Annual Report to Members - CSC

2018–19Annual Report

to Members

CSC

Annual Report 2018–19

Contents

Report from our Chair 1About our schemes 5Your investments 6Our investment management 24Our Board 26Financial overview 28Contact us 37

About this reportThis is the annual report for the year ended 30 June 2019 to members of the:

Public Sector Superannuation Scheme (PSS) ABN: 74 172 177 893 RSE: R1004595 Commonwealth Superannuation Scheme (CSS) ABN: 19 415 776 361 RSE: R1004649 Military Superannuation and Benefits Scheme (MilitarySuper) ABN: 50 925 523 120 RSE: R1000306 Public Sector Superannuation accumulation plan (PSSap) ABN: 65 127 917 725 RSE: R1004601 Commonwealth Superannuation Corporation retirement income (CSCri) ABN: 65 127 917 725 RSE: R1004601 Australian Defence Force Superannuation Scheme (ADF Super) ABN: 90 302 247 344 RSE: R1077063

This report was prepared in September 2019 by Commonwealth Superannuation Corporation (CSC) (ABN: 48 882 817 243 AFSL: 238069 RSEL: L0001397). CSC manages and is responsible for all aspects of PSSap and CSCri, including investment strategy, administration and member communications.

CSC is licensed under the Corporations Act 2001 and the Superannuation Industry (Supervision) Act 1993. CSC is the trustee of five regulated superannuation schemes: CSS, PSS, MilitarySuper, PSSap, ADF Super. CSC also administers six exempt public sector and military schemes.

General advice onlyAny financial product advice in this report is general advice only and has been prepared without taking account of your personal objectives, financial situation or needs. Before acting on any such general advice, you should consider the appropriateness of the advice, having regard to your own objectives, financial situation and needs. You may wish to consult a licensed financial adviser. You should obtain a copy of the Product Disclosure Statement (PDS) for the relevant scheme and consider its contents before making any decision regarding your super.

Financial advice for your needs and goalsObtaining professional advice from an experienced financial planner can help you reach your financial goals. CSC’s authorised* financial planners provide ‘fee for service’ advice, which means you receive a fixed quote upfront. There are no obligations, commissions or hidden fees.To arrange an initial advice appointment please call 1300 277 777 during business hours. If you wish to find out more, please visit csc.gov.au*CSC’s authorised financial planners are authorised to provide advice by Guideway Financial Services (ABN 46 156 498 538, AFSL 420367). Guideway is a licensed financial services business providing CSC financial planners with support to provide members with specialist advice, education and strategies.

1


About our schemes

Your investment

CSS

PSS

MilitarySuper

PSSap

ADF Super

Our Investment Management

CSS

PSS

MilitarySuper

PSSap

Our Board

ADF Super

Financial Overview

Contact us

Chair’s ReportReport from our Chair

IntroductionEvents in the past 18 months have unleashed changes in financial services that will fundamentally alter governance standards, behaviour, capability requirements, and product and service delivery. To maintain the high standards we have established at CSC in respect of these issues, we are assessing where we are, where we need to be, and what we need to get there.

During the last financial year comprehensive reports were issued by the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry; and the Productivity Commission into the efficiency and competitiveness of the superannuation industry. The Royal Commission’s recommendations have been largely accepted by government. Those from the Productivity Commission are still under review.

Our focus remains on achieving retirement outcomes for all our customers and improving our service delivery.

Investment returns were generally lower than in recent years, as markets attempted to assess and price global and domestic risk. CSC’s default fund and other investment options all exceeded their investment targets, and our objective to maximise capital retention in declining equity markets was clearly demonstrated during the last financial year.

CSC appointed a Chief Customer Officer and a Defence Liaison Officer in 2018. These new roles, and new technology, will improve our customer outcomes.

Royal Commission into Misconduct in the Banking, Superannuation and Financial Services IndustryThe final report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry was tabled in Parliament on 4 February 2019 following a year-long inquiry.

Many instances of wrongdoing, misconduct and poor governance were brought to light during the hearings. There are many funds with strong and proven governance and investment performance records, and CSC is one of those. CSC does not have, and never has had, conflicted remuneration structures. None of our employees receive commissions or increase remuneration outcomes by taking more risk. Our standards are high, and our reporting (to customers, the Parliament and regulators) is transparent, thorough and comprehensive.

Despite CSC’s strong governance and compliance record we are not complacent. There are areas where we can be better, and we are absolutely committed to identifying any deficiencies and doing all we can to make improvements.

A number of recommendations were made by the Commissioner in regard to the superannuation industry, all of which were supported by Government.

The Royal Commission urged individual financial services businesses to focus more on their governance processes and to improve or strengthen their culture, urging a move from an attitude of ‘Could we?’ to one of ‘Should we?’ This approach puts the interests of customers first and is a way of thinking and operating that CSC has long supported and uses in all parts of our business.

There will be significantly greater regulatory oversight from both the Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulation Authority (APRA) as a direct result of the Royal Commission.

The Royal Commission’s recommendation to ‘staple’ individuals to a single default account, when implemented, will have a great impact on the super industry.

The standards of governance and behaviour in the superannuation industry will change. The process of selecting, maintaining and reviewing Board members will change and our need to recruit and retain talent will become much more significant in the future. As the industry moves structurally to a small number of larger players, this concentration means greater competition for talent in both Board members and staff.

2


About our schemes

Your investment

CSS

PSS

MilitarySuper

PSSap

ADF Super


CSS

PSS

MilitarySuper

PSSap

Our Board

ADF Super

Financial Overview

Contact us

Chair’s ReportCSC’s governance frameworkThe Board Governance Committee is undertaking an extensive program of work to review CSC’s corporate governance framework to ensure that the Board functions in accordance with its aspiration to be a best-practice board. The committee’s detailed review aims to ensure that CSC’s policies and practices keep pace with community expectations. In particular, the committee is reviewing CSC’s board renewal and board performance practices to ensure that CSC promotes a board with an appropriate mix of skills, experience and independence that facilitates best-interest decision-making.

The committee will also oversee a holistic self-assessment that will critically analyse CSC’s governance practices against the expectations of regulators and that takes into account the recommendations of the Royal Commission and Productivity Commission.

As a result of the reports, reviews and regulatory changes, some of the major projects we are working on now include:

• Member Outcomes

• Remuneration Risk Gateway

• Strategic Plan – Implementation

• CBA Report Recommendations

• Royal Commission Recommendations

• PSSap/ADF Super Enhancements

• Accountabilities – Executive Accountability Regime

• APRA Priorities

Productivity Commission review of the efficiency and competitiveness of the Australian superannuation industryThe Productivity Commission’s final report into the efficiency and competitiveness of the Australian superannuation industry was publicly released on 10 January 2019.

The report is comprehensive and makes recommendations that deal with what the Commission sees as two structural flaws: multiple accounts and entrenched underperformers. The Commission considers that inadequate competition, governance and regulation have led to these structural flaws.

Its key recommendations are:

• Default superannuation accounts should only be created for members who are new to the workforce or do not have a superannuation account.

• The creation of a ‘best in show’ shortlist of up to 10 superannuation products for workforce starters to choose from.

• Legislation to require the auto-consolidation of inactive accounts and low-balance accounts.

• Opt-in insurance for young and inactive members.

• Legislation that requires all APRA-regulated superannuation funds to undertake annual outcomes tests for their MySuper and choice offerings.

While we accept a number of the challenges identified by the Commission, we have some reservations about some of the proposed solutions; for example, we do not consider best in show to be a solution that will benefit members in the long term.

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About our schemes About our schemes

Your investment Your investment

CSS CSS

PSS PSS

MilitarySuper MilitarySuper

PSSap PSSap

ADF Super ADF Super



CSS CSS

PSS PSS


PSSap PSSap

Our Board Our Board

ADF Super ADF Super

Financial Overview

Contact us Contact us

Chair’s ReportChanges from July 2019Very significant ‘Protecting Your Super’ changes came into operation on 1 July 2019. The changes impact fees, inactive low balance accounts and insurance in CSC’s defined contribution schemes PSSap and ADF Super.

