CSC Annual Report to Parliament 2011-12

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CSC Annual Report to Parliament 2011-12CSS, PSS, PSSap, 1922 Scheme & PNG Scheme


ISSN: 1442 6692 ISBN: 978-1-921246-99-9

© Commonwealth of Australia 2012

All material presented in this publication is provided under a Creative Commons Attribution 3.0 Australia (http://creativecommons.org/licenses/by/3.0/au/) licence.

For the avoidance of doubt, this means this licence only applies to material as set out in this document.

The details of the relevant licence conditions are available on the Creative Commons website (accessible using the links provided) as is the full legal code for the CC BY 3.0 AU licence (http://creativecommons.org/licenses/by/3.0/au/legalcode).

Commonwealth Superannuation Corporation (CSC)

Website www.csc.gov.au

Postal address GPO Box 1907 Canberra ACT 2601

Phone 02 6263 6999

Fax 02 6263 6900

ABN: 48 882 817 243 RSEL: L0001397 Annual report: www.csc.gov.au/reports-and-information/annual-reports

Superannuation Schemes (covered in this report)

CSS ABN: 19 415 776 361 RSE: R1004649 SPIN: CMS0100AU Website: www.css.gov.au Annual report: www.css.gov.au/forms-and-publications/publications

PSS ABN: 74 172 177 893 RSE: R1004595 SPIN: CMS0101AU Website: www.pss.gov.au Annual report: www.pss.gov.au/forms-and-publications/publications

PSSap ABN: 65 127 917 725 RSE: R1004601 SPIN: PSS0001AU Website: www.pssap.gov.au Annual report: www.pssap.gov.au/forms-and-publications/publications

1922 Scheme Website: www.csc.gov.au Annual reports: www.csc.gov.au/reports-and-information/annual-reports

PNG Scheme Website: www.csc.gov.au Annual reports: www.csc.gov.au/reports-and-information/annual-reports

Note: All statistics are derived solely from records available to CSC, ComSuper and Pillar Administration as of the time these statistics were compiled. Where statistics for earlier financial years are quoted, they may vary from those previously published due to the application of retrospective adjustments now reflected in this report. For similar reasons statistical information in this report may also vary from that presented by other agencies.

letter of transmittal1

iv CSC Annual Report to Parliament 2011-12 CSS, PSS, PSSap, 1922 Scheme & PNG Scheme CSC Annual Report to Parliament 2011-12 CSS, PSS, PSSap, 1922 Scheme & PNG Scheme v

1 letter of transmittal

Senator the Hon Penny Wong Minister for Finance and Deregulation Parliament House Canberra ACT 2600

Dear Minister

I am pleased to present to you, in accordance with section 30 of the Governance of Australian Government Superannuation Schemes Act 2011, the annual report on the operations of Commonwealth Superannuation Corporation (CSC) for the 2011/12 financial year.

This report details the performance of CSC functions and the administration of the Commonwealth Superannuation Scheme (CSS), the Public Sector Superannuation Scheme (PSS), the Public Sector Superannuation accumulation plan (PSSap) and the 1922 Scheme and the Papua New Guinea Scheme (PNG Scheme) during the year ended 30 June 2012.

This report also includes audited financial statements in respect of the management during the year of CSC, and the CSS, PSS and PSSap Funds. This report is one of three CSC reports for 2011/12. CSC’s other reports cover, first, the Military Superannuation and Benefits Scheme (MilitarySuper), and second, the Defence Forces Retirement Benefits Scheme (DFRB Scheme), the Defence Force Retirement and Death Benefits Scheme (DFRDB Scheme) and the Defence Force (Superannuation) (Productivity Benefits) Scheme (DFSPB).

From 1 July 2011, Commonwealth Superannuation Corporation (CSC) became responsible for the investment and management of the public sector and military superannuation Schemes. CSC is trustee of CSS, MilitarySuper, PSS and PSSap, and administers the 1922 Scheme, DFRB Scheme, DFRDB Scheme, PNG Scheme and DFSPB.

Subsection 30(4) of the Governance of Australian Government Superannuation Schemes Act 2011 requires you to cause a copy of this report to be laid before each House of Parliament within 15 sitting days after you receive it.

Yours sincerely,

Tony Hyams, AM Chairman, Commonwealth Superannuation Corporation

12 October 2012

iv CSC Annual Report to Parliament 2011-12 CSS, PSS, PSSap, 1922 Scheme & PNG Scheme CSC Annual Report to Parliament 2011-12 CSS, PSS, PSSap, 1922 Scheme & PNG Scheme v

contents2

vi CSC Annual Report to Parliament 2011-12 CSS, PSS, PSSap, 1922 Scheme & PNG Scheme

Contents1 Letter of transmittal iii

2 Contents v

3 Chairman’s report 2

4 Executive summary 5 Successful trustee board merger and asset integration 6 Global investment environment 7 Investment performance 8 Major 2011/12 events 9 Corporate governance 9 Federal Budget 2012 10 Future directions 10

5 CSC 11 CSC – single trustee authority 12 The CSC Board 12 Board and Board Committees 17 Professional development and performance review 18 CSC’s employees 18 CSC’s resources 19 CSC’s financial management 20 Ecologically sustainable development and environmental performance 21 CSC’s internal governance 21 Outcomes and program structure 23

6 Scheme overview 25 Regulated Schemes 26 Unregulated Schemes 28 SIS compliance 28 Actuarial review 28

7 Investments 31 Investment structure 32 Investment arrangements 32 Investment objectives 32 Investment managers 36 Custodial services 37 Derivatives 37 Events during 2011/12 37 Fund performance 39 Investment information 45 Allocating earnings 46 CSC’s approach to investment governance 46

2 contents

CSC Annual Report to Parliament 2011-12 CSS, PSS, PSSap, 1922 Scheme & PNG Scheme vii

8 Members and services 49 Scheme membership 50 Member communication and services 52

9 Scheme administration 55 Scheme administrator 56 Service Level Agreement 56 Administrator performance 56 Contributions 57 Benefit payments 57 Pension payments 58 Complaints and representations 61 Legal claims 62

10 CSS financial statements 63

11 PSS financial statements 105

12 PSSap financial statements 145

13 CSC financial statements 179

14 Appendices 219 Appendix A – Changes to legislation 220 Appendix B – CSC organisational chart at 30 June 2012 222 Appendix C – CSC functional chart 223 Appendix D – Access to information 224 Appendix E – Publications 227 Appendix F – CSC contact officer 231 Appendix G – List of requirements 232 Appendix H – New consultancies 235 Appendix I – Advertising/research 237 Appendix J – National Disability Strategy 238 Appendix K – Summary resource table by outcomes 239 Appendix L – Glossary 240 Index 242

ChartsChart 1: Membership by Scheme 2011/12 50Chart 2: Membership by member type 2011/12 50Chart 3: Membership trend by Scheme 50Chart 4: Membership trend by member type 50Chart 5: CIC enquiries trend – telephone, email and written 53Chart 6: Weighted average yearly pension amount trend 58 Chart 7: Pensioner population trend 58

IllustrationsIllustration 1: CSC functional chart 223

2contents

viii CSC Annual Report to Parliament 2011-12 CSS, PSS, PSSap, 1922 Scheme & PNG Scheme

2 contents

TablesTable 1: Board and Board Committee meeting attendance in 2011/12 17Table 2: Employee numbers at 30 June 2012 19Table 3: Outcomes and program structure 23Table 4: Scheme overview 26Table 5: PSSap retirement benefit components 27Table 6: Results of actuarial reviews 29Table 7: Actuarial projections 29Table 8: Key investment objectives for PSSap investment options 34Table 9: CSS Default Fund asset allocation 35Table 10: PSS Default Fund asset allocation 35Table 11: PSSap pre-mixed investment options asset allocation 35Table 12: Investment managers 2011/12 36Table 13: CSS Default Fund investments 2011/12 42Table 14: CSS Default Fund performance 2011/12 43Table 15: CSS Cash Investment Option performance 2011/12 43Table 16: PSS Default Fund investments 2011/12 44Table 17: PSS Default Fund performance 2011/12 44Table 18: PSS Cash Investment Option performance 2011/12 45Table 19: PSSap investment option performance 2011/12 45Table 20: Membership summary 30 June 2012 50Table 21: CSS and PSS pensions 2011/12 51Table 22: 1922 Scheme pensions in 2011/12 51Table 23: PNG Scheme pensions in 2011/12 51Table 24: Member and employer contributions comparison 2010/11 and 2011/12 57Table 25: Benefit applications processed in 2011/12 57Table 26: Benefit payments by type in 2011/12 57Table 27: Benefit payments including pensions paid 2011/12 and 2010/11 58Table 28: CSS pensions paid and weighted average yearly pension 58 Table 29: PSS pensions paid and weighted average yearly pension 58Table 30: Reconsideration applications received and outcomes 2011/12 59Table 31: Complaints lodged for 2011/12 – CSS, PSS and PSSap 60Table 32: Complaints and representations 2011/12 61Table 33: Compensation claims for CSS, PSS and PSSap 62Table A1: Freedom of information requests in 2011/12 226Table A2: New consultancies in 2011/12 235Table A3: Advertising and market research expenditure 2011/12 237Table A4: Summary resource by outcome 239

chairman’sreport3

3 chairman’s report

2 CSC Annual Report to Parliament 2011-12 CSS, PSS, PSSap, 1922 Scheme & PNG Scheme CSC Annual Report to Parliament 2011-12 CSS, PSS, PSSap, 1922 Scheme & PNG Scheme 3

Chairman’s reportI am pleased to present Commonwealth Superannuation Corporation’s (CSC) Annual Report to Parliament 2011/12 for CSS, PSS, PSSap and the 1922 Scheme and PNG Scheme. CSC’s reports for the military superannuation Schemes are presented separately.

2011/12 was CSC’s first year as trustee of the Australian Government’s nine superannuation Schemes for public sector employees and Australian Defence Force personnel. The implementation of the merger of the trustees of the public sector and military Schemes in accordance with the legislation passed by Parliament in June 2011 has been completed. A new Board was established to replace the previous ARIA and MSB Boards and DFRDB Authority.

Significant achievements in 2011/12 included:

> a smooth transition of responsibilities to the new Board

> the establishment of Board committees including an Audit and Risk Management Committee and a Human Resources Committee

> an equitable integration of MilitarySuper Fund assets with those of CSS, PSS and PSSap into one pooled superannuation trust

> the transfer of the custody of all MilitarySuper Fund and ARIA assets now managed by CSC to a new custodian, The Northern Trust Company

> the appointment of Peter Carrigy-Ryan as the inaugural Chief Executive Officer of CSC

> the continuing work on superannuation reforms including preparation of a MySuper product

> working with our scheme administrator on implementation of the government’s decision to transition PSSap administration from ComSuper to Pillar Administration

> preparing for the introduction of pension and salary sacrifice enhancements to the PSSap.

All of these ‘merger’ and other targets were achieved within the first 12 months with minimum disruption to everyday business activities.

The CSC Board has a depth of skill, knowledge and experience that has underpinned this year of achievement. The commitment and contribution from all directors in 2011/12 has been outstanding. It is a privilege to work with such capable people.

I acknowledge and thank CSC employees for their hard work and dedication during this year of change. Our major service providers including custodians, fund managers and scheme administrators have made a valuable contribution.

CSC now manages Schemes and invests $24.7 billion in superannuation savings on behalf of more than 600 000 members and pensioners. We expect that the scale created by the merger will enable CSC to improve long-term investment performance, reduce cost, strengthen already strong governance practices and enhance services to members.

3chairman’s report


CSC operates in an increasingly sophisticated, regulated and competitive superannuation market. To meet these challenges the Board has embarked on a major planning exercise, the results of which will define our key success targets and govern our priorities. Amongst other activities, the Board is reviewing CSC’s investment and member service offerings, and all governance policies and practices, with the aim of achieving the highest possible standards.

Tony Hyams, AM Chairman, Commonwealth Superannuation Corporation

executivesummary4 successful trustee

board merger and asset integration

global investment environment

investment performance

major 2011/12 events

corporate governance

Federal Budget 2012

future directions

4 executive summary


This report details the performance of CSC functions and the administration of CSS, PSS, PSSap and the 1922 Scheme and PNG Scheme during the year ended 30 June 2012. This report also includes audited financial statements in respect of the management during the year of CSC, and CSS, PSS and PSSap. This report is one of three CSC reports for 2011/12.

CSC’s other reports cover, first, the Military Superannuation and Benefits Scheme (MilitarySuper), and second, the Defence Forces Retirement Benefits Scheme (DFRB Scheme), the Defence Force Retirement and Death Benefits Scheme (DFRDB Scheme) and the Defence Force (Superannuation) (Productivity Benefits) Scheme (DFSPB).

All reports for 2011/12 can be viewed on CSC’s website at www.csc.gov.au/reports-and-information

CSC finished 2011/12 with over $24.7 billion funds under management and more than 600 000 members and pensioners after integrating all public sector and military Scheme assets during the year. CSC’s public sector Schemes, CSS, PSS and PSSap, comprised over $20 billion and 496 405 contributing, preserved and pensioner members at 30 June 2012.

Performance in CSC’s inaugural year focused on successfully integrating assets into a single investment vehicle and merging trustee boards and employees into one operating entity. CSC’s objectives continue to be consistent long-term investment performance and helping members to make informed decisions about their superannuation Scheme and retirement planning needs. The 2011/12 financial year provided a challenging mix of merger and business-as-usual objectives. CSC achieved these objectives during the year with minimal disruption.

Global investment markets were volatile in 2011/12. Investment returns were, however, competitive against peer performance, with the CSS Default Fund, PSS Default Fund and PSSap Trustee Choice option all exceeding median returns over one and five years to 30 June 2012 (as measured in the standard SuperRatings 50 Balanced Index).

In 2011/12, CSC appointed The Northern Trust Company as provider of custodial services and engaged in the implementation of the government’s decision to outsource PSSap scheme administration services from ComSuper to Pillar. During the year, CSC also enhanced six member and employer websites, increasing user accessibility and achieving early compliance with federal government web content accessibility (WCAG) 2.0 guidelines.

Successful trustee board merger and asset integrationCSC was established on 1 July 2011 as trustee of CSS, MilitarySuper, PSS, PSSap and administers the 1922 Scheme, DFRB Scheme, DFRDB Scheme, PNG Scheme and DFSPB, under legislation enacted on 21 June 2011, including the Governance of Australian Superannuation Schemes Act 2011.

The former trustee arrangements of the Australian Reward and Investment Alliance (ARIA), the Military Superannuation and Benefits Board (MSB Board) and the Defence Force Retirement and Death Benefits Authority (DFRDB Authority) were consolidated into one trustee entity. Superannuation Scheme rules, benefits and entitlements did not change.

4executive summary


CSC is now responsible for one of Australia’s largest pools of superannuation assets, providing scale to improve long-term investment performance, increase the efficiency of trustee arrangements for investment and corporate governance, and enable the delivery of more personalised, helpful and high-quality member services.

CSC has a Board of 11 directors with Mr Tony Hyams AM appointed CSC’s inaugural Chairman.

Ten directors (including CSC’s Chairman) commenced on 1 July 2011 and one director commenced on 13 September 2011.

All CSC directors are appointed by the Minister for Finance and Deregulation; three directors are nominated by the President of the Australian Council of Trade Unions (ACTU) and two directors are nominated by the Chief of the Defence Force. CSC’s Chairman is independent.

Peter Carrigy-Ryan was appointed Chief Executive Officer of CSC on 14 September 2011.

You can read more about CSC directors and employees in section 5 on page 11.

Global investment environmentInvestment market volatility continued in 2011/12, providing significant challenges to superannuation funds. Global financial market returns were primarily affected by:

> an escalation of the European sovereign debt crisis, which extended to Spain and Italy

> the rate of economic slowdown in China and its likely impact on both developed world economic growth and Australia’s raw material exports

> debate over the extent of US economic recovery in the face of tightening fiscal policy, and

> a significant decline in long-term interest rates, both in Australia and overseas.

Australian shares fell 7% during the financial year to 30 June 2012, dragged down by material and energy stocks following reductions in commodity prices. International shares fared comparatively better, trending sideways, although there were significant variations between countries. Index linked and government bonds were the best performing sectors in the 2011/12 financial year due to the significant decline in long-term interest rates.

Investment markets are expected to remain volatile, with uncertainty surrounding the European sovereign debt crisis, and US and Chinese economic growth, likely to continue.

4 executive summary


Investment performanceThe CSS Default Fund, PSS Default Fund and PSSap Trustee Choice (the default option) all exceeded the median super fund returns over one and five years to 30 June 2012. This is based on Australian peer group rankings as measured in the standard SuperRatings 50 Balanced Index.

CSS and PSS Default FundsAfter solid gains in the two years to 30 June 2011, the CSS Default Fund posted a modest net return (after fees and tax) of 2.0% over the year to 30 June 2012, while the PSS Default Fund recorded a net return of 1.8% (after fees and tax) for the same period. Performance was constrained by weak listed share market returns, reflecting concerns over the effect of the European debt crisis on global growth and the extent of the slowing US and Chinese economies.

In the three years to 30 June 2012, the CSS Default Fund achieved an average net return of 6.6% per annum; which compared to its five year average net return of 0.1% per annum and its seven year average net return of 4.1% per annum. In the three years to 30 June 2012, the PSS Default Fund achieved an average net return of 6.4% per annum; which compared to its five-year average net return of 0.0% per annum and its seven year average net return of 4.2% per annum.

CSS and PSS Cash Investment OptionsBoth the CSS Cash Investment Option and the PSS Cash Investment Option posted a net return of 4.0% (after fees and tax) for the financial year to 30 June 2012.

This is in line with their objectives, once the impact of tax on returns is taken into account.

PSSap default optionPSSap Trustee Choice, the default investment option in which most PSSap members are invested, was also competitive when measured against peer performance.

In the year ended 30 June 2012, PSSap Trustee Choice advanced by a modest 1.7%. Similarly to the CSS and PSS Default Funds, its performance was also constrained by weak listed share market performance, which tempered the stronger returns of other asset classes.

There is more about investment performance in section 7 on page 31.

4executive summary


Major 2011/12 events

New custodian – The Northern Trust CompanyDuring the 2011/12 financial year, CSC appointed The Northern Trust Company as its provider of custodial services. CSC remains responsible for all aspects of its investments including strategy, administration and member communication. Custodial arrangements transitioned from JP Morgan to The Northern Trust Company as at 31 March 2012.

New PSSap administrator – Pillar AdministrationPillar Administration (Pillar) began administration of PSSap in February 2012 under contract to ComSuper. Transition was planned for November 2011, but was delayed until February 2012, allowing more time to fine-tune administration processes.

New member and employer websitesDuring the year, CSC refreshed and enhanced its six superannuation Scheme websites for members and employers, including those for the CSS, PSS and PSSap Schemes. Websites and communication materials were renamed to reflect the change to CSC, while website enhancements were introduced to make it easier for members to quickly find the information they need online and to comply with federal government WCAG 2.0 guidelines.

You can read more about member services and communication in section 8 on page 49.

Corporate governanceThe CSC Board has embarked on a review and update of its corporate governance framework. The Board’s Operating Policy (available on CSC’s website) explains this framework, covering:

> CSC’s Code of Conduct

> CSC’s Board of directors, director responsibilities and meeting processes

> Board delegated authority

> Board committees

> Risk management and corporate responsibility, and

> CSC’s Board Renewal Policy.

This corporate governance framework review and update will assist CSC to comply with APRA’s new prudential standards, due to take effect by 30 June 2013.

Federal Budget 2012Changes to superannuation were announced in the Federal Budget 2012:

> The concessional super contributions cap, which includes Superannuation Guarantee (SG) and before-tax salary sacrifice contributions, is to be $25 000 per annum for all Australians; this concessional contributions cap also includes employer productivity contributions (which are generally 3%) for defined benefit scheme members.

> Individuals who have annual income over $300 000 will pay tax on their concessional super contributions at the rate of 30% instead of 15%; ‘income’ for this measure includes taxable income, concessional super contributions, adjusted fringe benefits, total net investment loss, target foreign income, tax-free government pensions and benefits, less child support.

Future directionsMajor changes to super regulation and policy will take effect in 2013, with the introduction of MySuper and other recommendations first made in the Super System Review.

A key focus for CSC will be to introduce a MySuper product for PSSap members in 2013. Other planned enhancements to product and member service arrangements include salary sacrifice options to PSSap for CSS and PSS members, a PSSap allocated pension product, and intra-fund advice. These enhancements aim to help members save and invest for their future income needs.

In 2012/13, CSC’s strategic objectives will focus on three areas:

> continuing to improve long-term investment performance

> corporate governance, compliance and risk management, and

> implementation of the enhancements to member products and services.

4 executive summary

10 CSC Annual Report to Parliament 2011-12 CSS, PSS, PSSap, 1922 Scheme & PNG Scheme

CSC5 CSC – single trustee authority

the CSC Board

Board and Board Committees

professional development and performance review

CSC’s employees

CSC’s resources

CSC’s financial management

ecologically sustainable development and environmental performance

CSC’s internal governance

outcomes and program structure

5 CSC


CSC – single trustee authorityCommonwealth Superannuation Corporation (CSC) was established as a single trustee body on 1 July 2011 following the merger of ARIA, the MSB Board and the DFRDB Authority. CSC is a body corporate, subject to the Commonwealth Authorities and Companies Act 1997.

CSC is trustee of CSS, MilitarySuper, PSS and PSSap, and administers the 1922 Scheme, DFRB Scheme, DFRDB Scheme, PNG Scheme and DFSPB. Four Schemes are regulated (CSS, MilitarySuper, PSS and PSSap) and five Schemes are unregulated (1922 Scheme, DFRB Scheme, DFRDB Scheme, PNG Scheme and DFSPB).

This report details the performance of CSC functions and the administration of CSS, PSS, PSSap, 1922 Scheme and PNG Scheme during the year ended 30 June 2012. This report also includes audited financial statements in respect of the management during the year of CSC, and the CSS, PSS and PSSap Funds. This report is one of three CSC reports for 2011/12.

CSC’s other reports cover MilitarySuper, DFRB Scheme, DFRDB Scheme and DFSPB.

CSC is licensed under the Corporations Act 2001 and the Superannuation Industry (Supervision) Act 1993. CSC manages and invests its members’ contributions in accordance with provisions of the Superannuation Act 1976, Superannuation Act 1990 and Superannuation Act 2005. For more about CSC view CSC’s functional chart in Appendix C.

The CSC BoardThe principal responsibility of the CSC Board is to manage and invest the superannuation Schemes and Funds in the best interest of members. This involves:

> approving CSC’s investment strategy, core investment beliefs, vision, mission and performance objectives

> reviewing and monitoring systems of risk management and internal control, codes of conduct, and legal compliance

> monitoring senior executive performance and strategy implementation

> appointing and setting key performance indicators of CSC’s Chief Executive Officer

> approving and monitoring financial and other reporting.

CSC’s 11 directors are appointed by the Minister for Finance and Deregulation. Three directors are nominated by the President of the Australian Council of Trade Unions (ACTU) and two directors are nominated by the Chief of the Defence Force. CSC’s Chairman is independent.

Directors are responsible for all aspects of Scheme management, including investment strategy, administration and stakeholder communication. All CSC’s directors are non-executive directors.

CSC directors are appointed for periods not exceeding three years (but are eligible for reappointment). A list of directors holding office between 1 July 2011 and 30 June 2012 is set out below. Ten directors’ terms commenced on 1 July 2011 and one director’s term commenced on 13 September 2011.

5CSC


Mr Tony Hyams, AM Chairman Appointed 1 July 2011 to 30 June 2014

Mr Hyams was appointed as the inaugural Chairman of CSC on 1 July 2011. He is also Chairman of the Board’s Human Resources Committee. Mr Hyams was Chairman of the predecessor organisations, ARIA and the MSB Board. He was previously the Deputy Chairman of the Australian Maritime Safety Authority and a director of the Australian Government Employees Superannuation Trust and other companies. Mr Hyams is an Independent Adviser to the Credit Suisse Group and is a Governor of WWF Australia. He has degrees in law and commerce from the University of Melbourne.

Mr Anthony (Tony) Cole, AO Appointed 1 July 2011 to 30 June 2013

Mr Cole is a member of the Board’s Human Resources Committee. He is a former executive director and investment consulting business leader of the global consulting, outsourcing and investment company, Mercer. Before joining Mercer in 1996, he was executive director of Life Investment and Superannuation Association of Australia. Mr Cole has also held a number of senior federal government appointments including Secretary to the Treasury. Mr Cole is Chairman of the Advisory Board of the Melbourne Institute of Applied Economic and Social Research and a member of the advisory boards of Australian Office of Financial Management and Northern Territory Treasury Corporation. In 1995 he was awarded an Order of Australia for service to government and industry.

General Peter Cosgrove, AC, MC, CNZM Appointed 1 July 2011 to 30 June 2014

General Cosgrove is a retired Australian Army Officer and Chairman of the Board’s Defence Force Case Assessment Panel. He was Chief of the Defence Force from 3 July 2002 to 3 July 2005, when he retired from full-time service after a long and distinguished career. He has numerous board appointments, principal among which is the Qantas Board. He is also on the Board of Trustees of Qantas Superannuation Limited. General Cosgrove is a nominee of the Chief of the Defence Force.

5 CSC


Mr Peter Feltham Appointed 1 July 2011 to 30 June 2012 (reappointed from 1 July 2012 to 30 June 2015)

Mr Feltham is a member of the Board’s Audit and Risk Management Committee. He is also a senior industrial officer with the Community and Public Sector Union (CPSU), responsible for superannuation policy within the CPSU. He has worked for the CPSU and its predecessor organisations for more than 25 years in a range of capacities at state and national level as an employee and official. Before the CPSU, Mr Feltham worked for 10 years in the federal public service. Mr Feltham is a nominee of the President of the ACTU.

Ms Nadine Flood Appointed 1 July 2011 to 30 June 2014

Ms Flood is a member of the Board’s Human Resources Committee. She is also National Secretary of the Community and Public Sector Union (CPSU), and a member and director of a number of other bodies, including the ACTU Executive. Ms Flood is a nominee of the President of the ACTU.

Ms Lyn Gearing Appointed 13 September 2011 to 12 September 2013

Ms Gearing has business experience in superannuation, funds management, corporate finance and management consulting. She is currently a director of Queensland Investment Corporation (QIC), IMB Limited, Garvan Research Foundation and Global Mining Investments Limited.

Ms Peggy Haines Appointed 1 July 2011 to 30 June 2014

Ms Haines is a member of the Board’s Human Resources Committee. She is a former partner with one of Australia’s top law firms specialising in superannuation and financial services law and continues to act as a consultant to Lander & Rogers, Melbourne. Ms Haines also serves as a director of other companies in the financial services sector as well as the Richmond Football Club. She is a fellow of the Australian Institute of Company Directors and an emeritus member of the Law Council of Australia Superannuation Committee.

5CSC


Ms Winsome Hall Appointed 1 July 2011 to 30 June 2013

Ms Hall is Chair of the Board’s Audit and Risk Management Committee. She is also Chair of Zurich Australian Superannuation Pty Limited and a trustee director of various commercialisation funds as a nominee of AustralianSuper. Ms Hall has previously been a director of listed company Colonial First State Infrastructure and Private Equity, the Financial Industry Complaints Scheme and State Super Financial Services. She has provided best practice advice to the Association of Superannuation Funds Australia and was previously a senior advisor in the Department of the Prime Minister and Cabinet and Secretary of the ACT Branch of the CPSU from 1989 to 1993. Ms Hall is a nominee of the President of the ACTU.

