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CS Annual report


									ANNUAL REPORT OF THE TRUSTEESto the members of

                        Annual Report for 2006
                                        of the Trustees
                                 to the members of the

         Corporate Selection Retirement Fund

            Corporate Selection Pension Fund

   Corporate Selection Retirement Fund No. 2

      Corporate Selection Pension Fund No. 2

                                                      ANNUAL REPORT OF THE TRUSTEESto the members of
                                                                 CORPORATE SELECTION PENSION & RETIREMENT FUNDS

A word from the Chairperson

I am pleased to be able to present a report on the activities of you Board for the calendar year 2006. The year has been an
exceptionally busy one and the Board met on four occasions for formal Board meetings. However, the increasing complexity of
legislation and regulation with its focus on improved levels of fund governance has led to the appointment of a number of sub
committees and ad hoc committees to focus on specific important topics such as the all important investment strategy and new
audit and financial reporting requirements for the Funds.

Sub committees

The activities of the various sub-committees are listed below:
• The audit sub-committee, which oversees the safeguarding of the Funds’ assets, the operation of adequate systems by the
  administrator and the preparation of accurate financial statements

• The death benefits sub-committee, which is concerned with the equitable and fair distribution of lump sum death benefits to
  the beneficiaries of deceased members.

• The investment sub-committee, which is concerned with the formulation of a broad investment strategy appropriate for these
  Funds. This committee, is in my opinion, the most important as it concentrates upon the fundamental reason for the Funds’
  existence; that of making available sufficient number of investment portfolios to suit the wide range of risk appetites that can
  be found within the Funds whilst at the same time maintaining a manageable framework of portfolios so that performance to
  benchmark can be easily monitored.

• The home loan sub-committee which oversees the granting of pension backed home loans to members and engages with various
  financial lending institutions regarding the terms and conditions of the agreements between the Fund and the institution.

I do need to sound a note of warning to members and employers that this activity is largely prompted by the increased regulation
of the retirement savings industry and in my view, however well meaning and well intended that regulation might be, the costs
involved are approaching the point where each participation in the Funds should, in conjunction with their financial advisor,
conduct a cost benefit analysis.

Composition of the Boards

There are 8 Trustees governing the business of the Funds. I am pleased to say that of these 7 Trustees, can be classified as fully
independent of the Funds’ sponsor, Liberty Life. This is an increase of 2 independents from the 2005 year.
I would like to make a special mention of Adv. Leslie Primo who resigned during the course of the year and to welcome Mr Mike
Garbutt to our deliberations.

The Principal Officer, Mr Charles Martin together with his support staff, transferred their employment to the Funds during the first
quarter of 2006. Consequently, the independence of your Board is in keeping with the highest standards of fiduciary independence;
a fairly uncommon position for life insurer sponsored retirement funds.

Meet your Trustees

             Alan McCulloch (Chairperson – Independent Trustee)

             • Trustee for 9 years
             • 44 years in the retirement fund industry
             • Chairperson/Trustee of a number of other Boards of Trustees
             • Qualifications: FCII, FIISA, APMI, CFP
             • Retired from Liberty Life in August 2005
             • Director of the Financial Planning Institute (FPI) and chair of its Employee Benefits Interest Sector Group.

             Johan Drotschie (Independent Trustee)

             • Trustee for 7 years
             • 37 years experience in the retirement fund industry
             • Currently running own Financial Planning and Consultancy Business
             • Member of the boards of Stanlib’s Preservation and Retirement Annuity Funds
             • Qualifications: B.Com Honours, Certificate of Advanced Trust Law, completed all in-house technical and
               managerial training programs at Sanlam, LIMRA manager’s diploma, CFP.

             Mike Elliott (Independent Trustee)

             • Trustee for 3 years
             • 49 years of extensive experience – Old Mutual, Alexander Forbes and ABSA
             • Currently member of PLA (Member of IPCA 10 years, IRF 12 years)
             • Qualifications: CFP.

             Adv. Cawe Mahlati (Independent Trustee)

             • Adv. Cawe Mahlati (Independent Trustee)
             • Trustee for 3 years
             • Advocate of the High Court of South Africa
             • Chairman CMI - Emerald Investment Holdings
             • Qualification: LLB, MA

             Martin Oakes (Independent Trustee)

             • Trustee for 4 years
             • 35 years experience of consulting to retirement funds and individuals
             • Currently acts as a consultant to a number of retirement funds and also acts as an independent Trustee, a
               principal officer and is a former member representative
             • Qualifications: BA Honours (UK), ACII, CFP.

