amp superannuation limited n.m. superannuation …...that the boards of amp superannuation limited...

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RESTRICTED

AMP Superannuation Limited and

AMP.6000.0128.0515

N.M. Superannuation Proprietary Limi ted

Concurrent Board Meetings Frid ay, 28 March 2014

10.25am - 2 .40pm

Boardroom Level25 33 Alfred Street SYDNEY

Members I Attendees

PLEASE DELETE SOFTCOPY PAPERS

Room4 Level 4 750 Collins Street MELBOURNE

PLEASE RETURN HARDCOPY PAPERS TO THE COMPANY SECRETARY AT THE CONCLUSION OF THIS MEETING

1.

2.

3.

4.

5.

6.

AGENDA

CONCURRENT MEETINGS OF THE

AMP SUPERANNUATION LIMITED (ASL) BOARD ABN 31008414104

and

AMP.6000.0128.0516

N.M. SUPERANNUATION PROPRIETARY LIMITED (NM SUPER) BOARD ABN 31008428322

TO BE HELD ON FRIDAY 28 MARCH 2014 FROM 10.25AM - 2.40PM

IN THE BOARD ROOM, LEVEL 25, 33 ALFRED STREET, CIRCULAR QUAY VIDEOCONFERENCE ROOM 4, CS4, 750 COLLINS STREET, MELBOURNE

Quorum - Two (2) Directors for each Board.

Entity

Material Personal Interests and Conflicts of Interest I Chairman All

(5min)

Minutes and Actions I Chairman (5min)

a. Minutes of the Board meeting held 28 February 2014 (noting) All

b. Business Arising (noting)

Trustee Services I Wilmot (40min)

a. Management Report (noting) All b. Trustee 2014 Business Plans (approval) All c. Conflicts of Interest Report (noting) All d. Compensation Policy (approval) All e. Delegations of Authority Annual Report (noting) All f . Delegation of Approval of Crediting Rates (approval) ASL g. Adoption of the People & Remuneration Committee (approval) All h. Responsible Person Appointments (noting) All i. FSC Governance Paper (noting) All

Board Audit Committee Update I Dolin (10min)

a. ASL and NM Super Statutory Financial Accounts (approval) All

Business Monitoring Model I Mihulka (5min) All

a. BMM Certification and Exception Reports (noting)

Business Initiatives (25min)

a. Insurance Definition Changes (noting) I Montague All b. Closure of FirstQuest and Synergy Funds to new business (approval) NM Super

I Cochrane c. Wind-up of ProSuper Fund (noting) I Warren NM Super d. Remuneration Report for Executive Officers (noting) I de Wolf All e. Approach to Responsible Persons Remuneration Review (noting) I All

de Wolf

Est. Time

10.25am

10.30am

10.35am

11 .15am

11.25am

11.30am

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7. Stronger Super I Jansen (15min)

a. Stronger Super Readiness for 1 July 2014 (noting) b. MySuper Implementation Update (noting) c. Transition Plan for Portfoliocare and Synergy (approva0

8. Risk Management I Brigham, Conroy (1 Smin)

a. Quarterly Risk and Compliance Certificate and Report (noting) b. Quarterly Material Risk Reg ister Update (approva0 c. Risk Management Declaration (approva0

9. Emerging Superannuation Issues (noting) I Brigham, Korte (Smin)

LUNCH with Pauline Vamos - CEO, ASFA

10. Business Monitoring Model (cont.) (Smin)

a. Operations Exceptions Report (noting) I Thorpe

11. Operations Update (noting) I Thorpe (25min)

12. Transformation Update (noting) I Akers (20min)

13. Litigation Report (noting) I Carter, Esparza (Smin)

14. Secretariat Report (noting) I Favelle (Smin)

15. Other Business I All (Sm in)

16. Chairman's session I Chairman (Smin)

a. Feedback on board papers

ESTIMATED CLOSE

Directors Michael Butler (Chairman)