• Fees As a result of the changes introduced by the Protecting Your Superannuation Package and other increased operating costs, we have had to review our fees. From 1 July 2019, the administration fee charged on ADF Super and PSSap accounts will change from $60 to $84 per annum. Most accounts with balances below $6,000 on the last day of a financial year will have certain fees and costs (generally, administration and investment related fees) capped at no more than 3% of the account balance for that year.

• Inactive low-balance accounts Inactive low-balance accounts with PSSap or ADF Super will be transferred to the ATO as ‘unclaimed super’. Where possible, the ATO will consolidate this balance into an active account that superannuants hold with a super fund.

• Insurance In most cases, insurance cover must be cancelled on 1 July 2019 for any accounts that are deemed to be inactive, that is, if no contributions have been made to the account for 16 continuous months prior.

Investment performanceCSC achieved its rolling three-year investment return objective for the eighth consecutive financial year in 2018–19.

All of our investment options either met or exceeded their target returns over their investment horizons to 30 June 2019.

Investment returns to 30 June 2019 for the Default, Balanced and MySuper Balanced options of the various schemes in which the majority of CSC’s assets under management (AUM) are invested exceeded their objectives.

Table 1: Investment returns to 30 June 2019 for CSC’s Default, Balanced and MySuper Balanced scheme options

AUM $billion 1 year % 3 years % p.a. 5 years % p.a. 7 years % p.a.

Australian inflation 1.6 1.9 1.6 1.9

Investment option

CSS default 2.17 7.9 9.0 8.1 9.5

PSS default 21.12 7.7 8.8 8.0 9.4

MilitarySuper Balanced 9.26 7.7 8.9 8.1 9.3

PSSap MySuper Balanced 12.02 7.7 8.8 8.0 9.4

ADF MySuper Balanced 0.26 7.6 8.8 – –

Target return 5.1 5.4 5.1 5.4

Note: Performance is presented net of fees and taxes.

CSC’s primary investment objective is to maximise long-term real (that is, above inflation) returns for members, with a target of 3.5% p.a. over rolling three-year periods for our Default, Balanced and MySuper Balanced options while keeping risk to an acceptable level (defined as a probability of loss in no more than three to four years out of 20). This investment objective is designed to provide adequacy in retirement for our average member. ‘Adequacy’ is defined by the Australian Superannuation Fund Association (ASFA) as a ‘comfortable standard’, which accounts for post-retirement cost-of-living adjustments.

4


About our schemes

Your investment

CSS

PSS

MilitarySuper

PSSap

ADF Super


CSS

PSS

MilitarySuper

PSSap

Our Board

ADF Super

Financial Overview

Contact us

Chair’s ReportCustomer serviceDuring the past year we have made many improvements to how we service our customers. We regularly hear from our customers that super can seem overwhelming and complicated, so we are committed to making it easier to find information, make decisions and take action. This includes providing customers with opportunities to learn about how they are tracking towards their retirement goals.

We have provided more options for customers to self-serve, providing flexibility around how and when they can contact us. We have simplified our language and increased our use of video and multimedia to help explain superannuation. We have re-designed our customer statements to make them easier to understand and provide individualised comparisons on progress towards retirement goals. We are also improving our website, making information easier to access and understand. In addition to our face-to-face customer seminars, we offer online webinars and this year we trialled real-time Facebook Live sessions.

We have more to do, but pleasingly our customer metrics (Net Promoter Scores) are improving and our ‘voice-of-customer’ program provides us with a continuous conversation with customers about what we should improve.

CSC’s Board and staffI thank CSC’s Board of Directors and staff for their efforts throughout a year that saw our industry face an almost unprecedented level of scrutiny, reputational impact and legislative change. Despite all of this, CSC continued to perform solidly, both in terms of our investment management and the improvements to the services we provide our customers. I take great pride that we were able to maintain the strong focus on our customers and were able to help them on their path towards the retirement they deserve.

Patricia Cross

Chair

25 September 2019

5


Chair’s Report

About our schemes


CSS CSS

PSS PSS


PSSap PSSap

ADF Super ADF Super



CSS CSS

PSS PSS


PSSap PSSap

Our Board Our Board

ADF Super ADF Super

Financial Overview


About our schemesAbout our schemesCSC is the trustee of five superannuation schemes regulated under the Superannuation Industry (Supervision) Act 1993, and we administer six exempt public sector and military schemes. This report provides information on the regulated schemes—i.e. CSS, PSS, MilitarySuper, PSSap, and ADF Super. Information about our exempt public sector and military schemes—including the Defence Force Retirement and Death Benefits (DFRDB) Scheme—is available on our website csc.gov.auThe Public Sector Superannuation Accumulation Plan (PSSap) and the Australian Defence Force Superannuation Scheme (ADF Super) are open to eligible Australian Government employees and members of the Australian Defence Force. These are accumulation funds meaning super accumulates depending on contributions and investment performance. As ‘not-for-profit funds’ all net investment returns are returned to customers.

PSSap offers access to our insurance product, lifePLUS Cover. This can be a cost effective way to hold insurance, with the benefit of group insurance often meaning lower premiums. These premiums are paid from a members’ super balance, not take home pay, which can help make finances easy. ADF Cover is our military cover product, automatically applied for eligible ADF Super members. ADF Cover makes it easy for those in military service to obtain death and invalidity cover at a reasonable cost.

The Commonwealth Superannuation Scheme (CSS) and Public Sector Superannuation Scheme (PSS) are defined benefit schemes which are closed to new members. Eligible PSS and CSS customers can open a PSSap Ancillary account, or access our account based pension product—Commonwealth Superannuation Corporation retirement income (CSCri)—giving them more flexibility to make the most of their super. A PSSap Ancillary membership provides the opportunity to grow super, access additional investment options, and take out additional insurance—like income protection. CSCri is designed to complement existing benefits by allowing members to keep some or all of their super invested while also receiving regular income payments in retirement.

Military Superannuation and Benefits Scheme (MilitarySuper) is a hybrid scheme, being part accumulation and defined benefit. This scheme is also closed to new members.

Our customers• contributors, are either employed by a participating scheme employer (usually an Australian Government

entity or the ADF) or are PSSap customers who were formerly employed by a participating scheme employer and who elected to continue PSSap membership when they changed jobs

• deferred benefit customers, or preservers, do not contribute to their scheme because they no longer work for a participating employer or are no longer ADF members. These customers maintain an account within their scheme and can generally become contributors again if they join a participating employer or re-join the ADF.

• pensioners are former scheme members who have exited their scheme and receive a pension. Eligible pensioners from the military schemes may become contributors again if they re-enter the ADF for a period of more than 12 months.

• Public sector scheme members who join CSCri are referred to as CSCri members.

Depending on scheme rules, customers of our schemes may also include:

• former spouses following a family law split—known as associates

• spouses and eligible children of deceased pensioners or members—known as reversionary pensioners

• customers who hold a benefit in a second scheme (MilitarySuper or PSSap)—known in their second scheme as ancillary members.

6


Chair’s Report

About our schemes

CSS

PSS

MilitarySuper

PSSap

ADF Super


CSS

PSS

MilitarySuper

PSSap

Our Board

ADF Super

Financial Overview

Contact us

Your investment

Your investmentsOur investment objectivesWe aim to achieve consistent long-term returns within a structured risk framework. To achieve this, we manage and invest each scheme’s investment option to enable its stated investment objective within strictly defined risk limits. Each scheme is also managed in a way that allows for payment of monies to meet member benefit payments, and to achieve equity among all members, as well as exercising care and diligence to maintain and grow the assets of the schemes.

CSC jointly invests the assets of CSS, PSS, MilitarySuper, PSSap and ADF Super, providing economy-of-scale benefits to members in each regulated scheme. We partner with professional external investment managers for their specialised expertise in the implementation and operational management of CSC’s individual investments. This means that CSC’s investment options in each scheme benefit from tailored oversight of their exposures, despite the fact that they span a very broad and diversified range of asset classes. Asset allocation and rebalancing ranges are set, fit for the purpose of each of CSC’s investment options.

Our strategyCompared with other superannuation funds, this means that we generally suffer fewer or smaller losses when markets are falling, but still capture a large proportion of the gains when markets are rising strongly. Note, however, that through these periods of strong equity market returns, CSC members’ investment returns should comfortably exceed targeted objectives.

On the long-term horizon, for customers in our balanced option, we expect to deliver competitive returns with greater certainty of income-sufficiency at retirement.