                                                      ANNUAL REPORT OF THE TRUSTEESto the members of
                                                                  CORPORATE SELECTION PENSION & RETIREMENT FUNDS

                    Mike Garbutt (Independent Trustee)

                    • Trustee for nearly a year
                    • 41 years experience in the life insurance industry at all levels of management
                    • Involved in all aspects of sales and marketing, specializing in:
                         Sales management
                         Retirement funds
                         Investment marketing
                         Product development
                         Start up operations
                       •Trustee of a number of other retirement funds
                       •Retired from Liberty Life in 2006.

                    Bongi Shongwe (Independent Trustee)

                    • Trustee for three years
                    • 17 years retirement fund experience
                    • Member of IRF, AFP
                    • Managing Director of Hlela Financial Solutions (Pty) Ltd
                    • Qualifications: Diploma in Business Management, MBA, Certificate of proficiency IISA, COP, currently in the
                       process of attaining B.Com, CFP.

                    Stuart Wenman (Liberty appointed Trustee)

                    • Trustee for 12 years
                    • 14 years extensive pensions experience
                    • Responsible for The Technical Sales & Distribution Support Services Unit at Liberty Life
                    • Qualifications: B. Economic Science degree, FIA and FASSA.

Investment Strategy for the Corporate Selection Umbrella Funds

For the past 18 months your Board has been engaged in formulating an investment strategy in consultation with our appointed
independent investment advisors, fifth Quadrant Actuaries and Consultants.

By way of background, historically there have been few constraints to members and participations in selecting any of the
investment portfolios made available by the plan sponsor, Liberty Life. The consequence has been that more than 250 investment
portfolios were on offer, but more than 80% of the funds overall assets were in a relatively few portfolios.

With such a widespread range of investment portfolios, it proved an impossible task for the Board to regularly monitor performance
to benchmark and some trimming of portfolios was clearly needed.

The following few paragraphs summarises the investment strategy developed by the Boards of the Corporate Selection Umbrella

• Employers and members (where the employer has agreed to make individual member choice available) may select from a range
      of risk profiled and other investment portfolios that the Boards are comfortable to make available to members and employers as
      sound choices for retirement provision.

• The Boards (in consultation with its independent investment advisors) and fund members/employers may conveniently and easily
      monitor performance.

The Boards have implemented their investment strategy in two phases.

Portfolios available to new participations from 1st May 2006

The portfolios marked below with a ‘#’’ comprise the entire suite of investment portfolios that can be made available to new
participations effective on or after 1st May 2006.

A significant feature of the new range of portfolios is the introduction of the Multi-manager Life Stage portfolio (which will also act
as the default portfolio where members/employers do not make an investment portfolio selection). Assets in the Multi-manager Life
Stage portfolio will automatically be shifted through the various risk profiles of investments aligned to the members tolerance for
risk, from aggressive to moderate and eventually to a conservative profile as the member nears retirement. This is intended to
minimise volatility of investment returns and to ensure maximum preservation of assets closer to retirement to ensure that the
accumulated capital is protected against fluctuation in value due to volatile markets.

Portfolios available to existing participations from 1st March 2008

The Boards’ view is that the historical range of 220 available investment portfolios is far too numerous to allow the board to monitor
performance or suitability for retirement provision. After taking independent investment advice and in consultation with Liberty
Life, it has been decided to reduce the number of investment portfolios to 35 (inclusive of the portfolios marked with a ‘#).

Ideally, the Boards would have preferred that all participations select solely from the suite of portfolios introduced from 1st May
2006, but recognised that such action might result in a potential reduction in benefits for certain members who have chosen
portfolios which offer performance guarantees. For those portfolios that are not being continued, affected members will be able
to retain their guarantees through an automatic switch into portfolios with similar mandates and guarantees, which are being

Further, a number of existing popular historical portfolios have been retained. The board has decided to retain these portfolios to
reduce the enormous workload in implementing the conversion and furthermore as it feels that these portfolios are suitable for use
for retirement provision.

As far as is practicable, the Boards have ensured that the values held in the portfolios to be closed will be transferred to portfolios
with similar mandates and risk profiles.

Adequate time will be given for members and employers with investments in those portfolios which are being closed, to notify the
administrator, in writing, of their new investment choices.         In the event of no investment decision being made by the
members/employers, assets will be transferred to the Stanlib Multi-manager Risk-profiled portfolios.

