conduct a triennial review on MLC in respect of its role as investment manager for NTGPASS, including:

• review of the investment performance of each asset class against a range of benchmarks including index results and industry competitors; and

• review of investment performance of each investment option against the stated investment goals for that option.

The report dated February 2012 concluded that:

• MLC asset sector returns generally track relevant indices quite closely;

• MLC’s investment performance for growth and defensive investment options neither consistently outperforms or consistently underperforms either its peers or the relevant indices; and

• MLC consistently has high quality communication of their strategies.

The next review is due to be conducted in 2015.

The STB is committed to act in the long-term interests of NTGPASS members and have engaged Regnan, an investment governance company, to provide specialist research and advice to the fund. Regnan researches environmental, social and corporate governance (ESG) risks to the long-term sustainability of Australian companies listed on the ASX 200. The Regnan model is unique in that it engages in proactive, constructive and confidential dialogue with companies on ESG issues.

During the year, Regnan undertook 110 engagements with 67 individual companies and logged 229 distinct topics. Corporate governance was thesole topic engaged on in 32 cases and environment in 15, whereas social risks were the sole topic on only three occasions. In 13 instances, topics across the ESG spectrum were raised. Main topics were remuneration, climate change and ESG disclosures. Climate change grew significantly as a discussion topic, being raised 38 times compared with 11 in the previous year.

Regnan has significantly increased engagement at director level, in keeping with its objective of further developing capacity for influence. The number of face-to-face meetings with directors increased from 26 in 2010-11 to 41 in 2011-12.


20


Table 7 shows the investment managers used by MLC under each asset class as at 30 June 2012.

Table 7: Investment Managers Asset Class Investment Managers

Australian shares Balanced Equity ManagementVanguardJCP Investment PartnersDimensionalMaple-Brown AbbottNorthcape CapitalNorthward CapitalWallara Asset Management

Global shares Capital InternationalCarnegie Asset ManagementDimensionalHarding LoevnerMondrian Investment PartnersSands CapitalTweedy, BrowneWalter Scott

Listed property LaSalle Investment ManagementMorgan Stanley Investment ManagementResolution Capital

Diversified debt Antares CapitalUBS Asset ManagementGoldman SachsWellingtonRogge Global PartnersDeutsche BankPrinciple Global InvestorsAmundiFranklin TempletonPIMCOWR Huff Asset ManagementOaktree Capital ManagementShenkman Capital ManagementStone Tower Capital

Low Correlation Strategy Bridgewater AssociatesNephila CapitalBalestra Capital

Multi-asset Strategy Ruffer Investment CompanyPyrford International

2 100 1 453Compliance with legislative processing timeframes 100% 100%Number of NTGPASS and NTSSS lost member accounts 5 500 3 984Seminars held 20 15Stakeholder satisfaction1 ≥ 5 5Average days to make benefit payments:

– from date of receipt of all information 30 10– where there is a delay in the receipt of information2 30 20



Scheme Overview

Operational Performance

Scheme PerformanceNTGPASS is established by the Superannuation Act (the Act), which sets out the arrangements for administration and management of the scheme. TheNTGPASS Rules are established by way of a schedule to the Act and contain administrative instructions regarding contributions and benefits applicable under the scheme.

NTGPASS is a defined benefit scheme that provides a lump sum benefit upon resignation, age retirement or retrenchment. Lump sum benefits generally comprise two components, a member accumulation component and aTerritory-financed component. The member component is made up of member contributions, rollovers and investment earnings. Members are required to contribute between 2 per cent and 6 per cent of their salary to the fund.

The Territory-financed component is calculated according to a formula based on the member’s length of membership in the scheme, final average salary and contribution rate. This component is unfunded, meaning it is only paid by the Territory when members claim their benefit (generally after ceasing employment with the Territory public sector). Members over preservation age (currentlyage 55) who have retired from the public sector can elect to receive their superannuation benefit as an income stream in the form of a pension, rather than a lump sum.

NTGPASS members are also entitled to a Territory-financed benefit from the NTSSS. The NTSSS is a non-contributory lump sum scheme that provides a 3 per cent productivity payment for each year of membership.

Other publications (primarily the Member Information Book) are available, which provide more information on how NTGPASS works.

The following table reports operational performance of the office in its administration and management of the scheme. It shows the actual performance against targets, some of which are also published in the Northern Territory Treasury Annual Report.

Table 8: Performance Measures Performance Measures Benefits processed

2011-12Target

2011-12Actual

1 Stakeholders are the Treasurer, Trustee and superannuation scheme members. Measures range from a rating of 1: extremely dissatisfied to 6: extremely satisfied.

2 All necessary information from the member and the employing agency must be received before a benefit can be paid.

During the year, the office responded to approximately 5500 member enquiries. The most common contact with members related to quote requests, lost members, scheme rules and to update member records.

Type of Benefit Paid

2012 2011

Number ofMembers Total Paid

Number ofMembers Total Paid

Superannuation

Resignation

Age retirement

Retrenchment

Invalidity

Death Transfer

Retained

Annuity bonus

TotalPension

$M

179 23.4

192 73.16

5 1.02

10 3.94

6 2.65

6 1.87

418 49.41

0 0.00816 155.46n/a 7.25

$M

339 31.28

150 56.95

7 1.92

12 3.10

5 2.70

1 0.88

420 38.30

3 0.03937 135.16n/a 4.7

Type of Contribution

2012 2011Number of Value of

Contributors ContributionsNumber of Value of

Contributors Contributions

Superannuation

Compulsory

Voluntary:

– active

– retained

Salary

sacrifice

Rollovers

Co-contribution

Spouse contribution

Total

$M

4 285 18.92

71 0.21

49 0.74

756 9.80

544 53.92

681 0.25

15 0.026 401 83.86

45 22.09

$M

4 573 19.12

82 0.79

51 0.73

801 10.19

1 182 59.60

924 0.39

21 0.067 634 90.88

51 19.72


22


Benefit Payments

Table 9: Total Benefits Paid for the Year Ended 30 June

Table 9 illustrates the different categories of benefits paid. Of members leaving Northern Territory Public Sector (NTPS) employment, age retirement was the most common type of benefit category.

ContributionsTable 10: Total Contributions Received for the Year Ended 30

June

Note: Pension benefits paid include regular payments as well as lump sum withdrawals.

During the year, 816 lump sum benefits were paid to members, totalling$155 million. This is an increase of $20 million (15 per cent) from last year.

Table 10 shows the number and value of contributions received into the fund.

Note: Pension contributions do not include additional contributions made by existing pension members.

In 2012, there was a decrease in most contributions received into the fund, attributable to the current uncertainty surrounding investment returns.