Our income-focused and aggressive funds are expected to deliver competitive returns consistently as their risk appetite is more directly comparable to that of other funds.

An example of the success of our strategy can be seen during the global financial crisis. CSC did not have any exposure to Collateralised Debt Obligations (CDOs); we did not experience any manager liquidity crises; and the default rates on our private assets did not rise above those expected under normal market environments. This is how we actively protect our customers’ savings and hunt robust opportunities to grow their savings without undue risk.

7


Chair’s Report


CSS CSS

PSS PSS


PSSap PSSap

ADF Super ADF Super



CSS CSS

PSS PSS


PSSap PSSap

Our Board Our Board

ADF Super ADF Super

Financial Overview



Our investment performanceIn 2018–19, for the eighth consecutive financial year, we achieved our real return targets for our default investment option. All other CSC investment options exceeded their return target to 30 June 2019.

Important contributors to our performance included:

• Diversification of our portfolio by investing in innovative private market opportunities. For example, we invested in Canberra Data Centre which delivers secure, reliable, green and customisable data centre solutions and infrastructure services.

• Using the impact of market sentiment on prices to opportunistically sell some of our mature private investments, and recycle those early-mover profits into new opportunities with more compelling net return prospects.

• Re-investment of some of our freed-up capital assets into emerging opportunities. For example, we co-invested in biotech and healthcare, as well as in infrastructure in the US and Europe, including in renewables.

• Progress of our seeder program for new, lower-cost investment skill, with a growing number of managers in our portfolio.

• Continuation of pro-active management of our portfolio risk exposures, not only at the asset level, but also at the fund level. For example, we increased the defensive character of our portfolios ahead of the December 2018 fall in equity markets. This action protected our customers’ savings when markets eventually fell in December 2018. We subsequently took that price opportunity to rebalance back into equity markets at lower prices, and thereby support our customers’ savings to grow, with lower risk.

As a result of our long-term investment strategy, we’ve achieved consistently strong retirement outcomes. Our approach aims to minimise losses when markets fall, but also capture most of the increases when markets are rising strongly. This is why we outperformed other funds in volatile and troubled market environments, such as in the six months to December 2018, but can underperform them when markets are driven by herd mentality rather than fundamentals. Over timeframes relevant to our customers, we expect this will accumulate to very competitive retirement outcomes. Importantly, CSC’s balanced fund consistently ranks in the top quartile of peers over the long-term when comparisons take into account the amount of risk that members are exposed to1.

1 In its annual industry-wide survey of superannuation fund investment returns, independent ratings agency, SuperRatings ranked all three of CSC’s PSSap investment options in the top 10. CSC’s PSSap Income Focused option was once again ranked first of 49 products, the PSSap Aggressive investment option was ranked second of 48 products, and the PSSap MySuper Balanced option was ranked ninth of 48 products.

8


Chair’s Report

About our schemes

PSS

MilitarySuper

PSSap

ADF Super


CSS

PSS

MilitarySuper

PSSap

Our Board

ADF Super

Financial Overview

Contact us

Your investment

CSS

CSSCSS investment performance summary

Table 2: All CSS options performance over last 10 years to 30 June 2019Option 1 year (%) 3 years (% pa) 5 years (% pa) 10 years (% pa)

Default Fund 7.9 9.0 8.1 8.6

Cash 1.7 1.6 1.8 2.5

Inflation 1.6 1.9 1.6 2.1

Note: All returns are calculated as the annually compounded average rate of earnings after tax and fees. Past performance is not indicative of future performance. CPI inflation shown to assist with comparison to objectives.

Table 3: CSS Default Fund and Cash option performance over last five financial yearsFinancial year Default Cash

2014–15 12.2 2.1

2015–16 1.9 1.8

2016–17 9.6 1.7

2017–18 9.4 1.5

2018–19 7.9 1.7

Note: All returns are calculated after tax and fees and are for the investment option as a whole; these returns are not your personal investment returns in CSS. Past performance is not indicative of future performance.

About CSS investment options

Cash option

OBJECTIVEThe objective is to preserve its capital and earn a pre-tax return close to that of the Bloomberg AusBond Bank Bill Index by investing 100% in cash assets.

ASSET ALLOCATION

Table 4: CSS Cash option asset allocation

Asset class Target (range) Actual at 30 June 2018 Actual at 30 June 2019

Cash 100% (100%) 100% 100%

Default Fund option

OBJECTIVEThe objective is to outperform the CPI by 3.5% per annum over 10 years.

9


Chair’s Report


PSS PSS


PSSap PSSap

ADF Super ADF Super



CSS CSS

PSS PSS


PSSap PSSap

Our Board Our Board

ADF Super ADF Super

Financial Overview


Your investmentYour investment

CSSCSS

ASSET ALLOCATION

Table 5. CSS Default Fund option asset allocation Asset class Target (range) Actual at 30 June 2018 Actual at 30 June 2019

Cash 15% (0–65%) 8.9% 9.6%

Fixed interest 14% (0–65%) 10.7% 12.5%

Equities 45% (15–75%) 54.9% 50.6%

Property 10% (5–25%) 8.0% 7.9%

Infrastructure 1% (0–20%) 2.9% 3.9%

Alternatives 15% (0–30%) 14.6% 15.5%

To manage the level of short-term volatility of returns and maintain appropriate levels of liquidity in the Fund, the target asset allocation to illiquid assets is limited to around 25% of the Default Fund’s investments, with a rebalancing range of plus or minus 10% around that target.

FUNDS UNDER MANAGEMENT

Table 6: CSS Funds under managementAt 30 June 2018 ($m) At 30 June 2019 ($m)

Cash 239.39 211.96

Balanced 2,497.37 2,173.02

Operational Risk Reserve 9.99 8.85

Total 2,746.75 2,393.83

Note: The Operational Risk Reserve is not an investment option. It is required by law for the purpose of providing a source of financial resources to help protect members’ interests should an operational risk event occur, such as the use of an inaccurate unit price to process a transaction that results in losses to the Fund or to members.

Other information about our investments

Assets in excess of 5% of the FundThere was no single asset greater than 5% of the total assets of the Fund at 30 June 2019.

Allocation of earning ratesCSC determines an earning rate for the CSS Default Fund and the CSS Cash Investment Option every business day. Earnings are allocated to member accounts monthly. The daily rates are used to calculate benefit entitlements for members who exit CSS before the end of the month. Daily earning rates are published in the Investment and Performance section of the CSS website at csc.gov.au

Eligible

rollover fundIf your super becomes

payable as a lump sum and we do not receive instructions on how you want it to be paid within 90 days of you stopping

work, it may be paid into an eligible rollover fund. CSC’s

nominated fund is:

AUSfund PO Box 2468 Kent Town SA 5071 Phone: 1300 361 798 Email: [email protected] Website: unclaimedsuper.com.au

If your CSS benefit has been paid to AUSfund, you must claim it from AUSfund, and you will be subject to AUSfund’s terms and conditions.

http://css.gov.au

10


Chair’s Report

About our schemes

CSS

MilitarySuper

PSSap

ADF Super


CSS

PSS

MilitarySuper

PSSap

Our Board

ADF Super

Financial Overview

Contact us

Your investment

PSS

PSSPSS investment performance summary

Table 7: All PSS options performance over last 10 years to 30 June 2019Option 1 year (%) 3 years (% pa) 5 years (% pa) 10 years (% pa)

Default Fund 7.7 8.8 8.0 8.5

Cash 1.7 1.6 1.7 2.5

Inflation 1.6 1.9 1.6 2.1


Table 8: PSS Default Fund and Cash options performance over last five financial yearsFinancial year Default Cash

2014–15 12.1 2.1

2015–16 1.7 1.7

2016–17 9.5 1.6

2017–18 9.3 1.5

2018–19 7.7 1.7

Note: All returns are calculated after tax and fees and are for the investment option as a whole; these returns are not your personal investment returns in PSS. Past performance is not indicative of future performance.