Mr John McCullagh Appointed 1 July 2011 to 30 June 2013

Mr McCullagh is a member of the Board’s Audit and Risk Management Committee and Defence Force Case Assessment Panel. Mr McCullagh formerly held the position of CEO of the Military Superannuation and Benefits Board and was part of the transition team which implemented the government’s reforms affecting Australian Government super Schemes. Mr McCullagh is a nominee of the Chief of the Defence Force.

Mr Gabriel Szondy Appointed 1 July 2011 to 30 June 2014

Mr Szondy is a member of the Board’s Audit and Risk Management Committee. He has extensive experience in the taxation and superannuation industries and was a senior partner in one of Australia’s top accounting firms. He is a former member of the Military Superannuation and Benefits Board. Mr Szondy holds a number of other appointments including independent director, CARE Super, Director (representative of AustralianSuper) Frontier Investment Consulting Pty Ltd and special advisor to the Chairman of the Centre for Investor Education (CIE).

5 CSC


Dr Michael John Vertigan, AC Appointed 1 July 2011 to 30 June 2013

Dr Vertigan is a member of the Board’s Audit and Risk Management Committee. Dr Vertigan has experience in the public, higher education, philanthropy and business sectors. He is the former Chairman of the AGEST Super Board and former Secretary of the Victorian and Tasmanian Departments of Treasury and Finance. He also held a number of academic appointments. Dr Vertigan currently holds a number of appointments to government and private sector bodies.

5CSC


Board and Board CommitteesCSC has the following committees:

> APS Scheme Reconsideration Advisory Committee

> Audit and Risk Management Committee

> Defence Force Case Assessment Panel

> Human Resources Committee

> Military Superannuation and Benefits Scheme Reconsideration Committee.

CSC may also establish other Board committees from time to time.

The Human Resources Committee comprises:

Mr Tony Hyams, AM, Chairman Mr Tony Cole, AO, Member Ms Nadine Flood, Member Ms Peggy Haines, Member

The Audit and Risk Management Committee comprises:

Ms Winsome Hall, Chair Mr Peter Feltham, Member Mr John McCullagh, Member Mr Gabriel Szondy, Member Dr Michael Vertigan AC, Member

The APS Scheme Reconsideration Advisory Committee comprises two independent and two administrator (ComSuper) representatives, appointed by the CSC Board. During the year, the Committee made recommendations to the Board which was the ultimate decision maker (see page 59).

Table 1: Board and Board Committee meeting attendance in 2011/12

Board meetings (10) ARM Ctte meetings (7) HR Ctte meetings (5)

Attended Eligible to attend



Tony Hyams 10 10 0 0 5 5

Tony Cole 10 10 0 0 5 5

Peter Cosgrove 9 10 0 0 0 0

Peter Feltham 10 10 7 7 0 0

Nadine Flood 7 10 0 0 3 5

Lyn Gearing 6 7 0 0 0 0

Peggy Haines 10 10 0 0 4 5

Winsome Hall 10 10 7 7 0 0

John McCullagh 10 10 7 7 0 0

Gabriel Szondy 9 10 7 7 0 0

Michael Vertigan 10 10 6 7 0 0

5 CSC


Professional development and performance review

Professional developmentThe CSC Board has a professional development program in place for all directors and undertakes regular individual and collective fitness and propriety assessments. Individual training objectives cover a three year timeframe to provide uniform and comprehensive professional development.

Performance reviewDirectors report to the Chairman against their three year rolling training and development objectives. Each year directors must complete a Trustee Fit and Proper Certification, undertake a self-assessment rating and declare any related party transactions. In addition, CSC’s Human Resources Committee also conducts a Board skills audit to compare the current skill mix to skills identified as being required. This review identifies any areas to be improved.

CSC’s Chairman liaises with the Minister and other sponsors regarding the required director skill base. This helps to ensure the CSC Board comprises directors who hold the necessary knowledge and experience in a range of fields including the financial services and super industry, investment governance and management, government, the defence force and legal services.

CSC’s employeesCSC employees are responsible for providing advice to the CSC Board, for implementing Board decisions and for the ongoing management of CSC’s functions and responsibilities.

Specifically, CSC employees are responsible for:

> advising the Board on investment strategy

> implementing Board approved strategies and plans

> managing the relationships with service providers

> managing CSC’s financial affairs

> ensuring CSC meets its responsibilities to maintain correct records

> coordinating advice from external advisers

> ensuring compliance with all relevant legislation and law

> communicating with members and, in particular, preparing and producing annual member statement packs and parliamentary reports

> providing comprehensive administrative and executive support services to the Board.

5CSC


CSC’s resources

Human resourcesThe combined ARIA and MilitarySuper Board staff at 1 July 2011 was 62. CSC had 61 staff at 30 June 2012.

Employee profileTable 2: Employee numbers at 30 June 2012

Employment category Male Female Total

Full-time employees 25 28 53

Part-time employees 2 6 8

Total 27 34 61

Performance payDuring the 2011/12 financial year, CSC paid a total of $1 188 323 as performance bonuses to 47 employees (paid in July 2011, for performance in the previous financial year, 2010/11). The average performance bonus paid was $25 283.

Non-salary benefitsCSC offers its employees a variety of salary packaging benefits. These are individually negotiated and benefits available for packaging include leased motor vehicles, professional membership fees and extra superannuation. Benefits that employees may include in a salary package are those that attract either no fringe benefits tax (FBT) or a concessional rate of FBT.

Professional developmentOngoing employee training and development is an important part of CSC’s human resource management. In addition, it helps CSC meet the ‘adequacy of resources’ requirement of its APRA licence (see CSC’s internal governance on page 21). During 2011/12, CSC employees participated in a range of continuing professional development activities, including specialised courses in investment, finance, and business operations.

5 CSC


Work health and safetyUnder the Safety, Rehabilitation and Compensation Act 1988 and the Work Health and Safety Act 2011 (this latter Act came into effect January 2012, effectively replacing the Occupational Health and Safety (Commonwealth Employment) (OH&S) Act 1991), CSC has a general duty of care that it must meet by taking all reasonably practicable steps to protect the health and safety of its employees and third parties at work. Workers’ compensation, provided by Comcare, covers CSC employees. During the 2011/12 financial year there were:

> no dangerous incidents under section 37 of the Work Health and Safety Act 2011

> no workplace inspections carried out by Comcare

> no remedial provisional improvement notices issued.

Activity locationCSC has two offices; one is located in Canberra and the other is located in Sydney.

Indemnities for officersCSC has the benefit of an indemnity in the Governance of Australian Government Superannuation Schemes Act 2011. In addition, CSC has trustee liability and comprehensive crime insurance which complies with section 912B of the Corporations Act 2001.

CSC’s financial management

Financial resourcesIn its role as trustee, CSC is responsible for management and investment of its members’ superannuation contributions. CSC also oversees the provision of scheme administration services for its Scheme members. Costs relating to the investment and management of the Funds are recovered proportionately from the invested Funds in accordance with the Schemes’ underlying legislation. Costs incurred by CSC in supporting member administration services of the Schemes are met through a fee arrangement with employer agencies whereby CSC receives fee income on a per-member or other negotiated basis.

CSC is a Commonwealth authority subject to the Commonwealth Authorities and Companies Act 1997 (CAC Act). The financial management of CSC is carried out in accordance with the requirements of that Act, the Governance of Australian Government Superannuation Schemes Act 2011 and Scheme legislation.

CSC operates under a Board approved budget that covers the total costs of CSC performing its functions. Performance against budget is reviewed regularly by the Board. Delegations to staff relating to incoming expenses, including entering into contracts for supply of goods and services, are formally issued and reviewed by the Board.

5CSC


Financial performanceCSC incurs various costs in managing and investing the Funds for which it is trustee. These include investment manager fees, custodian fees, advisor fees and tax. Part of the CSC expenses are referred to as ‘corporate expenses’; these expenses (see paragraph below) do not reflect the total costs of managing and investing the Funds. Details of investment costs for each of the Funds are provided in the financial statements included in this report.

Revenue and expenses were within budget for the 2011/12 financial year with CSC recording a surplus of $0.23 million. CSC’s business expenses were $21.6 million, of which $6.7 million was met by the administration fee on employer agencies and government funding to meet merger costs. Expenses balance of $14.9 million was proportionately met from investment assets of CSS, PSS, PSSap and MilitarySuper.

ConsultantsDuring the 2011/12 financial year, CSC entered into 20 new consultancy contracts involving total actual expenditure of $238 181. In addition, 12 ongoing consultancy contracts were active during the year, involving total actual expenditure of $1 167 409.

Ecologically sustainable development and environmental performanceCSC is a signatory to the UN Principles for Responsible Investment which aim to act as a framework for global best practice in responsible investment and include commitments to address environmental, social and governance issues in the policies and practices of investors.

CSC is a member of the Investor Group on Climate Change Australia/New Zealand and an investor signatory to the Carbon Disclosure Project. These collaborative industry initiatives address the business and shareholder value implications of climate change.

CSC is a founding investor in Regnan, which provides governance research and engagement services to CSC and its other institutional investors and clients. Regnan focuses on a constructive engagement process that aims to reduce portfolio risk exposures, including those relating to environmental risk.

CSC’s internal governanceCSC is accountable to members of the Schemes it manages under Scheme legislation, the Superannuation Industry Supervision Act and Regulations (SIS), corporations legislation and the general law. Its principal responsibility is to act in good faith, with prudence and in the members’ best interests in respect of the administration and investment of the Funds.

Directors are required by SIS to meet a ‘fit and proper’ standard. This means that they must satisfy both propriety and competency requirements on appointment and thereafter.

5 CSC


In addition to these requirements on individual directors, CSC has a Code of Conduct which guides the exercise of its wide range of discretions.

In performing its functions and duties, CSC will:

> carry out its duties in good faith, prudently and in accordance with the relevant legislation so that the best interests of members are served

> act ethically and impartially at all times.

CSC’s Code of Conduct is available on CSC’s website.

In conjunction with its governance principles, CSC’s responsibility for the Funds is supported by comprehensive risk management strategies, plans and compliance programs.

LicencesCSC has both a Registrable Superannuation Entity (RSE) licence (administered by the Australian Prudential Regulation Authority) and an Australian Financial Services (AFS) licence (administered by the Australian Securities and Investments Commission).

Risk managementAs an RSE licensee, CSC has a comprehensive risk management framework in place. This covers a range of business, operational and governance risks and outlines risk minimisation strategies and controls for all identified risks. Regulatory requirements include having a current Risk Management Plan and Risk Management Strategy.

CSC’s risk management framework is kept under review by CSC’s Executive Risk Management Committee and its Audit and Risk Management Committee. This framework is reviewed annually in conjunction with CSC’s strategic business plan and updated or amended as required to meet emerging risk or new business requirements.

ComplianceCSC’s compliance program meets CSC’s AFS licence requirements and underpins CSC’s risk management framework. Employees and service providers are required to provide positive certification that they have complied, or details of any non-compliance, with legislative requirements, contractual provisions, regulatory policy and service standards, in addition to licence conditions. This is done regularly – either monthly or quarterly. CSC’s Audit and Risk Management Committee oversees compliance reporting, remediation where breaches have occurred and any necessary regulatory reporting.

Consistent with CSC’s Breach and Compliance Policy, breach reports are required within a timeframe that enables CSC to make timely regulatory reports, if required.

5CSC


Fraud controlTo ensure all reasonable measures are taken to minimise the incidence of fraud, CSC maintains a current fraud risk assessment and fraud control plan in accordance with the Commonwealth Fraud Control Guidelines and has effective fraud risk controls in place. No instances of fraud arose during the reporting period.

Internal auditEach year, CSC’s Audit and Risk Management Committee agrees an internal audit plan which takes into account previously identified risks, the results and recommendations of previous internal and external audits, legislative and regulatory change and any anticipated Scheme or business changes.

This plan is additional to audits that can be initiated at any time by CSC’s Audit and Risk Management Committee or the Board to address changed business priorities or risk profile.

Outcomes and program structureOutcome 1: Retirement benefits for past, present and future Australian Government employees and members of the Australian Defence Force through investment and administration of their superannuation Funds and Schemes.

Table 3: Outcomes and program structure

Key performance indicator 2011/12 target 2011/12 results

Long-term investment performance – default options

Long-term nominal target of at least CPI + 4.5% per annum average after tax and fees, and positive Fund returns in 24 out of 30 years

CSC’s seven-year investment performance per annum after tax and fees was:

• CSS 4.1%

• PSS 4.2%

• PSSap 4.3%

Compliance with Superannuation Industry (Supervision) Act 1993 (SIS), Superannuation Act 2005, Superannuation Act 1990, Superannuation Act 1976, Military Superannuation and Benefits Act 1991 and the Corporations Act 2001

Compliance with all relevant Scheme and regulatory requirements

CSC continued to meet its obligations under relevant legislation

Status of Registrable Superannuation Entity (RSE) and Australian Financial Services (AFS) Licence holder

Fulfilment of ongoing licence obligations as set out by APRA and ASIC

CSC breached licensee law due to the incorrect calculation and reporting of Accrued Benefit Multiples for some PSS members

Administration quality as reflected in the satisfaction level of members, other beneficiaries and employers with the service provided through ComSuper, as CSC’s delegate, to standards set by CSC

Implement and monitor industry standard service requirements with ComSuper

Continued overall improvement of member services for defined benefit Schemes and transitional impact for PSSap members during transfer of scheme administration services from ComSuper to Pillar

Scheme overview6 regulated Schemes

unregulated Schemes

SIS compliance

actuarial review

6 Scheme overview


CSC is trustee of CSS, MilitarySuper, PSS and PSSap, and administers the 1922 Scheme, DFRB Scheme, DFRDB Scheme, PNG Scheme and DFSPB. Four superannuation Schemes are regulated (CSS, MilitarySuper, PSS and PSSap) and five Schemes are unregulated (1922 Scheme, DFRB Scheme, DFRDB Scheme, PNG Scheme and DFSPB).

This report details the performance of CSC functions and the administration of CSS, PSS, PSSap, 1922 Scheme and PNG Scheme during the year ended 30 June 2012. This report also includes audited financial statements in respect of the management during the year of CSC and CSS, PSS and PSSap. This report is one of three CSC reports for 2011/12.

CSC’s other reports cover MilitarySuper, DFRB Scheme, DFRDB Scheme and DFSPB.

Regulated SchemesTable 4: Scheme overview

CSS PSS PSSap

Established CSS was established on 1 July 1976 by the Superannuation Act 1976

PSS was established on 1 July 1990 by the Superannuation Act 1990

PSSap was established on 1 July 2005 by the Superannuation Act 2005

Type Combination of accumulation and defined benefit plans

Defined benefit plan Accumulation plan

Funds under management as at 30 June 2012

$4.2 billion $13.0 billion $3.5 billion

Members* as at 30 June 2012

132 208 237 492 121 266

Employer agencies as at 30 June 2012

220 220 168

*Includes: contributing, preserved, deferred and pension members

CSSCSS benefits generally are made up of two components:

1. A member-financed component: This benefit is based on the contributions paid by the member into the CSS Fund plus Fund earnings.

2. An employer-financed component, which includes two parts: The first part, which in most circumstances is paid as a non-commutable indexed pension out of the Australian Government’s Consolidated Revenue Fund (CRF), is a defined amount. The amount payable depends on the reason for exit and has regard to several factors including final salary, age and length of contributory membership. The second part of the employer component is the employer productivity superannuation contribution, which comprises employer contributions and Fund earnings.

CSS was closed to new members on 30 June 1990.

6Scheme overview


PSSPSS is a defined benefit superannuation Scheme. For contributing members, final benefits are calculated as a multiple of final average salary and an Accrued Benefit Multiple (ABM). A member’s ABM depends on the rate at which contributions are made to PSS and the length of membership. Members may contribute between 0% and 10% of their salary. The employer contribution rate varies with the member contribution rate, subject to a maximum ABM of 10.

Retirement benefits can be paid as lump sums with the option to exchange the lump sum (or part of it) for an indexed pension. The benefits are generally made up of two components:

1. A member-financed component: This component comprises the contributions paid by the member into the PSS Fund plus Fund earnings.

2. An employer-financed component, which includes two parts: The first part comprises the employer productivity superannuation contribution paid by the employer into the PSS Fund plus Fund earnings. The second part of the employer component is the ‘benefit balance’, which is determined at the time the member exits employment from the public service. The amount is the balance after the member and productivity components are deducted from the (defined) total lump sum benefit.

For preserved benefit members, investment performance has a more direct impact on their final benefit. Member and productivity components increase and decrease with the investment performance of the PSS Fund, while the employer component moves in line with CPI.

PSS was closed to new members on 30 June 2005.

PSSapPSSap is an accumulation plan. This means members and their employers pay money into the PSSap Fund and CSC credits investment earnings (positive or negative) to the account after deducting fees, taxes and charges. Employers are required to make a 15.4% per annum contribution to PSSap on behalf of each contributing member. Additionally, members can make before-tax (salary sacrifice) and after-tax (personal) contributions to PSSap. The retirement benefit is a lump sum amount and generally consists of the following components:

Table 5: PSSap retirement benefit components

Employer contributions

+ Any member contributions (before or after tax)

+ Any super co-contributions and transfers from other funds

+ Investment earnings

- Fees and charges

- Insurance premiums if applicable

- Taxes

= Retirement benefit


6 Scheme overview

Unregulated Schemes

1922 SchemeThe 1922 Scheme is a closed Scheme and there are no contributing members. Established under the Superannuation Act 1922 (the 1922 Act), Scheme contributors were transferred to CSS on 1 July 1976. However, the 1922 Act still provides for payment of pensions which were in force on 1 July 1976, deferred benefit entitlements and any reversionary pensions that become payable.

PNG SchemeThe PNG Scheme is a closed Scheme and there are no contributing members. Constituted under the Superannuation (Papua New Guinea) Ordinance 1951, the PNG Scheme provided retirement benefits for employees of the administration of the Territory of Papua and New Guinea through the establishment of the Papua and New Guinea Superannuation Fund.

Since 1 July 1976, the Scheme has been administered in accordance with section 38 of the Papua New Guinea (Staffing Assistance) Act 1973 (the PNG Act).

SIS complianceCSS, PSS and PSSap are complying funds under the Superannuation Industry (Supervision) Act 1993 and accordingly continue to be eligible to have tax payable on their net income assessed at the concessional rate of 15%. The 1922 Scheme and the PNG Scheme are not complying funds.

Actuarial reviewThe most recent triennial actuarial review of CSS and PSS was completed by Mercer (Australia) Pty Ltd in 2012 for 30 June 2011. The results were included in the PSS and CSS Long Term Cost Report 2011 (a copy of the actuarial review is available at: http://www.finance.gov.au/superannuation/pss-and-css-scheme-costs.html).

PSSap is an accumulation plan and as such the cost to the government is limited to the contributions made by Australian Government employers and no actuarial review is required.

Results of the 2011 actuarial review and the previous two reviews (2008 and 2005) of CSS and PSS are summarised in Table 6.


6Scheme overview


Table 6: Results of actuarial reviews

30 June 2011 30 June 2008 30 June 2005

CSS PSS CSS PSS CSS PSS

Net assets $4.6b $12.5b $6.1b $11.3b $6.0b $7.6b

Unfunded liability $59.9b $33.1b $59.2b $20.9b $50.6b $13.8b

Notional Commonwealth employer contribution rate (including 3% productivity contribution)

20.3% 18.8% 21.4% 16.3% 28.2% 15.6%

The notional employer contribution rates are the employer contribution rates necessary to ensure that employer financed benefits from CSS and PSS would remain fully funded in three years, if they were fully funded at the time of the actuarial review.

The Australian Government’s outlay on CSS and PSS in any year is equal to the total benefits paid to exiting members in that year, less the accumulated balance of member and productivity contributions of those members plus actual productivity superannuation contributions made by the Australian Government to the Funds.

The 2011 review provides an actuarial projection of the Australian Government’s estimated costs for CSS and PSS over 40 years to 2051 (adjusted to 2011 dollars using a discount rate of 6%).

Table 7 shows the projections for the first three years, to 30 June 2014.

Table 7: Actuarial projections

Year ending 30 June Estimated Australian Government costs

PSS CSS

2012 $749m $3 431m

2013 $742m $3 305m

2014 $755m $3 206m

More estimated cost projections are included in the PSS and CSS Long Term Cost Report 2011. Visit http://www.finance.gov.au/superannuation/pss-and-css-scheme-costs.html

investments7 investment structure

investment arrangements

investment objectives

asset allocation

investment managers

custodial services

derivatives

events during 2011-12

Fund performance

investment information

allocating earnings

CSC’s approach to investment governance

7 investments


Investment structureCSC jointly invests the CSS Fund, PSS Fund and PSSap Fund, providing all members with the benefits of economies of scale. In 2011/12, CSC integrated the MilitarySuper Fund assets into a single investment trust. That trust now includes the assets of all CSC regulated Funds.

Investment options for CSS Fund, PSS Fund and PSSap Fund are divided into asset classes, with professional investment managers managing Funds within each asset class. Each investment option accesses the same asset class pools to gain exposure to the sectors they need.

Investment arrangementsCSC’s investment team provides investment advice to the Board, implements and manages Board investment decisions, and monitors, reviews and reports investment performance.

CSC retains Macquarie Investment Management Ltd for advice on Australian and Asian private equity, Altius Associates for advice on international private equity, Albourne Partners Ltd for advice on hedge funds and Franklin Templeton Real Estate Advisers for advice on international property.

Investment objectives

CSS Default FundWith the accumulation component of a CSS member’s total benefit tied to the investment performance of CSS Fund, CSC is focused on achieving competitive returns over the long term.

This is explicitly recognised in the Fund’s objective, which focuses on long-term real returns in an attempt to ensure that the real wealth of members increases over time.

CSS Fund’s investment objectives specify the target or acceptable levels of portfolio risk and return. CSC expects to achieve an average real return of 4.5% per annum after tax and fees over the longer term. Consistent with the mid-point of the Reserve Bank’s inflation target range of 2% to 3%, this equates to an average nominal return of 7% per annum over the long term.

In developing an investment strategy to achieve this objective, and to recognise the average person may work for around 30 years, CSC has adopted the following constraint in order to manage risk: on average, nominal Fund returns are expected to be positive in 24 out of every 30 years; this is equivalent to positive returns in 16 of every 20 years, which is the preferred risk measurement period standard recommended by the Financial Services Council (FSC), the Association of Superannuation Funds of Australia (ASFA), and the Australian Securities and Investments Commission (ASIC). This constraint defines the ‘tolerable’ level of risk for the CSS Fund.

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

7investments


PSS Default FundTotal benefits payable to PSS members are set by governing legislation and PSS rules. PSS benefits do not depend on the earning rate of the PSS Fund, except for preserved benefit members where investment performance has a more direct impact on the level of final benefits.

The difference between the total benefit payable to a PSS contributor and the accumulated member and productivity contributions (including Fund earnings) invested in the PSS Fund is paid from the Australian Government’s Consolidated Revenue Fund (CRF). The call on the CRF will depend upon the investment performance of the Fund. The better the investment performance of the Fund, the smaller the call on the CRF. In these circumstances, it is the employer who bears the investment risk arising from the investment of the Fund.

The PSS Fund has a long-term perspective, but managing risk is imperative. The PSS Fund’s investment objectives specify the target, or acceptable, levels of both portfolio risk and return. Investment objectives are distilled from the characteristics of the Scheme, including benefit design, crediting rate policy and liability position.

The PSS Fund aims to achieve an average real return of 4.5% per annum after tax and fees over the longer term. Consistent with the mid-point of the Reserve Bank’s inflation target range of 2% to 3%, this equates to an average nominal return of 7% per annum over the long term.

In developing an investment strategy to achieve this objective, and to recognise that the average person may work for around 30 years, CSC has adopted the following constraint in order to manage risk: on average, nominal Fund returns are expected to be positive in 24 out of every 30 years; this is equivalent to positive returns in 16 of every 20 years, which is the preferred risk measurement period standard recommended by FSC, ASFA and ASIC. This constraint defines the ‘tolerable’ level of risk for the PSS Fund.

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

CSS Cash Investment Option and PSS Cash Investment OptionAll CSS members and PSS preserved benefit members may choose to invest the taxed components of their accounts (that is, their member and productivity components) in their respective Cash Investment Option. The key investment objective for both cash investment options is, before payment of tax, to match the return of the UBS Australian Bank Bill Index.

PSSap investment optionsTotal benefits payable to PSSap members are tied to the investment option or mix of options which a member selects. Therefore, achieving a good return over the long term is vital. This is explicitly recognised in the key investment objectives set out for each PSSap investment option (which are shown in Table 8), which involve maximising long-term real returns of each option within acceptable risk parameters.

7 investments


Table 8: Key investment objectives for PSSap investment options

PSSap investment option Key investment objective

Trustee Choice (default option) To outperform the Consumer Price Index (CPI) by 4.5% per annum over the medium to long term

Conservative To outperform the Consumer Price Index (CPI) by 3% per annum over the medium to long term

Balanced To outperform the Consumer Price Index (CPI) by 4% per annum over the medium to long term

Aggressive To outperform the Consumer Price Index (CPI) by 5% per annum over the medium to long term

Government bonds Before the payment of tax, to at least match the performance of the UBS Australian Government Bond Index

Australian shares Before the payment of tax, to at least match the performance of the ASX 300 Accumulation Index

International shares (unhedged) Before the payment of tax, to at least match the return of the MSCI All Country World (excluding Australia) Index with net dividends invested

International shares Before the payment of tax, to at least match the return of the MSCI All Country World (excluding Australia) Index with net dividends reinvested and a currency hedging ratio determined by the Trustee

Property Before the payment of tax, to outperform the Consumer Price Index (CPI) by 5% per annum over the medium to long term

Sustainable The Sustainable option is passively managed and represents a well-diversified portfolio that has expected risk and total return characteristics similar to the broader Australian share market (as represented by the S&P/ASX 200 Index).

Returns may deviate from SSgA’s underlying returns due to members investing in and out of the option and CSC’s costs associated with administering this option.