Michele Dolin

Martin Hudson

Darryl Mackay

Eric Mayne

Brian Salter

Also Attending: Michelle Favelle, Company Secretary

Nadine Wilmot, Director Trustee Services

Mai Tran, Legal Manager-Super/Life Insurance and Bank

Kate Mihulka, Manager Trustee Governance

Ashley Quinn, Senior Trustee Consultant

Patricia Montague, Director of Superannuation

Adrienne Cochrane, Head of Platform Products

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All All

NM Super

All

All

All

All

All

All

All

Items Full meeting

Full meeting

Full meeting

Full meeting

Item 3

Item 6a

Item 6b

AMP.6000.0128.0517

11 .55am

12.10pm

12.25pm

12.30pm

1.30pm

1.35pm

2.00pm

2.20pm

2.25pm

2.30pm

2.35pm

2.40pm

Page 2 of 3

David Warren, Head of Mature Products

Andy de Wolf, HR Director Group Functions and Performance & Reward

Chris Jansen, Director Stronger Super

James Brigham, Head of ERM Operations

Melanie Conroy, Senior ERM Manager Superannuation Trustees

Paul Korte, Senior Regulatory Risk Manager, Insurance & Superannuation

Wendy Thorpe, Group Executive Operations

David Akers, Director of Transformation

Vicki Carter, SLC Manager Litigation & Dispute Resolution - Melbourne

Terri Esparza, SLC Manager Litigation & Dispute Resolution - Sydney

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Item 6c

Item 6d & 6e

Item 7

Item 8 & 9

Item 8

Item 9

Item 10 & 11

Item 12

Item 13

Item 13

AMP.6000.0128.0518

Page 3 of 3

2b - Business Arising - Attachment 2 - Concentration Exposure Management

AMP*

David Rowe Chair, AMP Investment Committee

MEMORANDUM FOR:

FROM:

SUBJECT:

DATE:

Recommendation

The Directors of AMP Superannuation Limited (ASL) and N.M. Superannuation Proprietary Limited (NM Super)

David Rowe, Chair AMP Investment Committee

Business Arising - Concentration Exposure Management

12 March 2014

AMP .6000.0128.0538

That the Boards of ASL and NM Super NOTE the current risk management processes around concentration of exposures to fund managers and strategies, including any APRA related requirements.

Background

In November 2013, the Boards approved the legal framework for the Generic MySuper offers, which included the MySuper Age Cohort Lifecycle options for the AMP Superannuation Savings Trust and Super Directions Fund and the MySuper Balanced Diversified option for the AMP Retirement Trust.

AMP Capital was appointed as the investment manager of the MySuper options. Under the Investment Management Agreement {IMA), MySuper monies would be invested into AMP Capital unregistered managed investment schemes, and could gain the relevant asset class exposures by investing with external fund managers.

A key risk management provision in the IMA is the need for AMP Capital to obtain AMP Investment Committee pre-approval , if at the time of the proposal, the investment of MySuper monies (in total) would account for more than 20 per cent of any external fund manager's trust (where ASL/NM Super monies are co-invested alongside other investors). The purpose of this provision is for AMP Life/NMLA to be cognisant of potential concentration risks in fulfilling its broader investment-related obligations to ASL/NM Super.

The Boards requested further information around the management of risks from exposure concentration to fund managers and strategies, including across the AMP Group, and whether there were any APRA requirements around the management of these risks. This paper provides information on current practices.

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2b - Business Arising - Attachment 2 - Concentration Exposure Management AMP .6000.0128.0539

APRA Requirements

There are no explicit APRA requirements for superannuation trustees to manage the concentration of exposure to fund managers and strategies. In the context of investment options, including MySuper investment options, trustees are required to consider an appropriate level of diversification, including diversification across individual assets, asset classes, countries and/or investment managers. It is recognised by APRA that the appropriate level of diversification and specifically, the method by which it is achieved, will depend on the individual circumstances of the RSE as determined by the trustee.

Nonetheless, APRA monitors the investment exposure concentrations of trustees through a number of investment reporting requirements at the RSE and MySuper investment option level. For example, RSE investments held through investment vehicles (including a life policy) are required to be classified and reported by each combination of asset class type, asset domicile type, asset listing type, fixed income type and fixed income currency type. In addition, there are specific reporting requirements for large exposures that represent one per cent or more of RSE investments at a direct security and investment vehicle level as well as disclosure of large exposures to MySuper products, defined benefit interests and country of investment. This reporting covers whether the investment vehicle is an associate of the RSE, such as investments through AMP Capital.

Risk management processes

There are existing risk management processes in place to manage the exposure of indirectly held superannuation assets held through Life Insurance Policies. Under this arrangement these investments are not in the name of the RSE but in the name of AMP Life or NMLA and therefore subject to asset concentration limits for capital held with any one counterparty. As ASL and NM Super are part of the AMP Group, the Boards are able to rely on the Risk Management Framework operating within the Group.

For all superannuation investments (offered through a life policy or via wrap platform), due diligence on fund managers (including AMP Capital) is completed as part of standard risk management processes. By way of example, as the appointed fund manager of the MySuper options, due diligence was undertaken to assess the capabilities of AMP Capital as the overall fund manager, as well as the individual manager for proposed asset classes and individual strategies.