                                                      ANNUAL REPORT OF THE TRUSTEESto the members of
                                                                   CORPORATE SELECTION PENSION & RETIREMENT FUNDS

Members/employers who elect to transfer assets to the Multi-manager Life Stage portfolio will be required to invest 100% of existing
assets and future contributions into that portfolio as the Multi Manager Life Stage Portfolio concept can only operate effectively
subject to this condition.

Available Portfolios

 #Life Stage

 Multi-manager Life Stage consisting of: Single-manager Life Stage consisting of:

 Multi-manager Growth                     Single-manager Growth

 Multi-manager Consolidation              Single-manager Connsolidation

 Multi-manager Preservation               Single-manager Preservation

 Corporate Range

 Corporate Preferred Assets               Corporate Liquid Assets

 Corporate Preferred SA Assets            Corporate Advanced Bonus

 Corporate Absolute Returns               Corporate Specialist Equity

 Corporate SA Absolute Returns            Corporate Specialist SA Equity

 Corporate Choice Assets                  Corporate Real Estate CPI

 Corporate Real Estate                    Corporate ALSI 40 Plus

 Corporate Balanced Bonus                 Corporate Financial & Industrial

 Corporate International Assets           Corporate Wealth Development

 Corporate Specialist Balanced            Corporate Gilt

 Corporate Specialist SA Balanced

 Stanlib Multi-manager risk-profiled

 Stanlib Multi-manager Aggressive
                                          Stanlib Multi-manager Aggressive
 Stanlib Multi-manager Moderate
                                          Stanlib Multi-manager Moderate
 Stanlib Multi-manager Conservative
                                          Stanlib Multi-manager Conservative

 Stanlib Unit Trusts

 Standard Bank Money Market Fund

 Stanlib Pooled Portfolio

 Liberty Managed

 #External Managers

 Oasis Crescent Equity (Shari’ah
                                           Investec House View with Global
 compliant portfolio)

 Allan Gray House View with Global         Coronation House View with Global

 RMB House View with Global                Oasis House View with Global

Surplus apportionment

The task of apportioning surplus amongst members and former members of some participating employers that had surpluses is still
ongoing at the time of writing (May 2007). This has proved to be a huge logistical exercise for the Funds.

The final deadline for the submission of surplus apportionment schemes to the Financial Services Board (FSB) was 31 December 2006.
The Board is aware of a serious backlog in full surplus submissions in the Corporate Selection Funds and is applying constant pressure
on the Fund administrators to finalise the exercise. The exercise to identify and have approved nil and small surplus submissions is
virtually complete. In fairness, the legislation is very complex and although published at the close of 2001, the final detail only
emerged from the FSB in 2006. Even now there are considerable retrospective changes in the legislation before Parliament.

Registration of former members

A former member is defined as any previous member who left their scheme (sub-Fund) prior to the sub-Fund’s surplus apportionment
date (this date varies according to annual revision date). Former members are required to register their details in order to be
considered for any surplus benefits that may be due to them.

The Board strongly urges current members who are aware of any former members to encourage them to register their details with
Liberty Life’s Surplus Team. Contact details are:

Fax No:      (011) 408-4623
Call Centre: 0860 100 388

The surplus apportionment status report for the Corporate Selection Funds as at April 2007 is as follows:

                                                      ANNUAL REPORT OF THE TRUSTEESto the members of
                                                                  CORPORATE SELECTION PENSION & RETIREMENT FUNDS

Nil Submissions (No surplus to distribute)

Total number of sub-Funds                                3301
Number of submissions to the FSB                         3271
Number of submissions approved by the FSB                1617
Number of submissions still to be approved               1654
Number of submissions in progress                          30

Small submissions (small surplus within the sub-Funds)

Total number of sub-Funds                                1293
Number of submissions to the FSB                         1274
Number of submissions approved by the FSB                 884
Number of submissions still to be approved                390
Number of submissions in progress                          19

Full submissions (sub-Funds with distributable surpluses)

Total number of sub-Funds                                 372
Number of submissions to the FSB                           47
Number of submissions approved by the FSB                  nil
Number of submissions still to be approved                 47
Number of submissions in progress                         325

Beneficiary nominations

Members are again urged to ensure that beneficiary nomination forms are updated regularly to reflect up-to-date information in
the event of their death. These nomination forms should be lodged with your employer.

This will allow quicker resolution of death claim payments and avoid unnecessary time having to be spent on obtaining the
necessary information. Trustees are required in terms of the Pension Funds Act to make the final decisions on the allocation of death
benefits to beneficiaries. Your beneficiary nomination form helps them to do this timeously.