Cash Before the payment of tax, to match the return from the UBS Australian Bank Bill Index

7investments


Asset allocationThese tables set out actual asset allocation for investment options as at 30 June 2012:

Table 9: CSS Default Fund asset allocation

Asset class Actual asset allocation

2011 2012

Australian shares 26.5 23.1

International shares 28.6 28.6

Long/short equity funds 1.9 0.0

Real assets 12.8 14.7

Alternatives 13.8 15.8

Fixed income 11.5 14.0

Cash 4.9 3.8

Total fund 100.0 100.0

Table 10: PSS Default Fund asset allocation

Asset class Actual asset allocation

2011 2012

Australian shares 26.5 23.1

International shares 28.7 28.6

Long/short equity funds 1.9 0.0

Real Assets 12.8 14.7

Alternatives 13.8 15.8

Fixed income 11.5 14.0

Cash 4.8 3.8

Total fund 100.0 100.0

Table 11: PSSap pre-mixed investment options asset allocation

Asset class Trustee Choice Conservative Balanced Aggressive

Asset allocation 2011 2012 2011 2012 2011 2012 2011 2012

Australian shares 26.5 23.1 12.2 12.1 15.8 15.9 37.5 37.7

International shares 28.7 28.6 9.2 9.1 14.8 18.5 31.1 30.6

Long/short equity funds 1.9 0.0 0.0 0.0 4.1 0.0 0.0 0.0

Real assets 12.8 14.7 6.0 6.0 12.0 12.1 14.8 15.0

Alternatives 13.8 15.7 0.0 0.0 19.7 19.4 7.8 7.7

Fixed income 11.5 14.1 42.7 42.9 23.7 24.1 5.9 6.0

Cash 4.8 3.8 29.9 29.9 9.9 10.0 2.9 3.0

Total fund 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

7 investments


Investment managersCSC is required by legislation to invest through investment managers. CSC appoints investment managers who specialise in investing in particular asset classes. CSC provides investment guidelines and direction to each of its investment managers.

Investment managers are paid a fee generally based on the value of assets managed for CSC. It reflects investment costs applicable to each particular asset class sector and the investment style employed by each manager – for example, passive or active investment management.

In addition, some managers are paid a performance fee for exceeding a pre-determined benchmark or hurdle rate of return, within pre-specified risk limits, which is generally a share of any excess risk-adjusted performance above that agreed benchmark.

Table 12: Investment managers 2011/12

Alleron Investment Management Limited

Arcadia Funds Management Limited

Aurora Investment Management LLC

Balanced Equity Management Pty Limited

Bridgewater Associates Inc

Colchester Global Investors Limited

Eureka Funds Management Company

Integrity Investment Management Limited

JCP Investment Partners Limited

Lend Lease Real Estate Investments Limited

Loomis Sayles & Company LP

Macquarie Investment Management Limited

Marathon Asset Management Limited

Marvin & Palmer Associates Inc

Paradice Investment Management Limited

PIMCO Australia Pty Ltd

Platinum Asset Management

Schroder Investment Management Australia Limited

Solaris Investment Management Limited

State Street Global Advisors Limited

Stone Harbor International Partners LP

Vanguard Investments Australia Limited

Wellington International Management Company Pte Limited

Note: These are investment managers which hold more than 1% of the Fund

7investments


Custodial servicesDuring 2011/12, CSC appointed The Northern Trust Company as its provider of custodial services. A custodian is a financial institution that holds securities for guaranteed safekeeping on behalf of superannuation trustees. A custodian typically collects income on securities under custody, settles transactions, calculates unit prices and provides accounting and performance reports and analysis. CSC remains responsible for all aspects of its investments including investment strategy, administration and member communication. Custodial arrangements transitioned from JP Morgan to The Northern Trust Company as at 31 March 2012.

Derivatives Investment 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, the value of which 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 and transaction costs 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 an asset class.

Investment mandates granted to CSC investment managers, allowing them to use derivatives, reflect the policy for the Funds as a single investment vehicle. If CSC’s investment managers are permitted under their mandate to use derivative securities, the limits will be clearly set out in the mandate. CSC and the custodian monitor if derivative use is consistent with CSC’s policy.

Events during 2011/12Some key investment related events during 2011/12 are described in this section.

Australian sharesOne new small cap specialist manager was added to the portfolio this year. The portfolio was reconfigured upon the termination of an investment manager arising from sector-level portfolio construction requirements. This resulted in one additional manager being down-weighted, one manager being up-weighted, and additional capital provided to the portfolio’s cost effective passive manager. After this reconfiguration, the portfolio consists of six active managers and one passive manager. Two of the six active managers invest in mutually exclusive parts of the market as defined by market capitalisation.

7 investments


International sharesTwo active global investment managers were terminated in the second quarter of the year, with funds reallocated to an existing passive manager. Other portfolio changes throughout the year were largely confined to flows to and/or from the passive manager, which involved achieving Fund asset allocation targets. The portfolio now comprises: one active global manager, one country-specific active manager, a passive portfolio to complement the country-specific manager, and two passive managers with separate large cap and broad cap mandates.

The foreign currency hedging policy was maintained during the year with a strategic hedging range of 0-100%. At the end of 2011/12, 15% of the Fund’s developed market foreign currency exposure was hedged back into Australian dollars, down from 30% one year earlier.

Emerging market sharesAn additional passively managed regional portfolio (emerging markets Asia) was added to the portfolio this year. This passive capability in the Asia region, in combination with the existing global ex-Asia passive portfolio, allows the sector to accommodate Fund level flows without relatively costly transitions involving the active regional Asia portfolio. Additional portfolio changes throughout the year were confined to flows to both passive managers, reflecting Fund asset allocation changes. The allocation within the emerging markets portfolio remains fully unhedged.

Private capital investmentsThe Fund’s exposure to private capital investments increased opportunistically during the year, with commitments of $A303m made to new private equity funds. Some of the funds previously committed to private equity and opportunistic property were drawn down during the year, while some investments were realised and the proceeds returned.

The net result of these flows was that the net asset value of these investments increased from $A1 593m at the start of the year to $A1 668m at 30 June 2012.

Market neutral fundsConsistent with the strategic direction of the portfolio, one new credit manager was appointed and the allocations to incumbent credit and macro managers were increased.

No managers were terminated during the 2011/12 financial year.

Global investment grade creditOne of the three incumbent managers had its mandate terminated halfway through the year. This reflected a desire to obtain a more efficient portfolio structure. The portfolio now consists of an allocation to our two highest conviction managers in a 60/40 split.

7investments


Global government bonds and cashThe inflation-linked global government bonds sector remains passively managed. One half of the nominal government bonds allocation was changed from a global to Australian mandate half way through the year. This involved terminating one manager and funding a new manager. The other part of the nominal government bonds allocation remains invested with a nominal emerging market government bonds manager. Australian bank term deposits are authorised investments within the cash portfolio to take advantage of higher interest rates offered on term deposits relative to those on bank bills.

PropertyMajor activity during the year included the acquisition of partial interests in two office assets, the commencement of a major shopping centre re-development project, and establishment of a new debt facility. In November 2011, a 50% interest was acquired in a premium-grade office building located at 250 St Georges Terrace, Perth (QV1). This was followed in December 2011 by the acquisition of an additional 5% interest in 225 George Street, Sydney (Grosvenor Place), increasing ownership of this premium-grade Sydney office asset from 20% to 25%.

A major re-development of the portfolio’s largest asset, Indooroopilly Shopping Centre in Brisbane, commenced in January 2012. The re-development is scheduled for completion in mid-2014 and will increase the size of the existing centre by 37%, incorporating a new David Jones department store, a new Coles supermarket and fresh food precinct, as well as significant additional specialty tenancies through creation of a new two level parallel mall. The re-development has been designed to preserve the asset’s existing value and market share, realise the centre’s strong market potential, and better withstand the structural issues impacting the retail sector.

Fund performanceFund performance figures in this section are after tax and fees.

Performance by investment option

CSS and PSS Default FundsIn 2011/12, the CSS Default Fund posted a net (of fees and tax) return of 2.0% and the PSS Default Fund recorded a net (of fees and tax) return of 1.8%. After achieving solid gains in 2010/11, Default Fund performance was more subdued in 2011/12, constrained by listed share market declines, which suffered from concerns surrounding the European sovereign debt crisis and a slowdown in Chinese and US economic growth. Australian listed shares finished the year with a return of -7%. Returns were negatively impacted by a significant decline in materials stocks, which reflected signs of cooling Chinese demand for Australia’s raw material exports and a general slowdown in global economic growth. International shares fared better, trending sideways in aggregate, although this masked significant country performance dispersion. The US market achieved a positive return, but markets in Europe and Asia generally declined.

7 investments


Other asset class performance was more robust. The largest gains, of 12% to 14%, were achieved by fixed interest and credit markets, as investors benefited from the significant capital gains associated with a meaningful decline in long-term interest rates. Meanwhile, property recorded a solid rise of 8.7%, while market neutral funds increased by 5%.

The CSS Default Fund achieved an average net return (after fees and tax) of 6.6% per annum in the three years to 30 June 2012. This compared with a five-year average net return of 0.1% per annum and seven-year average net return of 4.1% per annum. Over the seven year period to 30 June 2012, the Fund is below its target return objective but ahead of the median peer fund.

The PSS Default Fund achieved an average net return (after fees and tax) of 6.4% per annum in the three years to 30 June 2012. This compared with a five-year average net return of 0.0% per annum and seven-year average net return of 4.2% per annum. Over the seven year period to 30 June 2012, the Fund is below its target return objective but ahead of the median peer fund.

CSS and PSS Cash Investment OptionsThe CSS Cash Investment Option posted a net return of 4.0% and the PSS Cash Investment Option also recorded a net return of 4.0% for the year ending 30 June 2012. This is in line with their target net return objectives once the impact of tax on returns is taken into account.

PSSap investment optionsOver the financial year to 30 June 2012, PSSap’s default Fund (Trustee Choice) advanced by a modest 1.7%, as weak listed share market performance constrained stronger returns from other asset classes. PSSap’s other three pre-mixed, diversified investment options also produced modest positive returns in 2011/12. The Conservative Option rose by 5.3%, reflecting its lower listed shares allocation. The Balanced Option advanced by 4.3% and the Aggressive Option by just 0.3% due to its higher listed shares allocation.

Single asset class option performance in 2011/12 was heavily reflective of the dispersion in financial market returns. The best performance was achieved by the Government Bonds option (previously ‘Fixed Interest’), which rose by 12.7%. The Property option recorded a solid gain of 8.4%, while the Cash option gained 4.0%.

However, the Australian Shares and Sustainable options recorded significant negative returns of -6.9% and -7.8% respectively, while the two international share options declined by 1.5% (unhedged) and 2.0% (hedged). In the seven years since inception, the highest single asset class option return was achieved by the Property option, which rose by 8.2% per annum.

Performance by asset classPerformance figures in these single asset classes are before tax but after fees.

Australian sharesThe Australian share market, defined by the S&P/ASX 300 Accumulation Index, fell by 7.0% in 2011/12, reflecting sharp declines in the first and last quarter of the financial year. The market’s decline was due to the negative impact of the European sovereign debt crisis, a slowdown in Chinese economic growth, the high value of the Australian dollar on domestic, import competing

7investments


businesses, and heightened investor risk aversion. The 2011/12 financial year was also notable for significant sector performance dispersion. For example, telecom, utility and healthcare stocks achieved strong gains while materials, energy and consumer discretionary stocks recorded very large falls. CSC’s actively managed portfolio underperformed the S&P/ASX 300 Accumulation Index by 0.7% during the year to deliver a total net return of -7.7%.

International sharesInternational share markets also experienced a difficult year, with developed world share markets rising by just 0.3% in hedged terms. Hedged returns are derived by taking local currency market returns and adding (subtracting) Australia’s positive (negative) short-term interest rate differential with other countries. The marginally positive hedged return outcome masked significant country performance dispersion, as evidenced by the US market achieving a positive return, while markets in Europe and Asia generally declined.

Developed world share markets declined by 0.5% in unhedged terms. Unhedged returns are derived by taking local currency market returns and adding (subtracting) the impact from a decline (increase) in the value of the Australian dollar against other currencies.

In 2011/12, the impact from Australia’s short-term interest rate differential with other countries was a little greater than the size of the decline in the value of the Australian dollar against other currencies. CSC’s portfolio underperformed its benchmark index by 0.4% during the year.

Global investment grade credit marketsGlobal investment grade credit markets rose by just under 12% in 2011/12. This return was buoyed by the large gains attributable to the sector’s underlying interest rate duration component, which benefited from a significant decline in long-term interest rates.

This impact easily offset the small negative influence of a modest widening in credit spreads. Within this environment, CSC’s portfolio outperformed its benchmark index by 0.7%.

Government bonds and cashGovernment bond markets enjoyed a very strong year, thanks to the large decline in long-term interest rates which eventuated from fears associated with the European sovereign debt crisis, a slowing in Chinese and US economic growth and heightened investor risk aversion.

This caused funds to flow out of share markets into government bond markets. Inflation linked government bonds achieved the highest returns, reflecting their longer interest rate duration. Nominal government bonds also performed strongly, rising by around 13%. The second half of the year saw a number of declines in the level of Australia’s official short-term interest rates, from 4.75% to 3.5%. In this environment, cash was able to record a return of 4.7% due to a positive yield gap between bank bill yields and official short-term interest rates.

7 investments


PropertyProperty performed solidly in the 2011/12 financial year, rising by 8.7%. This provides further evidence this asset class can perform well in environments in which listed share markets struggle, and emphasises its valuable diversification benefits.

CSC’s portfolio had a successful year, outperforming its benchmark index by 0.7%.

Market neutral fundsCSC’s market neutral funds rose by 5.1% and provided another layer of Fund diversification in an environment in which listed share markets struggled.

Table 13: CSS Default Fund investments 2011/12

Holdings at 30 June 2011

$m


$m

Proportion at 30 June 2012

%

Total Fund investments 4 341.7 3 644.0 100.0

Note: Total Fund investments are after tax and fees

Australian shares 1 156.3 837.0 23.1

International shares 1 248.4 1 034.9 28.6

Long/short equity funds 82.7 0.0 0.0

Real assets 557.4 531.3 14.7

Alternatives 602.8 570.7 15.8

Fixed income 504.5 510.3 14.0

Cash 212.8 138.0 3.8

Note: Asset class holdings are before tax and after fees

7investments


Table 14: CSS Default Fund performance 2011/12

One-year performance

Three-year performance

Five-year performance

Seven-year performance

% % % %

Total Fund performance 2.0 6.6 0.1 4.1

Note: Total Fund performance is after tax and fees

Australian shares -7.7 5.0 -4.0 3.8

International shares -1.4 8.4 -6.9 0.5

Emerging market shares -9.9 -0.4 0.0 0.0

Australian private equity 9.3 10.0 0.1 4.0

International private equity 9.4 10.7 1.7 8.8

Objective based funds 16.4 17.2 0.0 0.0

Market neutral fund 5.0 6.5 4.0 5.2

Property 9.4 8.1 6.1 8.1

Investment grade bonds 12.1 12.2 8.4 6.9

Index-linked bonds 14.1 12.4 0.0 0.0

Government bonds 14.9 8.7 0.0 0.0

Emerging market government bonds 7.0 0.0 0.0 0.0

Opportunistic credit 5.0 0.0 0.0 0.0

Cash 4.9 4.7 5.4 5.4

Note: Asset class performance is before tax and after fees

Table 15: CSS Cash Investment Option performance 2011/12


$m


$m


%


%

Total Fund 245.7 540.4 4.0 3.8

Note: Holdings and performance are after tax and fees

7 investments


Table 16: PSS Default Fund investments 2011/12


$m


$m

Proportion at 30 June 2012

%

Total Fund investments 12 463.5 12 928.2 100.0

Note: Total Fund investments are after tax and fees

Australian shares 3 304.8 2 959.0 23.1

International shares 3 577.0 3 658.8 28.6

Long/short equity funds 236.4 0.0 0.0

Real assets 1 592.9 1 878.4 14.7

Alternatives 1 722.8 2 017.9 15.8

Fixed income 1 441.8 1 804.2 14.0

Cash 599.2 488.0 3.8

Note: Asset classes are before tax and after fees

Table 17: PSS Default Fund performance 2011/12





% % % %

Total Fund performance 1.8 6.4 0.0 4.2

Note: Total Fund performance is after tax and fees

Australian shares -7.7 5.0 -4.0 3.6

International shares -1.4 8.4 -6.9 0.5

Emerging market shares -9.9 -0.4 0.0 0.0

Australian private equity 9.4 10.0 0.1 4.5

International private equity 9.4 10.7 1.7 8.8

Objective based funds 16.4 17.2 0.0 0.0

Market neutral fund 5.1 6.5 4.0 5.3

Property 9.4 8.1 6.1 8.2

Investment grade bonds 12.1 12.2 8.4 6.9

Index-linked bonds 14.1 12.4 0.0 0.0

Government bonds 14.9 8.7 0.0 0.0

Emerging market government bonds 7.0 0.0 0.0 0.0

Opportunistic credit 5.0 0.0 0.0 0.0

Cash 4.9 4.7 5.4 5.6

Note: Fund and asset class performance is before tax and after fees

7investments


Table 18: PSS Cash Investment Option performance 2011/12


$m


$m


%


%

Total Fund 27.1 50.8 4.0 3.8


Table 19: PSSap investment option performance 2011/12

Investment option

Holdings 30 June

2011 $m

Holdings 30 June

2012 $m


%


%


%


%

Conservative 18.4 41.4 5.3 6.8 3.2 4.7

Balanced (50/50)

29.8 42.3 4.3 6.9 2.2 4.7

Trustee Choice

2 515.0 3 174.1 1.7 6.3 0.0 4.3

Aggressive 74.7 85.8 0.3 6.7 -1.2 4.1

Cash 46.7 90.7 4.0 3.9 4.4 4.5

Government Bonds (previously Bonds/Fixed interest)

6.6 13.6 12.7 7.4 4.5 3.9

Australian Shares

44.9 45.8 -6.9 5.1 -3.2 3.9

International Shares (unhedged)

3.5 4.4 -1.5 2.4 -5.7 -0.3

International Shares

5.2 5.8 -2.0 6.0 -5.7 0.7

Property 13.6 22.9 8.4 7.2 5.6 8.2

Sustainable 9.9 9.7 -7.8 3.6 -4.2 2.5


Investment information Further information on investment performance is available from:

Web www.csc.gov.au

Postal address CSC GPO Box 1907 Canberra ACT 2601

Phone 02 6263 6999

Fax 02 6263 6900

Email [email protected]

7 investments


Allocating earnings

CSS and PSSEarnings are allocated in accordance with CSC’s Earnings Rate Policy which was effective on and from 28 June 2007. Visit either the CSS or PSS website to view this policy.

PSSapMembers’ interests in PSSap are valued in units. Contributions and other amounts transferred to the PSSap are used to buy units which are invested in accordance with members’ investment choices. There are 11 PSSap investment options to choose from.

The Fund’s net earnings are allocated to members’ accounts through changes in the unit price which fluctuate in line with investment markets. The unit price for an investment option reflects the total value of assets in the investment option (net of taxes and expenses) divided by the number of units issued in the investment option. A buy/sell spread is applied to all investment options to reflect the costs associated with the purchase or sale of assets. Calculation of the value of assets in each investment option is based on the latest available market value at the end of each business day and published daily on the Scheme’s website at www.pssap.gov.au. Where fees are payable directly from a member’s account (for example, insurance premiums and switching fees), units are sold to the extent required for payment.

CSC’s approach to investment governanceCSC’s approach to investment governance reflects the framework laid out by the United Nations Principles for Responsible Investment (UNPRI). See below for details on the UN PRI. CSC believes it has a responsibility to ensure that funds are not exposed to undue risk because of poor corporate governance behaviour. Therefore, CSC actively pursues principles of good governance in its own operations, and seeks them in service providers and in companies in which it invests. CSC considers corporate governance to be an important element of risk management.

This approach recognises that poor environmental, social and corporate governance (ESG) can indicate poor corporate management and lead to a decline in investment value. CSC undertakes a number of initiatives and practices in relation to managing risk in its investments, including:

> casting proxy votes in Australian and international companies in which it invests

> publicly communicating its ESG policy and practices

> governance research and engagement through Regnan.

7investments


Proxy voting In keeping with its belief in the value of good governance, CSC exercises its right to cast proxy votes in companies in which it invests. This activity underscores CSC’s commitment to ensuring long-term shareholder value for members. It also sends a clear signal to companies that as a shareholder, CSC will vote on company resolutions in the best interests of its members.

Regnan – Governance Research and Engagement Pty Limited Regnan was established to protect and enhance shareholder value for members by identifying ESG risks in present and future investments, to actively communicate those risks to relevant stakeholders, and engage directly with companies as required. The service was appointed to actively research governance risk in the Fund’s Australian equities investments and make recommendations on how constructive engagement might reduce such risks. CSC’s Australian equity investments represent funds under management of around $4.1 billion. Regnan is Australia’s only investment risk management service to focus on engagement to meet the oversight needs of institutional investors such as CSC. It addresses portfolio exposure to ESG risks by directly engaging with companies and performing specialist research and analysis. Regnan’s research universe includes all companies in the S&P/ASX200.

CSC’s ESG and Proxy Voting Policies are published on CSC’s website. Reports on the implementation of these policies, including progress against the UNPRIs are also available.

United Nations Principles for Responsible Investment CSC’s predecessor organisation, Australian Reward Investment Alliance (ARIA), became an asset owner signatory to the UNPRI in December 2006. CSC is now the signatory.

CSC is actively committed to aligning investment activities with the Principles in the best long-term interests of the beneficiaries of Schemes administered by CSC. CSC acts in the belief that application of the Principles is expected to lead to better long-term financial returns and a closer alignment between the objectives of institutional investors and those of society at large.

The six UNPRI are:

> PRI1. We will incorporate ESG issues into investment analysis and decision-making processes.

> PRI2. We will be active owners and incorporate ESG issues into our ownership policies and practices.

> PRI3. We will seek appropriate disclosure on ESG issues by the entities in which we invest.

> PRI4. We will promote acceptance and implementation of the Principles within the investment industry.

> PRI5. We will work together to enhance our effectiveness in implementing the Principles.

> PRI6. We will each report on our activities and progress towards implementing the Principles.

members and services8Scheme membership

member communication and services

8 members and services


Scheme membership

Regulated SchemesTable 20: Membership summary 30 June 2012

CSS PSS PSSap

Funds under management as at 30 June 2012 $4.2b $13.0b $3.5b

Members as at 30 June 2012 132 208 237 492 121 266

Employer agencies as at 30 June 2012 220 220 168

Chart 1: Membership by Scheme 2011/12

CSSPSSPSSap

Chart 2: Membership by member type 2011/12

contributorpreserver/deferredpensioner

Chart 3: Membership trend by Scheme

0

60 000

120 000

180 000

240 000

300 000

2005

2006

2007

2008

2009

2010

2011

2012

CSSPSSPSSap

Chart 4: Membership trend by member type

0

50 000

100 000

150 000

200 000

250 000

2005

2006

2007

2008

2009

2010

2011

2012

contributor preserved/deferred pensioner

8members and services


Pensions – regulated SchemesTable 21: CSS and PSS pensions 2011/12

Age retirement/involuntary

retirement

Invalidity Spouse Child/Other

Total Pensions Paid

Weighted Average

Yearly Pension

CSS 72 499 13 038 24 360 44 109 941 $3 508m $30 652

PSS 22 840 2 819 1 009 86 26 754 $594m $22 217

Total 95 339 15 857 25 369 130 136 695 $4 102m -

> CSS pensioners do not include 1922 Scheme members.

> Weighted average yearly pension amounts reflect the proportion of the year a member was a pensioner.

> PSSap did not offer a pension product at 30 June 2012.

Pensions – unregulated SchemesTable 22: 1922 Scheme pensions in 2011/12

At 30 June 2011 Commenced Ceased At 30 June 2012

Retirement/redundancy

118 2 22 98

Invalidity 953 0 68 885

Reversionary 3 902 20 436 3 486

Total 4 973 22 526 4 469

Table 23: PNG Scheme pensions in 2011/12

At 30 June 2011 Commenced Ceased At 30 June 2012

Retirement/redundancy

48 0 6 42

Invalidity 13 0 2 11

Reversionary 168 5 14 159

Total 229 5 22 212


8 members and services


Member communication and servicesCSC aims to give members information, education and advice to help them make the right decisions about their superannuation and retirement planning.

CSC provides clear, concise and tailored communications and delivers national education programs. Information and support is also provided to members and employers over the phone and via correspondence from customer information centres (CICs).

At Work for You workshopsCSC’s member education program, At Work for You, provides assistance and general guidance around Australia to CSS, PSS and PSSap members.

The program aims to increase members’ super confidence through a greater understanding of Scheme rules and potential entitlements. Both in-house and public workshops are delivered free of charge to members nationally. Workshops are also tailored for specific member needs to help employers during periods of restructure and redundancy.

The 2011/12 financial year was the seventh year of operation for CSC’s education program. During the year, CSC ran a total of 153 workshops at 20 locations across Australia, which were attended by nearly 5 000 CSS, PSS and PSSap members.

Member and employer websitesDuring the 2011/12 financial year, CSC’s three public sector Scheme websites, the employer administration centre website and the CSC corporate website were fully redeveloped, providing increased functionality and accessibility for all users. This work also achieved early compliance with federal government web content accessibility (WCAG) 2.0 guidelines.

These improvements were completed as part of a wider member and employer communication ‘renaming’ project which followed the establishment of CSC on 1 July 2011.

Customer information centresThe CICs provide members and employers with information about superannuation, Scheme memberships and pensions. The CICs can be contacted by telephone, email and written correspondence (see Chart 5), and are run by the scheme administrators, ComSuper and Pillar. Read more about scheme administration on page 55.

Improved service standards were achieved during 2011/12 for the provision of CSS and PSS phone, email and written services. Technological improvements also increased efficiencies in CIC response management and customer enquiry profiling.

8members and services


Chart 5: CIC enquiries trend – telephone, email and written

0

60 000

120 000

180 000

240 000

300 000

2005

2006

2007

2008

2009

2010

2011

2012

telephone email written

Employer support and data integrityCSC and the scheme administrators, ComSuper and Pillar, provide the 220 participating employers in the Australian Public Service with information, assistance and training on the submission and maintenance of member data and entitlements.

In 2011/12, ComSuper’s Employer Support and Data Integrity team made approximately 16 350 phone calls to employers, sent 33 183 emails to employers, and mailed 45 785 letters to public sector Scheme members. These figures are for CSS and PSS to 30 June 2012 and PSSap to 13 February 2012 (PSSap figures to 30 June 2012 were not captured).

Scheme administration9scheme administrator

Service Level Agreement

administrator performance

contributions

benefit payments

pension payments

dispute resolution

complaints and representations

legal claims

9 Scheme administration


This section of the report details the administration of CSS, PSS, PSSap, and the 1922 Scheme and PNG Scheme during the year ended 30 June 2012. This is one of three CSC reports for 2011/12. CSC’s other reports cover MilitarySuper, DFRB Scheme, DFRDB Scheme and DFSPB.

Scheme administratorComSuper is the provider of scheme administration services for CSS, PSS, PSSap and the 1922 Scheme and PNG Scheme. During the 2011/12 financial year, PSSap scheme administration transitioned to Pillar, following a decision by the government in 2010/11.

ComSuper and Pillar’s main responsibilities are to:

> maintain records of contributors, preservers and pensioners

> receive and account for contributions from employer agencies for their employees

> calculate and pay benefits (including invalidity benefits)

> make decisions on entitlements under delegation from CSC

> provide information and assistance to members.

ComSuper and Pillar provide information and assistance to members through customer information centres. This service is explained in the Members and services section of this report.

Service Level AgreementA Service Level Agreement (SLA) is in place between CSC and ComSuper. It establishes the services to be provided and service standards for scheme administration and reflects a shared understanding of the commitments each party is to provide.

Administrator performanceAs administrator, ComSuper reports monthly to CSC against the performance standards set out in the SLA. As trustee, CSC reviews and monitors ComSuper’s performance, which includes assessing ComSuper’s service delivery against agreed standards.