Information Seminar

s

Membership Profile

Figure 3: Membership Since the Closure of NTGPASS in August 1999

A total of 15 seminars and presentations were held in Darwin, Casuarina, Palmerston, Alice Springs and Katherine and were attended by around440 members. This is a decrease on the previous year, when two rounds of seminars were held. While desirable, work priorities do not always allow for a second round of presentations each year. Surveys were conducted at each seminar, with results indicating a high level of satisfaction with the quality of information presented at the seminars.

During 2011-12, seminars focused on recent investment performance and making investment choices, member benefits and products, recent and proposed reforms and the current superannuation environment. Details of the new opt-out provisions, including transition to retirement pension options, were also explained. As in previous years, the seminars were coordinated and run by the Superannuation Office with assistance from MLC, with Centrelink providing an overview of its Financial Information Service.

The Superannuation Office component of the presentations can be viewed on the Seminar page of our website.

When active members cease NTPS employment (or opt out of the scheme), they may choose to retain some or all of their NTGPASS benefit in the fund. Consequently, as the active membership declines, the retained membership generally increases.

Figure 3 illustrates the decline in active NTGPASS membership since the scheme closed to new members in August 1999. In the financial year immediately prior to scheme closure, there were around 12 000 active members.

Members (000)

16

14

12

10

8

6

4

2

01999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Active members Retained members Total members

During the year, active membership of NTGPASS decreased by 7 per cent to4109. The number of retained members also decreased by 3 per cent to 4350.

Active MembersActive members of NTGPASS are those members still employed by the NTPS and who will be eligible to receive a Territory-financed benefit when they leave employment. Table 11 illustrates the changes in active NTGPASS membership.

2012 2011Active members at beginning of period Less exits

– resignation– age retirement– retrenchment– invalidity– death– transfer– opt out

Total exitsMembers at 30 June

4 416

114124

5853

48307

4 109

4 726

136148

612

71-

3104 416

Entity1 Name 2012 2011Batchelor Institute of Indigenous Tertiary Education Charles Darwin UniversityDarwin Port CorporationDepartment of Business and Employment Department of Children and Families Department of Construction and Infrastructure Department of Education and Training Department of HealthDepartment of Housing, Local Government and Regional ServicesDepartment of JusticeDepartment of Lands and PlanningDepartment of Natural Resources, Environment, The Arts

and Sport

Department of Resources Department of the Chief Minister Legal Aid CommissionLegislative AssemblyMenzies School of Health Research Northern Territory TreasuryOffice of the Commissioner for Public Employment Police, Fire and Emergency ServicesPower and Water Corporation Tourism NTOther2

Total

293720

2195484

1 057859

95260120208

1407111101445

9462275

1317

4 109

344125

2325583

1 135927106280143221

155731112144610

489293

1318

4 416


24


Table 11: Active NTGPASS Members

NTGPASS active membership reduced from 4416 to 4109.

Table 12: Active NTGPASS Membership by Entity

Membership by EntityActive membership is widely distributed across the Northern Territory public sector, detailed in Table 12.

1 Entities listed are those as at 30 June 2012.2 ‘Other’ includes the Northern Territory Electoral Commission, Auditor-General’s Office, Land Development

Corporation, Ombudsman’s Office and Aboriginal Areas Protection Authority.

Around 49 per cent of active members are employed in the education and health sectors.

Contribution Rate

2012 2011Number ofMembers Total

Number ofMembers Total

2 per cent of salary





%

304 7.4

106 2.6

123 3.0

204 5.0

3 372 82.0

%

325 7.4

123 2.8

135 3.1

222 5.0

3 611 81.7



Table 13: Member Contribution Rates

Member Contribution RatesActive members can maximise the Territory-financed component of their NTGPASS benefit by contributing at a higher contribution rate. Member contribution rates generally increase with age. As members approach retirement they tend to increase their contribution rates to maximise their final NTGPASS age retirement benefit.

Table 13 shows the number of members contributing at different rates.

82 per cent of active members choose to contribute at the highest rate of6 per cent.

Figure 4: Membership by Age and Gender

Membership by Age and GenderMembership by age and gender is illustrated in Figure 4. Women continue to represent the majority of active members at 62 per cent of the total membership.

Members 1400

1200

1000

800

600

400

200

0<30 30-39 40-49 50-59 60+

Age (years)Male Female

The majority of men and women are in the 50 to 59 year age group.

2012 2011Retained members at beginning of period Add new members

– retained members– spouse accounts– family law retained benefit

Less exits– retained members– spouse accounts– family law retained benefit

Retained members at 30 June

4 505

12623

27952

4 350

4 462

33871

2976-

4 505

2012 2011Pension members at beginning of period Add new membersLess exitsPension members at 30 June

11445

9150

6851

5114


26


Retained and Spouse Members

Table 14: Retained NTGPASS Members

Retained members of NTGPASS include members who have retained all or part of their benefit in NTGPASS when they ceased active membership, as well as spouse account holders and non-member spouses who retained all or part of their family law benefit in NTGPASS. Retained members are not required tomake contributions but can do so under the NTGPASS Rules.

Table 14 illustrates the changes in retained NTGPASS membership. Usually, as active membership decreases, retained membership increases.

Pension Members

Table 15: NTGPASS Pension Members

The number of retained members decreased from 4505 members to 4350.

NTGPASS pensions have been available to members since March 2008, with the first pension payments commencing in April 2008. Table 15 shows the change

in the number of members.

Complaints

The number of members utilising the pension product increased from 114 to 150.

The Superannuation Office has a complaints management policy and internal complaints management framework. The objective of the policy is to ensure that complaints are dealt with fairly, promptly and in an efficient and confidential manner. One complaint was received and resolved during 2011-12.



Administration and Management of NTGPASS

GovernanceThe Superannuation Act requires:

• the Commissioner of Superannuation to administer NTGPASS;

• the STB to act as the Trustee of the fund; and

• the Superannuation Review Board to advise the Treasurer on proposed amendments to NTGPASS Rules and to hear appeals against decisions of the Commissioner of Superannuation.

Figure 5: NTGPASSAdministrative Structure Superannuation

Review BoardCommissioner of Superannuation


Northern TerritorySuperannuation Office

Policy OperationsFinance andInvestments

The Superannuation Act provides that the costs of day-to-day administrationand management of NTGPASS are paid by the Territory. These costs include the salaries of Superannuation Office staff, actuarial fees, office accommodation, system administration costs and board expenses relating to sitting fees, travel expenses and board member education.The Superannuation Act requires the fund to pay expenses incurred by or on behalf of the Trustee in relation to the management of the fund. These expenses include investment management fees and costs for Regnan and the fund’s tax agent.

The Superannuation Office provides secretariat services to the STB and the Superannuation Review Board. These services include recording minutesof meetings, preparation and distribution of board papers, financial and investment reports, travel arrangements, payment of sitting fees to board members and arranging attendance at educational seminars and conferences for board members.