About PSS investment options

Cash option


ASSET ALLOCATION

Table 9: PSS Cash option asset allocationAsset class Target (range) Actual at 30 June 2018 Actual at 30 June 2019

Cash 100% (100%) 100% 100%

Default Fund option


11


Chair’s Report


CSS CSS


PSSap PSSap

ADF Super ADF Super



CSS CSS

PSS PSS


PSSap PSSap

Our Board Our Board

ADF Super ADF Super

Financial Overview



PSSPSS

ASSET ALLOCATION

Table 10: PSS Default Fund option asset allocationAsset class Target (range) Actual at 30 June 2018 Actual at 30 June 2019

Cash 15% (0–65%) 7.2% 9.6%

Fixed interest 14% (0–65%) 10.9% 12.5%

Equities 45% (15–75%) 56.0% 50.6%

Property 10% (5–25%) 8.1% 7.9%


Alternatives 15% (0–30%) 14.9% 15.5%

To manage the level of short-term volatility of returns and maintain appropriate levels of liquidity in the Fund, the target asset allocation to illiquid assets is limited to around 25% of the Default Fund’s investments, with a rebalancing range of plus or minus 10% around that target.


Table 11: PSS Funds under managementAt 30 June 2018 ($m) At 30 June 2019 ($m)

Cash 50.27 51.01

Balanced 20,338.79 21,115.92


Total 20,456.50 21,238.12




Allocation of earning ratesCSC determines an earning rate for the PSS Default Fund and the PSS Cash Investment Option every business day. Earnings are allocated to member accounts monthly. The daily rates are used to calculate benefit entitlements for members who exit the PSS before the end of the month. Daily earning rates are published in the Investment and Performance section of the PSS website at csc.gov.au

Eligible

rollover fundIf your super becomes

payable as a lump sum and we do not receive instructions on how you want it to be paid within 90 days of you stopping

work, it may be paid into an eligible rollover fund. CSC’s

nominated fund is:

AUSfund PO Box 2468 Kent Town SA 5071 Phone: 1300 361 798 Email: [email protected] Website: unclaimedsuper.com.au

If your PSS benefit has been paid to AUSfund, you must claim it from AUSfund, and you will be subject to AUSfund’s terms and conditions.

pss.gov.au

12


Chair’s Report

About our schemes

CSS

PSS

PSSap

ADF Super


CSS

PSS

MilitarySuper

PSSap

Our Board

ADF Super

Financial Overview

Contact us

Your investment

MilitarySuper

MilitarySuperMilitarySuper investment performance summary

Table 12: All MilitarySuper options performance over last 10 years to 30 June 2019Option 1 year (%) 3 years (% pa) 5 years (% pa) 10 years (% pa)

Cash 1.6 1.6 1.7 2.5

Income Focused 7.0 6.5 6.5 5.3

Balanced (default) 7.7 8.9 8.1 7.0

Aggressive 9.5 10.6 9.8 8.0

Inflation 1.6 1.9 1.6 2.1


Table 13: All MilitarySuper options performance over last 5 financial yearsFinancial year Balanced (default) Aggressive Income focused Cash

2014–15 12.1 16.1 7.0 2.1

2015–16 1.9 1.5 6.1 1.7

2016–17 9.6 11.8 6.1 1.6

2017–18 9.3 10.5 6.2 1.4

2018–19 7.7 9.5 7.0 1.6

Note: All returns are calculated as the annual average rate of earnings after fees and taxes. Past performance is not indicative of future performance.

About MilitarySuper investment options

Cash option


ASSET ALLOCATION

Table 14: MilitarySuper Cash option asset allocationAsset class Target (range) Actual at 30 June 2018 Actual at 30 June 2019

Cash 100% (100%) 100% 100%

13


Chair’s Report


CSS CSS

PSS PSS

PSSap PSSap

ADF Super ADF Super



CSS CSS

PSS PSS


PSSap PSSap

Our Board Our Board

ADF Super ADF Super

Financial Overview


MilitarySuper


MilitarySuper

Income Focused option

OBJECTIVEThe objective is to outperform the CPI by 2% per annum over 10 years.

ASSET ALLOCATIONTable 15: MilitarySuper Income Focused option asset allocation


Cash 30% (10-100%) 24.4% 26.8%

Fixed interest 20% (10-100%) 20.7% 25.6%

Equities 15% (0-40%) 22.6% 17.4%

Property 24% (0-35%) 18.7% 16.9%


Alternatives 10% (0–70%) 6.9% 5.0%

Balanced (default) optionOBJECTIVEThe objective is to outperform the CPI by 3.5% per annum over 10 years.

ASSET ALLOCATIONTable 16: MilitarySuper Balanced (default) option asset allocation


Cash 15% (0-65%) 6.9% 9.6%

Fixed interest 14% (0-65%) 11.0% 12.6%

Equities 45% (15-75%) 56.1% 50.5%

Property 10% (5-25%) 8.2% 7.9%


Alternatives 15% (0–30%) 14.9% 15.5%

Aggressive option


ASSET ALLOCATIONTable 17: MilitarySuper Aggressive option asset allocation


Cash 3% (0-35%) 3.0% 0.5%

Fixed interest 5% (0-35%) 2.8% 4.9%

Equities 65% (20-95%) 68.3% 68.1%

Property 16% (0-50%) 12.1% 11.3%


Alternatives 10% (0–70%) 9.5% 9.6%

14


Chair’s Report

About our schemes

CSS

PSS

PSSap

ADF Super


CSS

PSS

MilitarySuper

PSSap

Our Board

ADF Super

Financial Overview

Contact us

Your investment

MilitarySuper

Our investment information


Table 18: MilitarySuper Funds under managementAt 30 June 2018 ($m) At 30 June 2019 ($m)

Cash 64.46 70.49

Income Focused 47.89 55.16

Balanced (default) 8,472.99 9,256.27

Aggressive 706.03 857.47


Total 9,324.04 10,275.55



Asset in excess of 5% of the FundThere was no single asset greater than 5% of the total assets of the Fund at 30 June 2019.

Calculation of unit pricesYour investment in MilitarySuper is valued in units. The unit price for an investment option reflects the total value of assets in the investment option (less expenses and taxes), divided by the number of all units issued in the investment option.

MilitarySuper uses units and daily unit prices to process transactions on your account, perform switches between investment options and track the value of your investment in the Fund.

When contributions are paid into your account, that money buys a number of units and the value of each unit (in dollars) is known as the unit price. Each investment option has a different unit price that can change daily, due to changes in investment markets and the value of assets. Investment earnings attributable to your account are reflected in the price of units that you hold.

Generally CSC bases its calculation of the value of assets in each investment option on the latest available market value at the end of each business day. Using these values, CSC will generally calculate the unit price for a given business day on the next business day. For example, CSC will generally calculate the unit price for 1 September (if a business day) and make it available on 2 September (if a business day).

If CSC is unable to determine a unit price for a business day on the following business day due to an unforeseeable event, such as a trading suspension in relevant markets, all reasonable steps will be taken to recommence unit pricing as soon as possible.

For further information, refer to the Fees and other costs booklet, which forms part of the MilitarySuper Product Disclosure Statement (PDS), available at csc.gov.au

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Chair’s Report


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PSS PSS

MilitarySuper

PSSap

ADF Super ADF Super



CSS CSS

PSS PSS


PSSap PSSap

Our Board Our Board

ADF Super ADF Super

Financial Overview



PSSap

MilitarySuper

PSSapPSSap investment performance summary

Table 19: All PSSap options performance over last 10 years to 30 June 2019Option 1 year (%) 3 years (% pa) 5 years (% pa) 10 years (% pa)

Cash 1.6 1.5 1.7 2.5

Income Focused 7.1 6.4 6.3 6.6

MySuper Balanced (default) 7.7 8.8 8.0 8.5

Balanced (Ancillary members only) 7.7 8.8 8.0 8.4

Aggressive 9.5 10.5 9.7 9.9

Inflation 1.6 1.9 1.6 2.1

Note: All returns are calculated as the annually compounded average rate of earnings after fees and taxes. Past performance is not indicative of future performance. CPI inflation shown to assist with comparison to objectives.