9Scheme administration


ContributionsTable 24: Member and employer contributions comparison 2010/11 and 2011/12

2010/11 2011/12 Difference Change

Member Employer Total Member Employer Total

CSS $96m $35m $131m $91m $33m $124m -$7m -5.34%

PSS $571m $225m $796m $596m $225m $821m $25m 3.14%

PSSap $12m $706m $718m $12m $809m $821m $103m 14.34%

Total $679m $966m $1 645m $699m $1 067m $1 766m $121m 7.35%

Benefit paymentsService standards in 2011/12 required that 95% of benefits must be processed within a maximum of five business days from the time when a benefit application is ready to be processed, and a maximum of two business days of receiving a valid application for all benefits in relation to death, invalidity and hardship cases.

Regulated SchemesTable 25: Benefit applications processed in 2011/12

2010/11 2011/12 Comparison to 2010/11

CSS and PSS 13 818 14 458 4.6% increase

PSSap 4 482 4 404 1.8% decrease

Table 26: Benefit payments by type in 2011/12

Age/retirement

Involuntary retirement

Invalidity Death Resignation/ other

Early release

Other Total 2011/12

CSS contributor exits

549 478 51 4 635 10 23 1 750

CSS preserved claims

1 692 0 7 1 5 0 10 1 715

CSS total 2 241 478 58 5 640 10 33 3 465

PSS contributor exits

2 202 1 150 270 36 4 137 172 81 8 048

PSS preserved claims

1 654 10 46 46 1 500 52 2 309

PSS total 3 856 1 160 316 82 4 138 672 133 10 357

PSSap total 82 N/A 23 34 2 895 0 121 3 155

Total 6 179 1 638 397 121 7 673 682 287 16 977

Note: Figures in this table reflect benefits processed and include cases where a member did not necessarily claim their entire benefit. Exit type ‘other’ includes opt out, orphan and sale (following the sale or outsourcing of an organisation).



Unregulated SchemesTable 27: Benefit payments including pensions paid 2011/12 and 2010/11

2011/12 2010/11

1922 Scheme $128.9 million $143.68 million

PNG Scheme $9.79 million $10.57 million

Pension payments

Regulated SchemesTable 28: CSS pensions paid and weighted average yearly pension

Pensions paid Weighted average yearly pension*

2011/12 $3 508 million $30 652

2010/11 $3 486 million $29 847

Table 29: PSS pensions paid and weighted average yearly pension

Pensions paid Weighted average yearly pension*

2011/12 $594 million $22 217

2010/11 $515 million $21 584

Chart 6: Weighted average yearly pension amount trend

17 000

19 000

21 000

23 000

25 000

27 000

29 000

2005

2006

2007

2008

2009

2010

2011

2012

avg yearly pension

* Weighted average yearly pension figures take into account the proportion of the year that a member was a pensioner if the period was less than 12 months.

PSSap did not offer a pension product at 30 June 2012.

Chart 7: Pensioner population trend

100 000

110 000

120 000

130 000

140 000

150 000

2005

2006

2007

2008

2009

2010

2011

2012

total



Dispute resolutionDecisions of CSC and its delegates are subject to both internal review (the reconsideration process) and external review (review by other bodies). A formal complaints process is also in place which is outlined in ‘Complaints and representations’ on page 61.

Internal review – the reconsideration process

Regulated Schemes – CSS, PSS and PSSapA person affected by a decision of CSC or a delegate may apply in writing to have it reconsidered. Reconsideration requests are treated as complaints for the purposes of section 101 of the Superannuation Industry (Supervision) Act 1993 (the SIS Act). If a member is dissatisfied with the decision, they may request the Superannuation Complaints Tribunal (SCT) to review the decision in accordance with the Superannuation (Resolution of Complaints) Act 1993. Read about the SCT on page 60.

Reconsideration requests generally relate to decisions made in respect of spouse eligibility, limited benefits membership for re-entered PSS members, applications to change benefit choices and invalidity claims. Following the completion of any internal reconsideration investigations, cases are prepared for review by the APS Reconsideration Advisory Committee (RAC). The role of this committee during the 2011/12 financial year was to make recommendations to CSC concerning requests for reconsiderations. The RAC was able to make a recommendation to affirm or vary a decision, substitute another decision or set a decision aside. Each applicant was provided a written statement of reasons for CSC’s decision.

The RAC comprises four members (two independent and two scheme administrator representatives). It has a quorum of three members, one of whom must be an independent member. At 30 June 2012, the Committee comprised:

> Ms Elizabeth d’Abbs and Mr Stevan Matheson, as independent members, and

> any two of four nominated scheme administrator representatives.

During the year, a total of 33 reconsideration cases were received (see Table 30 for a breakdown by Scheme), which was less than the 46 received in the previous year, while a total of 30 cases were finalised, which was six less than the 36 cases finalised in the previous year.

In addition, 80% of cases finalised by the RAC during the year were presented to CSC for a decision within six months of receipt. Reconsideration cases were finalised by the RAC in an average of 4.7 months in 2011/12, compared to 4.1 months in 2010/11.

Unregulated Schemes – 1922 Scheme and PNG SchemePeople who are dissatisfied with decisions made by delegates under either the 1922 Act or the PNG Act or the Papua New Guinea (Staffing Assistance) (Superannuation) Regulations 1973 can have their matter reviewed by CSC. During the 2011/12 financial year, no requests for reconsideration were received for the 1922 Scheme or PNG Scheme.



Table 30: Reconsideration applications received and outcomes 2011/12

Decision of the:

Brought forward

Received

Withdrawn or lapsed

Decisions affirmed

Decisions set aside

Resolved*

Cases finalised

Carried forward**

CSSDelegate 3 9 1 4 2 3 7 5

Trustee 0 2 1 1 0 1 2 0

PSSDelegate 10 21 5 11 5 10 21 10

Trustee 1 0 0 0 0 0 0 1

PSSapDelegate 2 1 0 0 0 0 0 0

Trustee 0 0 0 0 0 0 0 0

Total 16 33 7 16 7 14 30 16

* Resolved = withdrawn or lapsed + decisions set aside ** Carried forward = brought forward + received - finalised

Note: There were no applications received or outcomes in relation to the 1922 Scheme or PNG Scheme.

External reviewCertain CSC decisions are subject to external review by bodies such as the SCT, the Administrative Appeals Tribunal (AAT), the Federal Court, the Commonwealth Ombudsman and the Australian Human Rights Commission.

Superannuation Complaints TribunalCSS, PSS and PSSap are regulated Schemes for the purpose of the SIS Act. As trustee, CSC decisions in relation to these Schemes can be the subject of a complaint to the SCT, established under the Superannuation (Resolution of Complaints) Act 1993 (the SRC Act). CSC decisions include any decision taken by CSC or its delegates which include the RAC.

Complaints lodged with the SCT

Table 31: Complaints lodged for 2011/12 – CSS, PSS and PSSap

Carried over Lodged Completed Carried forward

2011/12 64 44 43 65

2010/11 68 43 47 64

Administrative Appeals TribunalThe 1922 Scheme and PNG Scheme are unregulated Schemes. Trustee decisions made by CSC in relation to these Schemes can be the subject of a complaint to the AAT, established under the Administrative Appeals Tribunal (AAT) Act 1975 (the AAT Act). AAT applications are processed according to the procedures and practices of the AAT set out in the AAT Act and the practice directions issued by the AAT President. No matters were referred to the AAT for review in 2011/12 in relation to the 1922 Scheme or PNG Scheme.



Federal CourtDecisions of the SCT are reviewable by the Federal Court under section 46 of the SRC Act. Appeals, on the grounds of an error of law, must be initiated within 28 days of notification of the SCT decision. During 2011/12, CSC did not appeal any SCT decisions to the Federal Court in respect of CSS, PSS or PSSap. There were also no appeals to the Federal Court by members of CSS, PSS or PSSap in respect of SCT decisions.

Under section 44 of the AAT Act, a party to a proceeding before the AAT may also appeal to the Federal Court on a question of law arising from any decision of the AAT in that proceeding.

During 2011/12, no matters were appealed to the Federal Court arising from an AAT proceeding in respect of the 1922 Scheme or PNG Scheme.

Judicial reviewThe Administrative Decisions (Judicial Review) Act 1977 (the AD(JR) Act) provides another review mechanism for a person aggrieved by an administrative decision taken under Commonwealth legislation. Under the AD(JR) Act, the person can seek, on specified grounds, an order for review of the decision in the Federal Court.

During 2011/12, there were no orders for review and no requests for a statement of reasons under the AD(JR) Act in respect of decisions made under either the CSS Act, the PSS Act, the PSSap Act, the 1922 Act or the PNG Act.

Commonwealth OmbudsmanIn 2011/12, eight Ombudsman enquiries were received in relation to CSS and PSSap; no Ombudsman enquiries were received in relation to PSS, or the 1922 Scheme and PNG Scheme (refer to Table 32 for complaints and representations including Ombudsman enquiries).

Complaints and representationsCSC has put in place formal procedures for member complaints. As trustee, CSC manages complaints relating to investment, policy and governance. As scheme administrator, ComSuper manages complaints relating to scheme administration including the maintenance of member accounts, recording of contributions, estimating and paying member benefits, issuing member statements and other service enquiries. Complaints handling processes and procedures comply with the Association of Superannuation Funds of Australia (ASFA) Best Practice Guide and reflect the guiding principles of Standards of Australia AS ISO 10002-2006 (Customer Satisfaction – guidelines for complaints handling in organisations).

During 2011/12, a total of 675 complaints were received in relation to CSS, PSS and PSSap (see Table 32), which was more than the 580 complaints received in 2010/11; no complaints were received during the year in relation to the 1922 Scheme or PNG Scheme.

Representations from members of parliament are also outlined in Table 32.

Freedom of information procedures and requests are outlined in Appendix D.

Table 32: Complaints and representations 2011/12

Total received

CSS Complaints 131

Ministerials 5

Ombudsman enquiries 1

PSS Complaints 193

Ministerials 2


PSSap Complaints 351

Ministerials 8


1922 Scheme Complaints 0

Ministerials 0


PNG Scheme Complaints 0

Ministerials 0


Total 691

Note: Statistics in this table were provided by CSC, ComSuper and Pillar.

Legal claimsTable 33: Compensation claims for CSS, PSS and PSSap

Carried over Received Considered Liability accepted Carried forward

2011/12 23 29 40 25 12

Lump sum compensation payments (including claimant’s legal costs) of the 25 cases where liability was accepted during the year totaled $356 698.83.

No claims were received in respect of the 1922 Scheme or PNG Scheme during the year.



CSS financial statements10

10CSS financial statements

CSC Annual Report to Parliament 2011-12 CSS, PSS, PSSap, 1922 Scheme & PNG Scheme 65

10 CSS financial statements




Commonwealth Superannuation Scheme (ABN 19 415 776 361)

The Board of Directors hereby states that in its opinion:

(a)

(b)

(c)

(d)

(e)

(f)

Tony Hyams Winsome HallChairman Director

the financial statements have been prepared based on properly maintained financial records; and

the operations of the CSS Fund were conducted in accordance with the Governance of Australian Government Superannuation Schemes Act 2011, the Superannuation Act 1976 and the requirements of the Superannuation Industry (Supervision) Act 1993 and Regulations, and the relevant requirements of the Corporations Act 2001 and Regulations (to the extent applicable).

Signed at Sydney this 14th day of September 2012 in accordance with a resolution of directors of the Commonwealth Superannuation Corporation (ABN 48 882 817 243) as Trustee of the Scheme.

Statement by the Trustee of the Commonwealth Superannuation Scheme ('Scheme')

the attached financial statements give a true and fair view of the matters required by Australian Accounting Standards, including AAS 25 'Financial Reporting by Superannuation Plans' , and Schedule 1 of the Finance Minister's Orders (Financial statements for reporting periods ending on or after 1 July 2011) to the extent that the latter is not inconsistent with AAS 25;

the attached financial statements give a true and fair view of the net assets of the Scheme as at 30 June 2012 and the changes in net assets of the Scheme for the year ended 30 June 2012;

at the date of this statement there are reasonable grounds to believe that the Scheme will be able to pay its debts as and when they fall due;

the financial statements are in a form agreed by the Minister for Finance and Deregulation and the Trustee in accordance with subsection 30(1)(d) of the Governance of Australian Government Superannuation Schemes Act 2011 and have been prepared in accordance with Australian Accounting Standards and other mandatory professional reporting requirements;



Commonwealth Superannuation SchemeStatement of Changes in Net AssetsFor the Year Ended 30 June 2012

Note 2012 2011$'000 $'000

4 598 445 4 767 657

Net investment revenueInterest 1 971 2 163 Changes in net market values 5c 82 877 325 667

84 848 327 830

Contribution revenueMember contributions 6a 90 671 96 037 Employer contributions 6a 32 922 34 606 Government co-contributions 6a 476 864 Appropriation from Consolidated Revenue Fund 6b 3 397 712 3 378 233

3 521 781 3 509 740

Total revenue 3 606 630 3 837 570

Benefits paid 6b (4 029 191) (4 002 110)

9 (577) -Total expenses (4 029 768) (4 002 110)

(423 138) (164 540)

Income tax expense 7a (5 241) (4 672)

(428 379) (169 212)

4 170 066 4 598 445

The attached notes form part of these financial statements.

Net assets available to pay benefits at the beginning of the financial year

Change in net assets before income tax

Change in net assets after income tax

Net assets available to pay benefits at the end of the financial year

Transfers to the Public Sector Superannuation Scheme



Commonwealth Superannuation SchemeStatement of Net AssetsAs at 30 June 2012

Note 2012 2011$'000 $'000

InvestmentsPooled superannuation trust 4 4 176 894 4 578 499 Total investments 4 176 894 4 578 499

Other assetsCash and cash equivalents 50 065 40 821 Sundry debtors 8 1 175 606 Total other assets 51 240 41 427

Total assets 4 228 134 4 619 926

LiabilitiesBenefits payable 52 402 16 152 Amounts due to other superannuation schemes 9 577 -Current tax liabilities 7b 5 063 5 298 Deferred tax liabilities 7c 26 31 Total liabilities 58 068 21 481

Net assets available to pay benefits 4 170 066 4 598 445




NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTSFor the year ended 30 June 2012

1. DESCRIPTION OF THE SCHEME

2.

(a) Statement of Compliance

The financial report of the Scheme is a general purpose financial report which has been prepared in accordance with Schedule 1 of the Finance Minister's Orders (Financial statements for reporting periods ending on or after 1 July 2011) , Accounting Standards and Interpretations and the Superannuation Industry (Supervision) Act 1993 . Accounting Standards include Australian Accounting Standards and International Financial Reporting Standards ('IFRS') to the extent that they are not inconsistent with AAS 25 'Financial Reporting by Superannuation Plans' .

The financial statements have been prepared on the basis required by the Defined Benefit Plan provisions of AAS 25, which provides specific measurement requirements for assets, liabilities and for accrued benefits. A Defined Benefit Plan refers to a superannuation plan where the amounts to be paid to members on retirement are determined at least in part by a formula based on years of membership and salary levels. The Trustee adopted the provisions of AAS 25 whereby the financial statements include a Statement of Net Assets, a Statement of Changes in Net Assets and Notes thereto.

BASIS OF PREPARATION

The Commonwealth Superannuation Scheme ('Scheme') is a hybrid accumulation-defined benefits scheme which provides benefits to its members under the Superannuation Act 1976 (as subsequently amended). The Trustee of the Scheme is Commonwealth Superannuation Corporation (CSC) (ABN 48 882 817 243). The Trustee's name was changed on 1 July 2011 from Australian Reward Investment Alliance (ARIA).

Monies paid to the Trustee for the purposes of the Scheme are held in the CSS Fund. The CSS Fund comprises contributions made by members and employers, income arising from investments, and unrealised and realised changes in market value of investments held within the CSS Fund. The Trustee pays member benefits and taxes relating to the CSS Fund out of the CSS Fund. The Trustee pays the direct and incidental costs of management of the CSS Fund and the investment of its money from the assets of the ARIA Investments Trust that are referable to the CSS Fund (Note 6(c)).

Administration of member records, contributions receipts and benefit payments is conducted on behalf of the Trustee by ComSuper.

The principal place of business of the Scheme is Level 8, 121 Marcus Clarke Street, Canberra ACT 2601.




2.

(a) Statement of Compliance (continued)

Standard / Interpretation Effective for annual reporting periods

beginning on or after

Expected to be initially applied in the financial

year ending

1 January 2013 30 June 2014





Australian Accounting Standards require disclosure of Australian Accounting Standards that have not been applied for standards that have been issued but are not yet effective. The Trustee expects to adopt the Standards disclosed below upon their application date to the extent that they are not inconsistent with AAS 25 'Financial Reporting by Superannuation Plans' . It is anticipated that adoption of the Standards will not have a material financial impact on the financial report of the Scheme. The following Standards expected to be relevant to the Scheme were in issue but not yet effective at the date of authorisation of the financial report.

BASIS OF PREPARATION (continued)

AASB 9 'Financial Instruments' and AASB 2009-11 'Consequential amendments to other accounting standards' resulting from its issue AASB 2010-7 'Amendments to Australian Accounting Standards arising from AASB 9 (December 2010)'.AASB 1053 'Application of Tiers of Australian Accounting Standards' and AASB 2010-2 'Amendments to Australian Accounting Standards arising from Reduced Disclosure Requirements'

AASB 13 'Fair Value Measurement' and 2011-8 'Amendments to Australian Accounting Standards arising from AASB 13'AASB 2012-2 'Amendments to Australian Accounting Standards - Disclosures - Offsetting Financial Assets and Financial Liabilities (AASB 7 & 132)' and AASB 2012-3 'Amendments to Australian Accounting Standards - Offsetting Financial Assets and Financial Liabilities (AASB 132)' AASB 2012-5 'Amendments to Australian Accounting Standards arising from Annual Improvements 2009-2011 Cycle

The financial statements of the Scheme were authorised for issue by the Directors on the 14th September 2012.

The form of these financial statements has been agreed by the Minister for Finance and Deregulation and the Trustee in accordance with sub-section 30(1)(d) of the Governance of Australian Government Superannuation Schemes Act 2011 .




2.

(a) Statement of Compliance (continued)

Effective for annual reporting periods


1 January 2011

(b) Functional and presentation currency

(c) Use of judgements and estimates

Standard / Interpretation

AASB 124 'Related Party Disclosures (2009)' and AASB 2009-12 'Amendments to Australian Accounting Standards'

BASIS OF PREPARATION (continued)

The following new and revised Standards and Interpretations have been adopted in these financial statements. The adoption has not had any significant impact on the amounts reported in these financial statements but may affect the accounting for future transactions or arrangements.

Judgements made by management in the application of Accounting Standards that have significant effects on the financial statements, and estimates with a significant risk of material adjustments in the next year are disclosed, where applicable, in the relevant notes to the financial statements.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

The financial statements are presented in Australian dollars, which is the functional currency of the Scheme.

Amounts in these financial statements have been rounded to the nearest thousand dollars, unless otherwise indicated.

In the application of Accounting Standards, management is required to make judgements, estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstance, the results of which form the basis of making the judgements. Actual results may differ from these estimates.




3. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES

(a) Assets

(i)

(ii)

(b) Cash and Cash Equivalents

(c) Foreign Currency Translation

The accounting policies set out below have been applied in preparing the financial statements for the year ended 30 June 2012 and the comparative information presented in these financial statements for the year ended 30 June 2011.

Assets are included in the Statement of Net Assets at net market value as at the reporting date and changes in the net market value of assets are recognised in the Statement of Changes in Net Assets in the periods in which they occur. Net market value of investments includes a deduction for selling costs which would be expected to be incurred if the investments were sold.

Financial assets (being investments in a pooled superannuation trust, cash at bank and sundry debtors) are recognised on the date the Scheme becomes a party to the contractual provisions of the asset. Financial assets are recognised using trade date accounting. From this date, any gains and losses from changes in net market value are recorded.

Net market value means the amount which could be expected to be received from the disposal of an asset in an orderly market after deducting costs expected to be incurred in realising the proceeds of such a disposal. As selling costs are generally immaterial, net market value approximates fair value unless otherwise stated.

Net market values have been determined as follows:

The Scheme does not undertake transactions denominated in foreign currencies.

Units in a pooled superannuation trust are valued at the redemption price at close of business on the last business day of the reporting period as notified by the manager of the trust, reflecting the net market value of the underlying investments.

Cash includes cash at bank used to transact member and employer contributions, transfers to and from other funds, benefit payments and tax liabilities.

Sundry debtors are recognised at the amounts receivable. All amounts are unsecured and are subject to normal credit terms.




3. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (continued)

(d) Payables

Benefits payable

Sundry payables and amounts due to other schemes

(e) Derivatives

(f) Revenue

Investment revenue

Contribution Revenue

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

The Scheme does not directly enter into derivative financial instruments.

Employer and member contributions, transfers from other funds and superannuation co-contributions from the Commonwealth Government are recognised on a cash basis.

Interest revenue is recognised on an accrual basis.

Benefits payable to a member are recognised where a valid withdrawal notice has been received from the employer sponsor, and approved by the Scheme administrator ('ComSuper'), but payment has not been made by reporting date.

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the entity and the revenue can be reliably measured. Specific revenues are recognised as follows:

Sundry payables represent liabilities for goods and services provided during the financial period and which are unpaid at reporting date. All amounts are unsecured. Creditors are subject to normal credit terms. Amounts due to other superannuation schemes are recognised in the year the election to transfer is received, valued at the amount of contributions plus earnings accrued (Note 9).

Payables (being benefits payable, sundry payables and amounts due to other superannuation schemes) are recognised at their nominal value which is equivalent to net market value.





(g) Expenses

(h) Income Tax

Current tax

Deferred tax

Income tax on the change in net assets for the year comprises current and deferred tax. Income tax is recognised in the Statement of Changes in Net Assets except to the extent that it relates to items recognised directly in members' funds.

Current tax is calculated by reference to the amount of income taxes payable or recoverable in respect of the taxable profit or loss for the period. It is calculated using tax rates and tax laws that have been enacted or substantively enacted by reporting date. Current tax for the current and prior periods is recognised as a liability (or asset) to the extent that it is unpaid (or refundable).

Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Scheme intends to settle its current tax assets and liabilities on a net basis.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period(s) when the asset and liability giving rise to them are realised or settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by reporting date. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Scheme expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.

Expenses are recognised on an accruals basis and, if not paid at reporting date, are reflected in the Statement of Net Assets as an accrual or payable depending upon whether or not the expense has been billed.

Deferred tax is accounted for using the comprehensive balance sheet liability method in respect of temporary differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax base of those items.

In principle, deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised to the extent that it is probable that sufficient taxable amounts will be available against which deductible temporary differences or unused tax losses and tax offsets can be utilised. However, deferred tax assets and liabilities are not recognised if the temporary differences giving rise to them arise from the initial recognition of assets and liabilities (other than as a result of a business combination) which affects neither taxable income nor accounting profit.





(h) Income Tax (continued)

Current and deferred tax for the period

(i) Superannuation Contributions (Surcharge) Tax

(j) Scheme Liability for Accrued Benefits

The liability for accrued benefits is the value of the Scheme's present obligation to pay benefits to members and other beneficiaries at the date of measurement. The liability is determined as the present value of expected future payments which arise from membership of the Scheme up to the date of measurement. The present value is determined by reference to expected future salary levels and by application of a current, market-determined, risk-adjusted discount rate and appropriate actuarial assumptions.

The liability for accrued benefits is not included in the Statement of Net Assets, however it is disclosed at Note 14.

The liability for accrued benefits is measured by an independent actuary on at least a triennial basis.

Surcharge liabilities are calculated by the Australian Taxation Office (ATO) and recorded against Scheme member accounts. The liability for surcharge is not payable until the member receives a lump sum, transfers their contributions or receives a death benefit. The amount assessed by the ATO is fully recoverable from the member from their benefit or by voluntary member payment, therefore no surcharge expense is recognised in the Scheme (Note 11).

The superannuation surcharge was abolished with effect from 1 July 2005 by the passing of the Superannuation Laws Amendment (Abolition of Surcharge) Act 2005 .

No estimate has been made for the balance of any tax payable in respect of surchargeable contributions received by the Scheme during the year on transfer of member entitlements from other superannuation funds as the Trustee is unable to determine the amount until receipt of applicable assessments in the following period.

Current and deferred tax is recognised as an expense or benefit in the Statement of Changes in Net Assets.




(k) Goods and Services Tax ('GST')

4. INVESTMENTS2012 2011

$'000 $'000

Pooled Superannuation Trust - ARIA Investments Trust 4 176 894 4 578 499 4 176 894 4 578 499

5. CHANGES IN NET MARKET VALUES2012 2011

$'000 $'000

(a) Investments held at 30 June:

Pooled Superannuation Trust - ARIA Investments Trust 87 012 300 773 87 012 300 773

(b) Investments realised during the year:

Pooled Superannuation Trust - ARIA Investments Trust (4 135) 24 893 (4 135) 24 893

(c) Total changes in net market values of investments 82 877 325 667

Revenues, expenses and assets are recognised net of the amount of goods and services tax ('GST') recoverable from the Australian Taxation Office as a reduced input tax credit. Where the amount of GST incurred is not recoverable from the Australian Taxation Office, it is recognised as part of the cost of acquisition of an asset or as part of an expense item.

Receivables and payables are recognised inclusive of GST.

The net amount of GST recoverable from, or payable to, the Australian Taxation Office is included as an asset or liability in the Statement of Net Assets.




6. FUNDING ARRANGEMENTS

(a) Contributions

Member Contributions

Employer Contributions

Transferring superannuation benefits from other funds

Government Co-Contributions

(b) Benefits

Members contribute to the Scheme at optional rates from 5% of salary, or they may opt to make nil contributions. The contribution rates were the same in the prior year.

Employers who do not operate their own productivity schemes contribute employer (productivity) contributions to the Scheme on a sliding scale averaging 3% of salaries paid to members. The contribution rates were the same in the prior year.

Money invested in other superannuation funds can be transferred to the Scheme.

For the financial year ended 30 June 2012, the Commonwealth Government contributes $1.00 for every $1.00 of eligible personal after-tax member contributions paid to the Scheme up to a maximum of $1 000 per member for each financial year. The co-contribution rate was the same for the 2011 financial year.

Where a benefit that becomes payable in respect of a member can be fully met from Scheme assets attributable to that member, the benefit is paid to the beneficiary from the CSS Fund. Where a benefit becomes payable that cannot be fully met from Scheme assets attributable to the member, all moneys held in the CSS Fund in respect of the member are paid into the Consolidated Revenue Fund, and the Commonwealth Government then assumes responsibility for payment of the benefit.

Of the total benefits payable at 30 June 2012, $1.102 million (2011: $0.35 million) is payable by the Consolidated Revenue Fund. The Commonwealth Government is the corresponding debtor for this amount in accordance with the funding arrangements described above.





(b) Benefits (continued)

2012 2011$'000 $'000

Gross Appropriation from Consolidated Revenue Fund 4 028 686 4 001 971

(630 974) (623 738)Net Appropriation 3 397 712 3 378 233

Consolidated Revenue FundLump-sum benefits 520 218 516 272 Pensions 3 508 467 3 485 699

4 028 685 4 001 971

CSS FundLump-sum benefits 506 139 Total benefits paid 4 029 191 4 002 110

(c) Costs of Administration

Costs of and incidental to the management of the Scheme and the investment of its money are charged against the assets of ARIA Investments Trust ('AIT') that are referable to the Scheme. Transactions in respect of these costs have been brought to account in the financial statements of AIT. The costs of member administration are met by ComSuper.