Payments to board members are made in accordance with a determination under the Assembly Members and Statutory Officers (Remuneration and Other Entitlements) Act 2006 (AMSO), which sets the rates payable to board members for attendance at board meetings, travel and other board-related activities. Remuneration is not payable where a board member is also an employee of the NTPS, the Commonwealth or a state public service.Commissioner of SuperannuationSection 4 of the Superannuation Act provides for a Commissioner of Superannuation to be appointed by the Administrator. The statutory role of the


28


Northern Territory Superannuatio

n Office


Commissioner is to administer NTGPASS and to undertake and manage the investments of the fund as directed by the STB.

Following a period of acting in the role, John Montague was appointed as Commissioner of Superannuation in March 2012.

The Commissioner of Superannuation manages the Northern Territory Superannuation Office, which is a division of Northern Territory Treasury, a Northern Territory Government agency. The primary role of the Superannuation Office is to:

• provide superannuation policy advice to the Territory;

• administer the Northern Territory’s public sector superannuation schemes and NTGDIS;

• manage the investments of the Northern Territory’s public sector superannuation funds as directed by the trustees of the various schemes; and

• provide secretariat services for the Superannuation Review Board and the STB.

Further information on the Northern Territory Superannuation Office can be found in the Northern Territory Treasury Annual Report.

The Superannuation Trustee Board (STB) is a body corporate established by section 8A of the Superannuation Act. The functions of the board are to act as trustee of the fund and to direct the Commissioner of Superannuation in managing the investments and the fund on its behalf. Additionally, the board may direct the Commissioner to:

• engage investment managers, actuaries, financial and legal advisers and other experts in relation to the management of the investments of the fund; and

• invest the monies of the fund in investments that the board considers appropriate.

With the Minister’s approval, the STB may also administer any other superannuation scheme and manage investments of the fund for any such scheme.

Last year it was reported that the STB replaced the previous Superannuation Investment Board. Legislative amendments to formalise the structure of the expanded STB have now been completed. Commencing 27 April 2012, the legislation provides for a nine-member board representing three schemes:

• NTGPASS;

• LAMS Scheme; and

• NTPSBS.

Representatives from the previous boards became the initial members of the expanded STB.

The membership of the STB includes the Under Treasurer, a chairperson, a deputy chairperson and six nominated persons. Of the nominated persons, two must be nominated by the Under Treasurer, two must be nominated by unions,



one must be nominated by the Commissioner of Police and one by the Police Association. All members (except the Under Treasurer) are appointed by the Minister.

Members of the Superannuation Trustee Board at 30 June 2012:

Ms Kathleen Robinson FCPA BBUS (Acc) – ChairpersonKathleen is Deputy Under Treasurer Corporate and Information Services for the Department of Treasury and Finance. She has had a long career with the NTPS, including extensive experience in senior positions in Shared Services and Northern Territory Treasury.

Kathleen was appointed as Chair of the former Superannuation Investment Boardon 22 March 2007. She was re-appointed as Chair (now Chairperson) of the STB on 22 March 2012, for a five-year term.

Ms Marianne McAdie BBUDP – Deputy ChairpersonMarianne is currently Director Finance and Budgets, Tourism NT. She joined the NTPS in 1978 and has previously held positions within Northern Territory Treasury.

Marianne was appointed as Acting Chair of the former Superannuation Investment Board on 22 March 2007. She was re-appointed as Acting Chair (now Deputy Chairperson) of the STB on 22 March 2012, for a five-year term.

Mr Michael Martin OAM FCPA BA BCom Grad Dip (Admin)AdvDip (Superannuation) – Member, nominated by Unions NTMichael is a former senior public servant with both the Commonwealth and Territory governments and has been involved in the accounting and finance environment for over 30 years. He is currently Chairman of the Larrakia Trade Training Centre, a partner with a local Territory consultancy firm and a company director.

Michael was appointed as Member of the former Superannuation Investment Board on 11 May 2004. He was re-appointed on 11 May 2009 and his position carries over as Member of the STB for five years from that date.

Ms Michelle Kempster – Member, nominated by Unions NTMichelle is the Data Migration Manager for the Northern Territory Government Asset Management System Project with the Department of Infrastructure. She joined the NTPS in 1991.

Michelle was appointed as Alternate Member of the former Superannuation Investment Board on 11 May 2004. She was re-appointed on 11 May 2009 and her position carries over as Member of the STB for five years from that date.

Mr Alex Pollon GAICD – Member, nominated by the Under TreasurerAlex is the General Manager of the Northern Territory Treasury Corporation. He joined the NTPS in 1998 and has more than 18 years experience in the Australian financial markets industry. Alex is a member of the Australian Institute of Company Directors and has been granted Australian Financial Markets Association dealer accreditation.

Alex was appointed as Member of the former Superannuation Investment Board on 1 April 2009. His position carries over as Member of the STB for five years from that date.


30


Ms Vicky Coleman BBUS (Acc) CPA GAICD – Member, nominated by theUnder TreasurerVicky is Manager Financial Administration of the Northern Territory Treasury Corporation. She is a Certified Practising Accountant, has completed the Australian Institute of Company Directors’ course, the Chartered Secretaries Australia’s Certificate in Governance and Risk Management, is a member of the Finance and Treasury Association and serves on a number of external boards. She joined the NTPS in 2000.

Vicky was appointed as Alternate Member of the former Superannuation Investment Board on 1 April 2009. Her position carries over as Member of the STB for five years from that date.

Jennifer Prince – Member, Under Treasurer (to August 2012)Jennifer Prince held the position of Under Treasurer from 2002 to August 2012. The Under Treasurer became a member of the STB on 27 April 2012 to represent members of the Legislative Assembly Members’ Superannuation scheme.Alan Tregilgas was appointed to the position of Under Treasurer in August 2012.

Mr Mark McAdie BEc M Pub Pol Grad Cert App Mgt – Member, nominated byCommissioner of PoliceMark is a former Assistant Commissioner, Crime and Support Services of the Northern Territory Police. He retired on 4 August 2010 after 35 years of service.

Mark is also Chair of the board of Northern Territory Police Legacy, President of Beat the Heat NT (Inc) and President of the Northern Territory Police Museum and Historical Society (Inc). He has previously served on the executive of the Northern Territory Police Association (NTPA), the committee of the Duke of Edinburgh Award (NT) (including several terms as Chair) and the Duke of Edinburgh Award Australian Coordinating Council.

Mark previously held an ongoing appointment as Chairman of Trustees of the NTPSBS (Police representative). His appointment carries over as Member of the STB from25 May 2012 for a period of five years.

Mr Gowan Carter – Member, nominated by Police AssociationGowan is a former Sergeant of the Northern Territory Police, who retired in 2008 after 32 years of service. Gowan was a long-term Executive Member of the NTPA.

Gowan was previously appointed as Trustee of the NTPSBS (member representative).His appointment carries over as Member of the STB until 8 August 2013.