For investments through a life policy, where there is an investment management agreement in place with fund managers, risk management provisions are typically incorporated into the contractual clauses. For some contracts, the asset classes and investment instruments in which the fund manager may invest, and the trading ranges for each asset class are set. In some cases, specific credit or concentration limits (such as single issuer limits) are also set.

Contractual agreements may also provide for AMP Life/NMLA to be notified of pre-defined events or transactions, which may incorporate notification of large exposures (to a fund manager or a single strategy). It is usual practice to receive regular reporting of these exposures, such as the MySuper IMA provision that AMP Capital report quarterly on AMP Life's/NMLA's MySuper monies as a percentage of each external manager's total funds under management.

For investments offered on a wrap platform, Investment Management monitors the concentration risk to fund managers and strategies on a quarterly basis. The value of funds under management of each investment option is also reported in the Quarterly Investment Management Report provided to Trustee Services.

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2b - Business Arising - Attachment 2 - Concentration Exposure Management AMP .6000.0128.0540

More generally, Group Treasury monitors single name counterparty concentration risk holistically across AMP Group as a whole, by aggregating risk from credit exposures taken in business units. Concentration of credit risk is managed through both aggregate credit rating limits and individual counterparty limits, which are determined predominantly on the basis of the counterparty's credit rating . Compliance is monitored and exposures and breaches are reported to senior management and the AMP Audit Committee through regular reports.

David Rowe Chair, AMP Investment Committee

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2b - Business Arising - Attachment 3 - Investment Performance and Measures of Success for MySuper~Jnac§00 ·0128·054 1

AMP*

Nadine Wilmot Leanne Bradley Director, Trustee Services Director, AMP Investments

MEMORANDUM FOR: Board of AMP Superannuation Limited and Board of NM Superannuation Proprietary Limited

FROM: Nadine Wilmot, Director Trustee Services Leanne Bradley, Director AMP Investments

SUBJECT: Business Arising - Investment Performance and Measures of Success for MySuper Funds

DATE: 5 March 2014

Recommendation

That the Boards of AMP Superannuation Limited (ASL) and N.M. Superannuation Proprietary Limited (NM Super) NOTE the investment performance monitoring and reporting processes and measures of success for the MySuper Funds.

Background

At the Trustee board meeting in November 2013, AMP Capital was asked by the Trustee how success will be measured for the My Super Lifecycle (Age Cohort) Funds. It was pointed out at the meeting by AMP Capital that measures of success for the Lifecycle Funds will be different to the previous default superannuation options such as Future Directions. The measures of success for previous defaults were centred around; performance in surveys versus peers within a similar risk profile and performance versus the weighted benchmark of the underlying sectors indices.

As the Lifecycle funds are more total return focussed based on years to retirement; the previous peer survey comparison will no longer be relevant. In other countries where Lifecycle type approaches are used for retirement savings, the measures of success would including focussing on investment performance in terms of the ability for an individual to achieve their target multiple of salary at retirement.

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2b - Business Arising - Attachment 3 - Investment Performance and Measures of Success for MySuper~Jnac§00 ·0128·0542

Measures of success

Given the Australian regulatory environment, performance versus CPI plus target will be the key measure of success for the MySuper Lifecycle Funds (and also for MySuper Balanced). For example, APRA requires the return target in MySuper Product Dashboards to be expressed in terms of level of return above CPI. Similarly, when APRA publishes "league tables", the Funds' returns will be compared to the CPI plus target.

The portfolio manager however will also measure performance versus the weighted benchmark to determine the level of performance added through stock selection versus asset allocation.

MySuper Investment Performance Monitoring

Under various Superannuation Industry (Supervision) Act 1993 {SIS Act), Stronger Super and APRA requirements, Trustees have investment-related obligations including the formulation of investment objectives and strategies and determining appropriate monitoring and reporting measures.

The Trustees' Investment Policies sets out overarching investment objectives and strategies, and including the objective to achieve investment returns which meet or exceed stated targets for each specific investment option. The investment objectives for each investment option contain a specific and measurable return objective, expressed as a percentage return relative to a quantifiable benchmark. For the MySuper options, this is expressed as an average annual percentage rate of return above the Consumer Price Index (CPI), after fees and costs, over a 10 year investment horizon ('CPI plus' objective).

Performance of the MySuper options will be regularly monitored and reported against these 'CPI plus' objectives. This will be consistent with the published MySuper Product Dashboard, which will compare the return for each MySuper option compared with its post fees and cost return target. Investment performance monitoring on this basis will ensure that regulatory reporting obligations are met.