Benefits paid by the CSS Fund and the Consolidated Revenue Fund during the year are as follows:

less: Transfers from CSS Fund to Consolidated Revenue Fund




6. FUNDING ARRANGEMENTS (continued)

(c) Costs of Administration (continued)

Expenses met by the AIT and referable to the Scheme are as follows:

2012 2011$'000 $'000

InvestmentInvestment Advisors 753 900 Investment Managers 6 150 6 517 Custodian 1 152 934 Other 412 182 Total direct investment expenses 8 467 8 533

General administration 3 677 3 853

Total costs 12 144 12 386

2012 2011$'000 $'000

Trustee costs 1 250 1 279 ComSuper costs 14 069 13 888 Total 15 319 15 167

Scheme administration costs met by sponsoring employers are as follows:

In accordance with the ComSuper Act 2011 , ComSuper provides administrative services to the Trustee in relation to the Scheme. The expenses of ComSuper are met by government appropriation and a share of the administrative fees paid to ComSuper by employing agencies. The remaining share of administrative fees is paid to the Trustee to meet costs other than those incurred in managing and investing Scheme assets. Transactions in respect of the receipt of these fees and the costs of administration have been brought to account in the financial statements of the Trustee and ComSuper.




7. INCOME TAX2012 2011

$'000 $'000

(a) Income tax recognised in the Statement of Changes in Net Assets

Tax expense comprises:Current tax expense 5 247 5 523

- (853)

(6) 2 Total tax expense 5 241 4 672

(423 138) (164 540)

Income tax expense / (benefit) calculated at 15% (63 471) (24 681)

(13 578) (14 526)Benefits paid 604 379 600 317 Appropriation from Consolidated Revenue Fund (509 657) (506 735)Investment revenue already taxed (12 432) (48 850)

- (853)Total tax expense 5 241 4 672

(b) Current tax liabilities

Current tax payables:Provision for current year income tax 5 063 5 298

5 063 5 298

Adjustments recognised in the current year in relation to the current tax of prior years

Add (less) permanent differences - items not assessable or deductible

Adjustments recognised in the current year in relation to the current tax of prior yearsDeferred tax expense relating to the origination and reversal of temporary differences

The prima facie income tax expense on the benefits accrued as a result of operations before income tax reconciles to the income tax expense in the Statement of Changes in Net Assets as follows:

Increase / (decrease) in net assets for the year before income tax

Member contributions and government co-contributions




7. INCOME TAX (continued)

(c) Deferred tax balances2012 2011

$'000 $'000

Deferred tax liabilities comprise:Temporary differences 26 31

26 31

Taxable and deductible temporary differences arise from the following:

2012 Opening balance

Charged to income

Acquisition / disposal

Closing balance

$'000 $'000 $'000 $'000Gross deferred tax liabilities:Interest receivable 31 (6) - 26

31 (6) - 26

Total 31 (6) - 26


Charged to income


Closing balance

$'000 $'000 $'000 $'000Gross deferred tax liabilities:Interest receivable 29 2 - 31

29 2 - 31

Total 29 2 - 31

8.2012 2011

$'000 $'000

Interest receivable 171 207Surcharge tax 35 49

969 350 Total 1 175 606

SUNDRY DEBTORS

Amount to be appropriated from/to Consolidated Revenue Fund




9.

10. AUDITOR'S REMUNERATION

Value of audit services provided by the Australian National Audit Office:

2012 2011$ $

Financial statements and regulatory returns 93 302 70 340 8 580 7 535

Total 101 882 77 875

Deloitte Touche Tohmatsu are contracted by the Australian National Audit Office to provide audit services on its behalf. Fees for those services are included above.

No other services were provided by the Australian National Audit Office or Deloitte Touche Tohmatsu to the Scheme during the reporting period.

TRANSFERS FROM THE COMMONWEALTH SUPERANNUATION SCHEME TO THE PUBLIC SECTOR SUPERANNUATION SCHEME

Certain former contributors to the Commonwealth Superannuation Scheme (CSS) who rejoin as members of the CSS are entitled to elect to transfer to the Public Sector Superannuation Scheme ('PSS'). There were 5 elections to transfer made during the year ended 30 June 2012 (2011: Nil).

The audits of the financial statements and regulatory returns were provided by the Australian National Audit Office. The audit fees for these and the audit of the combined Risk Management Strategy and Plan ('RMSP') will be charged against assets of ARIA Investments Trust that are referable to the Scheme.

The value of contributions transferrable for members who elected to transfer from CSS to PSS is $576 914 at 30 June 2012 (2011: $Nil). This is payable to PSS.

Combined Risk Management Strategy and Plan




11. SUPERANNUATION CONTRIBUTIONS (SURCHARGE) TAX

2012 2011$'000 $'000

Total surcharge liability outstanding at start of year 60 051 63 465 Changes in unpaid assessments (77) (89)

1 598 2 978 61 572 66 354

(7 349) (6 303)Total surcharge liability outstanding at end of year 54 223 60 051

12. UNALLOCATED INCOME

The Superannuation Contributions (Surcharge) Tax applies to the surchargeable superannuation contributions of Scheme members whose adjusted taxable income exceeds the surcharge threshold. Surcharge liabilities are calculated by the Australian Taxation Office and recorded against Scheme member accounts. The surcharge liability may be paid by the member in full or in part during the period of Scheme membership. Any surcharge liability remaining at the end of the financial year incurs interest. Scheme rules provide for any outstanding surcharge liability to be recovered from a benefit payable to the member.

Transactions recorded during the reporting period were as follows:

The surcharge tax ceased on 1 July 2005. Assessments relating to periods prior to this date continue to be received by the Scheme.

No liability is recognised in the financial statements for the estimated value of the surcharge liability because the liability will be either met by the relevant members during their period of membership or will be recovered from benefits paid on exit from the Scheme.

Interest on outstanding surcharge liabilities at year end

Less: Amounts paid by members and Consolidated Revenue Fund

Monthly earnings are allocated to members each month-end, or for part of a month on contributions made during a month or where a member exits the Scheme during a month.

The closing balance represents approximately 0.17% (2011: 0.55%) of the members' funded entitlements as at 30 June 2012.




12. UNALLOCATED INCOME (continued)

2012 2011$'000 $'000

Opening balance of unallocated income 25 290 28 258 Add: Earnings of fund for the year 85 144 327 301 Less: Earnings allocated (103 266) (330 269)Closing balance of unallocated income 7 167 25 290

13. VESTED BENEFITS

The vested benefits amount is made up of:2012 2011

$billion $billion

Funded component 4.2 4.6Unfunded component 63.0 62.6

67.2 67.2

The net assets of the Scheme compared to the vested benefits are:

Funded component 4.2 4.6Net assets plus funded benefits payable 4.2 4.6Surplus (deficiency) - -

The vested benefits have been calculated on the basis of current legislative arrangements for indexation of pension payments.

Vested benefits are benefits which are not conditional upon continued membership of the Scheme (or any other factor other than resignation from the Scheme) and include benefits which members were entitled to receive had they terminated their Scheme membership as at the reporting date.

An actuarial estimate of vested benefits at 30 June 2012 is $67.243 billion (2011: $67.227 billion). The value of vested benefits represents the liability that would have fallen on the Scheme if all members had ceased service on 30 June 2012 and elected the option which maximised their benefit entitlement.

Unallocated income materially represents the difference between investment valuations applied in daily earnings rates and the confirmed investment values published in these financial statements.




14. LIABILITY FOR ACCRUED BENEFITS

Accrued benefits as at 30 June were:2011 2008

$billion $billion

Funded component 4.6 6.1Unfunded component 59.9 59.2

64.5 65.3

The net assets compared to the liability for accrued benefits as at 30 June are:2011 2008

$billion $billion

Funded accrued benefits 4.6 6.1Net assets plus funded benefits payable 4.6 6.1Surplus (deficiency) - -

The amount of accrued benefits is the present value of expected future benefit payments that arise from membership of the Scheme up to the measurement date. The accrued benefits are comprised of a funded component (i.e. accumulated member contributions, and, where applicable, productivity contributions, plus interest) which will be met from the Scheme, and an unfunded component to be financed from the Consolidated Revenue Fund at the time the superannuation benefits become payable.

The amount of accrued benefits in respect of the Scheme is calculated on a triennial basis. The most recent valuation of the accrued benefits was undertaken by Mercer Consulting (Australia) Pty Ltd as part of a comprehensive review as at 30 June 2011. A summary of the report is attached.




15. FINANCIAL INSTRUMENTS

(a) Financial instruments management

(b) Significant accounting policies

(c) Capital risk management

(d) Categories of financial instruments

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.

The Investments of the Scheme (other than cash held for managing contribution receipts, benefit payments and tax payments) comprise units in ARIA Investments Trust ('AIT'). AIT is a pooled superannuation trust which is also governed by the Commonwealth Superannuation Corporation as Trustee. This type of investment has been determined by the Trustee to be appropriate for the Scheme and is in accordance with the Scheme's published investment strategy. The Trustee applies strategies to manage the risk relating to the investment activities of AIT. The investments of AIT are managed on behalf of the Trustee by specialist sector fund managers who are required to invest the assets in accordance with contractual investment mandates.

Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised in respect of each class of financial asset and financial liability are disclosed in Note 3 to the financial statements.

The financial assets and liabilities of the Scheme are recognised at net market value as at the reporting date. Net market value approximates fair value less costs of realisation of investments. The cost of realisation of investments is minimal and therefore net market value that is carrying value approximates fair value. Changes in net market value are recognised in the Statement of Changes in Net Assets.

The RSE license of the Trustee of the Scheme requires the Trustee to maintain a balance of at least $100 000 at all times in an administration reserve account. This is required to be maintained in cash or cash equivalents. The Trustee of the Scheme was in compliance with this requirement throughout the year.




15. FINANCIAL INSTRUMENTS (continued)

(e) Financial risk management objectives

(f) Credit risk

The Scheme's investments are managed on behalf of the Trustee by specialist external investment managers who invest their respective fund allocation in accordance with the terms of a written investment mandate or disclosure document. The Trustee has determined that the appointment of these managers is appropriate for the Scheme and is in accordance with its investment strategy.

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Scheme. In its capacity as trustee of AIT, the Trustee has adopted a policy of spreading the aggregate value of transactions across approved counterparties with approved credit qualities, as a means of mitigating the risk of financial loss. The Scheme's exposure to its counterparties are continuously monitored by the Trustee.

The Trustee's internal investment team monitors and manages the financial risks relating to the Scheme's investments. Derivative Risk Statements set out the strict parameters for the Trustee's investment managers authorised to use derivatives. In essence, derivatives cannot be used to raise the level of risk above the level it would otherwise have been, and derivatives cannot be used to leverage the investments.

The Scheme is exposed to a variety of financial risks as a result of its pooled investment in AIT. These risks include market risk (including currency risk, fair value interest rate risk and price risk), credit risk, liquidity risk and cash flow interest rate risk. The Scheme's risk management and investment policies, approved by the Trustee, seek to minimise the potential adverse effects of these risks on the Scheme's financial performance. These policies may include the use of financial derivative instruments.

The Trustee is responsible for ensuring that there is an effective risk management control framework in place for the Scheme. Consistent with regulatory requirements, the Trustee has developed, implemented and maintains a combined Risk Management Framework to identify the policies, procedures, processes and controls that comprise its risk management and control systems for the Scheme and for the Scheme's investments through the AIT. The overall investment strategy of the Scheme is set out in the Trustee's approved investment policies and the Derivatives Securities Policy which address the investment strategy and objectives and risk mitigation strategies including risk mitigation relating to the use of derivatives.





(f) Credit risk (continued)

2012 2011$'000 $'000

Investments4 176 894 4 578 499

Other financial assetsCash and cash equivalents 50 065 40 821 Sundry debtors 1 175 606 Total 4 228 134 4 619 926

(g) Liquidity risk

The Trustee's approach to managing liquidity is to ensure that the Scheme will always have sufficient liquidity to meet its liabilities and member benefit payments. The Scheme allows members to withdraw benefits, and it is therefore exposed to the liquidity risk of meeting member withdrawals at any time. The Trustee undertakes forecasting and scenario testing of the cashflow requirements of the Scheme to ensure timely access to sufficient cash and actively-traded, highly-liquid investments to meet anticipated funding requirements.

Pooled Superannuation Trust - ARIA Investments Trust

There has been no other changes to the Scheme's exposure to credit risk or the manner in which it manages and measures that risk during the reporting period.

Liquidity risk is the risk that the Scheme will encounter difficulty in either realising assets or otherwise raising sufficient funds to meet its financial liabilities and/or member benefit payments or tax liabilities.

The table below shows the maximum exposure of financial assets to credit risk at the reporting date:

The largest exposure to a single counterparty is to cash held by the investment master custodian Northern Trust. Prior to 31 March 2012 the custodian was JP Morgan. Credit risk relating to the master custodian is mitigated through contract indemnity provisions. Other than the master custodian, no individual exposure within AIT exceeded 5% of net assets of that trust at 30 June 2012 or 30 June 2011.

The credit risk on the Scheme's directly held cash and cash equivalents and interest receivable is limited because the counterparty is the Reserve Bank of Australia.





(g) Liquidity risk (continued)

(h) Market risk

Foreign currency risk

As a further risk mitigation strategy, it is the Trustee's policy that the target asset allocation to illiquid assets is limited to around 25% of the investments of the AIT (with a plus or minus 10 percentage point rebalancing range around that target). Regular scenario testing is performed to confirm the validity of the strategy.

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: foreign exchange risk, interest rate risk and other market price risk. The policies and procedures put in place to mitigate the exposure to market risk are detailed in the Trustee's investment policies, and the Risk Management Framework.

There has been no change to the Scheme's exposure to market risk or the manner in which it manages and measures that risk since the 2011 reporting period.

There has been no change to the Scheme's exposure to liquidity risk or the manner in which it manages and measures that risk during the reporting period.

All financial liabilities (being benefits payable, sundry payables and amounts due to other superannuation funds) are expected to be settled within 3 months of the reporting date (2011: within 3 months). Current tax liabilities are expected to be settled within 1 year of the reporting date (2011: within 1 year) and the deferred tax liability within 2 years (2011: within 2 years). At 30 June 2012 the Scheme's total exposure to liquidity risk was $58.068 million (2011: $21.481 million) relating to scheme liabilities and $67.243 billion representing the liability for vested benefits (2011: $67.227 billion). Refer to Note 13 for information on liabilities for vested benefits.

Foreign currency risk is the risk that the net market value of future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates.

The Scheme does not undertake any transactions in foreign currency and is therefore not directly exposed to foreign currency risk. The AIT enters into forward foreign exchange contracts to hedge into Australian dollars some of the currency exposure arising from its investments denominated in developed markets foreign currencies. These contracts neutralise some of the gains and losses from currency fluctuation. A small part of the investments of the AIT, relating to emerging markets', may remain unhedged due to lack of suitable currency instruments for hedging.





(h) Market risk (continued)

Interest rate risk

2012 50 065 (701) (701) 701 701

2011 40 821 (714) (714) 714 714 Cash and cash equivalents

-1.4% +1.4%

-1.75% +1.75%

Cash and cash equivalents

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

The Scheme is indirectly exposed to interest rate risk through its investments in AIT. The Trustee manages interest rate risk through its investment strategy including diversification of asset allocation and the use of a diversity of specialist investment sector managers.

Carrying amount

$'000

Interest rate risk $' 000Changes

in net assets

The following table illustrates the Scheme's sensitivity to a 1.4% p.a. (2011: 1.75%) increase or decrease in interest rates, based on cash balances directly held at reporting date. This represents an assessment of a reasonably possible change in interest rates. Had interest rates been lower or higher by 1.4% at reporting date, and all other variables were held constant, the financial result would have improved/(deteriorated) as demonstrated:

Changes in net assets

Net assets available

to pay benefits


to pay benefits

The Scheme is directly exposed to interest rate risk on cash and cash equivalents held with the Reserve Bank of Australia to meet benefits and taxation payments. All holdings at 30 June 2012 and 30 June 2011 had a maturity profile of less than one month.

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

In the Trustee's opinion, the sensitivity analysis at reporting date approximates the direct interest rate exposures of the Scheme during the financial year.






Other price risk (continued)

2012

Default Option -/+8% 3 636 496 (290 920) (290 920) 290 920 290 920 Cash option -/+1.4% 540 398 (7 566) (7 566) 7 566 7 566

4 176 894 (298 485) (298 485) 298 485 298 485 2011

Default Option -/+8% 4 332 780 (346 622) (346 622) 346 622 346 622 Cash option -/+1.75% 245 719 (4 300) (4 300) 4 300 4 300

4 578 499 (350 922) (350 922) 350 922 350 922 Total Increase / (decrease)

ARIA Investments Trust:Financial Assets

Carrying amount

$'000

Change in price

ARIA Investments Trust:

Total Increase / (decrease)

The following table illustrates the Scheme's sensitivity to a reasonably possible change in the value of its investment in AIT, based on risk exposures at reporting date. The volatility factor of 8% (2011: 8%) represents the average annual volatility in the default option unit price of the Scheme's investment in the AIT. For the Cash Option a factor of 1.4% (2011: 1.75%) has been applied representing a reasonably possible change in interest rates as a proxy for price risk of the option. Had the unit price been higher or lower throughout the reporting period by the volatility factor, and based on period end balances with all other variables held constant, the financial result would have improved/(deteriorated) as follows:

Financial Assets



to pay benefits



to pay benefits

Price risk $' 000

In it's capacity as trustee of AIT, the Trustee manages the market price risk arising from these investments by diversifying the portfolio in accordance with its investment strategy.

The Scheme's investment in AIT is exposed to market price risk in respect of the latter's holdings of equity securities, unit trusts and pooled superannuation trusts. As the investment in AIT is carried at net market value with changes in net market value recognised in the Statement of Changes in Net Assets, all changes in market conditions will directly affect the Scheme's net investment income.





(i) Fair value measurements

Net market value measurements recognised in the Statement of Net Assets

Level 1 Level 2 Level 3 Total$'000 $'000 $'000 $'000

2012Financial AssetsPooled superannuation trust - 4 176 894 - 4 176 894


There were no transfers between Level 1 and 2 in the period.

Reconciliation of Level 3 net market value measurements

Units in the pooled superannuation trust are valued daily based on the latest listed and unlisted market prices and values of the underlying investments, less any tax and expenses.

There were no Level 3 financial assets or liabilities for the period.

The Scheme's financial instruments are included in the Statement of Net Assets at net market value that approximates fair value. The net market value is determined per accounting policies in Note 3(a).

The following table provides an analysis of the Scheme's financial instruments whereby the assets and liabilities are each grouped into one of three categories based on the degree to which their method of valuation is observable.

Level 1: net market value measurements are those derived from quoted prices in active markets.

Level 2: net market value measurements are those derived from inputs (other than quoted prices included within Level 1) that are observable such as prices or derived from prices.

Level 3: net market value measurements are those derived from valuation techniques that include inputs that are are not based on observable market data.




16. RELATED PARTIES

(a) Trustee

(b) Key Management Personnel

Tony Cole (appointed 1 July 2011) Winsome Hall (appointed 1 July 2011)Peter Cosgrove (appointed 1 July 2011)

Peter Feltham (appointed 1 July 2011) John McCullagh (appointed 1 July 2011)Nadine Flood (appointed 1 July 2011)Lyn Gearing (appointed 13 September 2011) Michael Vertigan (appointed 1 July 2011)Peggy Haines (appointed 1 July 2011)

Helen AyresPeter Carrigy-Ryan

Leonie McCracken Senior Executive, OperationsBronwyn McNaughton Senior Executive, Legal & RiskAlison Tarditi Chief Investment OfficerKevin Thompson Senior Executive, Finance & TechnologyChristine Pearce

Kim Kirsten

In addition to the Directors listed above, the following executives of the Trustee had authority and responsibility for planning, directing and controlling the activities of the Scheme throughout the year ended 30 June 2012:

Acting Chief Executive Officer until 13 September 2011, appointed Chief Executive Officer 14 September 2011

Senior Executive, Member & Employer Services Senior Executive, Human Resources and Business Services (from 10 April 2012)

Corporate Secretary

Commonwealth Superannuation Corporation (CSC) was the Trustee throughout the reporting period. The Trustee's name was changed from Australian Reward Investment Alliance (ARIA) on 1 July 2011. No fees were charged by CSC for acting as Trustee of the Scheme during the reporting period.

Tony Hyams (Chairman) (appointed 1 July 2011)

Gabriel Szondy (appointed 1 July 2011)

The Directors of CSC throughout the year ended 30 June 2012 and to the date of the report were:




16. RELATED PARTIES (continued)

(c) Key Management Personnel Compensation

2012 2011$ $

Short-term employee benefits 314 770 340 769 Post-employment benefits 33 854 32 420 Other long-term benefits 12 611 3 623 Termination benefits 11 330 -Share-based payment - -

372 565 376 813

(d) Investing entities

The other investors in AIT throughout the year were the Public Sector Superannuation Scheme and the Public Sector Superannuation Accumulation Plan. During the year, the Military Superannuation and Benefits Scheme also invested in the AIT. All investing transactions are conducted under normal industry terms and conditions.

The Trustee of the Scheme, Commonwealth Superannuation Corporation, is the trustee of the following regulated superannuation schemes: Commonwealth Superannuation Scheme, the Public Sector Superannuation Scheme, the Public Sector Superannuation Accumulation Plan and the Military Superannuation and Benefits Scheme.

The aggregate compensation of the key management personnel is set out below:

Throughout the year ended 30 June 2012, the Scheme's only investment consisted of units in AIT, which was established to provide a cost-effective means of gaining exposure to a broad range of listed and unlisted securities across various asset classes.

Aggregate compensation in relation to the Scheme is a pro-rata apportionment of the overall compensation paid by the Trustee, based on the net assets of the entities under its trusteeship or actual control.

The compensation of key management personnel (including Directors) related to investment management was charged as part of general administration expenses against assets of the AIT that are referable to the Scheme.

The Scheme has not made, guaranteed or secured, directly or indirectly, any loans to key management personnel or their personally-related entities at any time during the year.




(d) Investing entities (continued)

The Scheme held the following investments in related parties at 30 June:

Net Market Value of

Investment

Net Market Value of

Investment

Share of Net Income after

tax


tax 2012 2011 2012 2011

$'000 $'000 $'000 $'000

ARIA Investments Trust 4 176 894 4 578 499 82 877 325 667 4 176 894 4 578 499 82 877 325 667

17. COMMITMENTS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS

18. SUBSEQUENT EVENTS

No matters have arisen since 30 June 2012 that have materially affected, or may materially affect, the operations of the Scheme, the results of those operations, or the financial position of the Scheme in future financial years.

The Trustee pays costs of and incidental to the management of the Scheme and the investment of its money from the assets of the AIT that are referable to the Scheme (see Note 6(c)). No fees were charged for acting as Trustee during the year ended 30 June 2012 (2011: $nil).

The Scheme had no capital or other expenditure commitments at 30 June 2012 (2011: $nil).

In the normal course of business, requests are made by members and former members for the review of decisions relating to benefit entitlements of the Scheme which could result in additional benefits becoming payable in the future. Each request is considered on its merits prior to any benefit becoming payable. In the opinion of the Trustee, these requests do not represent a material liability on the Scheme.

There were no other contingent liabilities or contingent assets for the Scheme at 30 June 2012 (2011: $nil).





INFORMATION REQUIRED FOR PURPOSES OF AUSTRALIAN ACCOUNTING STANDARD AAS 25

RELATING TO THE ACTUARIAL VALUATION OF THECOMMONWEALTH SUPERANNUATION SCHEME

AS AT 30 JUNE 2011

Purpose of Report This statement has been prepared for the purposes of AAS 25 as at 30 June 2011 for the Commonwealth Superannuation Scheme (CSS) at the request of the Commonwealth Superannuation Corporation (CSC).

This extract summarises the actuarial valuation of the Scheme as at 30 June 2011 carried out by Mercer Consulting (Australia) Pty Limited under the advice of Martin Stevenson FIAA, FIA and Darren Wickham FIAA. It has been prepared for the purposes of inclusion with the Scheme Accounts and is in a form that complies with the Australian Accounting Standard AAS 25.

Accrued and Vested Benefits AAS 25 requires the disclosure of Accrued and Vested benefits at the reporting date.

For the purpose of AAS 25 the following amounts have been determined:

Reporting Date Accrued Benefits $billion

Vested Benefits $billion

30 June 2011 64.5 67.2

Accrued Benefits have been determined as the present value of expected future benefit payments that arise from membership of the CSS up to the reporting date.

Vested Benefits are benefits which the CSS would be required to pay if all members were to voluntarily leave employment on the reporting date and elected the benefit option which is most costly to the Scheme.

The method and assumptions used to determine Accrued and Vested Benefits are summarised in Attachment 1 to this statement.

Accrued Benefits have been calculated in a manner consistent with Guidance Note 454 and Professional Standard 402 issued by the Institute of Actuaries of Australia.



AAS25 COMMONWEALTH SUPERANNUATION SCHEME AT 30 JUNE 2011 Page 2

MERCER

j:\frc\clients\dofa\2011 long term cost report\aas25 at 30 june 2011 css v3.doc

Review of Actuarial Report AAS 25 also requires the notes to the Scheme accounts to include a summary of the most recent actuarial report of the CSS. Attachment 2 to this Statement provides a summary of the report on the Long Term Cost of the Public Sector Superannuation Scheme (PSS) and the CSS carried out as at 30 June 2011. The summary contains the information required under AAS 25.

Martin A Stevenson Fellow of the Institute of Actuaries of Australia Partner, Mercer Consulting(Australia) Pty Ltd

13 July 2012




MERCER


Attachment 1 to AAS 25 Statement

Method of Determining Accrued and Vested Benefits Accrued Benefits were determined as the present value of expected future benefit payments that arise from membership of the CSS up to the date of calculation. The expected future benefits were determined allowing for future salary growth to the date of exit.

The approach used to apportion benefits between past and future membership involves an “actual accrual” or “Projected Unit Credit Method” (or PUCM) approach.

This involves determining the total benefit using:

Accrued Multiple Final Salary (calculated using membership

to the date of the valuation) × at future date

The method used to apportion benefits between past and future membership is unchanged from that used in the previous review as at 30 June 2008.

The past membership component of the member-financed lump sum benefits and of the productivity superannuation benefits is taken to be the accumulated amount of contributions and interest at the calculation date.

Vested Benefits are determined as the value of benefits which the CSS would be required to pay if all members were to voluntarily leave employment on the reporting date and elect the benefit option which is most costly to the CSS.

Assumptions Used to Determine Accrued Benefits The assumptions used to determine Accrued Benefits are the same as those used for the most recent actuarial investigation into the long term cost of the PSS and the CSS as at 30 June 2011. Therefore, the Accrued Benefit calculated for AAS 25 purposes is the same as that calculated for the purposes of the Long Term Cost Report.