Board Meetings



Superannuation Review Board

The Board met four times during the year. The meetings related to general business of the board and investment decisions of the fund. Representatives of MLC attended all the meetings to update the board on investment performance and present on contemporary investment topics.Conflict of InterestSection 8S of the Superannuation Act provides that a member of the board who has a direct or indirect interest in any matter being considered by the board must disclose the nature of that interest as soon as possible at a meeting of the board.

The disclosure of interest does not apply where a member of the board has a direct or indirect interest in a matter because they are a member of NTGPASS or if they are a member of an incorporated company with 25 or more members of which they are not a director.

The Board maintains a conflict of interest register as part of its best practice processes. At the commencement of each meeting, the members are required to sign the register and record any disclosure in the minutes of that meeting.

Where a disclosure is made in relation to a matter being considered, the members cannot take part in deliberations or decisions made on that matter and the member is disregarded for constituting a quorum on that matter.

During the year, there were no conflicts of interest registered.RemunerationThe current remuneration rate applicable to board members is set in the Statutory Bodies Classification Structure 2012, issued under AMSO. The rate is$304 per day or an hourly rate of one-fifth of the daily rate. In 2011-12 only one board member was entitled to receive sitting fees for board and conference attendance, and the total amount of remuneration received was $1495.

The Superannuation Review Board is established by section 9 of the Superannuation Act. The role of the board is to review decisions or actions of the Commissioner of Superannuation (on request or appeal of those whose benefits are affected by a decision or action of the Commissioner) and to advise the Treasurer, as the Minister responsible for superannuation matters, on amendments to the NTGPASS Rules.

The Superannuation Review Board comprises an independent chair, a member nominated by Unions NT, a member nominated by the NTPA and a member nominated by the Treasurer. The nominee of the NTPA participates in an appeal hearing only where the appeal concerns a member of the Northern Territory Police. The nominee of Unions NT does not participate in Police appeal matters.


32


Compliance with Commonwealt

h Superannuatio

n Legislation

Audits

The current members of the Review Board are:

Chair Ms Jane LargeActing Chair Mr Christopher Hosking

Member nominated by Unions NT Mr Lynton SherryAlternate Member Mr Rod SmithMember nominated by NTPA Mr Gowan Carter Alternate Member Mr Andrew Smith

Member nominated by Minister Mr Robert Bradshaw Alternate Member Mr Stephen Herne AppealsSection 46(5) of the Superannuation Act provides for a member or other persondissatisfied by a decision of the Commissioner of Superannuation to request the Commissioner to reconsider the decision.Section 47(1) of the Superannuation Act allows a person to appeal to the Superannuation Review Board in relation to a decision or action of the Commissioner, or the Commissioner’s failure to make a decision or take action.

No appeals were lodged with the Review Board during 2011-12.

The superannuation industry is regulated by an extensive and diverse legislative framework. Commonwealth legislation includes the superannuation industry supervision framework, the resolution of complaints system, superannuation guarantee regime, superannuation contributions regime and the taxation of superannuation benefits and superannuation entities.

Most state and territory public sector schemes, including NTGPASS, are regulated under their own legislation and have been classified as exempt public sector superannuation schemes under the Superannuation Industry (Supervision) Act 1993 (Cth) (SIS). SIS legislation treats exempt public sector superannuation schemes as complying funds for concessional taxation and superannuation guarantee purposes.

A Heads of Government Agreement requires NTGPASS to conform to the principles of SIS and the Commonwealth’s retirement income policies. As a result, NTGPASS is not regulated under SIS but is required to comply with most other Commonwealth superannuation legislation, for example, superannuation surcharge and family law.

The results of the annual compliance audit and the NTGPASS Annual Report are provided to the Commonwealth each year to assist in its monitoring of NTGPASS under the Heads of Government Agreement.

The Northern Territory Auditor-General’s Office provides audit services to both the scheme and the fund. Section 43 of the Superannuation Act requires the fund’s financial statements to be audited by the Auditor-General and tabled in the Legislative Assembly. The audited financial statements are presented from page 33.

The audit services also include an annual compliance audit to ensure the scheme complies with the principles of SIS and other relevant legislation. Todate there have been no significant compliance issues arising from these audits.



Actuarial Services

Section 45 of the Superannuation Act requires an actuarial review of NTGPASS to be undertaken every three years. The review examines the scheme’s experience during the previous three years, and prepares projections of the Territory-financed cash flows and accrued liabilities.

The most recent actuarial review of the scheme was undertaken as at30 June 2010 by PricewaterhouseCoopers Securities Ltd. A summary of the review is presented on page 54 with the financial statements. The next review is due in 2013.

The actuarial estimates of future cash flows to fund the Territory-financed component of NTGPASS benefits and accrued liabilities of the scheme (based upon nominal values) have been updated based on 2011-12 information and are shown in Table 16.

Table 16: Estimated Year to 30 JuneNTGPASS Territory-financed

Estimated Cash Flow$M

Estimated Accrued Liability$M

Benefit Costs 2015 79.3 821.62020 94.4 788.82025 95.7 652.12030 83.8 456.82035 61.9 255.02040 35.3 99.12045 11.4 20.12050 1.2 1.0

In addition to undertaking actuarial reviews, the actuary provides advice on superannuation policy matters, including advice on the offset provisions to apply where a member is retired on the grounds of invalidity and is entitled to workers compensation benefits for loss of earning capacity. The actuary also assists with advice in relation to taxation deductions available to the fund.

The Territory has a panel contract for the provision of actuarial services to Northern Territory Treasury and ad hoc actuarial advice to the Northern Territory Government. On the panel are Cumpston Sarjeant Pty Ltd, PricewaterhouseCoopers Securities Ltd and Bendzulla Actuarial Pty Ltd. The contract commenced on 1 July 2007 for a six-year period.

Actuarial services to the scheme are provided by PricewaterhouseCoopers Securities Ltd.




34


Financial Statements



Notes to the Financial Statements for the year ended 30 June 2012Overview of the Financial StatementsForm and ContentFinancial statements for superannuation funds are prepared in conformity with Accounting Standard AAS25 Financial Reporting by Superannuation Plans. To reflect the overall change in the value of assets available to pay superannuation benefits to members, AAS25 requires that periodic changes in the net market value of assets be recognised as revenue. AAS25 provides for an alternative reporting format to that of other entities, namely:

• a statement of changes in net assets replaces the operating statement;

• a statement of net assets replaces the balance sheet; and

• a cash flow statement is not required.InvestmentsThe fund held investments of $763.8 million with MLC and $1.4 million with Super Loans Trust as at 30 June 2012. The investment with Super Loans Trust allows members access to low interest home loans and credit cards. Cash of approximately $6 million was held in the operating accounts for the day-to-day operations of the fund.Benefit PaymentsA benefit payment comprises the member’s accumulation account and, where applicable, a Territory-financed component. The Territory guarantees to meet the employer share of benefit entitlements as it arises, and transfersthe Territory-financed component to the fund at the time a benefit is paid. This funding method is known as emerging cost and is an appropriate way to meet benefits in a public sector scheme. The member accumulation account contains the member’s contributions and rollovers, accumulated with interest at thefund’s crediting rate on an annual basis. If applicable, benefit payments are reduced by the amount of the member’s surcharge debt account at the time the benefit is paid.Fund ExpensesExpenses paid by the fund relate to benefit payments, management expenses incurred in the investment of funds, membership of the governance advisory service and the provision of tax accounting services. All other administrative costs such as salaries, audit, actuarial, administration and operational costs are paid by the Territory.