From a portfolio management perspective, the return of each MySuper option will also be assessed against the performance benchmark for each option on an ongoing basis. The performance benchmark is the average weighted return of the relevant market indices used to measure the performance of each specific asset class in which the Funds in vests. The relevant asset class benchmarks are detailed in the MySuper IMA between AMP Life/NMLA and the AMP Capital Investors as the fund manager.

Under the current Business Monitoring Model (BMM), performance of the MySuper options is reported to Trustee Services on a quarterly basis. Based on agreed criteria, an Exceptions Report will be raised to the Trustee where an investment option has underperformed against benchmark over a rolling 36 month period, and remains under investigation by Investment Management for more than eight quarters. However, this would mean that it would be not until early 2017 (ie, as the Trustees' MySuper options only effectively commenced with effect from 1 January 2014) before potential exceptions are raised. While the current BMM criteria recognise that focus on short-term returns should be avoided, the publicity around and competitive pressures on MySuper returns may warrant a change in approach for monitoring MySuper investment returns. This will be considered as part of the annual BMM review conducted by Trustee Services.

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2b - Business Arising - Attachment 3 - Investment Performance and Measures of Success for MySuper~Jnac§00 ·0128·0543 -·-·-·-·-·-·-·-·-·-·-·-·-·-·-·-·-·-·-·-·-·-·-·-·-·-·-·-·-·-·-·-·-·-·-· ... . . . . . . ! CONTAINS CONFIDENTIAL INFORMATION ! i i i i i·-·-·-·-·- ·-·- ·-·-·-·-·-·- ·-·- ·-·-· -·-·- ·-·- ·-·-·-·-·-·-·-·- ·-·- ·-·-·- ·i

Communications

The way performance is communicated to members and other stakeholders (employers, planners and consultants) is obviously important. Work is underway - sponsored within the Corporate Super area - on how performance can be communicated in more relevant ways to stakeholders, rather than only reporting against CPI targets.

Nadine Wilmot Leanne Bradley Director of Trustee Services Director, AMP Investments

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Chris Jansen Director Stronger Super Program

7b - MySuper Implementation Update

MEMORANDUM FOR: The Board of AMP Superannuation Limited The Board of NM Superannuation Proprietary Limited

FROM: Chris Jansen, Director, Stronger Super Program

SUBJECT: MySuper implementation update

DATE: 7 March 2014

Recommendation

AMP.6000.0128.0633

It is recommended that the AMP Superannuation Limited Board and the NM Superannuation Proprietary Limited Board NOTE this update in regards to:

1) the implementation of the 3 generic and 7 tailored MySuper products;

2) the communication with members in regards to these MySuper products;

3) the progress of the insurance implementation for MySuper; and

4) the possible introduction of intra-fund advice.

1. Purpose

The purpose of this paper is to provide an update on the successful implementation of the Trustees' MySuper products and progress of the insurance component for some MySuper members.

2. Implementation of MySuper products

The MySuper products were successfully implemented across the Superannuation Savings Trust, the AMP Retirement Trust and the Super Directions Fund on 1 January 2014, with now over $400 million of super contributions successfully invested in the new MySuper investment options.

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7b - MySuper Implementation Update AMP.6000.0128.0634

The MySuper Program has been working very closely with the business, in particular with the operations teams, to manage our MySuper products, including areas where there were some outstanding systems changes and some production issues from the initial implementation. A successful warranty release in January, followed by another successful release in February has now resolved these issues with the exception of further insurance implementation for a number of members as outlined below.

3. Communication with impacted members

Following the process of identifying which members would be impacted by MySuper the Program successfully mailed over 1 million members with details of their MySuper product.

Along with the communication we also enclosed an Investment Direction form to enable to member to make a simple investment choice and thus not be redirected to MySuper.

So far, more than 50,000 Investment Direction forms have been returned from members' requesting to stay in their existing investment options. This indicates that the intensive MySuper education and communication activities have enabled planners and members to understand and consider their options following the introduction of MySuper.

4. Insurance update

As previously advised to the Trustees at the May 2013 Board meeting there is a need to provide death and permanent incapacity insurance to members with no insurance or permanent incapacity cover to members with death cover only (who have previously not opted out). Whilst this has been done for all new members who have joined the MySuper offers the MySuper Program has subsequently identified a group of existing members who had not previously been considered as requiring the need for insurance to be added. The program is currently finalising the necessary insurance changes required in regards to these existing members.

The MySuper Program has contacted more than half of the estimated 200,000 existing impacted members. The remaining members will be contacted in March and April with details of their new or additional insurance.