The financial assumptions used to determine the Accrued Benefits along with those used for the recent actuarial investigation are shown in the table below:

Item AAS 25 Long Term Cost ReportCPI Increases 2.5% per annum 2.5% per annum

Investment Return / Discount Rate 6.0% per annum 6.0% per annum

General Salary Increases 4.0% per annum 4.0% per annum




MERCER


A summary of the other assumptions used is contained in Appendix B of the Long Term Cost Report of the PSS and the CSS.




MERCER



Summary of the Long Term Cost Report The latest actuarial investigation into the long term cost of the PSS and CSS was conducted at 30 June 2011.

This attachment provides a summary of that report.

Membership Data Data relating to the membership of the PSS and the CSS was provided by ComSuper, the Schemes’ administrator, on behalf of CSC, for the purposes of this investigation.

The table below summarises the total membership of the CSS as at 30 June 2011.

CSS MEMBERSHIP as at 30 JUNE 2011 Male Females Total

Number of Contributors 10,264 5,652 15,916 Salaries $1,082 m $524 m $1,606 m Number of Preserved Members 6,481 2,629 9,110

Number of Age Pensioners 52,581 19,209 71,790

Number of Invalidity Pensioners 10,433 4,309 14,742

Number of Reversionary Pensioners 1,441 27,026 28,467

AssumptionsThe key economic assumptions adopted for this review are shown in the table below. The assumptions adopted for the previous review (which was carried out as at 30 June 2008) are shown for comparison purposes.

Item Assumption 2008 Investigation CPI Increases 2.5% per annum 2.5% per annum

Investment Returns / Discount Rate

6.0% per annum (nominal) 3.5% per annum (real)


General Salary Increases






MERCER


The key economic assumptions are consistent between the 2008 investigation and the 2011 investigation.

The demographic assumptions at 2011 have been revised from those at 2008 to more closely reflect actual experience of the Scheme. These are set out in Appendix B of the Long Term Cost Report.

Of the changes in assumptions, the most significant were:

• An allowance for mortality improvements; and • The extension of retirement assumptions to age 75.

Value of Assets The PSS and CSS are partly funded to the extent that real assets are held in respect of member contributions and productivity superannuation contributions. The realisable value of the CSS assets as at 30 June 2011 was $4.6 billion.

Accrued Benefits The value of accrued benefits as at 30 June 2011 was $64.5 billion.

Accrued Benefits were determined as the present value of expected future benefit payments that arise from membership of the CSS up to the date of calculation. The expected future benefits were determined allowing for future salary growth to the date of exit. Benefits were apportioned between past and future membership by multiplying the accrued multiple at the calculation date by the Final Salary at the date of exit.

The past membership component of the member-financed lump sum benefits and of productivity superannuation benefits is taken to be the accumulated amount of contributions and interest at the calculation date. An amount of $4.6 billion has been included in the Accrued Benefit in respect of the member financed benefits and productivity superannuation benefits.

The Accrued Benefit also includes an amount of $49.3 billion in respect of pensioners and preserved beneficiaries of the CSS.

Vested Benefits Vested Benefits of the CSS were not calculated as a part of the Long Term Cost Report as at 30 June 2011 but were calculated separately.

The estimated value of the Vested Benefits of the CSS as at 30 June 2011 is $67.2 billion.

Vested Benefits are determined as the value of benefits which the CSS would be required to pay if all members were to voluntarily leave employment on the reporting date and elected the benefit option which is most costly to the CSS.




MERCER


Financial Condition The CSS is a partially funded scheme. As a consequence, the value of Accrued Benefits and Vested Benefits is significantly more than the realisable value of Scheme assets at the same date.

However, the CSS operates under an underlying guarantee from the Commonwealth Government. Further, the investigation shows that the projected combined Commonwealth costs in respect of the PSS and CSS reduce as a percentage of projected Gross Domestic Product over the next 40 years.

Martin A Stevenson Fellow of the Institute of Actuaries of Australia Partner, Mercer Consulting (Australia) Pty Ltd

13 July 2012

PSS financial statements11

11 PSS financial statements


11PSS financial statements






Public Sector Superannuation SchemeStatement of Changes in Net AssetsFor the Year Ended 30 June 2012

Note 2012 2011$'000 $'000

Net assets available to pay benefits at the start of the financial year 12 480 633 11 394 820

Net investment revenueInterest 2 107 2 021 Changes in net market values 5c 228 674 825 485

230 781 827 506

Contribution revenueMember contributions 6a 585 413 571 200 Employer contributions 6a 225 062 224 592 Government co-contributions 6a 10 192 14 055 Appropriation from Consolidated Revenue Fund 6b 491 049 406 931 Transfers from the Commonwealth Super Scheme 8 577 -

1 312 293 1 216 778 Total revenue 1 543 074 2 044 284

Benefits paid 6b (1 064 516) (924 384)Total expenses (1 064 516) (924 384)

Change in net assets before income tax 478 558 1 119 900

Income tax expense 7a (34 186) (34 087)

Change in net assets after income tax 444 372 1 085 813

Net assets available to pay benefits at the end of the financial year 12 925 005 12 480 633




Public Sector Superannuation SchemeStatement of Net AssetsAs at 30 June 2012

Note 2012 2011$'000 $'000

InvestmentsPooled superannuation trust 4 12 952 590 12 464 957 Total investments 12 952 590 12 464 957

Other assetsCash and cash equivalents 67 502 68 956 Sundry debtors 8 1 617 509 Total other assets 69 119 69 465

Total assets 13 021 709 12 534 422

LiabilitiesBenefits payable 61 666 19 055 Sundry payables 1 023 864 Current tax liabilities 7b 33 990 33 840 Deferred tax liabilities 7c 25 30 Total liabilities 96 704 53 789






1. DESCRIPTION OF THE SCHEME

2. BASIS OF PREPARATION

(a) Statement of compliance

The Public Sector Superannuation Scheme ('Scheme') is a defined benefit scheme which provides benefits to its members under the Superannuation Act 1990 (as amended) and is administered in accordance with a Trust Deed dated 21 June 1990 (as amended). The Trustee of the Scheme is Commonwealth Superannuation Corporation (CSC) (ABN 48 882 817 243). The Trustee's name was changed on 1 July 2011 from Australian Reward Investment Alliance (ARIA).

Monies paid to the Trustee for the purposes of the Scheme are held in the PSS Fund. The PSS Fund comprises contributions made by members and employers, income arising from investments, and unrealised and realised changes in market value of investments held within the PSS Fund. The Trustee pays member benefits and taxes relating to the PSS Fund out of the PSS Fund. The Trustee pays the direct and incidental costs of management of the PSS Fund and the investment of its money from the assets of the ARIA Investments Trust that are referable to the PSS Fund (Note 6(c)).

Administration of member records, contributions receipts and benefit payments is conducted on behalf of the Trustee by ComSuper.

The principal place of business of the Scheme is Level 8, 121 Marcus Clarke Street, Canberra ACT 2601.

The financial report of Scheme is a general purpose financial report which has been prepared in accordance with Schedule 1 of the Finance Minister's Orders (Financial statements for reporting periods ending on or after 1 July 2011) , Accounting Standards and Interpretations, the Superannuation Industry (Supervision) Act 1993 and provisions of the Trust Deed. Accounting Standards include Australian Accounting Standards and International Financial Reporting Standards ('IFRS') to the extent that they are not inconsistent with AAS 25 'Financial Reporting by Superannuation Plans' .

In the previous financial year, consolidated financial statements were presented for the Scheme. Following a change in the constitution of the Trustee on 1 July 2011, the appropriateness of this treatment was reconsidered. On review of the provisions of the Trust Deed of the investment entity, the ARIA Investments Trust (AIT), the Trustee determined that no one investor can be regarded to have the power to govern the financial and operating policies of the AIT. Hence, in the current period, the financial statements of the Scheme are prepared on a stand-alone basis. This presentation also applies to the comparative year disclosures, which are now also disclosed on a stand-alone basis.




2. BASIS OF PREPARATION (continued)

(a) Statement of compliance (continued)




year ending






Australian Accounting Standards require disclosure of Australian Accounting Standards that have not been applied for standards that have been issued but are not yet effective. The Trustee expects to adopt the Standards disclosed below upon their application date to the extent that they are not inconsistent with AAS 25 'Financial Reporting by Superannuation Plans' . It is anticipated that adoption of the Standards will not have a material financial impact on the financial report of the Scheme. The following Standards expected to be relevant to the Scheme were in issue but not yet effective at the date of authorisation of the financial report.


The financial statements of the Scheme were authorised for issue by the Trustee on the 14th September 2012.

AASB 9 'Financial Instruments', AASB 2009-11 'Consequential amendments to other accounting standards' resulting from its issue and AASB 2010-7 'Amendments to Australian Accounting Standards arising from AASB 9 (December 2010)'AASB 1053 'Application of Tiers of Australian Accounting Standards' and AASB 2010-2 'Amendments to Australian Accounting Standards arising from Reduced Disclosure Requirements'AASB 13 'Fair Value Measurement' and 2011-8 'Amendments to Australian Accounting Standards arising from AASB 13'AASB 2012-2 'Amendments to Australian Accounting Standards - Disclosures - Offsetting Financial Assets and Financial Liabilities (AASB 7 & 132)' and AASB 2012-3 'Amendments to Australian Accounting Standards - Offsetting Financial Assets and Financial Liabilities (AASB 132)' AASB 2012-5 'Amendments to Australian Accounting Standards arising from Annual Improvements 2009-2011 Cycle








1 January 2011


(c)




Use of judgements and estimates

The financial statements are presented in Australian dollars, which is the functional currency of the Scheme.




The following new and revised Standards and Interpretations have been adopted in these financial statements. The adoption has not had any significant impact on the amounts reported in these financial statements but may affect the accounting for future transactions or arrangements:





(a)


(i) Units in a pooled superannuation trust are valued at the redemption price at close of business on the last business day of the reporting period as notified by the manager of the trust, reflecting the net market value of the underlying investments.

(ii) Sundry debtors are recognised at the amounts receivable. All amounts are unsecured and are subject to normal credit terms.

(b) Cash and cash equivalents


Assets

The Scheme does not undertake transactions denominated in foreign currencies.


Financial assets (being investments in a pooled superannuation trust, cash at bank and sundry debtors) are recognised on the date the Scheme becomes a party to the contractual provisions of the asset. Financial assets are recognised using trade date accounting. From this date, any gains and losses from changes in net market value are recorded.


Assets are included in the Statement of Net Assets at net market value as at reporting date and changes in the net market value of assets are recognised in the Statement of Changes in Net Assets in the periods in which they occur. Net market value of investments includes a deduction for selling costs which would be expected to be incurred if the investments were sold.

Cash includes cash at bank used to transact member and employer contributions, transfers to and from other funds, benefit payments and tax liabilities.





(d)

Benefits payable

Sundry payables

(e) Derivatives

(f) Revenue

Investment revenue

Contribution Revenue

The Scheme does not directly enter into derivative financial instruments.

Payables

Payables (being benefits payable and sundry payables) are recognised at their nominal value which is equivalent to net market value.

Benefits payable to a member are recognised where a valid withdrawal notice has been received from the employer sponsor, and approved by the Scheme administrator ('ComSuper'), but payment has not been made by reporting date.

Sundry payables represent liabilities for goods and services provided during the financial period and which are unpaid at reporting date. All amounts are unsecured. Creditors are subject to normal credit terms.

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the entity and the revenue can be reliably measured. Specific revenues are recognised as follows:



Employer and member contributions, transfers from funds other than the Commonwealth Superannuation Scheme (CSS), and superannuation co-contributions from the Commonwealth Government are recognised on a cash basis. Transfers from CSS are recognised as income and as a receivable in the year in which the member elects to transfer (Note 9).





(g) Expenses

(h) Income Tax

Current tax

Deferred taxDeferred tax is accounted for using the comprehensive balance sheet liability method in respect of temporary differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax base of those items.

Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Scheme intends to settle its current tax assets and liabilities on a net basis.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period(s) when the asset and liability giving rise to them are realised or settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by reporting date. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Scheme expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.

Current tax is calculated by reference to the amount of income taxes payable or recoverable in respect of the taxable profit or loss for the period. It is calculated using tax rates and tax laws that have been enacted or substantively enacted by reporting date. Current tax for the current and prior periods is recognised as a liability (or asset) to the extent that it is unpaid (or refundable).


Income tax on the change in net assets for the year comprises current and deferred tax. Income tax is recognised in the Statement of Changes in Net Assets except to the extent that it relates to items recognised directly in members' funds.

Expenses are recognised on an accruals basis and, if not paid at reporting date, are reflected in the Statement of Net Assets as an accrual or payable depending upon whether or not the expense has been billed.





(h) Income Tax (continued)



(j) Scheme liability for accrued benefits

The liability for accrued benefits is the value of the Scheme's present obligation to pay benefits to members and other beneficiaries at the date of measurement. The liability is determined as the present value of expected future payments which arise from membership of the Scheme up to date of measurement. The present value is determined by reference to expected future salary levels and by application of a current, market-determined, risk-adjusted discount rate and appropriate actuarial assumptions.

The liability for accrued benefits is not included in the Statement of Net Assets, but is reported at Note 14.

The liability for accrued benefits is measured by an independent actuary on at least a triennial basis.

No estimate has been made for the balance of any tax payable in respect of surchargeable contributions received by the Scheme during the year on transfer of member entitlements from other superannuation funds as the Trustee is unable to determine the amount until receipt of applicable assessments in the following period.

Surcharge liabilities are calculated by the Australian Taxation Office (ATO) and recorded against Scheme member accounts. The liability for surcharge is not payable until the member receives a lump sum, transfers their contributions or receives a death benefit. The amount assessed by the ATO is fully recoverable from the member from their benefit or by voluntary member payment, therefore no surcharge expense is recognised in the Scheme (Note 11).

The superannuation surcharge was abolished with effect from 1 July 2005 by the passing of the Superannuation Laws Amendment (Abolition of Surcharge) Act 2005 .

Current and deferred tax is recognised as an expense or benefit in the Statement of Changes in Net Assets.







$'000 $'000

Pooled Superannuation Trust - ARIA Investments Trust 12 952 590 12 464 957 12 952 590 12 464 957

5. CHANGES IN NET MARKET VALUES2012 2011

$'000 $'000


Pooled Superannuation Trust - ARIA Investments Trust 229 584 824 056 229 584 824 056


Pooled Superannuation Trust - ARIA Investments Trust (910) 1 429 (910) 1 429


Revenues, expenses and assets are recognised net of the amount of goods and services tax ('GST') recoverable from the Australian Taxation Office as a reduced input tax credit. Where the amount of GST incurred is not recoverable from the Australian Taxation Office, it is recognised as part of the cost of acquisition of an asset or as part of an expense item.


The net amount of GST recoverable from, or payable to, the Australian Taxation Office is included as an asset or liability in the Statement of Net Assets.





(a) Contributions



Transferring superannuation benefits from other funds


(b) Benefits

Where a benefit that becomes payable in respect of a member can be fully met from Scheme assets attributable to that member, the benefit is paid to the beneficiary from the PSS Fund. Where a benefit becomes payable that cannot be fully met from Scheme assets attributable to the member, all moneys held in the PSS Fund in respect of the member are paid into the Consolidated Revenue Fund, and the Commonwealth Government then assumes responsibility for payment of the benefit.

Of the total benefits payable as at 30 June 2012, $0.87 million (2011: $0.309 million) is payable by the Consolidated Revenue Fund. The Commonwealth is the corresponding debtor for this amount in accordance with the funding arrangements described above.

Members contribute to the Scheme at optional rates ranging from 2% - 10% or they may opt to make nil contributions. The contribution rates were the same in the prior year.

Employers who do not operate their own productivity schemes contribute employer (productivity) contributions to the Scheme on a sliding scale averaging 3% of salaries paid to members. The contribution rates were the same in the prior year.

Money invested in other superannuation funds can be rolled over to the Scheme.

For the financial year ended 30 June 2012, the Commonwealth Government contributes $1.00 for every $1.00 of eligible personal after-tax member contributions paid to the Scheme up to a maximum of $1 000 per member for each financial year. The co-contribution rate was the same for the 2011 financial year.





(b) Benefits (continued)

2012 2011$'000 $'000

Gross Appropriation from Consolidated Revenue Fund 1 047 178 906 853

(556 129) (499 924)Net Appropriation 491 049 406 931

Consolidated Revenue FundLump-sum benefits 452 785 391 634 Pensions 594 393 515 219

1 047 178 906 853

PSS FundLump-sum benefits 17 338 17 531 Total benefits paid 1 064 516 924 384

(c) Costs of administration

Costs of and incidental to the management and investment of the Scheme are charged against the assets of ARIA Investments Trust ('AIT') that are referable to the Scheme. Transactions in respect of these costs have been brought to account in the financial statements of AIT. The costs of member administration are met by ComSuper.

Benefits paid by the PSS Fund and the Consolidated Revenue Fund during the year are as follows:

less: Transfers from PSS Fund to Consolidated Revenue Fund





(c) Costs of administration (continued)

2012 2011$'000 $'000

InvestmentInvestment advisors 2 187 2 299 Investment managers 17 853 16 648 Custodian 3 345 2 387 Other 1 197 467

24 582 21 801



Scheme administration costs met by sponsoring employers are as follows:

2012 2011$'000 $'000

Trustee costs 2 120 2 133 ComSuper costs 29 847 28 051 Total 31 967 30 184

In accordance with the ComSuper Act 2011, ComSuper provides administrative services to the Trustee in relation to the Scheme. The expenses of ComSuper are met by government appropriation and a share of the administrative fees paid to ComSuper by employing agencies. The remaining share of administrative fees is paid to the Trustee to meet costs other than those incurred in managing and investing the Scheme assets. Transactions in respect of the receipt of these fees and the costs of administration have been brought to account in the financial statements of the Trustee and ComSuper.

Expenses met by the AIT and referable to the Scheme are as follows:

Total direct investment expenses




7. INCOME TAX

(a) Income tax recognised in the Statement of Changes in Net Assets

2012 2011$'000 $'000

34 191 34 092

(5) (5)34 186 34 087

478 558 1 119 900

71 784 167 985

(89 317) (87 693)Benefits paid 159 677 138 658

(73 657) (61 040)Investment revenue already taxed (34 300) (123 823)Total tax expense 34 186 34 087

(b) Current tax liabilities


33 990 33 840

Member contributions and government co-contributions

Tax expense comprises:Current tax expenseDeferred tax expense relating to the origination and reversal of temporary differences Total tax expense

Increase in net assets for the year before income tax

Income tax expense calculated at 15%


The prima facie income tax expense on the benefits accrued as a result of operations before income tax reconciles to the income tax expense in the Statement of Changes in Net Assets as follows:

Appropriation from Consolidated Revenue Fund




7. INCOME TAX (continued)2012 2011

$'000 $'000

(c) Deferred tax balances

Deferred tax liabilities comprise:Temporary differences 25 30

25 30



Charged to income


Closing balance


30 (5) - 25

30 (5) - 25


Charged to income


Closing balance


30 (5) - 30

30 (5) - 30

8. SUNDRY DEBTORS

2012 2011$'000 $'000

Interest receivable 170 200 577 -

870 309 1 617 509

Amount to be appropriated from Consolidated Revenue Fund

Amounts due from the CSS Fund




9.


2012 2011$ $


Financial statements and regulatory returns 106 700 81 930 Combined Risk Management Strategy and Plan 8 580 7 535 Total 115 280 89 465

No other services were provided by the Australian National Audit Office or Deloitte Touche Tohmatsu during the reporting period.

The value of contributions transferrable for members who elected to transfer from CSS to PSS is $576 914 at 30 June 2012 (2011: $Nil). The transfer is receivable from CSS.

TRANSFER TO THE PUBLIC SECTOR SUPERANNUATION SCHEME FROM THE COMMONWEALTH SUPERANNUATION SCHEME

Certain former contributors to the Commonwealth Superannuation Scheme (CSS) who again become members of the CSS are entitled to elect to transfer to the Public Sector Superannuation Scheme (PSS). There were 5 elections made during the year ended 30 June 2012 (2011: nil elections).

The audits of the financial statements and regulatory returns were provided by the Australian National Audit Office. The audit fees for these and the audit of the combined Risk Management Strategy and Plan ('RMSP') will be charged against assets of ARIA Investments Trust that are referable to the Scheme.

Deloitte Touche Tohmatsu have been contracted by the Australian National Audit Office to provide audit services on its behalf. Fees for those services are included above.




11. SUPERANNUATION CONTRIBUTIONS (SURCHARGE) TAX

Transactions recorded during the reporting period were as follows:

2012 2011$'000 $'000

Total surcharge liability outstanding at start of year 41 194 42 266 Changes in unpaid assessments (6 979) 12 Interest on outstanding surcharge liabilities at end of year 1 146 2 044

35 361 44 322

(3 484) (3 128)Total surcharge liability outstanding at end of year 31 877 41 194

12. UNALLOCATED INCOME

The Superannuation Contributions (Surcharge) Tax applies to the surchargeable superannuation contributions of Scheme members whose adjusted taxable income exceeds the surcharge threshold. Surcharge liabilities are calculated by the Australian Taxation Office and recorded against Scheme member accounts. The surcharge liability may be paid by the member in full or in part during the period of Scheme membership. Any surcharge liability remaining at the end of the financial year incurs interest. Scheme rules provide for any outstanding surcharge liability to be recovered from a benefit payable to the member.

Less: Amounts paid by members and Consolidated Revenue Fund

The surcharge tax ceased on 1 July 2005. Assessments relating to periods prior to this date continue to be received by the Scheme.

No liability is recognised in the financial statements for the estimated value of the surcharge liability because the liability will be either met by the relevant members during their period of membership or will be recovered from benefits paid on exit from the Scheme.

Monthly earnings are allocated to members each month-end, or for part of a month on contributions made during a month or where a member exits the Scheme during a month.

The closing balance is approximately -0.15% (2011: 0.52%) of the members' funded entitlements as at the 30 June 2012.




12. UNALLOCATED INCOME (continued)

2012 2011$'000 $'000

Opening balance of unallocated income 64 870 78 646 Add: Earnings of Fund for the year 231 097 827 809 Less: Earnings allocation to members' accounts (315 836) (841 585)Closing balance of unallocated income (19 870) 64 870

13. VESTED BENEFITS

2012 2011$billion $billion

The vested benefits amount is made up of:

Funded component 13.0 12.5 Unfunded component 46.5 41.6

59.5 54.1

The net assets of the Scheme compared to the vested benefits are:

Funded component 13.0 12.5 Net assets plus funded benefits payable 13.0 12.5 Surplus (deficiency) - -

Vested benefits are benefits which are not conditional upon continued membership of the Scheme (or any other factor other than resignation from the Scheme) and include benefits which members were entitled to receive had they terminated their Scheme membership as at the reporting date.

The actuarial estimate of vested benefits at 30 June 2012 is $59.5 billion (2011: $54.1 billion). The value of vested benefits represents the liability that would have fallen on the Scheme if all members had ceased service on 30 June 2012 and elected the option which maximised their benefit entitlement.

The vested benefits have been calculated on the basis of current legislative arrangements for indexation of pension payments.

Unallocated income materially represents the difference between investment valuations applied in daily earnings rates and the confirmed investment values published in these financial statements.





2011 2008$billion $billion

Accrued benefits as at 30 June were:

Funded component 12.5 11.4 Unfunded component 33.1 20.9

45.6 32.3

The net assets compared to the liability for accrued benefits as at 30 June are:

Funded accrued benefits 12.5 11.4 Net assets plus funded benefits payable 12.5 11.4 Surplus (deficiency) - -

The amount of accrued benefits is the present value of expected future benefit payments that arise from membership of the Scheme up to the measurement date. The accrued benefits are comprised of a funded component (i.e. accumulated member contributions, and, where applicable, productivity contributions, plus interest) which will be met from the Scheme, and an unfunded component to be financed from the Consolidated Revenue Fund at the time the superannuation benefits become payable.

The amount of accrued benefits in respect of the Scheme is calculated on a triennial basis. The most recent valuation of the accrued benefits was undertaken by Mercer Consulting (Australia) Pty Ltd as part of a comprehensive review as at 30 June 2011. A summary of the review is attached.










The Investments of the Scheme (other than cash held for managing contribution receipts, benefit payments and tax payments) comprise units in ARIA Investments Trust ('AIT'). AIT is a pooled superannuation trust which is also governed by the Commonwealth Superannuation Corporation as Trustee. This type of investment has been determined by the Trustee to be appropriate for the Scheme and is in accordance with the Scheme's published investment strategy. The Trustee applies strategies to manage risk relating to the investment activities of the AIT. The investments of AIT are managed on behalf of the Trustee by specialist sector fund managers who are required to invest the assets in accordance with contractual investment mandates.


The RSE license of the Trustee of the Scheme requires the Trustee to maintain a balance of at least $100 000 at all times in an administration reserve account. This is required to be maintained in cash or cash equivalents. The Trustee of the Scheme was in compliance with this requirement throughout the year.

The financial assets and liabilities of the Scheme are recognised at net market value as at the reporting date. Net market value approximates fair value less costs of realisation of investments. The cost of realisation of investments is minimal and therefore net market value that is carrying value approximates fair value. Changes in net market value are recognised in the Statement of Changes in Net Assets.






(f) Credit risk

The Trustee's internal investment team monitors and manages the financial risks relating to the Scheme's investments. Derivative Risk Statements set out the strict parameters for the Trustee's investment managers authorised to use derivatives. In essence, derivatives cannot be used to raise the level of risk above the level it would otherwise have been, and derivatives cannot be used to leverage the investments.

The Scheme is exposed to a variety of financial risks as a result of its pooled investment in AIT. These risks include market risk (including currency risk, fair value interest rate risk and price risk), credit risk, liquidity risk and cash flow interest rate risk. The Scheme’s risk management and investment policies, approved by the Trustee, seek to minimise the potential adverse effects of these risks on the Scheme’s financial performance. These policies may include the use of financial derivative instruments.

The Trustee is responsible for ensuring that there is an effective risk management control framework in place for the Scheme. Consistent with regulatory requirements, the Trustee has developed, implemented and maintains a combined Risk Management Framework to identify the policies, procedures, processes and controls that comprise its risk management and control systems for the Scheme and for the Scheme's investments through the AIT. The overall investment strategy of the Scheme is set out in the Trustee's approved investment policies and the Derivatives Securities Policy which address the investment strategy and objectives and risk mitigation strategies including risk mitigation relating to the use of derivatives.

The Scheme's investments are managed on behalf of the Trustee by specialist external investment managers who invest their respective fund allocation in accordance with the terms of a written investment mandate or disclosure document. The Trustee has determined that the appointment of these managers is appropriate for the Scheme and is in accordance with its investment strategy.

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Scheme. In its capacity as trustee of AIT, the Trustee has adopted a policy of spreading the aggregate value of transactions across approved creditworthy counterparties as a means of mitigating the risk of financial loss. The Scheme's exposure to its counterparties are continuously monitored by the Trustee.






2012 2011$'000 $'000

InvestmentsPooled Superannuation Trust - ARIA Investments Trust 12 952 590 12 464 957 Other financial assetsCash and cash equivalents 67 502 68 956 Sundry debtors 1 617 509

13 021 709 12 534 422

(g) Liquidity risk

Liquidity risk is the risk that the Scheme will encounter difficulty in either realising assets or otherwise raising sufficient funds to meet its liabilities and/or member benefit payments or tax liabilities.