Statement by the Superannuation Trustee BoardIn the opinion of the Board:

• the accompanying financial statements consisting of a Statement of Net Assets, Statement of Changes in Net Assets and Notes to the Financial Statements are drawn up to present fairly the financial position of the Northern Territory Government and Public Authorities’ Superannuation Scheme as at 30 June 2012 and the results of its operations for the year then ended in accordance with Australian Accounting Standards and other mandatory reporting requirements;

• the financial statements have been prepared in accordance with the requirements of the Superannuation Act as amended; and

• the scheme has operated in accordance with the provisions of the Superannuation Act as amended and in compliance with the requirements of the Superannuation Industry (Supervision) Act 1993 during the year ended 30 June 2012.

Chairperson Date: 28 September 2012

K ROBINSON

Member Date: 28 September 2012

A POLLON



Statement of Net Assetsas at 30 June 2012

Note 2012 2011

ASSETSCash and cash equivalents Units in life policiesSuper Loans TrustTerritory contributions receivable Other receivablesDeferred tax assetsTOTAL ASSETSLessLIABILITIESBenefits payable 4(a) Sundry liabilitiesProvision for surcharge contributions taxCurrent tax liability 7(c) Deferred tax liability 7(d) TOTAL LIABILITIES (excluding net assets available to pay benefits)NET ASSETS AVAILABLE TO PAY BENEFITS

$000

6 444763 858

1 41019 989

1021

791 804

33 4286

2 4442 0572 989

40 924750

$000

7 097748 775

1 40019 453

951

776 821

34 3496

2 514386

2 90840 163

736 658

The statement of net assets should be read in conjunction with the notes to financial statements.



Statement of Changes in Net Assetsfor the year ended 30 June 2012

Note 2012 2011

REVENUE Investment revenue InterestDistributions from investmentsMovement in net market value of investments 5

Contributions revenue Member contributions Surcharge payments received Government co-contributions Territory contributionsTransfers from other funds and rollovers

TOTAL REVENUE EXPENSESBenefits paid 4Disablement benefits Retirement benefits Withdrawal benefits Death benefits Pensions paid

Other expensesOther expensesSuperannuation surcharge contributions tax

TOTAL EXPENSES

Net change for the year before income taxIncome tax expense 7(b)Net change for the year after income tax

NET ASSETS AVAILABLE TO PAY BENEFITS AT THE BEGINNING OF THE FINANCIAL YEAR

NET ASSETS AVAILABLE TO PAY BENEFITS AT THE END OF THE FINANCIAL YEAR

$000

10 578257228

10 093

174 005

51 790136254

67 90353 922

184 583

162 7123 938

73 18575 6912 6477 251

338272

66

163 050

21 5337 311

14 222736 658

750

$000

58 261370134

57 757

170 44050 603

222393

59 60559 617

228 701

139 8653 095

56 98472 3842 6994 703

265139126

140 130

88 5716 338

82 233654 425

736 658

The statement of changes in net assets should be read in conjunction with the notes to financial statements.


Notes to the Financial Statements for the year ended 30 June 2012


1.Reporting EntityThe Northern Territory Government and Public Authorities Employees’ Superannuation Fund (ABN 67 738 128 022) is established under the Superannuation Act (as amended). The fund incorporates a member accumulation and a defined benefit component and operates for the purpose of providing benefits for or in relation to members under the Northern Territory Government and Public Authorities’ Superannuation Scheme Rules (asamended). Administration of the scheme is conducted by the Northern Territory Superannuation Office on behalf of the Trustee.

2.Basis of Preparationa) Statement of complianceThe financial report is a general purpose report that is prepared in accordance with Australian Accounting Standards (AAS) including AAS25, otherapplicable accounting standards, the requirements of the SuperannuationIndustry (Supervision) Act 1993 and Regulations and the provisions of theSuperannuation Act as amended.

International Financial Reporting Standards (IFRS) form the basis of Australian Accounting Standards issued by the Australian Accounting Standards Board (AASB). Certain requirements of AAS25 however differ from the equivalent requirements that would be applied under IFRS.

The financial statements were approved by the Trustee on 28 September 2012.

b) Basis of measurementThe financial statements are prepared on a net market value basis.

c) Functional and presentation currencyThe financial statements are presented in Australian dollars, which is the functional currency of the scheme.

Amounts have been rounded to the nearest one thousand dollars except where otherwise noted.

d) Use of estimates and judgementsThe preparation of financial statements requires the Trustee to make judgements, estimates and assumptions that affect the application of accounting policies and reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are viewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and any future periods affected.

There are no critical accounting estimates and judgments contained in these financial statements other than those used to determine the liability for accrued benefits, which are not brought to account but disclosed by way of note. The following significant accounting policies have been adopted in the preparation and presentation of the financial report.




3.Significant Accounting PoliciesThe accounting policies set out below have been applied consistently in these financial statements.

a) AssetsAssets are included in the statement of net assets at net market value as at reporting date and movements in net market value of assets are recognised in the statement of changes in net assets in the periods in which they occur.

The fund recognises financial assets on the date it becomes party to the contractual provisions of the asset. Financial assets are recognised using trade date accounting. From this date any gains and losses arising from changes in net market value are recorded.

Estimated costs of disposal are deducted in the determination of net market value. As disposal costs are generally immaterial, unless otherwise stated, net market value approximates to fair value.

The fund’s investments with MLC Implemented Consultants (MLC) are unitised and operate as units in pooled superannuation trusts. The fund’s investment with Super Loans Trust is identified as a unitised unlisted managed investment scheme. As such, both investments are valued at the redemption price at reporting date, as advised by the investment managers, and are based onthe net market value of the underlying investment. Unit values denominated in foreign currency are then translated to Australian dollars at the current exchange rates.

b) Cash and cash equivalentsCash comprises cash on hand and demand deposits. Cash equivalents are short term, highly liquid investments that are readily converted to known amounts of cash and are subject to an insignificant risk of changes in value.

c) Financial liabilitiesThe fund recognises financial liabilities on the date it becomes a party to the contractual provisions of the instrument.

Benefits payable comprises the entitlements of members who ceased employment with the employer sponsor prior to year end, but have not been paid by that date. Other payables are payable on demand or short time frames of less than 60 days.