As part of this communication we are giving the members the option to opt-out of the new or additional insurance. In the meantime manual processes are in place to ensure that all impacted members have insurance should a claim be made.

At the same time, we are continuing to work closely with Group Risk to implement the associated systems solutions in upcoming IT releases in April and May.

5. Intra-fund advice

As a result of competitive forces, and reviews of the Modern Award changes AMP is currently investigating the introduction of intra-fund advice into one or more of the Trustees' funds that hold a MySuper interest.

6. Next Steps

Going forward there are a number of further items that the program will deliver over the coming months prior to wind down of the program in June 2014. These items include:

• Exploring the legal framework and seek APRA guidance to implement Intra-fund advice such that a proposal can be put the Trustees for consideration;

2

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r .......................................................................................... ~ l CONTAINS CONFIDENTIAL INFORMATION ! ! i

7b - MySuper Implementation Update

! i .............................................................................................

• Commencement of accrued default amount (ADA) transitions for four of the Tailored MySuper products, as advised at the February 2014 Trustee meeting;

• Handover of the ongoing process, to the Superannuation and Investment Platforms team, associated with the quarterly reporting to APRA in respect of Accrued Default Accounts ( ADAs);

AMP.6000.0128.0635

• Handover of the transition plan and associated processes to the Superannuation and Investment Platforms team to facilitate future transitions of these ADA to the Trustees' MySuper offerings before July 2017

Chris Jansen

Director

Stronger Super Program

3

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AMP.6000.0128.0636

7c - Transition Plan for Portfolio Care and Synergy CONFIDENTIAL

MEMORANDUM FOR: The Board of N.M. Superannuation Proprietary Limited

FROM: Chris Jansen, Director, Stronger Super Program

SUBJECT: Accrued Default Amount Transitions for the Funds

DATE: 20 March 2014

Recommendation

The Board of N.M. Superannuation Proprietary Limited (NM Super) is requested to :

1 APPROVE the amendments to Transition Plans for:

• The Retirement Plan,

• Synergy Superannuation Master Fund, and

• First Quest Retirement Service,

(Collectively Funds), as described in Sections 4-7 of this paper.

2 DETERMINE that the AMP SDF MySuper in the Super Directions Fund (SDF) is a suitable product to transfer the Accrued Default Amounts (ADAs) of each member of the Funds {'Transferring Members') other than any member defined as an Excluded Member as described in section 2 of this paper:

3 NOTE the intention to commence the first tranche transfer of the Accrued Default Amounts (ADAs) of the Transferring Members from the Funds during 03 and 04 of 2014 and the proposed process that will be undertaken to do so as outlined in section 9 of this paper; and

4 NOTE that work will be undertaken to review and monitor the Transition Plan and produce a strategy for transferring the ADAs of any Excluded Members remaining in the Funds after 04 2014 and before 1 July 2017.

1. Purpose

The Trustee currently has in place a transition plan for each Fund which sets out the Trustee's process for identifying ADAs and transferring them to a suitable MySuper product {Transition Plan). The Transition Plans were approved by the Board at its 17 June 2013 meeting.

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AMP.6000.0128.0637


The purpose of this Memorandum is to:

• obtain the Board's approval to amend the MySuper Transition Plans for the Funds as described in section 4-7 of this paper

• provide an update to the Board on the implementation of the Transition Plans and those impediments identified through the process;

• obtain the Board's approval that the AMP SDF MySuper product is a suitable product for the Transferring Members of the Funds; and

• Provide an update to the Board on the transition of ADAs which are planned to commence during 03 and 04 of 2014.

2. Background

Under the Stronger Super legislation and APRA's prudential standards, the Trustee must identify all ADAs in the Funds by 30 September 2013 and quarterly thereafter.

It must also have in place a Transition Plan for each Fund which articulates the processes and timeframes for specified activities which need to be undertaken by the Trustee in order to identify ADAs and transfer them to a suitable MySuper product before the transition period ends on 1 July 2017.

As the Trustee has not applied for a MySuper authorisation for any of the Funds, the Trustee must nominate a "suitable" MySuper product to which a member's ADA may be transferred.

The FOFA and Stronger Super Program Team (the Program) in consultation with the Superannuation & Investments Team, recommends that the Board approve the AMP SDF MySuper as the suitable MySuper product for the Fund members with ADAs other than those Excluded Members as described below:

• Members with Salary Continuance insurance in a Fund;

• Members with Death only or Death and Total and Permanent Disablement insurance cover where the premium in SDF would be significantly greater than their current premium;

• Members with illiquid investments in a Fund;

• Members who are deceased or who die before the transfer;

• Members with a Family Law settlement pending; and

• Members with an insurance claim pending.