Table 20: All PSSap options performance over last 5 financial years

Financial year MySuper Balanced (default)

Aggressive Balanced (Ancillary)

Income focused Cash

2014–15 12.2 16.1 12.1 6.9 2.2

2015–16 1.8 1.4 1.7 5.7 1.8

2016–17 9.4 11.6 9.4 5.8 1.6

2017–18 9.3 10.5 9.2 6.2 1.4

2018–19 7.7 9.5 7.7 7.1 1.6


Table 21: All CSCri options performance over last 6 years to 30 June 2019Option 1 year (%) 5 years (% pa) 6 years (% pa)

Cash 1.9 2.0 2.1

Income Focused (default) 7.7 6.8 6.8

Balanced 8.2 8.7 9.4

Aggressive 10.6 10.7 11.3

Inflation 1.6 1.6 1.9

Note: All returns are calculated as the annual average rate of earnings after fees and taxes. Past performance is not indicative of future performance. CPI inflation shown to assist with comparison to objectives.

16


Chair’s Report

About our schemes

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PSS

MilitarySuper

ADF Super


CSS

PSS

MilitarySuper

PSSap

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Financial Overview

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Your investment

PSSap

Table 22: All CSCri TRIS options performance over last 2 years to 30 June 2019

Option 1 year (%) 2 years (% p.a)

Cash 1.6 1.5

Income Focused (default) 7.2 7.0

Balanced 7.7 8.6

Aggressive 9.5 10.2

Inflation 1.6 1.8


CPI inflation shown to assist with comparison to objectives.

About PSSap, CSCri and CSCri TRIS investment options

Cash option


ASSET ALLOCATION

Table 23: PSSap & CSCri Cash options asset allocationAsset class Target (range) Actual at 30 June 2018 Actual at 30 June 2019

Cash 100% (100%) 100% 100%


OBJECTIVEThe objective is to outperform the CPI by 2% per annum over 10 years.

ASSET ALLOCATION

Table 24: PSSap Income Focused option asset allocationAsset class Target (range) Actual at 30 June 2018 Actual at 30 June 2019

Cash 30% (10–100%) 24.2% 26.8%

Fixed interest 20% (10–100%) 20.8% 25.6%

Equities 15% (0–40%) 22.6% 17.4%

Property 24% (0–35%) 18.7% 16.9%


Alternatives 10% (0–70%) 7.0% 5.0%

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Chair’s Report


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ADF Super ADF Super



CSS CSS

PSS PSS


PSSap PSSap

Our Board Our Board

ADF Super ADF Super

Financial Overview



PSSap PSSap

Table 25: CSCri Income Focused option asset allocationAsset class Target (range) Actual at 30 June 2018 Actual at 30 June 2019

Cash 35% (10–100%) 28.4% 31.8%

Fixed interest 20% (10–100%) 21.0% 25.6%

Equities 10% (0–40%) 17.9% 12.4%

Property 24% (0–35%) 18.9% 16.9%


Alternatives 10% (0–70%) 7.0% 5.0%

Table 26: CSCri TRIS Income Focused option asset allocationAsset class Target (range) Actual at 30 June 2018 Actual at 30 June 2019

Cash 30% (10–100%) 23.7% 26.8%

Fixed interest 20% (10–100%) 20.9% 25.6%

Equities 15% (0–40%) 22.8% 17.4%

Property 24% (0–35%) 18.8% 16.9%


Alternatives 10% (0–70%) 7.0% 5.0%

PSSap MySuper Balanced (default) and Balanced (PSSap Ancillary and CSCri) optionsPSSap’s default investment option is called MySuper Balanced (default). PSSap Ancillary and CSCri members can also invest in a ‘balanced’ option (called the Balanced option).


ASSET ALLOCATIONTable 27: PSSap MySuper Balanced (default) option asset allocation


Cash 15% (0–65%) 6.7% 9.6%

Fixed interest 14% (0–65%) 11.0% 12.5%

Equities 45% (15–75%) 56.3% 50.6%

Property 10% (5–25%) 8.2% 7.9%


Alternatives 15% (0–30%) 14.9% 15.5%

18


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Financial Overview

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Your investment

PSSap

Table 28: Balanced option (PSSap Ancillary members only) asset allocation


Cash 15% (0–65%) 6.3% 9.6%

Fixed interest 14% (0–65%) 11.0% 12.5%

Equities 45% (15–75%) 56.5% 50.6%

Property 10% (5–25%) 8.2% 7.9%


Alternatives 15% (0–30%) 15.0% 15.5%

Table 29: CSCri Balanced option asset allocationAsset class Target (range) Actual at 30 June 2018 Actual at 30 June 2019

Cash 19% (0–65%) 9.0% 13.6%

Fixed interest 15% (0–65%) 12.2% 13.5%

Equities 40% (15–75%) 52.3% 45.6%

Property 10% (5–25%) 8.3% 7.9%


Alternatives 15% (0–30%) 15.2% 15.5%

Table 30: CSCri TRIS Balanced option asset allocationAsset class Target (range) Actual at 30 June 2018 Actual at 30 June 2019

Cash 15% (0–65%) 5.6% 9.6%

Fixed interest 14% (0–65%) 11.1% 12.5%

Equities 45% (15–75%) 56.9% 50.6%

Property 10% (5–25%) 8.3% 7.9%


Alternatives 15% (0–30%) 15.1% 15.5%

Aggressive optionOBJECTIVEThe objective is to outperform the CPI by 4.5% per annum over 10 years.

ASSET ALLOCATIONTable 31: PSSap Aggressive option asset allocation


Cash 3% (0–35%) 1.8% 0.5%

Fixed interest 5% (0–35%) 2.7% 4.7%

Equities 65% (20–95%) 69.3% 68.3%

Property 16% (0–50%) 12.2% 11.3%


Alternatives 10% (0–70%) 9.6% 9.6%

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Chair’s Report


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PSS PSS


ADF Super ADF Super



CSS CSS

PSS PSS


PSSap PSSap

Our Board Our Board

ADF Super ADF Super

Financial Overview



PSSap PSSap

Table 32: CSCri Aggressive option asset allocation


Cash 3% (0–35%) 0.8% 0.5%

Fixed interest 5% (0–35%) 2.7% 4.7%

Equities 60% (20–95%) 65.0% 63.3%

Property 16% (0–50%) 12.4% 11.3%


Alternatives 15% (0–70%) 14.7% 14.6%

Table 33: CSCri TRIS Aggressive option asset allocationAsset class Target (range) Actual at 30 June 2018 Actual at 30 June 2019

Cash 3% (0–35%) 1.3% 0.5%

Fixed interest 5% (0–35%) 2.8% 4.7%

Equities 65% (20–95%) 69.7% 68.3%

Property 16% (0–50%) 12.2% 11.3%


Alternatives 10% (0–70%) 9.6% 9.6%

FUNDS UNDER MANAGEMENTTable 34: PSSap Funds under management

At 30 June 2018 ($m) At 30 June 2019 ($m)

Cash 150.39 192.14


MySuper Balanced 10,570.01 12,018.09

Balanced 126.05 155.55

Aggressive 1,061.81 1,386.02


Total 12,206.98 14,109.25


Table 35: CSCri Funds under managementAt 30 June 2018 ($m) At 30 June 2019 ($m)

Cash 11.35 17.80


Balanced 91.08 121.89



Total 230.59 312.41


20


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About our schemes

CSS

PSS

MilitarySuper

ADF Super


CSS

PSS

MilitarySuper

PSSap

Our Board

ADF Super

Financial Overview

Contact us

Your investment

PSSap

Table 36: CSCri TRIS Funds under managementAt 30 June 2018 ($m) At 30 June 2019 ($m)

Cash 2.75 2.46


Balanced 31.70 29.00



Total 70.39 63.58



Assets in excess of 5% of FundThere was no single asset greater than 5% of the total assets of the Fund at 30 June 2019.

Calculation of unit pricesYour investment in PSSap is valued in units. The unit price for an investment option reflects the total value of assets in the investment option (less expense and taxes other than those deducted directly from your account), divided by the number of all units issued in the investment option.

PSSap uses units and daily unit prices to process transactions on your account, perform switches between investment options and track the value of your investment in the Fund.