The fund recognises financial liabilities at net market value as at reporting date with any change in net market values of the fund’s financial liabilities since the beginning of the reporting period included in the statement of changes in net assets for the reporting period. Net market value approximates to the amortised costs of the liability using effective interest rate method less estimated transaction costs.

As disposal costs are generally immaterial, unless otherwise stated, net market value approximates to fair value.




3. Significant Accounting Policies (continued)d) Accrued benefitsThe amount of accrued benefits has been determined on the basis of the present value of expected future payments, which arise from membershipof the scheme up to the reporting date. The figure reported below has been determined by reference to expected future salary levels and by application ofa market-based, risk-adjusted discount rate and relevant actuarial assumptions. The liability for accrued benefits is not included in the statement of net assets, but the liability at the latest measurement date is reported by way of note.In accordance with section 45ZA of the Superannuation Act, the actuarial review of the operations of the scheme was carried out as at 30 June 2010. In determining accrued benefits, it was assumed that rates of return will onaverage exceed the rate of general salary inflation by 2.5 per cent per year. The next triennial review is scheduled for 2013.

e) RevenueInterest revenueInterest revenue is recognised when the fund has established its right to receive the interest.

DistributionsDistributions from managed investment schemes are recognised as at the date the unit value is quoted ex-distribution and, if not received at reporting date, are reflected in the statement of net assets as a receivable at net market value.

Contribution revenue and transfersMember and contribution revenue is recognised on an accrual basis. Members contribute to the fund each pay period at an elected contribution rate of between 2 per cent and 6 per cent of their contribution salary. Member contributions are accumulated with investment returns in the fund.

Members may make additional contributions to their accumulation accounts by making voluntary contributions or entering into an approved salary sacrifice arrangement. Investment returns are applied annually to member’s accumulation accounts based on the earning rate of the fund. Member contributions and investment returns thereon are accumulated in the fund.

The Territory does not make direct contributions to the fund. Under section 29 of the Superannuation Act, all benefits are paid from the fund. Where a benefit contains a Territory-financed component, the Territory reimburses the fund for this amount at the time the benefit is paid. Thus, the employee component of benefits is met on a fully funded basis while the Territory-financed component of benefits is met on an emerging cost basis. This policy is reflected in the difference between the net assets available to pay benefits and the amountof the accrued benefits, as calculated by the actuary. Superannuationco-contributions from the Commonwealth are recognised on a cash basis as this is the only point at which measurement is reliable.




3. Significant Accounting Policies (continued)Co-contributions revenue from the Australian Taxation Office is recognised when the control and benefits of the funds from the revenue have transferred to the fund.

Movement in net market value of investmentsChanges in net market value of investments are recognised as income and are determined as the difference between the net market value at year end or consideration received (if sold during the year) and the net market value as at the prior year or cost (if the investment was acquired during the period).

f) Income taxThe superannuation scheme established under the Superannuation Act as amended is an exempt public sector superannuation scheme under the Superannuation Industry (Supervision) Act 1993 and is deemed to be a complying superannuation fund for the purposes of Part IX of the Income Tax Assessment Act 1936 as amended. Accordingly, the concessional tax rate of 15 per cent has been applied.

Income tax on benefits accrued as a result of operations for the year comprises current and deferred tax. Income tax is recognised in the statement of changes in net assets except to the extent that it relates to items recognised directly in members’ funds.

Current tax is the expected tax payable on the taxable income for the year using tax rates enacted or substantially enacted at the statement of net assets andany adjustments to tax payable in respect of previous years.

Deferred tax is calculated using the balance sheet method, providing for temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realisation of the asset using tax rates enacted or substantially enacted at reporting date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent it is no longer probable that a related tax benefit will be realised.

The expense (and any corresponding liability) is brought to account in the period in which the assessments are received by the Trustee and are properly payable by the fund.

g) Superannuation contributions (surcharge) taxThe fund recognises amounts paid or payable in respect of the surcharge tax as an expense of the fund. The expense (and any corresponding liability) is brought to account in the period in which the assessments are received by the fund and are properly payable by the fund.




3.Significant Accounting Policies (continued)No estimate has been made for the balance of any tax payable in respectof surchargeable contributions received by the fund during the current year as the Trustee is unable to determine this amount until receipt of applicable assessments in the following period.

h) Goods and services tax (GST)The fund is not registered for GST. Where GST has been applied, revenues, expenses and assets are recognised inclusive of GST. Receivables and payables in the statement of net assets are also shown inclusive of GST.

i) Issued standards not early adoptedA number of new standards, amendments to standards and interpretations are effective for annual periods commencing 1 July 2011 and have not been applied in preparing these financial statements. None of these is expectedto have a significant effect on the financial statements. The scheme does not plan to adopt this standard early and the extent of the impact has not been determined.

4.Payables2012 2011

(a) Benefits payable Member financed benefits Territory financed benefits

(b) Benefits payable movement Member financed benefits Territory financed benefits

(c) Benefits paidMember financed benefits Territory financed benefits

$000

13 43919 98933 428

$000

14 89619 45334 349

- 1 457 536

6661 7112 37

796 26667 367

163 633162 712

79 98757 501

137 488139 865




5.Movements in Net Market Values2012 2011

Investments held at the end of the financial year: Super Loans TrustUnits in pooled superannuation trustsUnits in pooled superannuation pension trustsTOTAL CHANGES IN NET MARKET VALUE

$000

88 9971 088

10 093

$000

- 51 55 825 1 983

57 757

6.Auditors’ RemunerationAudit services are provided by the Northern Territory Auditor-General’s Office at no cost to the fund.

7.Income Tax Expense2012 2011

a) Current tax expense Current income tax Current tax chargeAdjustments to current tax for prior periodDeferred income taxRelating to the origination and reversal of temporary

differencesINCOME TAX EXPENSEb) Income tax expenseTotal revenue less expenses before income tax Tax applicable at the rate of 15% (2011:

$000

7 229-

82

7 311

$000

5 690396

252

6 338

21 5333 230

88 57113 285

Tax effect of expenses that are not deductible in determining taxable income:Benefit payments 24 407 20 980Superannuation contributions surcharge 1 -Other non deductible expenses 1 -

Tax effect of income that are not assessable/deductible in determining taxable income:

Investment income - 1 513 - 8 668Member contributions and transfers in - 9 655 - 10 738Non-taxable employer contributions - 8 930 - 8 685Surcharge payments received - 20 - 33

Tax effect of other adjustments:Deduction for anti-detriment payments -12 -Notional premium deduction for death and disability - 192 - 195Over provision prior period - 396Exempt income - 6 - 4

Income tax expense 7 311 6 338




7. Income Tax Expense (continued)2012 2011

$000 $000c) Current tax liabilities/(assets) comprises:Balance at beginning of year 386 2 030Income tax paid – current period - 5 172 - 5 303Income tax paid – prior period - 386 - 2 426Current year’s income tax provision 7 229 5 689Under/(over) provision prior period - 396

-2 05

7 386d) Deferred tax liabilitiesThe amount of deferred tax liabilities recognised in the Statement of Net Assets at reporting date is made up as follows:Contributions receivable 2 999 2 918Accrued expenses - 1 - 1Unrealised capital gains - 9 - 9

2 989 2 908e) Deferred tax assetsThe amount of deferred tax asset not recognised in the Statement of Net Assets at reporting date due to the fact that it is not probable that it will be realised is made up as follows:Realised carried forward capital losses 2 831 2 831

8.Liability for Accrued Benefits and Funding Arrangementsa) Benefits payableBenefits payable include benefits in respect of members who ceased to be members prior to year end but had not been paid by 30 June 2012.