It is recommended that these members' ADAs not be transferred together with the Transferring Members' ADAs because the transfer may not be in their financial interests.

A subsequent review of those members will be completed during late 2016, early 2017 to ascertain if their circumstances have changed such that it is in their financial interest to affect a transfer to MySuper.

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AMP.6000.0128.0638


Redaction for Legal Privilege

4. Proposed amendments to Transition Plans

NM Super approved the Transition Plans for the Funds at their 17 June 2013 Board meeting. The work the Program has done in implementing the Transition Plans has resulted in a number of amendments now being required to the Transition Plans, These are summarised below and detailed in the sections following :

• An update to Members with an ADA (section 5)

• Identification of a suitable MySuper product (section 6); and

• An update on known impediments (section 7)

5. Members with an ADA - update

The Transition Plans set out the process the Trustee has adopted to identify the ADAs in each of the Funds. The Board delegated to the Program responsibility for identifying the ADAs in accordance with that process. The following is an update from the Program.

5.1 The Retirement Plan

The Program initially identified 695 members with ADAs in the Retirement Plan as at 30 May 2013.

Following the process set out in the Transition Plan, the Program has identified 1,357 members in The Retirement Plan with an ADA. The individual amounts have been identified. The total amount is $13,263,198.

5.2 Synergy Superannuation Master Fund The Program initially identified 453 members with ADAs in the Synergy Superannuation Master Fund as at 30 May 2013.

Following the process set out in the Transition Plan, the Program has identified 401 of members in the Synergy Fund with an ADA. The individual amounts have been identified. The total amount is $2,671 ,694.

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AMP.6000.0128.0639


5.3 First Quest Retirement Service The Program initially identified 29 members with ADAs in the First Quest Retirement Service as at 30 May 2013.

Following the process set out in the Transition Plan, the Program has identified 29 of members in the First Quest Retirement Service with an ADA. The individual amounts have been identified. The total amount is $142,408.64

5.4 Summary of changes in ADA member numbers The differences between the numbers of members identified in the Transition Plans with ADAs and the numbers of members identified as at 31 December 2013 is explained by the Program:

• identifying additional default investment options within the Funds;

• identifying the members who have account balances in those additional default investment options; and

• removing members who have provided an investment direction since 30 May 2013.

6. Identifying a suitable MySuper product - approval of AMP SDF MySuper

A MySuper product is suitable if it is a MySuper product:

• that the Trustee is authorised to offer in the fund in which the ADA is held, in another fund within the Trustee's business operations or in any other fund;

• to which the member or class of members is eligible under the governing rules to make contributions;

• to which the Trustee is legally able to attribute the member's ADA; and

• in respect of which the Trustee has formed the view that attribution of the member's ADA to that MySuper product promotes the financial interests of the member or class of members.

The AMP SDF MySuper product has the following features:

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• a lifecycle investment strategy designed to suit the member's age-bracket;

• account balances will be unitised and provide daily forward pricing;

• a MySuper administration fee and a MySuper investment fee will apply to the MySuper product. All other fees, will be limited to cost recovery only;

• it will provide a default level of $50,000 death insurance cover and $25,000 Total and Permanent Disability {TPD) benefits to members who do not currently have insurance cover on an opt-out basis; and

• Transferring Members with existing death only cover or death and total and permanent disablement cover will have their cover replicated at a fixed nominated amount equal to the level of their existing cover.

Page 4 of 7

AMP.6000.0128.0640


The Program considered other MySuper products where the investment strategy, investment and administration fees were comparable with the MySuper product offered by NM Super. Given that they are all new products, that members had chosen NM Super as their provider (or had not exercised their right to move to another provider), the Program did not consider there was any reason to prefer a product offered by another provider. Moreover, doing so would terminate the existing Death only cover or Death and TPD cover for Transferring Members. This would not be in the financial interests of these members.

The MySuper products offered by AMP Superannuation Limited (ASL) within the AMP Superannuation Savings Trust (SST) have similarly been considered. However the insurance premiums offered within these products use a more complex premium rate formula which includes factors such as age, gender, smoker status, state of health and occupation loadings.

Whereas the relevant insurance arrangement in AMP SDF MySuper utilises composite, aged based premiums rates, the benefit of which would allow us to maintain simplicity of insurance premiums similar to the existing arrangements in place for these members.

The Program has not identified any reason to determining that the AMP SDF MySuper product will be a suitable product for the Transferring Members with an ADA in a Fund.