If CSC is unable to determine a unit price for a business day on the following business day due to an unforeseeable event, such as a trading suspension in relevant markets, all reasonable steps will be taken to recommence unit pricing as soon as possible. The costs associated with the purchase or sale of fund investments are reflected in the unit price for the relevant investment option through a buy-sell spread. For further information, refer to the Fees and other costs booklet, which forms part of the PSSap Product Disclosure Statement (PDS), available at csc.gov.au

csc.gov.au

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Chair’s Report


CSS CSS

PSS PSS


PSSap

ADF Super



CSS CSS

PSS PSS


PSSap PSSap

Our Board Our Board

ADF Super ADF Super

Financial Overview


ADF Super


PSSap

ADF SuperADF Super investment performance summary

Table 37: All ADF Super investment options performance over last 3 years to 30 June 2019Option 1 year (%) 3 years (% pa)

Cash 1.6 1.6


MySuper Balanced (default) 7.6 8.8

Aggressive 9.4 10.6

Inflation 1.6 1.9


Investment performanceTable 38: All ADF Super options performance over last 3 financial years

Financial year MySuper Balanced (default)

Aggressive Income Focused Cash

2016–17 9.4 11.6 5.9 1.6

2017–18 9.3 10.6 6.2 1.5

2018-19 7.6 9.4 7.0 1.6


About ADF Super investment options

Cash option

OBJECTIVEThe objective is to preserve its capital and earn a pre-tax return close to that of the Bloomberg AusBond bank bill index by investing 100% in cash assets.

ASSET ALLOCATION

Table 39: ADF Super Cash option asset allocationAsset class Target (range) Actual at 30 June 2018 Actual at 30 June 2019

Cash 100% (100%) 100% 100%


OBJECTIVETo outperform the CPI by 2% per annum over 10 years.

22


Chair’s Report

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CSS

PSS

MilitarySuper

PSSap


CSS

PSS

MilitarySuper

PSSap

Our Board

ADF Super

Financial Overview

Contact us

ADF Super

Your investment

ASSET ALLOCATION

Table 40: ADF Super Income Focused option asset allocation


Cash 30% (10-100%) 23.8% 26.8%

Fixed interest 20% (10-100%) 20.9% 25.6%

Equities 15% (0-40%) 22.7% 17.4%

Property 24% (0-35%) 18.8% 16.9%


Alternatives 10% (0–70%) 7.0% 5.0%

MySuper Balanced (default) optionThe ADF Super default option is called the MySuper Balanced option.


ASSET ALLOCATION

Table 41: ADF Super MySuper Balanced (default) option asset allocation


Cash 15% (0-65%) 5.4% 9.6%

Fixed interest 14% (0-65%) 11.1% 12.5%

Equities 45% (15-75%) 57.1% 50.6%

Property 10% (5-25%) 8.3% 7.9%


Alternatives 15% (0–30%) 15.1% 15.5%

Aggressive option


ASSET ALLOCATION

Table 42: ADF Super Aggressive option asset allocationAsset class Target (range) Actual at 30 June 2018 Actual at 30 June 2019

Cash 3% (0-35%) 1.0% 0.5%

Fixed Interest 5% (0-35%) 2.7% 4.7%

Equities 65% (20-95%) 69.9% 68.3%

Property 16% (0-50%) 12.3% 11.3%

Infrastucture 1% (0-50%) 4.4% 5.6%

Alternatives 10% (0-70%) 9.7% 9.6%

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Chair’s Report


CSS CSS

PSS PSS


PSSap PSSap



CSS CSS

PSS PSS


PSSap PSSap

Our Board Our Board

ADF Super ADF Super

Financial Overview


ADF Super

Your investment

ADF Super

Your investment


Table 43: ADF Super Funds under managementAt 30 June 2018 ($m) At 30 June 2019 ($m)

Cash 0.27 1.23


MySuper Balanced (default) 117.07 263.14



Total 125.00 282.53



Calculation of unit prices Your investment in ADF Super is valued in units. The unit price for an investment option reflects the total value of assets in the investment option (less expense and taxes other than those deducted directly from your account), divided by the number of all units issued in the investment option.

ADF Super uses units and daily unit prices to process transactions on your account, perform switches between investment options and track the value of your investment in the Fund.



If CSC is unable to determine a unit price for a business day on the following business day due to an unforeseeable event, such as a trading suspension in relevant markets, all reasonable steps will be taken to recommence unit pricing as soon as possible. The costs associated with the purchase or sale of fund investments are reflected in the unit price for the relevant investment option through a buy-sell spread. For further information, refer to the Fees and other costs booklet, which forms part of the ADF Super Product Disclosure Statement (PDS), available at csc.gov.au

csc.gov.au

24


Chair’s Report

About our schemes

Your investment

CSS

PSS

MilitarySuper

PSSap

ADF Super

CSS

PSS

MilitarySuper

PSSap

Our Board

ADF Super

Financial Overview

Contact us


Our investment managementThe assets of CSS, PSS, MilitarySuper, PSSap and ADF Super are pooled together in order to deliver investment scale and a cost efficient investment process.

Through the ARIA Investments Trust (AIT), CSC invests in multiple, specialist investment funds and portfolios. Listed below are the investment managers appointed to invest assets, as well as specialist investment funds and portfolios. Investments that represent less than 0.5% of CSC’s funds under management as at 30 June 2019 are not included.

• Airlie Funds Management Pty Limited

• Anchorage Capital Partners Pty Limited

• Antipodes Partners Limited

• Arcadia Funds Management Limited

• Balanced Equity Management Pty Limited

• Bridgewater Associates, Inc

• Eureka Funds Management Limited

• HRL Morrison & Co (Australia) Pty Limited

• Lendlease Real Estate Investments Limited

• Luxor Capital Group, LP

• Macquarie Investment Management Global Limited

• Magellan Asset Management Limited

• Paradice Investment Management Pty Limited

• Pharo Management (UK) LLP

• Platinum Investment Management Limited

• PGIM, Inc

• Schroder Investment Management Australia Limited

• Scopia Capital Management LP

• State Street Global Advisors, Australia, Limited

• Steadfast Financial LP

• Stonepeak Infrastructure Partners

• Sunley House Capital Fund Ltd

• Wellington Management Australia Pty Limited

Our derivatives policyInvestment managers who enter into an investment management agreement with CSC may use derivative securities (known as ‘derivatives’) to facilitate increases or decreases in the Fund’s exposure to different investment markets.

Derivatives are financial instruments whose value changes in response to the changes in underlying variables.Examples include futures, options and forward exchange contracts.

Derivatives within investment mandates are mainly used to reduce risk for members. CSC’s investment managers are not permitted to use derivative securities for gearing the Fund or any part of the Fund, or for placing the Fund in a position where it is short in an asset class.

Any investment mandates which permit an investment manager to use derivatives reflect the derivatives policy of the Fund as a whole. If CSC’s investment managers are permitted to use derivatives, the limits will be clearly set out in the mandate. CSC’s internal investment and operations teams (and custodian) monitor whether derivatives use is consistent with CSC’s policy.

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Chair’s Report



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PSS PSS


PSSap PSSap

ADF Super ADF Super

CSS CSS

PSS PSS


PSSap PSSap

Our Board Our Board

ADF Super ADF Super

Financial Overview




Payment of surcharge liabilitySurcharge is a tax on surchargeable superannuation contributions. It was abolished in July 2005 but still applies if a member’s adjusted taxable income prior to 2005-06 exceeded a certain amount. If we are informed by the Australian Taxation Office (ATO) that a member is assessed as having a surcharge liability, the member can either have the amount deducted from their final benefit before it is paid, or pay some or all of their surcharge debt at any time before their benefit is payable.

Each scheme maintains a surcharge debt account for each member to record any surcharge assessments from the ATO, together with any payments made by the member and any interest required to be imposed.