The amount of accrued benefits has been determined on the basis of the present value of expected future payments, which arise from membership of the scheme up to the reporting date. The accrued benefits value has been determined by reference to expected future salary levels and by application of market-based, risk-adjusted discount rate and relevant actuarial assumptions.

b) Accrued benefits2012 2011

Accrued benefits as at 30 June$M

1 738.79$M

1 522.89

c) Employer contributions tax receivableTo ensure fair and equitable treatment, a retrospective payment into the fund for employer contribution tax is being received. This tax is payable in respect of contributions paid by the Northern Territory Government to the fund for employees whose service commenced prior to 1 July 1983.




8.Liability for Accrued Benefits and Funding Arrangements (continued)d) Closure of schemeIn 1999 the Territory Government closed NTGPASS to new members. The superannuation arrangements that apply now require employees who commenced service on or since 10 August 1999 to nominate a superannuation fund to which employer superannuation (as required under superannuation guarantee legislation) is paid. Under the Superannuation Act, this means that they cannot become members of NTGPASS.

9.Vested BenefitsVested benefits are benefits that are not conditional upon continued membership of the scheme and include benefits that members are entitled to receive had they terminated their membership of the scheme at the reporting date. Vested benefits at a particular date represent the present value of benefits payable in respect of former members and the benefits payable to current members on voluntary withdrawal from scheme membership at that date.These benefits include the payment of member contributions accumulated with investment returns.

The accrued employer-financed component is partially vested after five years of membership and fully vested after ten years and also on retrenchment or after attaining age 55.

Benefits credited to former members of the Northern Territory Electricity Commission Superannuation Scheme for Trade Categories and, where relevant, benefits payable in consequence of other transfer arrangements entered intoby the scheme have been taken into account in determining vested benefits.

2012 2011

Vested benefits as at 30 June Net assets as at 30 June

$M1 708.93

750.88

$M1 635.97

736.66

10. Related Partiesa) SponsorThe Superannuation Act provides that costs incurred by the Superannuation Trustee Board such as brokerage fees, costs for investment advice, membership of Regnan (a governance advisory service) and other expenses relating to the functions of the board in the investment of the scheme’s funds are paid directly by the fund.

Costs for the day-to-day management of the scheme are paid by the Territory and include salaries, sitting fees (where applicable), audit, actuarial, office accommodation, administration and operational costs.




10. Related Parties (continued)b) TrusteeThe Trustee of the fund is the Superannuation Trustee Board (STB). Membership of the STB was expanded during the year to nine members. The LAMS representative (J Prince) commenced on 27 April 2012 and the PSBS representatives (M McAdie and G Carter) commenced on 25 May 2012.

Members at 30 June 2012:

Kathleen Robinson Chairperson

Marianne McAdie Deputy Chairperson

Michael Martin Member

Michelle Kempster Member

Alex Pollon Member

Vicky Coleman Member

Jennifer Prince Member

Mark McAdie Member

Gowan Carter Member

One member was paid STB sitting fees for services during the 2011-12 financial year ($1495). Where a board member is also a member of the fund, member contributions are made on an arm’s length basis.

11. Financial InstrumentsInvestments of the fund (other than cash held for liquidity purposes) comprise units in collective investment products, such units in pooled superannuation trusts and unlisted managed investment schemes. The Trustee has determined that this type of investment is appropriate for the fund and is in accordance with the fund’s investment strategy.

The Trustee has overall responsibility for the establishment and oversight of the fund’s risk management framework. The Trustee established risk management policies to identify and analyse the risks faced by the fund and set appropriate risk limits and controls, monitor risks and adherence to risk limits. Monitoring of risks includes those managed by the investment manager, MLC Implemented Consulting (MLC) appointed in 2005.

The Trustee regularly reviews the risk management policies to ensure changes in market conditions and the fund’s activities are reflected.

The fund’s investments are exposed to a variety of investment risks, such as market risk and liquidity risk. This note presents information about the fund’s exposure to these risks, the fund’s objectives, policies and processes for measuring and managing risk.




11. Financial Instruments (continued)MLC reports regularly to the STB and provides a formal risk management statement. Other reports from MLC include:

• details of the controls it has in place to monitor compliance with the fund’s investment strategy;

• current asset allocations against target positions;

• investment performance against benchmarks; and

• fund manager compliance reporting.

The following section identifies and outlines the management of risks faced by the fund. MLC manages these risks on behalf of the fund.

Market riskMarket risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: currency risk; interest rate risk; and other price risk. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return on investment. Also to aid in mitigating market risk, MLC undertakes extensivedue diligence prior to the appointment of investment managers and monitors ongoing investment manager performance.

Currency riskCurrency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates.

The fund is exposed to currency risk on financial instruments that are denominated in a currency other than Australian dollars. Consequently, the fund is exposed to the risk that exchange rates may change in a manner thatadversely affects the value of the fund’s investments held in foreign currencies.

Interest rate riskInterest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

The majority of the fund’s financial assets are non-interest-bearing with onlycash being directly subject to interest rate risk. As a result, the fund is subject to limited exposure to interest rate risk due to fluctuations in interest rates. All the fund’s cash assets as at 30 June 2012 are held with National Australia Bank and Territory Insurance Office.

An increase (or decrease) of 1 per cent in interest rates at the reporting date would have increased (decreased) the benefits accrued as a result of operations and net assets available to pay benefits by the amounts shown below.




11. Financial Instruments (continued)1% movement in interest rates

BalanceBenefits accrued as a

result of operationsNet assets available

to pay benefits$000 $000 $000

30 June 2012 6 444 ± 64 ± 6430 June 2011 7 097 ± 71 ± 71

Other market price riskOther market price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments traded in the market.