The Trustee's approach to managing liquidity is to ensure that it will always have sufficient liquidity to meet its liabilities and member benefit payments. The Scheme allows members to withdraw benefits, and it is therefore exposed to the liquidity risk of meeting member withdrawals at any time. The Trustee undertakes forecasting and scenario testing of the cashflow requirements of the Scheme to ensure timely access to sufficient cash and actively-traded, highly-liquid investments to meet anticipated funding requirements.

There has been no other changes to the Scheme's exposure to credit risk or the manner in which it manages and measures that risk during the reporting period.

The credit risk on the Scheme's directly held cash and cash equivalents and interest receivable is limited because the counterparty is Reserve Bank of Australia.








(h) Market risk

Foreign currency riskForeign currency risk is the risk that the net market value of future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates.

The Scheme does not undertake any transactions in foreign currency and is therefore not directly exposed to foreign currency risk. The AIT enters into forward foreign exchange contracts to hedge into Australian dollars some of the currency exposure arising from its investments denominated in developed markets foreign currencies. These contracts neutralise some of the gains and losses from currency fluctuation. A small part of the investments of the AIT, relating to emerging markets', remains unhedged due to lack of suitable currency instruments for hedging.

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: foreign exchange risk, interest rate risk and other market price risk. The policies and procedures put in place to mitigate the exposure to market risk are detailed in the Trustee's investment policies and the Risk Management Framework.

There has been no change to the Scheme's exposure to market risk or the manner in which it manages and measures that risk since the 2011 reporting period.

All financial liabilities (being benefits payable, sundry payables and amounts due to other superannuation funds) are expected to be settled within 3 months of the reporting date (2011: within 3 months). Current tax liabilities are expected to be settled within 1 year of the reporting date (2011: within 1 year) and the deferred tax liability within 2 years (2011: within 2 years). At 30 June 2012 the Scheme's total exposure to liquidity risk was $96.704 million (2011: $53.789 million) relating to scheme liabilities and $59.506 billion representing the liability for vested benefits (2011: $54.136 billion). Refer to Note 13 for information on liabilities for vested benefits.

There has been no change to the Scheme's exposure to liquidity risk or the manner of management of the risk during the reporting period.







Interest rate risk

2012 67 502 (945) (945) 945 945

2011 68 956 (1 207) (1 207) 1 207 1 207

-1.4% +1.4%

-1.75% +1.75%

In the Trustee's opinion, the sensitivity analysis at reporting date approximates the direct interest rate exposures of the Scheme during the financial year.

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





to pay benefits



to pay benefits


The Scheme is directly exposed to interest rate risk on cash and cash equivalents held with the Reserve Bank of Australia to meet benefits and taxation payments. All holdings at 30 June 2012 and 30 June 2011 had a maturity profile of less than one month.

The Scheme is indirectly exposed to interest rate risk through its investments in AIT. The Trustee manages interest rate risk through its investment strategy including diversification of asset allocation and the use of a diversity of specialist investment sector managers.

The following table illustrates the Scheme's sensitivity to a 1.4% p.a. (2011: 1.75%) increase or decrease in interest rates, based on cash balances directly held at reporting date. This represents an assessment of a reasonably possible change in interest rates. Had interest rates been lower or higher by 1.4% at reporting date, and all other variables were held constant, the financial result would have improved/(deteriorated) as demonstrated:

Carrying amount

$'000

Interest rate risk $' 000






2012

Default Option -/+7% 12 901 743 (903 122) (903 122) 903 122 903 122 Cash option -/+1.4% 50 847 (712) (712) 712 712

Total 12 952 590 (903 834) (903 834) 903 834 903 834 2011

Default Option -/+7% 12 437 905 (870 653) (870 653) 870 653 870 653 Cash option -/+1.75% 27 052 (473) (473) 473 473

Total 12 464 957 (871 127) (871 127) 871 127 871 127

Financial AssetsARIA Investments Trust:

Financial AssetsARIA Investments Trust:


to pay benefits

Other price risk (continued)The Scheme's investment in AIT is exposed to market price risk in respect of the latter's holdings of equity securities, unit trusts and pooled superannuation trusts. As the investment in AIT is carried at net market value with changes in net market value recognised in the Statement of Changes in Net Assets, all changes in market conditions will directly affect the Scheme's net investment income.

In its capacity as trustee of AIT, the Trustee manages the market price risk arising from these investments by diversifying the portfolio in accordance with its investment strategy.

The following table illustrates the Scheme's sensitivity to a reasonably possible change in the value of its investment in AIT, based on risk exposures at reporting date. The volatility factor of 7% (2011: 7%) represents the average annual volatility in the default option unit price of the Scheme's investment in the AIT. For the Cash Option a factor of 1.4% (2011: 1.75%) has been applied representing a reasonably possible change in interest rates as a proxy for price risk of the option. Had the unit price been higher or lower throughout the reporting period by the volatility factor, and based on period end balances with all other variables held constant, the financial result would have improved/(deteriorated) as follows:

Change in price

Carrying amount

$'000

Price risk $' 000Changes

in net assets


to pay benefits






(i) Fair value measurement

Net market value measurements recognised in the Statement of Net Assets

Level 1 Level 2 Level 3 Total $'000 $'000 $'000 $'000








The Scheme's financial instruments are included in the Statement of Net Assets at net market value that approximates fair value. The net market value is determined per accounting policies disclosed in Note 3(a).

The following table provides an analysis of the Scheme's financial instruments whereby the assets and liabilities are each grouped into one of three categories based on the degree to which their method of valuation is observable.






16. RELATED PARTIES

(a) Trustee

(b)





Kim Kirsten

Key Management Personnel

Commonwealth Superannuation Corporation (CSC) was the Trustee throughout the reporting period. The Trustee's name was changed from Australian Reward Investment Alliance (ARIA) on 1 July 2011. No fees were charged by CSC for acting as Trustee of the Scheme during the reporting period.

In addition to the Directors listed above, the following executives of the Trustee had authority and responsibility for planning, directing and controlling the activities of the Scheme throughout the year ended 30 June 2012:

Corporate Secretary Acting Chief Executive Officer until 13 September 2011, appointed Chief Executive Officer 14 September 2011










2012 2011$ $


1 077 840 960 546


The Trustee of the Scheme, Commonwealth Superannuation Corporation, is the trustee of the following regulated superannuation schemes: Commonwealth Superannuation Scheme, the Public Sector Superannuation Scheme, the Public Sector Superannuation Accumulation Plan and the Military Superannuation and Benefits Scheme.

The aggregate compensation of the key management personnel is set out below:

Throughout the year ended 30 June 2012, the Scheme's only investment consisted of units in AIT, which was established to provide a cost-effective means of gaining exposure to a broad range of listed and unlisted securities across various asset classes.

The other investors in AIT throughout the year were the Commonwealth Superannuation Scheme and the Public Sector Superannuation Accumulation Plan. During the year, the Military Superannuation and Benefits Scheme also invested in the AIT. All investing transactions are conducted under normal industry terms and conditions.

The Scheme has not made, guaranteed or secured, directly or indirectly, any loans to key management personnel or their personally-related entities at any time during the year.

The compensation of key management personnel (including Directors) related to investment management was charged as part of general administration expenses against assets of the AIT that are referable to the Scheme.

Aggregate compensation in relation to the Scheme is a pro-rata apportionment of the overall compensation paid by the Trustee, based on the net assets of the entities under its trusteeship or actual control.





(d) Investing entities (continued)

The Scheme held the following investments in related parties at 30 June:

Net Market Value of

Investment

Net Market Value of

Investment


tax


tax 2012 2011 2012 2011

$'000 $'000 $'000 $'000




No matters have arisen since 30 June 2012 that have materially affected, or may materially affect, the operations of the Scheme, the results of those operations, or the financial position of the Scheme in future financial years.

The Trustee pays costs of and incidental to the management of the Scheme and the investment of its money from the assets of the AIT that are referable to the Scheme (Note 6(c)). No fees were charged for acting as Trustee during the year ended 30 June 2012 (2011: $nil).

The Scheme had no capital or other expenditure commitments at 30 June 2012 (2011: $nil).

In the normal course of business, requests are made by members and former members for the review of decisions relating to benefit entitlements of the Scheme which could result in additional benefits becoming payable in the future. Each request is considered on its merits prior to any benefit becoming payable. In the opinion of the Trustee, these requests do not represent a material liability on the Scheme.

There were no other contingent liabilities or contingent assets for the Scheme at 30 June 2012 (2011: $nil).



%

INFORMATION REQUIRED FOR PURPOSES OF AUSTRALIAN ACCOUNTING STANDARD AAS 25

RELATING TO THE ACTUARIAL VALUATION OF THE PUBLIC SECTOR SUPERANNUATION SCHEME

AS AT 30 JUNE 2011 Purpose of Report This statement has been prepared for the purposes of AAS 25 as at 30 June 2011 for the Public Sector Superannuation Scheme (PSS) at the request of the Commonwealth Superannuation Corporation (CSC).

This extract summarises the actuarial valuation of the Scheme as at 30 June 2011 carried out by Mercer Consulting (Australia) Pty Limited under the advice of Martin Stevenson FIAA, FIA and Darren Wickham FIAA. It has been prepared for the purposes of inclusion with the Scheme Accounts and is in a form that complies with the Australian Accounting Standard AAS 25.

Accrued and Vested Benefits AAS 25 requires the disclosure of Accrued and Vested benefits at the reporting date.

For the purpose of AAS 25 the following amounts have been determined:

Reporting Date Accrued Benefits $billion

Vested Benefits $billion

30 June 2011 45.6 54.1

Accrued Benefits have been determined as the present value of expected future benefit payments that arise from membership of the PSS up to the reporting date.

Vested Benefits are benefits which the PSS would be required to pay if all members were to voluntarily leave employment on the reporting date and elected the benefit option which is most costly to the Scheme.

The method and assumptions used to determine Accrued and Vested Benefits are summarised in Attachment 1 to this statement.

Accrued Benefits have been calculated in a manner consistent with Guidance Note 454 and Professional Standard 402 issued by the Institute of Actuaries of Australia.



AAS 25 PUBLIC SECTOR SUPERANNUATION SCHEME AS AT 30 JUNE 2011 Page 2

MERCER

j:\frc\clients\dofa\2011 long term cost report\aas25 at 30 june 2011 pss v3.doc

Review of Actuarial Report AAS 25 also requires the notes to the Scheme accounts to include a summary of the most recent actuarial report of the PSS. Attachment 2 to this Statement provides a summary of the report on the Long Term Cost of the PSS and the Commonwealth Superannuation Scheme (CSS) carried out as at 30 June 2011. The summary contains the information required under AAS 25.

Martin A Stevenson Fellow of the Institute of Actuaries of Australia Partner, Mercer Consulting (Australia) Pty Limited

13 July 2012




MERCER



Method of Determining Accrued and Vested Benefits Accrued Benefits were determined as the present value of expected future benefit payments that arise from membership of the PSS up to the date of calculation. The expected future benefits were determined allowing for future salary growth to the date of exit.

The approach used to apportion benefits between past and future membership involves an “actual accrual” or “Projected Unit Credit Method” (or PUCM) approach.

This involves determining the total benefit using:

Accrued Multiple Final Average Salary (calculated using membership

to the date of the valuation) × at future date

The method used to apportion benefits between past and future membership is unchanged from that used in the previous review as at 30 June 2008.

The past membership component of the member-financed lump sum benefits and of the productivity superannuation benefits is taken to be the accumulated amount of contributions and interest at the calculation date.

Vested Benefits are determined as the value of benefits which the PSS would be required to pay if all members were to voluntarily leave employment on the reporting date and elect the benefit option which is most costly to the PSS.

Assumptions Used to Determine Accrued Benefits The assumptions used to determine Accrued Benefits are the same as those used for the most recent actuarial investigation into the long term cost of the PSS and the CSS as at 30 June 2011. Therefore, the Accrued Benefit calculated for AAS 25 purposes is the same as that calculated for the purposes of the Long Term Cost Report.

The financial assumptions used to determine the Accrued Benefits along with those used for the recent actuarial investigation are shown in the table below:

Item AAS 25 Long Term Cost ReportCPI Increases 2.5% per annum 2.5% per annum

Investment Return / Discount Rate 6.0% per annum 6.0% per annum

General Salary Increases 4.0% per annum 4.0% per annum




MERCER


A summary of the other assumptions used is contained in Appendix B of the Long Term Cost Report of the PSS and the CSS.




MERCER



Summary of the Long Term Cost Report The latest actuarial investigation into the long term cost of the PSS and CSS was conducted at 30 June 2011.

This attachment provides a summary of that report.

Membership Data Data relating to the membership of the PSS and the CSS was provided by ComSuper, the Schemes’ administrator, on behalf of CSC, for the purposes of this investigation.

The table below summarises the total membership of the PSS as at 30 June 2011.

PSS MEMBERSHIP as at 30 JUNE 2011 Male Females Total

Number of Contributors 47,638 65,586 113,224 Salaries $4,267m $5,190m $9,457m Number of Preserved Members 42,043 61,049 103,092

Number of Age Pensioners 9,961 10,325 20,286

Number of Invalidity Pensioners 1,150 1,432 2,582

Number of Reversionary Pensioners 329 724 1,053

AssumptionsThe key economic assumptions adopted for this review are shown in the table below. The assumptions adopted for the previous review (which was carried out as at 30 June 2008) are shown for comparison purposes.

Item Assumption 2008 Investigation CPI Increases 2.5% per annum 2.5% per annum

Investment Returns / Discount Rate



General Salary Increases






MERCER


The key economic assumptions are consistent between the 2008 investigation and the 2011 investigation.

The demographic assumptions at 2011 have been revised from those at 2008 to more closely reflect actual experience of the Scheme. These are set out in Appendix B of the Long Term Cost Report.

Of the changes in assumptions, the most significant were:

• An increase in the assumed rate of PSS member contributions; • An increase in the take-up of pension benefits by PSS members; and • The extension of retirement assumptions to age 75.

Value of Assets The PSS and CSS are partly funded to the extent that real assets are held in respect of member contributions and productivity superannuation contributions. The realisable value of the PSS assets as at 30 June 2011 was $12.5 billion.

Accrued Benefits The value of accrued benefits as at 30 June 2011 was $45.6 billion.

Accrued Benefits were determined as the present value of expected future benefit payments that arise from membership of the PSS up to the date of calculation. The expected future benefits were determined allowing for future salary growth to the date of exit. Benefits were apportioned between past and future membership by multiplying the accrued multiple at the calculation date by the Final Average Salary at the date of exit.

The past membership component of the member-financed lump sum benefits and of productivity superannuation benefits is taken to be the accumulated amount of contributions and interest at the calculation date. An amount of $12.5 billion has been included in the Accrued Benefit in respect of the member financed benefits and productivity superannuation benefits.

The Accrued Benefit also includes an amount of $13.2 billion in respect of pensioners and preserved beneficiaries of the PSS.

Vested Benefits Vested Benefits of the PSS were not calculated as a part of the Long Term Cost Report as at 30 June 2011 but were calculated separately.

The estimated value of the Vested Benefits of the PSS as at 30 June 2011 is $54.1 billion.


MERCER


Vested Benefits are determined as the value of benefits which the PSS would be required to pay if all members were to voluntarily leave employment on the reporting date and elected the benefit option which is most costly to the PSS.

Financial Condition The PSS is a partially funded scheme. As a consequence, the value of Accrued Benefits and Vested Benefits is significantly more than the realisable value of Scheme assets at the same date.

However, the PSS operates under an underlying guarantee from the Commonwealth Government. Further, the investigation shows that the projected combined Commonwealth costs in respect of the PSS and CSS reduce as a percentage of projected Gross Domestic Product over the next 40 years.

Martin A Stevenson Fellow of the Institute of Actuaries of Australia Partner, Mercer Consulting (Australia) Pty Ltd

13 July 2012



PSSap financial statements12

12 PSSap financial statements


12PSSap financial statements






Public Sector Superannuation Accumulation PlanOperating StatementFor the Year Ended 30 June 2012

Note 2012 2011$'000 $'000

Net investment revenueInterest 5 657 6 091 Changes in net market values 5c 58 501 145 937 Total investment revenue 64 158 152 028

Contribution revenueMember contributions 6a 12 380 12 263 Employer contributions 6a 809 001 705 929 Transfers from other funds 6a 148 739 149 032 Government co-contributions 6a 1 261 1 484 Total contributions revenue 971 381 868 708

Other revenueInsurance proceeds 10 677 12 832 Other revenue 27 -Total other revenue 10 704 12 832

Total revenue 1 046 243 1 033 568

ExpensesInsurance expense 28 340 23 135 Superannuation contributions (surcharge) tax - 3 Other administration expenses 2 -Total expenses 28 342 23 138

1 017 901 1 010 430

Income tax expense 7a 120 047 104 598

897 854 905 832


Benefits accrued as a result of operations before income tax

Benefits accrued as a result of operations after income tax



Public Sector Superannuation Accumulation PlanStatement of Financial PositionAs at 30 June 2012

Note 2012 2011$'000 $'000

InvestmentsPooled superannuation trust 3 529 416 2 762 802 Total investments 3 529 416 2 762 802

Other assetsCash and cash equivalents 8a 142 666 120 450 Sundry debtors 9 415 521 Deferred tax asset 7c 264 240 Total other assets 143 345 121 211

Total assets 3 672 761 2 884 013

LiabilitiesBenefits payable 2 649 3 428 Sundry payables 10 2 260 2 068 Current tax liabilities 7b 120 072 104 414 Total liabilities 124 981 109 910


Represented by:

Liability for accrued benefitsAllocated to members' accounts 3 544 406 2 754 175 Not allocated to members' accounts 12a 3 374 19 928 Total liability for accrued benefits 12b 3 547 780 2 774 103




Public Sector Superannuation Accumulation PlanStatement of Cash FlowsFor the Year Ended 30 June 2012

Note 2012 2011$'000 $'000

Cash flows from operating activitiesContributions received -

Employer 809 079 705 929 Member 12 380 12 263 Transfers from other funds 148 739 149 032 Government co-contributions 1 261 1 484

Interest received 5 703 6 015 Other revenue received 30 -Insurance proceeds 10 738 12 824 Insurance expense paid (28 232) (24 590)Superannuation contributions (surcharge) tax paid - (3)Benefits paid (124 955) (86 435)GST Paid - 36 Income tax paid (104 413) (87 400)Net cash inflows from operating activities 8b 730 330 689 155

Cash flows from investing activities

124 004 52 441 Purchases of units in pooled superannuation trusts (832 118) (722 999)Net cash outflows from investing activities (708 114) (670 558)

Net increase in cash held 22 216 18 597

Cash at the beginning of the financial year 120 450 101 853

Cash at the end of the financial year 8a 142 666 120 450


Proceeds from sales of units in pooled superannuation trusts




1. DESCRIPTION OF THE PLAN

2. BASIS OF PREPARATION

(a) Statement of compliance

The Public Sector Superannuation Accumulation Plan ('Plan') is a defined contribution scheme constituted by Trust Deed dated 29 June 2005 under the 'Superannuation Act 2005' and is domiciled in Australia. The Trustee of the Plan is the Commonwealth Superannuation Corporation (CSC) (ABN 48 882 817 243). The Trustee's name was changed on 1 July 2011 from Australian Reward Investment Alliance (ARIA).

Administration of member records, contributions receipts and benefit payments is conducted on behalf of the Trustee by ComSuper. ComSuper has contracted Pillar Administration ('Pillar') to perform these duties from 11 February 2012.

The principal place of business and registered office of the Plan is Level 8, 121 Marcus Clarke Street, Canberra ACT 2601.

The financial report of the Plan is a general purpose financial report which has been prepared in accordance with Schedule 1 of the Finance Minister's Orders (Financial statements for reporting periods ending on or after 1 July 2011) , Accounting Standards and Interpretations, the Superannuation Industry (Supervision) Act 1993 and provisions of the Trust Deed. Accounting Standards include Australian Accounting Standards and International Financial Reporting Standards ('IFRS') to the extent that they are not inconsistent with AAS 25 'Financial Reporting by Superannuation Plans' .


The financial statements of the Plan were authorised for issue by the Directors on the 14th September 2012.









year ending





1 January 2013 30 June 2014AASB 2012-5 'Amendments to Australian Accounting Standards arising from Annual Improvements 2009-2011 Cycle

AASB 1053 'Application of Tiers of Australian Accounting Standards' and AASB 2010-2 'Amendments to Australian Accounting Standards arising from Reduced Disclosure Requirements'

AASB 9 'Financial Instruments', AASB 2009-11 'Consequential amendments to other accounting standards' resulting from its issue and AASB 2010-7 'Amendments to Australian Accounting Standards arising from AASB 9 (December 2010)'

Australian Accounting Standards require disclosure of Australian Accounting Standards that have not been applied for standards that have been issued but are not yet effective. The Trustee expects to adopt the Standards disclosed below upon their application date to the extent that they are not inconsistent with AAS 25 'Financial Reporting by Superannuation Plans' . It is anticipated that adoption of the Standards will not have a material financial impact on the financial report of the Plan. The following Standards expected to be relevant to the Plan were on issue but not yet effective at the date of authorisation of the financial report.

AASB 13 'Fair Value Measurement' and 2011-8 'Amendments to Australian Accounting Standards arising from AASB 13'AASB 2012-2 'Amendments to Australian Accounting Standards - Offsetting Financial Assets and Financial Liabilities (AASB 7 & AASB 132)' and AASB 2012-3 'Amendments to Australian Accounting Standards - Offsetting Financial Assets and Financial Liabilities (AASB 132)'








1 January 2011


(c) Use of judgements and estimates



The financial statements are presented in Australian dollars, which is the functional currency of the Plan.


The following new and revised Standards and Interpretations have been adopted in these financial statements. The adoption has not had any significant impact on the amounts reported in these financial statements but may affect the accounting for future transactions or arrangements.








(a) Assets


(i)

(ii)

(b) Cash and Cash Equivalents


The Plan does not undertake transactions denominated in foreign currencies.


Assets are included in the Statement of Financial Position at net market value as at reporting date and movements in the net market value of assets are recognised in the Operating Statement in the periods in which they occur. Net market value of investments includes a deduction for selling costs which would be expected to be incurred if the investments were sold.

Financial assets (being investments in a pooled superannuation trust, cash at bank and sundry debtors) are recognised on the date the Plan becomes a party to the contractual provisions of the asset. Financial assets are recognised using trade date accounting. From this date, any gains and losses from changes in net market value are recorded.


Units in a pooled superannuation trust are valued at the redemption price at close of business on the last business day of the reporting period as notified by the manager of the trust, reflecting the net market value of the underlying investments.

Sundry debtors are recognised at the amounts receivable. All amounts are unsecured and are subject to normal credit terms.

Cash comprises cash at bank and is used to transact contributions, transfers to and from other funds, benefit payments and tax liabilities.





(d) Payables

Benefits payable

Sundry payables

(e) Derivatives

(f) Revenue

Investment revenue

Contribution revenue

Other revenue

The Plan does not directly enter into derivative financial instruments.

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the entity and the revenue can be reliably measured. The following recognition criteria relate to the different revenues the Fund has recognised:

Sundry payables represent liabilities for goods and services provided to the Plan during the financial period and which are unpaid at reporting date. All amounts are unsecured. Creditors are subject to normal credit terms.

Payables (being benefits payable and sundry payables) are recognised at their nominal value which is equivalent to net market value.

Benefits payable to a member are recognised where a valid withdrawal notice has been received from the employer sponsor, and approved by the Plan administrator ('Pillar'), but payment has not been made by reporting date.



Employer and member contributions, transfers from other funds and superannuation co-contributions from the Commonwealth Government are recognised when cash is received.

Insurance claim amounts on a group life policy and compensation payments from the administrator are recognised on a cash basis.





(g) Expenses

(h) Insurance Premiums


(j) Income Tax

Current tax

Expenses are recognised on an accruals basis and, if not paid at reporting date, are reflected in the Operating Statement as an accrual or payable depending upon whether or not the expense has been billed.

Amounts paid or payable in respect of the surcharge tax are recognised as an expense of the Plan. The expense (and any corresponding liability) is brought to account in the period in which the assessments are received by CSC and are properly payable by the Plan. All amounts paid are allocated back against the member account to which the surcharge applies.

No estimate has been made for the balance of any tax payable in respect of surchargeable contributions received by the Plan during the year on transfer of member entitlements from other superannuation funds as the Trustee is unable to determine the amount until receipt of applicable assessments in the following period.

The superannuation surcharge was abolished with effect from 1 July 2005 by the passing of the Superannuation Laws Amendment (Abolition of Surcharge) Act 2005 . The Plan commenced on 1 July 2005, therefore surcharge assessments received by PSSap relate to surchargeable contributions transferred in from other funds.

Income tax on benefits accrued as a result of operations for the year comprises current and deferred tax. Income tax is recognised in the Operating Statement except to the extent that it relates to items recognised directly in members' funds.

Current tax is calculated by reference to the amount of income taxes payable or recoverable in respect of the taxable profit or loss for the period. It is calculated using tax rates and tax laws that have been enacted or substantively enacted by reporting date. Current tax for the current period is recognised as a liability (or asset) to the extent that it is unpaid (or refundable).

Death and total & permanent disability insurance premiums are charged to member accounts on a monthly basis and then remitted to the life insurer in arrears.





(j) Income Tax (continued)

Deferred tax


Deferred tax is accounted for using the comprehensive balance sheet liability method in respect of temporary differences arising from the carrying amounts of assets and liabilities in the financial statements and the corresponding tax base of those items.

Current and deferred tax is recognised as an expense or benefit in the Operating Statement.


Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period(s) when the asset and liability giving rise to them are realised or settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by reporting date. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Plan expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.

Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Plan intends to settle its current tax assets on a net basis.








$'000 $'000

3 529 416 2 762 802 3 529 416 2 762 802

5. CHANGES IN NET MARKET VALUE OF INVESTMENTS2012 2011$'000 $'000


Pooled superannuation trust - ARIA Investments Trust 59 665 144 342


Pooled superannuation trust - ARIA Investments Trust (1 164) 1 595


The net amount of GST recoverable from, or payable to, the ATO is included as an asset or liability in the Statement of Financial Position.

Revenues, expenses and assets are recognised net of the amount of goods and services tax ('GST') recoverable from the Australian Taxation Office ('ATO') as a reduced input tax credit. Where the amount of GST incurred is not recoverable from the ATO, it is recognised as part of the cost of acquisition of an asset or as part of an expense item.

Pooled superannuation trust - ARIA Investments Trust





(a) Contributions



Transferring superannuation from other funds

Spouse Contributions


(b) Benefits paid

2012 2011$'000 $'000

Benefits paid and payable 124 177 88 387 Total 124 177 88 387

Benefits paid by the Plan during the year are as follows:

Where a member meets a condition of release and a valid application is received, the benefit is paid to the beneficiary from the Plan.

Employers contribute at least 15.4% (2011: 15.4%) of employees superannuation salary to the Plan, subject to superannuation law.

Members may make voluntary contributions to the Plan in the form of personal contributions (after tax). Alternatively, employers may make salary sacrifice contributions (before tax) to the Plan on behalf of members.

Money invested in other superannuation funds can be rolled over to the Plan.