26


Chair’s Report

About our schemes

Your investment

CSS

PSS

MilitarySuper

PSSap

ADF Super


CSS

PSS

MilitarySuper

PSSap

ADF Super

Financial Overview

Contact us

Our Board

Our BoardThe CSC Board consists of an independent Chair and 10 other directors. Of the 10 other directors, three are nominated by the President of the Australian Council of Trade Unions (ACTU) and two are nominated by the Chief of the Defence Force. The Minister for Finance chooses the remaining five directors in consultation with the Minister for Defence. Director biographies are available at csc.gov.au

Mrs Patricia CrossAppointed 1 July 2014; re-appointed 1 July 2017 to 30 June 2020

• Chair of the Board• Member of the Board Governance Committee• Member of the Remuneration and HR Committee

Mrs Ariane BarkerAppointed 13 September 2016; re-appointed 1 July 2019 to 30 June 2022

• Member of the Audit Committee• Member of the Risk Committee

The Hon. Chris EllisonAppointed 1 July 2014; re-appointed 1 July 2017 to 30 June 2020

• Member of the Board Governance Committee• Chair of the Remuneration and HR Committee

Ms Nadine FloodAppointed 1 July 2011; re-appointed 1 July 2017 to 30 June 2020

• Nominee of the President of the ACTU• Member of the Audit Committee• Member of the Risk Committee

Ms Winsome HallAppointed 1 July 2011; re-appointed 1 July 2019 to 30 June 2020

• Nominee of the President of the ACTU• Member of the Board Governance Committee• Member of the Remuneration and HR Committee• Member of the APS Reconsideration Advisory Committee

Mr Garry HounsellAppointed 1 July 2016; re-appointed 1 July 2019 to 30 June 2022

• Chair of the Audit Committee• Member of the Risk Committee

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Chair’s Report



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PSSap PSSap

ADF Super ADF Super



CSS CSS

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ADF Super ADF Super

Financial Overview


Our BoardOur Board

Mr Sunil KemppiAppointed 1 July 2016; re-appointed 1 July 2018 to 30 June 2021

• Nominee of the President of the ACTU

Air Vice-Marshal Tony Needham, AMAppointed 1 July 2016; re-appointed 1 July 2019 to 30 June 2022

• Nominee of the Chief of the Defence Force• Deputy Chair of the MilitarySuper Reconsideration Committee• Deputy Chair of the Defence Force Case Assessment Panel

Ms Peggy O’NealAppointed 1 July 2011; re-appointed 1 July 2017 to 30 June 2020

• Member of the Board Governance Committee• Member of the Remuneration and HR Committee• Chair of the APS Reconsideration Advisory Committee

Air Vice-Marshal Margaret Staib, AM, CSCAppointed 2 May 2014; re-appointed 2 May 2017 to 1 May 2020

• Nominee of the Chief of the Defence Force• Chair of the MilitarySuper Reconsideration Committee• Chair of the Defence Force Case Assessment Panel• Chair of the Risk Committee• Member of the Audit Committee

Dr Michael John Vertigan, ACAppointed from 1 July 2017 to 30 June 2020

• Chair of the Board Governance Committee• Member of the Remuneration and HR Committee

Director indemnityAnything done, or omitted to be done, in good faith by a director or delegate of the Board in the performance of functions under relevant CSC legislation will not subject that person to any action, liability, claim or demand. CSC may, however, be subject to an action, liability, claim or demand. In addition to the legislative indemnity, CSC holds trustee liability and comprehensive crime insurance which complies with the Corporations Act 2001.

28


Chair’s Report

About our schemes

Your investment

CSS

PSS

MilitarySuper

PSSap

ADF Super


PSS

MilitarySuper

PSSap

Our Board

ADF Super

Contact us

CSS

Financial Overview

CSS financial overview 2018–19 Table 44. CSS unaudited financial information for 2018–19

$’000

Net assets available to pay benefits as at 30 June 2018 2,779,027

Inflows

Changes in fair value of investments 164,680

Interest 694

Member contributions 36,958

Employer contributions 11,094

Low income superannuation tax offset contributions 3

Government co-contributions 19

Net appropriation from Consolidated Revenue Fund 3,885,305

Outflows1

Benefits and pensions paid (4,465,915)

Income tax expense (1,770)


Assets and liabilities as at 30 June 20192

Investments3 2,390,568

Cash 30,666

Other receivables 395

Benefits payable (9,811)

Tax liabilities (1,723)

Net assets as at 30 June 2019 2,410,095

1Expenses relating to investment management were borne by the underlying investments of the Scheme. Costs other than those incurred in managing and investing Scheme assets are met by CSC. Administrative fees are paid by employers to meet these costs. 2Excludes member benefit liabilities of $64.1 billion, of which $61.7 billion is funded by the Commonwealth Government. 3The value of investments shown above reconciles with the total Fund values shown in Table 6 on page 8 as follows:

$’000

CSS Options

Default Fund 2,173,017

Cash Investment Option 211,957

Investments backing the operational risk reserve 8,854

Total Fund 2,393,828

Add/(less)

Adjustment from unit pricing to financial statements valuation basis (3,260)

2,390,568

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Chair’s Report



CSS CSS

PSS PSS


PSSap PSSap

ADF Super ADF Super



PSS PSS


PSSap PSSap

Our Board Our Board

ADF Super ADF Super


Financial Overview

CSSCSS

The assets of CSS are invested through the AIT, where they are pooled with the investments of CSC’s other schemes.

The AIT invests in multiple specialist investment funds and portfolios.

The AIT receives income such as dividends, interest, trust distributions and gains and losses on sale and incurs administration and management expenses including expenses that would otherwise be incurred by CSS.

The operating surplus or deficit generated by the AIT is reflected in daily unit prices released by the AIT for its unitholders including CSS, and daily earning rates based on the unit prices are published on the CSC website. If you would like to see a copy of CSS audited financial statements for this year and the report from the auditor, please refer to our Annual Report to Parliament (which is published and tabled in Parliament in October) at csc.gov.au, send an email to [email protected], call us on 1300 000 277 or write to CSS, GPO Box 2252, Canberra ACT 2601.

30


Chair’s Report

About our schemes

Your investment

CSS

PSS

MilitarySuper

PSSap

ADF Super


CSS

MilitarySuper

PSSap

Our Board

ADF Super

Contact us

PSS

Financial Overview

PSS financial overview 2018–19 Table 45. PSS unaudited financial information for 2018–19

$’000


Inflows

Changes in fair value of investments 1,524,397

Insurance premiums charged to members 3,453

Other revenue 3,662




Government co-contributions 1,195

Net appropriation from Consolidated Revenue Fund 913,509

Outflows1

Benefits and pensions paid (2,425,965)

Insurance premiums paid (3,453)





Cash 43,095

Other receivables 3,584


Other payables (1,126)

Net tax liabilities (27,564)


1Expenses relating to investment management were borne by the underlying investments of the Scheme. Costs other than those incurred in managing and investing Scheme assets are met by CSC. Administrative fees are paid by employers to meet these costs. 2Excludes member benefit liabilities of $83.1 billion, of which $62.0 billion is funded by the Commonwealth Government. 3The value of investments shown above reconciles with the total Fund values shown in Table 11 on page 10 as follows:

$’000

PSS Options

Default Fund 21,115,923

Cash Investment Option 51,007



Add/(less)


21,206,444

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Chair’s Report



CSS CSS

PSS PSS


PSSap PSSap

ADF Super ADF Super



CSS CSS


PSSap PSSap

Our Board Our Board

ADF Super ADF Super


Financial Overview

PSSPSS

The assets of PSS are invested through the AIT, where they are pooled with the investments of CSC’s other schemes.


The AIT receives income such as dividends, interest, trust distributions and gains and losses on sale and incurs administration and management expenses including expenses that would otherwise be incurred by PSS.

The operating surplus or deficit generated by the AIT is reflected in daily unit prices released by the AIT for its unitholders including PSS, and daily earning rates based on the unit prices are published on the CSC website. If you would like to see a copy of PSS audited financial statements for this year and the report from the auditor, please refer to our Annual Report to Parliament (which is published and tabled in Parliament in October) at csc.gov.au, send an email to [email protected], call us on 1300 000 377 or write to PSS, GPO Box 2252, Canberra ACT 2601.

32


Chair’s Report

About our schemes

Your investment

CSS

PSS

MilitarySuper

PSSap

ADF Super


CSS

PSS

Our Board

ADF Super

Contact us

MilitarySuper

PSSap

Financial Overview

MilitarySuper financial overview 2018–19

Table 46. MilitarySuper unaudited financial information for 2018–19$’000


Inflows


Interest 420





Net appropriation from Consolidated Revenue Fund 770,024

Outflows1

Benefits and pensions paid (977,104)




Investments 10,275,549

Cash 52,327

Other receivables 6,410


Other payables (482)

Tax liabilities (25,741)


1Expenses relating to investment management were borne by the underlying investments of the Scheme. Costs other than those incurred in managing and investing Scheme assets are met by CSC. Administrative fees are paid by employers to meet these costs. 2Excludes member benefit liabilities of $54.6 billion, of which $44.4 billion is funded by the Commonwealth Government.

The assets of MilitarySuper are invested through the AIT, where they are pooled with the investments of CSC’s other schemes.