The fund’s financial instruments are carried at net market value with changes recognised in the statement of changes in net assets. All changes in market conditions affecting net market value are therefore recognised in the statement of changes in net assets. Investments of the fund (other than cash held for liquidity purposes and investment properties) comprise fixed interest securities, listed Australian equities, units in collective investment vehicles such as life office policies, pooled superannuation trusts and other unitised investments.The fund’s exposure to other market price risk is therefore limited to the market price movement of these investments. The Trustee has determined that these investments are appropriate for the fund and are in accordance with the fund’s published investment strategy in respect of asset class allocation.

The following sensitivity analysis demonstrates the movement in the total value of investments as a result of a 5 per cent variation in value.

5% movement in investments

Investments Balance

Change for the year in net assets available to

pay benefitsNet assets available

to pay benefits30 June 2012 771 712 ± 38 586 ± 38 58630 June 2011 757 272 ± 37 864 ± 37 864

For an explanation of the return and risk objectives for each of the investment options offered by the scheme please refer to the Investments section of this report starting on page 12.

Credit riskCredit risk is the risk that the counterparty to a financial instrument will cause a financial loss by failing to discharge an obligation. No financial assetsare considered past due as all payments are considered recoverable when contractually due. The employer-financed superannuation component is paid to the fund at the time the benefit is paid.




11. Financial Instruments (continued)The maximum exposure to credit risk (excluding the value of any collateral or other security) to recognised financial assets at balance date, is the carrying amount of those assets.

With the exception of the Northern Territory Government, the fund does not have any material credit risk exposure to any single debtor or group of debtors under financial instruments entered into by the fund. The Territory financed superannuation component is guaranteed under section 29 of the Superannuation Act.

Level 2 Investments 2012 2011

$000 $000Cash and cash equivalents 6 444 7 097Superannuation investments

MLC – Superannuation Managed Cash 38 019 14 364MLC – Superannuation Conservative 31 803 22 650MLC – Superannuation Cautious 33 931 31 309MLC – Superannuation Growth 578 132 608 404MLC – Superannuation Assertive 15 268 18 779MLC – Superannuation Aggressive 17 016 18 669

Pension investmentsMLC – Pension Managed Cash 10 580 2 278MLC – Pension Conservative 7 678 3 032MLC – Pension Cautious 10 087 6 859MLC – Pension Growth 19 744 18 892MLC – Pension Assertive 380 1 209MLC – Pension Aggressive 1 220 2 330

Unit trust investmentSuper Loans Trust 1 410 1 400

Total 771 712 757 272

Liquidity riskLiquidity risk is the risk that the fund will not be able to meet its financial obligations as they fall due. The fund’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, withoutincurring unacceptable losses. The fund’s liquidity risk is managed on a daily basis in accordance with policies and procedures in place and the fund’s investment strategy. The fund’s overall liquidity risks are regularly monitored by the Trustee.




11. Financial Instruments (continued)

BalanceContractual cash flows

potentially payable in 2012-13$000 $000

30 June 2012Benefits payable 33 428 33 428Vested benefits 1708 930 1708 930

1742 358 1742 358

30 June 2011Benefits payable 34 349 34 349Vested benefits 1 635 970 1 635 970

1 670 319 1 670 319

Vested benefits (refer Note 9) have been included, as this is the amount that members could call upon as at year end. This is the earliest date on which the fund can be required to pay members’ vested benefits, however members may not necessarily call upon amounts vested to them during this time.

Estimation of fair valuesThe fund’s financial assets and liabilities included in the statement of net assets are carried at net market value, which the Trustee believes approximates netfair value. The major methods and assumptions used in determining net market value of financial instruments were disclosed in note 3(a) of the summary of significant accounting policies section.Fair value measurementsThe following table analyses financial instruments carried at net market value, which approximates fair value, by valuation method. The different levels are defined as:

• Level 1 net market value measurements are those instruments with value based on quoted prices (unadjusted) in active markets for identical assets or liabilities;

• Level 2 net market value measurements are those instruments with value based on inputs other than quote prices included in Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices); and

• Level 3 net market value measurements are those instruments with value based on inputs for the asset or liability that are not based on observable market data.

The STB has determined that the fair value of the fund’s investments are Level 2.




11. Financial Instruments (continued)Level 2 Investments 2012 2011

$000 $000Superannuation investments

MLC – Superannuation Managed Cash 38 019 14 364MLC – Superannuation Conservative 31 803 22 650MLC – Superannuation Cautious 33 931 31 309MLC – Superannuation Growth 578 132 608 404MLC – Superannuation Assertive 15 268 18 779MLC – Superannuation Aggressive 17 016 18 669

Pension investmentsMLC – Pension Managed Cash 10 580 2 278MLC – Pension Conservative 7 678 3 032MLC – Pension Cautious 10 087 6 859MLC – Pension Growth 19 744 18 892MLC – Pension Assertive 380 1 209MLC – Pension Aggressive 1 220 2 330

Unit trust investmentSuper Loans Trust 1 410 1 400

12. Contingent LiabilitiesThe fund has no contingent liabilities at 30 June 2012 (2011: nil).

13. Segment ReportingThe superannuation scheme operates in one business and geographical segment, being the provision of superannuation benefits for members in the Northern Territory of Australia.

14. Events Subsequent to Reporting DateThere were no significant subsequent events after balance date.



Summary of the Report of the ActuarialInvestigation of the Schemeas at 30 June 2010

The last actuarial review of the scheme was performed as at 30 June 2010 by Catherine A Nance FIAA, from PricewaterhouseCoopers Securities Ltd and the results were provided in her report dated August 2010.

The review dealt with the employer liabilities, which are guaranteed by the Territory under the Superannuation Act and met on an emerging cost basis. The future employer cash flows and accrued liabilities were projected to the year 2052.

The scheme started in 1986 and was closed to new members from9 August 1999. The employer cash flow for the year ended 30 June 2010 was$36.4 million. It is expected that the cash flow will continue to grow over the next thirteen years to peak at $95.1 million in the year 2019-2020. It is then expected to decline slowly, becoming zero by 2052.

It was assumed that notional earning rates would exceed the rate of general salary inflation by 0.7 per cent per year. On this basis the accrued employer liability was $752.0 million as at 30 June 2010. The accrued liability is expected to increase over the next six years to peak at $832 million by 2016. The last members are expected to leave by 2052, at which stage the liabilities willbe zero.

If a real discount rate of 1.7 per cent, rather than 0.7 per cent were used, the accrued liability would be reduced from $752.0 million to $691.6 million. If a real discount rate of negative 0.3 per cent, rather than 0.7 per cent were used, the accrued liability would be increased from $752.0 million to $822.0 million.

Member contributions are invested in the scheme and credited with interest. Interest rates are determined so that the market value of the assets of the scheme is very close to the sum of the member accounts, so members share fairly in the earnings on their own contributions.

The financial soundness of the scheme arises from the Territory guarantee to meet the employer share of benefit entitlements as they arise. This is an appropriate way to meet benefits in a public sector scheme provided the extent and nature of the liabilities is disclosed and included within public sector accounts as is the case with the NTGPASS.

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