7. Update on known impediments

At the last Board update, the Program team identified a number of impediments to transferring ADAs to a MySuper product in another fund. Those impediments and the actions the Program has taken to address those impediments are summarised below:

• Identifying an ADA

The Program identified a risk that not all ADAs will be identified or that an amount may be incorrectly identified as an ADA.

The Program identified ADAs by identifying each of the former and existing default investment options within the Funds and the members invested in those. The Program then considered whether there was any evidence that any of these members had provided an investment direction to the Trustee.

All members who were identified as having an account balance in an existing or former default option and who was not positively identified as having provided an investment direction (where they are in a former default option) have been sent a notice advising them that they have been identified as having an ADA.

If this was incorrect, this notice provided them with an opportunity to confirm a previous investment direction (or give a new one). This will reduce the risk of inadvertently transferring ADA assets to MySuper.

• Ill iquid funds

The Synergy Superannuation Master Fund and First Quest Retirement Service each currently hold ADA assets in some illiquid funds. This means that the Trustee will not be able to cash the full amount of some members account balances.

Rather than transferring only part of a member's ADA, the Program recommends that the ADAs of members with an investment in an illiquid fund not be transferred to the SDF as part of the initial transfer.

Given the very small value of these illiquid funds (the current total is -$3,000 shared across 8 members) and the fact that the member is generally receiving either a monthly or quarterly

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AMP.6000.0128.0641


capital return, these illiquid funds may be fully redeemed prior to the proposed completion of the transfer of the first tranche of ADAs. In that case, these 8 members will cease to be Excluded Members and their ADAs will be transferred with the other Transferring Members.

The investments in the illiquid funds will be monitored as part of the ongoing activities of affecting the Transition Plan.

• Timing of transfer

The Program identified the transfer process and timing as potential risks. However, given that there are few Transferring Members in the first tranche, the Program considers that the transfers can be undertaken without risk to Transferring Members during Q3 and Q4.

The Program believes this will provide sufficient time to communicate the transfer with affected members and adequate planning time to put in place the appropriate resources and processes to undertake the transfer the ADAs.

• Equivalent insurance benefits

The loss of valuable insurance benefits was identified by the Program as a risk. The SDF will be able to provide equivalent Death & TPD insurance benefits on transfer of the ADAs.

Further, where a Transferring Member does not currently hold any insurance cover they will be provided with default insurance cover on an opt-out basis. Approximately half the members of the Funds do not have insurance cover today.

Whilst equivalent Death & TPD insurance cover can be provided on review it has been identified that some product features and the cost of providing such benefits within the SDF fund are not in the financial interest of the following classes of membership:

• Members with Salary Continuance; and

• Members with Death only or Death and Total and Permanent Disablement where (due to age) the change in premium is significantly greater than their current premiums payable.

It has been recommended that affected members be excluded from the first tranche. The Program will continue to consider how to address the needs of these members.

• Administration and investment fees

Based on individual member analysis undertaken by the Program the administration and investment fees (including estimated buy/sell margins) payable on the AMP SDF MySuper have been found to be the same if not less than the total fees paid by the member within their current default investment option.

• Bespoke benefits

There is no evidence that a Transferring Member has any special or unique benefits.

• Asset transfer - CGT/losses

The Program in consultation with the Superannuation & Investments team and the Funds administrators are currently formulating business rules, processes and timelines for the transfer of ADAs from the Funds to the AMP SDF MySuper investment option within the Super Directions Rollover Section (SDRS) product.

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,-·-·-·-·-·-·-·-·-·-·-·-·-·-·-·-·-·-·-·-·-·-·-·-·-·-·-·-·-·-·-·-·· ! CONTAINSCONFIDENTIALINFORMATION !

AMP.6000.0128.0642

t -·-·-·-·-·- ·-·- ·- ·- · - ·- ·-·- ·-·-·-·-·-·-·- ·-·- ·-·- ·-·- ·-·-·-·-·-; 7c - Transition Plan for Portfolio Care and Synergy CONFIDENTIAL

There will be a buy and sell of units in order to effect the transfer of ADAs from the Funds to the AMP SDF MySuper investment option.

In undertaking the individual member administration and investment fees (including estimated buy/sell margins) analysis the Program has identified that whilst this transfer will be a cost to the member, given the member cannot contribute to their current account any deductions from that account associated with product administration fee or insurance fees are effectively transacted as a sell down of assets. The sell spread is considerably higher than that of the AMP MySuper SDF fund

The transfer of ADAs will be performed on a cash transfer (asset roll-over) basis allowing the Funds to utilise any Capital Gains Tax (CGT) losses.