The AIT receives income such as dividends, interest, trust distributions and gains and losses on sale and incurs administration and management expenses including expenses that would otherwise be incurred by MilitarySuper.

The operating surplus or deficit generated by the AIT is reflected in daily unit prices released by the AIT for its unitholders including MilitarySuper, and daily MilitarySuper unit prices based on the AIT unit prices are published on the CSC website. If you would like to see a copy of MilitarySuper audited financial statements for this year and the report from the auditor, please refer to our Annual Report to Parliament (which is published and tabled in Parliament in October) at csc.gov.au, send an email to [email protected], call us on 1300 006 727 or write to MilitarySuper, GPO Box 2252 Canberra ACT 2601.

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ADF Super ADF Super



CSS CSS

PSS PSS

MilitarySuper

Our Board Our Board

ADF Super ADF Super


MilitarySuper

Financial Overview

PSSap PSSap

PSSap financial overview 2018–19 Table 47. PSSap unaudited financial information for 2018–19

$’000


Revenue

Interest 2,223

Changes in fair value of investments 1,017,433

Employer contributions 1,241,953


Transfers from other funds 522,981


Low income superannuation tax offset contributions 2,882

Insurance claims received and other revenue 28,109

Total revenue 2,882,973

Insurance premium expense (98,603)

Other administration expenses (10,794)

Benefits, transfers and pensions paid and payable (614,298)

Total expenses1 (723,695)


Net increase in net assets available to pay benefits 1,989,439




Cash 224,427

Other assets 1,844

Total assets 14,690,228

Liabilities

Benefits and pensions payable (953)

Other payables (9,237)

Current tax liabilities (175,129)

Total liabilities (185,319)

Net assets available to pay benefits as at 30 June 2019 14,504,909 1Expenses relating to investment management were borne by the underlying investments of the Plan. Costs other than those incurred in managing and investing Plan assets are met by CSC and are disclosed as ‘other administration expenses’ above. Administration fees are paid by members to cover these costs. 2The value of investments shown above reconciles with the total Fund values shown in tables 34 and 35 on page 18 and table 36 on page 19 as follows:

$’000

PSSap options

Cash 192,145

Income Focused 307,948

MySuper Balanced 12,018,090

Balanced 155,550

Aggressive 1,386,015

34


Chair’s Report

About our schemes

Your investment

CSS

PSS

MilitarySuper

PSSap

ADF Super


CSS

PSS

MilitarySuper

Our Board

ADF Super

Contact us

PSSap

Financial Overview

CSCri options

Cash 17,796


Balanced 121,893

Aggressive 19,743

Cash – TRIS 2,462

Income Focused – TRIS 26,271

Balanced – TRIS 28,998

Aggressive – TRIS 5,630



Add/(less)


14,463,957

The assets of PSSap are invested in the AIT, where they are pooled with the investments of CSC’s other schemes. The AIT invests in multiple specialist investment funds and portfolios.

The AIT receives income such as dividends, interest, trust distributions and gains and losses on sale and incurs administration and management expenses including expenses that would otherwise be incurred by PSSap.

The operating surplus or deficit generated by the AIT is reflected in daily unit prices released by the AIT for its unitholders including PSSap, and daily PSSap unit prices based on the AIT unit prices are published on the CSC website. If you would like to see a copy of the PSSap audited financial statements for this year and the report from the auditor, please refer to our Annual Report to Parliament (which is published and tabled in the Parliament in October) at csc.gov.au, send an email to [email protected], call us on 1300 725 171 or write to PSSap, Locked Bag 9300, Wollongong DC NSW 2500.

35


Chair’s Report



CSS CSS

PSS PSS


PSSap PSSap

ADF Super ADF Super



CSS CSS

PSS PSS


Our Board Our Board

ADF Super


ADF Super

PSSap

Financial Overview

PSSap

ADF Super financial overview 2018–19 Table 48. ADF Super unaudited financial information for 2018–19

$’000

Net assets available to pay benefits as at 30 June 2018 125,312

Revenue

Interest 182




Transfers from other funds 38,667



Total revenue 184,127

Administration and other expenses (875)

Benefits and transfers paid and payable (6,960)

Total expenses1 (7,835)


Net increase in net assets available to pay benefits 157,626

Net assets available to pay benefits as at 30 June 2019 282,938


Investments2 282,111

Cash 19,532

Other assets 55

Total assets 301,698

Liabilities

Other payables (100)

Current tax liabilities (18,660)

Total liabilities (18,760)

Net assets available to pay benefits 282,938

1 Expenses relating to investment management were borne by the underlying investments of the Scheme. Costs other than those incurred in managing and investing Scheme assets are met by CSC and are disclosed as ‘other administration expenses’ above. Administration fees are paid by members to cover these costs. As the Scheme is yet to reach the sufficient scale required to cover its total administration costs from the administration fees paid by members, the Department of Defence has also contributed further administration funding. 2 The value of investments shown above reconciles with the total Fund values shown on table 43 on page 22 as follows.

ADF Super options

Cash 1,235


MySuper Balanced 263,138

Aggressive 16,641

Investments backing the operational risk reserve 202

Total Fund 282,534

Add/(less)

Adjustment from unit pricing to financial statements valuation basis (423)

Net assets available to pay benefits 282,111

36


Chair’s Report

About our schemes

Your investment

CSS

PSS

MilitarySuper

PSSap

ADF Super


CSS

PSS

MilitarySuper

PSSap

Our Board

Contact us

ADF Super

Financial Overview

The assets of ADF Super are invested in the AIT, where they are pooled with the investments of CSC’s other schemes. The AIT invests in multiple specialist investment funds and portfolios.

The AIT receives income such as dividends, interest, trust distributions and gains and losses on sale and incurs administration and management expenses including expenses that would otherwise be incurred by ADF Super.

The operating surplus or deficit generated by the AIT is reflected in daily unit prices released by the AIT for its unitholders including ADF Super, and daily ADF Super unit prices based on the AIT unit prices are published on the CSC website. If you would like to see a copy of the ADF Super audited financial statements for this year and the report from the auditor, please refer to our Annual Report to Parliament (which is published and tabled in the Parliament in October) at csc.gov.au, send an email to [email protected], call us on 1300 203 3439 or write to ADF Super, Locked Bag 9400, Wollongong DC NSW 2500.

37


Chair’s Report



CSS CSS

PSS PSS


PSSap PSSap

ADF Super ADF Super



CSS CSS

PSS PSS


PSSap PSSap

Our Board Our Board

ADF Super

Financial Overview


ADF Super

Contact usFor all the information you need to make smart choices about your super, visit csc.gov.auOn our website you’ll find:

• the CSS, PSS, MilitarySuper, PSSap, ADF Super Product Disclosure Statements• forms and publications to help you manage your account

• news and information

• dates and locations for CSC’s free At Work for You superannuation seminars

• Member Services OnlineIf you haven’t registered yet, or forgot your password, you can register or reset your password online. If you need help, please contact us.

EMAIL [email protected] 1300 000 277FAX (02) 6275 7010MAIL CSS

GPO Box 2252, Canberra, ACT, 2601

WEB csc.gov.au

EMAIL [email protected] 1300 000 377FAX (02) 6275 7010MAIL PSS

GPO Box 2252, Canberra, ACT, 2601

WEB csc.gov.au

EMAIL members@enq. militarysuper.gov.auPHONE 1300 006 727FAX (02) 6275 7010MAIL MilitarySuper

GPO Box 2252 Canberra, ACT, 2601

WEB csc.gov.au

EMAIL [email protected] 1300 725 171FAX 1300 364 144MAIL PSSap

Locked Bag 9300, Wollongong DC, NSW, 2500

WEB csc.gov.au

EMAIL [email protected] 1300 203 439FAX 1300 204 314MAIL ADF Super

Locked Bag 9400, Wollongong DC, NSW, 2500

WEB csc.gov.au

If you would like more information about your Fund’s investments and governance, you can also contact CSC in one of the following ways:

EMAIL [email protected] PHONE 1300 001 777 FAX 02 6275 7010 MAIL CSC GPO Box 2252 Canberra ACT 2601 STREET ADDRESS 7 London Circuit Canberra, ACT, 2600 WEB csc.gov.au

csc.gov.au

Documents

Annual Report to Members - CSC