Death benefit trusts

When deliberating on the distribution of death benefits, the Trustees will take into account the circumstances of the beneficiaries.
The Trustees may decide that the interests of the beneficiaries would best be served by investing the money in a trust that would
pay a monthly income.

In 2006, an umbrella trust fund called the Coselira Umbrella Trust was established specifically for Liberty Life sponsored retirement
annuity and umbrella retirement funds.       The trust is administered by Fairheads Umbrella Trust Company (Pty) Ltd and the
investments are managed by Stanlib Asset Managers.

The Board of Trustees of the Coselira Umbrella Trust meets quarterly to oversee the affairs of the Trust and your Chairperson, Mr
Alan McCulloch, chairs the Board of the Trust.

Pension Fund Adjudicator cases

The office of the Pension Funds Adjudicator was established to resolve disputes and investigate and determine complaints by
members of retirement funds regarding abuse of power, maladministration, disputes of fact or law and employer dereliction of duty
in respect of retirement funds.

A number of Pension Fund Adjudicator complaints were received during the course of the year under review.

A common complaint was that members were not paid out their withdrawal benefits due to a withdrawal notification not being
received by the administrators when the member has left service. The Adjudicator ruled against one employer who refused to
submit a signed withdrawal form on behalf of one of his employees and ordered the employer to submit the signed form and pay
interest at the rate of 15,5% from the date of the member’s resignation to the date of payment.

The Adjudicator’s contact details are as follows:

Cape Town office

Tel. number:          (021) 674-0209
Fax number:           (021) 674-0185
Physical address:     2nd Floor, Oakdale House, The Oval, Oakdale Road, Newlands, 7700
Postal address:       P O Box 23005, Claremont, 7735

Johannesburg office

Tel number:           (011) 8848454
Fax number:           (011) 8841144
Physical address:     1st Floor, Norfolk House, Cnr. 5th Street & Norwich Close, Sandton 2196

Rule amendments

Rule amendments changing the Financial Year of the Funds to 1 October of each year were signed by the Trustees and submitted to
the Financial Services Board during the period under review.

Home loans

In terms of the Pension Funds Act, members are permitted to use a portion of their share of the Fund’s assets (currently the Trustees
allow up to 40%) as collateral for securing a pension backed home loan from a recognised financial institution. Provided certain
conditions are fulfilled, your retirement fund will stand as guarantor for the collateral.

In 2005 and 2006, the Board of Trustees of your Fund, fully aware of their fiduciary duties, called for tenders from a number of
leading financial institutions that operate in the field of pension backed home loans in order to ensure that the institutions meet
their requirements and offer competitive rates of interest and conditions to you, the members.

                                                      ANNUAL REPORT OF THE TRUSTEESto the members of
                                                                  CORPORATE SELECTION PENSION & RETIREMENT FUNDS

Some of the requirements are that members receive proper education and assistance from the institution in relation to the
affordability of loan repayments, the purpose for which the loans are granted, the correct and accurate completion of the loan
application documents as well as other relevant matters associated with the acquisition and/or maintenance or improvement of a

At present, there is only one financial institution that meets most of the Board’s requirements and that is Standard Bank, which also
offer members an interest rate of prime less 0,5%.

At the time of writing this report the Board of Trustees is still negotiating with Standard Bank on the conditions of a new home loan
agreement between the Fund and the Bank to ensure that the members’ interests are safe guarded at all times. The new agreement
will also comply with the provisions of the National Credit Act that comes into effect on 1 June 2007 and which offers greater
protection to borrowers.

Other financial institutions are being considered to offer pension backed home loans to members once they have fulfilled the
Board’s requirements.

In terms of the Pension Funds Act, pension backed home loans may only be used to

• buy the land on which you will build a house or dwelling
• purchase a house or dwelling
• build a house or dwelling
• alter an existing house or dwelling.

Fund contact details

Any general queries relating to the day-to-day administration of your Fund can be raised via your employer or appointed
intermediary or directly with Liberty Corporate Benefit Operations (CBO) at their call centre, telephone number 011-408 2999 or fax
011-408 2264. All queries to CBO should ideally be put in writing.

Should a Corporate Selection Fund member wish to bring any matter to the attention of the Trustees or have a problem in obtaining
a response from the administrator, he/she can contact the Principal Officer, Charles Martin, directly.

His contact details are:

Tel. Number: (011) 408 8736
Fax number:    (011) 408 7236

Liberty Group Limited - an Authorised Financial Services Provider in terms of the FAIS Act (Licence No. 2409)

                                                                                                    B12 11185

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