8. Proposed transfer date

The Program recommends the commencement of the transfer of ADAs for Transferring Members during 03 and 04 of 2014. The final timing is currently being worked through in consultation with the Superannuation & Investments team and the Funds administrators. This will give the Program sufficient time to undertake communication strategy and put in place necessary processes. It is also consistent with APRA's preference that ADAs be moved to MySuper products quickly.

9. Next steps

The following process is proposed if the Board passes the proposed resolutions:

• Affected members will receive a significant event notice advising that the member's account balance in the relevant Fund will be transferred to the AMP SDF MySuper offer within the SDRS product;

• Affected members will be provided with information about the AMP SDF MySuper product and their change in investment strategy, fees and insurance premiums;

• That the affected member may opt out of the transition to the AMP SDF MySuper investment option by providing an investment direction at any time prior to the transition ; and

• If the member does not provide an opt-out election within 90 days, the member's ADA balance will be transferred to the AMP SDF MySuper product.

Chris Jansen

Director,

FOFA & Stronger Super Program

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AMP .6000.0128.0643

r nsition Plan for Portfoliocare and S ner - TS Cover Memo CONFIDENTIAL

MEMORANDUM FOR: The Directors of N.M. Superannuation Proprietary Limited

FROM: Kate Mihulka, Manager Trustee Governance

SUBJECT: Accrued Default Amount Transitions for the Funds

DATE: 19 March 2014

Recommendation

The Board of N.M. Superannuation Proprietary Limited (NM Super) is asked to NOTE this recommendation to approve the resolutions as set out in the memorandum from Chris Jansen Director, Stronger Super Program presented at agenda item le (business paper).

Background

NM Super has in place for its Funds that hold ADAs Transition Plans that describe its process for identifying and moving ADAs to a suitable MySuper product. These Plans were approved at its 17 June 2013 meeting and the purpose of the paper is to provide an update on the implementation of the Plans and request NM Super to determine that NM Super's SDF MySuper product is a suitable MySuper product for the ADAs in the Funds to be transferred to. The funds are:

• The Retirement Plan,

• Synergy Superannuation Master Fund, and

• First Quest Retirement Service,

Legal advice

Legal advice on the proposal was sought from King & Wood Mallesons

Thi s s ec t ion o f t he p aper i s confid ential a n d p rivi l eged ,

i t has been considered by the Board and is held separat ely

by Group Secretariat .

Proposal

I have assessed the proposal and note the following: r-·-·-·-·-·-·-·-·- ·-·-·-·-·-·-·-·-·-·-·-·-·-·-·-·-·- ·-·-·-·-·-·-·-·-·-·-·-·-·-·-·-·-·- ·-·-·-·-·-·-·-·-·-·-···-·-·-·-·-·- ·-·-·-·-·-·-·-·-·-·-·-·-·-·-·-·-·- ·-···-·- ·-·-·-·-·-·-·-·-·-·-·-·-·- ·-···-·-·-·-·-·-·-·-·-·-·-·-·-·-·- ·-·-·-·- ·-·-·-·-·-·-·-·-·-·-·-·-·- ·-·-·-·- ·-·-·-·-·-· ; i

' Redaction for Legal Privilege i ................................................................................................................................................................................................................................................................................................................................................................................................................................. .. .

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:-·-·-·-·-·-·-·-·-·-·-·-·-··-·-·-·-·-·-·-·-·-·-·-··-·-·-···-····-·-·-.. i i ! coNrA1NscoNF10ENT1AL1NFoRMAT10N i 7c Transition Plan for Portfoliocare and Synergy - TS Cover Memo i i ! i "-·-·-·-·-·- ·-·- ·-·-·- ·-·-·-·- · -·-·-·-·-·- ·-·- ·-·- ·-·- ·- ·-·-·-·- ·~

AMP .6000.0128.0644

• The project have done detailed analysis on the financial impact of the transfer to members and determined that except for the Excluded Members who will not transfer at this time the fees are the same, if not less and the insurance terms are comparable The analysis is not required to be on the same basis as a successor fund transfer however the project performed assessments at a member by member level.

• The rationale for treatment of buy/sell spreads is fair and reasonable.

• The work done to identify the impediments has been thorough and how they are proposed to be overcome is reasonable

• I have reviewed amended Transition Plans and the amendments are as described in the business paper. A copy of the Transition Plans is available on request.

Recommendation In view of the above, taking all relevant things into consideration it is recommended that the NM Super Board approve the resolutions as outlined in the business paper

Kate Mihulka Manager, Trustee Governance

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