Additional contributions can be made by a spouse on behalf of a member of the Plan.

For the financial year ended 30 June 2012, the Commonwealth Government contributes $1.00 for every $1.00 of eligible personal after-tax member contributions paid to the Plan up to a maximum of $1 000 per member for each financial year. The co-contribution rate was the same for the 2011 financial year.





(c) Costs of Administration

Expenses met by the AIT and referable to the Plan are as follows:

2012 2011$'000 $'000

InvestmentInvestment advisors 541 454 Investment managers 4 419 3 291 Custodian 828 472 Other 296 92 Total direct investment expenses 6 084 4 309



Plan administration costs met by sponsoring employers are as follows:

2012 2011$'000 $'000

Trustee costs 996 889 ComSuper costs 9 301 7 776 Total 10 297 8 665

Costs of and incidental to the management of the Plan and the investment of its money are charged against the assets of ARIA Investments Trust ('AIT') that are referable to the Plan. Transactions in respect of these costs have been brought to account in the financial statements of AIT. The costs of member administration are met by ComSuper.

In accordance with the ComSuper Act 2011 , ComSuper provides administrative services to the Trustee in relation to the Plan. ComSuper has contracted Pillar Administration to perform these services. The expenses of ComSuper are met by government appropriation and a share of administrative fees paid by employing agencies. The remaining share of administrative fees is paid to the Trustee to fund its costs other than those incurred in managing and investing the Plan assets. Transactions in respect of the receipt of these fees and the costs of administration have been brought to account in the financial statements of the Trustee and ComSuper.




7. INCOME TAX

(a) Income tax recognised in Operating Statement2012 2011$'000 $'000

Tax expense comprises:Current tax expense 120 071 104 414

(24) 230

- (46)Total tax expense 120 047 104 598

1 017 901 1 010 430

Income tax expense calculated at 15% 152 685 151 564

Group life insurance proceeds (1 602) (1 925)Investment revenue already taxed (8 775) (21 889)

(22 150) (22 895)Superannuation contributions (surcharge) tax - (1)Death benefit increase (Anti-Detriment) (111) (210)Under/(over) provision for income tax in previous year - (46)Total tax expense 120 047 104 598

Member contributions, government co-contributions and transfers from other superannuation funds

The prima facie income tax expense on the benefits accrued as a result of operations before income tax reconciles to the income tax expense in the financial statements as follows:

Income tax in the Operating Statement represents the tax on the benefits accrued as a result of operations before income tax, adjusted for non-taxable and non-deductible amounts.

The tax effect of timing differences, which occur where items are allowed for income tax purposes in a period different from that in which they are recognised in the financial statements, is included in the deferred tax asset at current taxation rates.

The tax rate used in the reconciliation below is the superannuation tax rate of 15% payable by Australian superannuation funds on taxable profits under Australian tax law. There has been no change in the superannuation tax rate when compared with the previous financial year.


Deferred tax income relating to the origination and reversal of temporary differences

Benefits accrued as a result of operations before income tax

Adjustments recognised in current year in relation to current tax of prior year




7. INCOME TAX (continued)2012 2011$'000 $'000

(b) Current tax balances


120 072 104 414

(c) Deferred tax balances

Deferred tax asset:Temporary differences 264 240

264 240



Charged to income

Acquisition / (disposal)

Closing balance

$'000 $'000 $'000 $'000Gross deferred tax assets:Temporary differences 240 24 - 264

240 24 - 264


Charged to income

Acquisition / (disposal)

Closing balance

$'000 $'000 $'000 $'000Gross deferred tax assets:Temporary differences 470 (230) - 240

470 (230) - 240




8. CASH FLOW INFORMATION2012 2011$'000 $'000

(a) Reconciliation of Cash

Cash at bank 142 666 120 450

(b)

897 854 905 832 Less: Benefits paid and payable (124 176) (88 387)

(58 501) (145 937)Add back:(Increase)/decrease in sundry debtors 106 (48)(Increase)/decrease in deferred tax asset (24) 230 Increase/(decrease) in benefits payable (779) 1 952 Increase/(decrease) in sundry payables 192 (1 455)Increase/(decrease) in current tax liabilities 15 658 16 968 Net cash inflows from operating activities 730 330 689 155

9. SUNDRY DEBTORS2012 2011$'000 $'000

Interest receivable 415 461 Insurance receivable - 60

415 521

For the purposes of the Statement of Cash Flows, cash represents cash at bank. Cash at the end of the reporting period as shown in the Statement of Cash Flows is reconciled to the related items in the Statement of Financial Position as follows:

Reconciliation of Benefits Accrued as a Result of Operations after Income Tax to Net Cash Inflows from Operating Activities


Increase in net market value of investments




10. SUNDRY PAYABLES2012 2011$'000 $'000

Insurance premiums payable 2 176 2 068 Employer contributions refundable 78 -Other payables 6 -

2 260 2 068



2012 2011$ $

Financial statements and regulatory returns 91 080 70 400 8 580 7 535

44 000 -Total 143 660 77 935 Administration transitionCombined Risk Management Strategy and Plan

The audits of the financial statements and regulatory returns were provided by the Australian National Audit Office. The audit fees for these and the audit of the combined Risk Management Strategy and Plan ('RMSP') will be charged against assets of ARIA Investments Trust that are referable to the Plan.

Deloitte Touche Tohmatsu are contracted by the ANAO to provide audit services on its behalf. Fees for those services are included above.

No other services were provided by the Australian National Audit Office or Deloitte Touche Tohmatsu to the Plan during the reporting period.

An assessment relating to the administrator transition process was provided by the Australian National Audit Office (ANAO) and fees for those services are included above.





2012 2011$'000 $'000

(a) Funds Not Allocated to Members' Accounts

4 330 866 Change in net market value of investments (13 319) 3 753 Bank interest 17 633 12 056 Other (5 270) 3 253

3 374 19 928

(b) Changes in the Liability for Accrued Benefits

Liability for accrued benefits at beginning of the year 2 774 103 1 956 658

Add:

897 854 905 832 Less:Benefits and transfers paid and payable (124 177) (88 387)Net change 773 677 817 445

Liability for accrued benefits at the end of the year 3 547 780 2 774 103

The liability for accrued benefits is the Plan's present obligation to pay benefits to members and beneficiaries and has been calculated as the difference between the total assets and total liabilities as at year-end.

Employer contributions (net of contributions tax) and member transfers received prior to year-end but not allocated at balance date

Funds not allocated to members' accounts at the end of the year





13. GUARANTEED BENEFITS

14. VESTED BENEFITS

The vested benefits amount is made up of:

2012 2011$'000 $'000

Members' account balances at 30 June 3 544 406 2 754 175

5 123 1 567

(794) (702)Vested benefits 3 548 736 2 755 040


At 30 June 2012 the value of vested benefits exceeds the net assets available to pay benefits due to the financial statements incorporating 30 June 2012 valuations received at a later time. This difference is temporary as the valuations are reflected in member unit prices after the end of financial year.

No guarantees have been made in respect of any part of the liability for accrued benefits.

Less accrued contributions tax on refunds / unallocated contributions

Vested benefits are benefits which are not conditional upon continued membership of the Plan (or any factor other than resignation from the Plan) and include benefits which members were entitled to receive had they terminated their Plan membership as at the balance date.

Plus contributions (refundable) allocated after balance date










The Investments of the Plan (other than cash held for managing contribution receipts, insurance expenses, benefit payments and tax payments) comprise units in ARIA Investments Trust ('AIT'). AIT is a pooled superannuation trust which is also governed by the Trustee. This type of investment has been determined by the Trustee to be appropriate for the Plan and is in accordance with the Plan's published investment strategy. The Trustee applies strategies to manage risk relating to the investment activities of the AIT. The investments of AIT are managed on behalf of the Trustee by specialist sector fund managers who are required to invest the assets in accordance with contractual investment mandates.


The RSE license of the Trustee of the Plan requires the Trustee to maintain a balance of at least $100 000 at all times in an administration reserve account. This is required to be maintained in cash or cash equivalents. The Trustee was in compliance with this requirement throughout the year.

The financial assets and liabilities of the Plan are recognised at net market value as at the reporting date. Net market value approximates fair value less costs of realisation of investments. The cost of realisation of investments is minimal and therefore net market value that is carrying value approximates fair value. Changes in net market value are recognised in the Operating Statement.






(f) Credit risk

The Plan is exposed to a variety of financial risks as a result of its activities. These risks include market risk (including currency risk, fair value interest rate risk and price risk), credit risk, liquidity risk and cash flow interest rate risk. The Plan's risk management and investment policies, approved by the Trustee, seek to minimise the potential adverse effects of these risks on the Plan's financial performance. These policies may include the use of financial derivative instruments.

The Trustee ensures that there is an effective risk management control framework in place for the Plan. Consistent with regulatory requirements, the Trustee has developed, implemented and maintains a combined Risk Management Framework to identify the policies, procedures, processes and controls that comprise its risk management and control systems for the Plan and for the Plan's investments through the AIT. The overall investment strategy of the Plan is set out in the Trustee's approved investment policies and the Derivatives Securities Policy which address the investment strategy and objectives and risk mitigation strategies including risk mitigation relating to the use of derivatives.

The Plan's investments are managed on behalf of the Trustee by specialist external investment managers who invest their respective fund allocation in accordance with the terms of a written investment mandate or disclosure document. The Trustee has determined that the appointment of these managers is appropriate for the Plan and is in accordance with its investment strategy.

The Trustee's internal investment team monitors and manages the financial risks relating to the Plan's investments. Derivative Risk Statements set out the strict parameters for the Trustee's investment managers authorised to use derivatives. In essence, derivatives cannot be used to raise the level of risk above the level it would otherwise have been, and derivatives cannot be used to leverage the investments.

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Plan. In its capacity as trustee of AIT, the Trustee has adopted a policy of spreading the aggregate value of transactions across approved creditworthy counterparties as a means of mitigating the risk of financial loss. The Plan's exposure to its counterparties are continuously monitored by the Trustee.






2012 2011$'000 $'000

Investments3 529 416 2 762 802

Other financial assetsCash and cash equivalents 142 666 120 450 Sundry debtors 415 521 Total financial assets 3 672 497 2 883 773

(g) Liquidity risk

Pooled Superannuation Trust - ARIA Investments Trust


There has been no change to the Plan's exposure to credit risk or the manner in which it manages and measures that risk since the 2011 reporting period.

Liquidity risk is the risk that the Plan will encounter difficulty in either realising assets or otherwise raising sufficient funds to meet its financial liabilities and/or member benefit payments.

The Trustee's approach to managing liquidity is to ensure that the Plan will always have sufficient liquidity to meet its liabilities and member withdrawals. The Plan allows members to withdraw benefits, and it is therefore exposed to the liquidity risk of meeting member withdrawals at any time. The Plan has a high level of net inward cash flows through new contributions which provide capacity to manage liquidity risk. The Trustee undertakes forecasting and scenario testing of the cashflow requirements of the Plan to ensure timely access to sufficient cash and actively-traded, highly-liquid investments to meet anticipated funding requirements.


The credit risk on the Plan's directly held cash and cash equivalents and interest receivable is limited because the counterparty is the Reserve Bank of Australia.






(h) Market risk

Foreign currency risk

The Plan does not undertake any transactions in foreign currency and is therefore not directly exposed to foreign currency risk. The AIT enters into forward foreign exchange contracts to hedge into Australian dollars some of the currency exposure arising from its investments denominated in developed markets foreign currencies. These contracts neutralise some of the gains and losses from currency fluctuation. A small part of the investments of AIT, relating to emerging markets, may remain unhedged due to lack of suitable currency instruments for hedging.

Foreign currency risk is the risk that the net market value of future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates.


All financial liabilities (being benefits payable and sundry payables) are expected to be settled within 3 months of reporting date (2011: within 3 months). At 30 June 2012 the Plan's total exposure to liquidity risk was $3.549 billion relating to vested benefits (2011: $2.755 billion).

There has been no change to the Plan's exposure to liquidity risk or the management and measurement of that risk during the reporting period.

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: foreign exchange risk, interest rate risk and other market price risk. The policies and procedures put in place to mitigate the exposure to market risk are detailed in the Trustee's investment policies and the Risk Management Framework.

There has been no change to the Plan's exposure to market risk or the manner in which it manages and measures the risk since the 2011 reporting period.






Interest rate risk

Benefits accrued


to pay benefits

Benefits accrued


to pay benefits

2012Cash and cash equivalents 142 666 (1 997) (1 997) 1 997 1 997

2011Cash and cash equivalents 120 450 (2 108) (2 108) 2 108 2 108

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

Other price risk

Interest rate risk $' 000Carrying amount

$'000

In the Trustee's opinion, the sensitivity analysis at reporting date approximates the direct interest rate exposures of the Plan during the financial year.

-1.75% +1.75%


The Plan is directly exposed to interest rate risk on cash and cash equivalents held with the Reserve Bank of Australia to meet benefits, taxation and insurance costs. All holdings at 30 June 2012 and 30 June 2011 had a maturity profile of less than one month.

The following table illustrates the Plan's sensitivity to a 1.4% p.a. increase or decrease in interest rates (2011: 1.75%), based on cash balances directly held at reporting date. This represents an assessment of the reasonably possible change in interest rates as at that date. Had interest rates been lower or higher by 1.4% at reporting date, and all other variables were held constant, the financial result would have improved/(deteriorated) as demonstrated:

-1.40% +1.40%

The Plan is indirectly exposed to interest rate risk through its investments in AIT. The Trustee manages interest rate risk through its investment strategy including diversification of asset allocation and the use of a diversity of specialist investment sector managers.






2012Balanced -/+4% 42 216 (1 689) (1 689) 1 689 1 689 Aggressive -/+11% 85 608 (9 417) (9 417) 9 417 9 417 Australian Shares -/+19% 45 719 (8 687) (8 687) 8 687 8 687 Cash -/+1.4% 90 656 (1 269) (1 269) 1 269 1 269 Conservative -/+3% 41 375 (1 241) (1 241) 1 241 1 241

-/+16% 5 833 (933) (933) 933 933

-/+15% 4 360 (654) (654) 654 654

Bonds Fixed Interest -/+4% 13 640 (546) (546) 546 546 Property -/+4% 22 803 (912) (912) 912 912 Sustainable -/+18% 9 651 (1 737) (1 737) 1 737 1 737 Trustee Choice -/+7% 3 167 555 (221 729) (221 729) 221 729 221 729


International Shares HedgedInternational Shares Unhedged

Carrying amount

$'000


Benefits accrued

Change in price


The Plan's investment in AIT is exposed to market price risk in respect of the latter's holdings of equity securities, unit trusts and pooled superannuation trusts. As the investment in AIT is carried at net market value with changes in net market value recognised in the Operating Statement, all changes in market conditions will directly affect the Plan's net investment income. In its capacity as trustee of AIT, the Trustee manages the market price risk arising from these investments by diversifying the portfolio in accordance with its investment strategy.

The following table illustrates the Plan's sensitivity to a reasonably possible change in the value of its investment in AIT, based on risk exposures at reporting date with the exception of the cash option. The volatility factors represent the average annual historical volatility in the investment option unit prices. For the Cash Option a factor of 1.4% (2011: 1.75%) has been applied representing a reasonably possible change in interest rates as a proxy for price risk of the option. Had the unit price been higher or lower at the reporting date by the volatility factor, and all other variables were held constant, the financial result would have improved/ (deteriorated) as follows:

Net assets

available to pay

benefits

Net assets

available to pay

benefits

Benefits accrued

Price risk $' 000Financial Assets







2011Balanced -/+4% 29 763 (1191) (1191) 1 191 1 191 Aggressive -/+12% 74 587 (8 950) (8 950) 8 950 8 950 Australian Shares -/+19% 44 787 (8 510) (8 510) 8 510 8 510 Cash -/+1.75% 46 732 (818) (818) 818 818 Conservative -/+3% 18 337 (550) (550) 550 550

-/+17% 5 208 (885) (885) 885 885

-/+16% 3 511 (562) (562) 562 562

Bonds Fixed Interest -/+3% 6 577 (197) (197) 197 197 Property -/+4% 13 560 (542) (542) 542 542 Sustainable -/+18% 9 864 (1 776) (1 776) 1 776 1 776 Trustee Choice -/+7% 2 509 874 (175 691) (175 691) 175 691 175 691


Benefits accrued

Net assets

available to pay

benefits

Benefits accrued

Net assets

available to pay

benefits


In the Trustee's opinion, the sensitivity analysis at reporting date is representative of the other market price exposures during the financial year.

Change in price

Carrying amount

$'000

Price risk $' 000Financial Assets

International Shares HedgedInternational Shares Unhedged





(i) Fair value measurements

Net market value measurements recognised in the Statement of Financial Position

Level 1 Level 2 Level 3 Total$'000 $'000 $'000 $'000








The Plan's financial instruments are included in the Statement of Financial Position at net market value that approximates fair value. The net market value is determined per accounting policies in Note 3(a).

The following table provides an analysis of the Plan's financial instruments whereby the assets and liabilities are each grouped into one of three categories based on the degree to which their method of valuation is observable.






16. RELATED PARTIES

(a) Trustee

(b)





Kim Kirsten

Commonwealth Superannuation Corporation (CSC) was the Trustee throughout the reporting period. The Trustee's name changed from Australian Reward Investment Alliance (ARIA) on 1 July 2011. No fees were charged by CSC for acting as Trustee of the Plan during the reporting period.

In addition to the Directors listed above, the following executives of the Trustee had authority and responsibility for planning, directing and controlling the activities of the Plan throughout the year ended 30 June 2012:

Key Management Personnel



Corporate Secretary Acting Chief Executive Officer until 13 September 2011, appointed Chief Executive Officer 14 September 2011








2012 2011$ $


268 033 190 325


Aggregate compensation in relation to the Plan is a pro-rata apportionment of the overall compensation paid by the Trustee, based on the net assets of the entities under its trusteeship or actual control.

The aggregate compensation of the key management personnel in relation to the Plan is set out below:

The compensation of key management personnel (including Directors) related to investment management for the year ended 30 June 2012 was charged as part of general administration expenses against assets of the ARIA Investments Trust.

The Trustee of the Plan, Commonwealth Superannuation Corporation, is the trustee of the following regulated superannuation schemes: Commonwealth Superannuation Scheme, the Public Sector Superannuation Scheme, the Public Sector Superannuation Accumulation Plan and the Military Superannuation and Benefits Scheme.

The Plan has not made, guaranteed or secured, directly or indirectly, any loans to key management personnel or their personally-related entities at any time during the year.

Throughout the year ended 30 June 2012, the Plan's only investment consisted of units in AIT, which was established to provide a cost-effective means of gaining exposure to a broad range of listed and unlisted securities across various asset classes.

The other investors in AIT throughout the year were the Public Sector Superannuation Scheme and the Commonwealth Superannuation Scheme. During the year, the Military Superannuation and Benefits Scheme also invested in the AIT. All investing transactions are conducted under normal industry terms and conditions.

PSSap financial statements



(d) Investments (continued)

The Plan held the following investments in related parties at 30 June:

Net Market Value of

Investment

Net Market Value of

Investment


tax


tax 2012 2011 2012 2011

$'000 $'000 $'000 $'000



The Plan had no capital or other expenditure commitments at 30 June 2012 (2011: $nil).


In the normal course of business, requests are made by members and former members for the review of decisions relating to benefit entitlements of the Plan which could result in additional benefits becoming payable in the future. Each request is considered on its merits prior to any benefit becoming payable. In the opinion of the Trustee, these requests do not represent a material liability on the Plan.

There were no other contingent liabilities or contingent assets as at the reporting date (2011: $nil).

No matters have arisen since 30 June 2012 that have materially affected, or may materially affect, the operations of the Plan, the results of those operations, or the financial position of the Plan in future financial years.

The Trustee recovers costs of and incidental to the management of the Plan and the investment of its money from the assets of the ARIA Investments Trust that are referable to the Plan (Note 6(c)). No fees were charged for acting as Trustee during the year ended 30 June 2012 (2011 - $nil).



CSC financial statements13

13CSC financial statements

CSC Annual Report to Parliament 2011-12 CSS, PSS, PSSap, 1922 Scheme & PNG Scheme 181

13 CSC financial statements




STATEMENT BY THE CHAIRMAN AND CHIEF EXECUTIVE

In our opinion, the attached financial statements for the year ended 30 June 2012 are based on properly maintained financial records and give a true and fair view of the matters required by the Finance Minister's Orders made under the Commonwealth Authorities and Companies Act 1997, as amended.

In our opinion, at the date of this statement, there are reasonable grounds to believe that the Authority will be able to pay its debts as and when they become due and payable.

This statement is made in accordance with a resolution of the directors.

Signed………. Signed……….

Tony Hyams Peter Carrigy-Ryan Chairman Chief Executive Officer

14 September 2012 14 September 2012

1



STATEMENT OF COMPREHENSIVE INCOME for the year ended 30 June 2012

2012 2011Notes $'000 $'000

EXPENSESEmployee benefits 3A 12,366 9,862 Supplier 3B 8,403 5,597 Depreciation and amortisation 3C 879 563 Write-down and impairment of assets 3D - 39 Total expenses 21,648 16,061

LESS: OWN-SOURCE INCOMEOwn-source revenueSale of goods and rendering of services 4A 21,757 16,163 Interest 4B 118 -Other 4C 3 31 Total own-source revenue 21,878 16,194

Net contribution by services 230 133

Surplus attributable to the Australian Government 230 133

Total comprehensive income attributable to the Australian Government 230 133

The above statement should be read in conjunction with the accompanying notes.

2



2012 2011Notes $’000 $’000

ASSETSFinancial AssetsCash and cash equivalents 5A 4,772 1,992 Trade and other receivables 5B 1,150 1,396 Total financial assets 5,922 3,388

Non-Financial AssetsProperty, plant and equipment 6A 3,758 3,509 Intangibles 6C 393 304 Total non-financial assets 4,151 3,813

Total assets 10,073 7,201

LIABILITIESPayablesSuppliers 7A (71) (69)Other 7B (2,827) (2,146)Total payables (2,898) (2,215)

ProvisionsEmployee provisions 8A (1,887) (1,149)Other 8B (240) -Total provisions (2,127) (1,149)

Total liabilities (5,025) (3,364)Net assets 5,048 3,837

EQUITYContributed equity 2,324 1,343 Reserves 511 511 Retained surplus 2,213 1,983 Total entity 5,048 3,837

Total equity 5,048 3,837


BALANCE SHEET as at 30 June 2012

3



STATEMENT OF CHANGES IN EQUITY

2012 2011 2012 2011 2012 2011 2012 2011$’000 $'000 $’000 $’000 $’000 $’000 $’000 $’000

Opening balanceBalance carried forward from previous period 1,983 1,850 511 511 1,343 1,343 3,837 3,704 Adjusted opening balance 1,983 1,850 511 511 1,343 1,343 3,837 3,704

Comprehensive incomeOther comprehensive income - - - - - - - -Surplus for the period 230 133 - - - - 230 133 Total comprehensive income 230 133 - - - - 230 133

Transactions with ownersDistributions to ownersReturns of capital:

Restructuring - - - - - - - -Other - - - - - - - -

Contributions by ownersEquity injection - - - - - - - -Restructuring - - - - 981 - 981 -Other - - - - - - - -Sub-total transactions with owners - - - - 981 - 981 -Closing balance as at 30 June 2,213 1,983 511 511 2,324 1,343 5,048 3,837


for the year ended 30 June 2012

reserveAsset revaluation

Total equityContributed

equity/capitalRetained earnings

4



2012 2011Notes $’000 $’000

OPERATING ACTIVITIESCash receivedGoods and services 21,867 15,572 Interest 118 -Other 2 -Total cash received 21,987 15,572

Cash usedEmployees (11,874) (9,644)Suppliers (7,250) (5,397)Total cash used (19,124) (15,041)Net cash from operating activities 10 2,863 531

INVESTING ACTIVITIESCash usedPurchase of property, plant and equipment (782) (2,173)Purchase of intangibles (218) (198)Total cash used (1,000) (2,371)Net cash used by investing activities (1,000) (2,371)

FINANCING ACTIVITIESCash receivedContributed equity from restructuring 917 -Total cash received 917 -

Net increase (decrease) in cash held 2,780 (1,840)Cash and cash equivalents at the beginning of the reporting period 1,992 3,832 Cash and cash equivalents at the end of the reporting period 5A 4,772 1,992


CASH FLOW STATEMENT for Not-For-Profit Reporting Entitiesfor the year ended 30 June 2012

5



SCHEDULE OF COMMITMENTS

2012 2011BY TYPE $’000 $’000Commitments receivableSublease rental income 1,023 -Net GST recoverable on commitments 823 783 Total commitments receivable 1,846 783

Commitments payableOther commitmentsOperating leases (9,049) (8,611)Net GST payable on commitments (93) -Total other commitments (9,142) (8,611)Net commitments by type (7,296) (7,828)

BY MATURITYCommitments receivableOperating lease incomeOne year or less 312 93 From one to five years 1,363 490 Over five years 171 200 Total operating lease income 1,846 783

Commitments payableOperating lease commitmentsOne year or less (1,754) (1,019)From one to five years (5,512) (5,390)Over five years (1,876) (2,202)Total operating lease commitments (9,142) (8,611)

Net commitments by maturity (7,296) (7,828)

Note: Operating lease commitment will be met by the ARIA Investments Trust from 1st July 2012.

as at 30 June 2012

6



In addition, CSC's activities are funded through charges to the ARIA Investments Trust to recover the cost of administering and managing the investment of the schemes.

CSC is structured to meet the following outcome:Outcome 1: Retirement benefits for past, present and future Australian Government employees and members of the Australian Defence Force through investment and administration of their superannuation funds and schemes.

The continued existence of the entity in its present form and with its present programs is dependent on Government policy and on continuing funding by Parliament for the entity's administration and programs.

Note 1: Summary of Significant Accounting Policies

1.1 Objective of the entityThe objective of Commonwealth Superannuation Corporation ('CSC') (ABN 48 882 817 243) is to provide retirement benefits for past, present and future Australian Government employees and members of the Australian Defence Force, as trustee of their superannuation funds and schemes.

On 1 July 2011 the name of CSC was changed from Australian Reward Investment Alliance (ARIA) and CSC became responsible for the administration of Military Superannuation and Benefits Scheme ('MSBS'), the Defence Force Retirement and Death Benefits Scheme ('DFRDB'), the Defence Force Retirement Benefits Scheme ('DFRB'), the Defence Force (Superannuation) (Productivity Benefit) Scheme ('DFSPB'), the Papua New Guinea Scheme ('PNG') and the 1922 Scheme in addition to the Public Sector Superannuation Scheme ('PSS'), the Commonwealth Superannuation Scheme ('CSS') and the Public Sector Superannuation Accumulation Plan ('PSSap') for which ARIA was trustee (collectively, the Schemes).

The Schemes invest solely through the ARIA Investments Trust - a pooled superannuation trust under CSC's trusteeship - which facilitates access to a broad range of underlying securities across various asset classes on an efficient and cost-effective basis.

CSC's sole source of income is from external sources, and therefore no appropriations are included.

CSC's activities are funded in part through a share of the scheme administration charges collected by ComSuper from employers participating in PSS, CSS and PSSap, and in part through negotiated administration charges collected by ComSuper from the Department of Defence. Additional funding may be provided by government to meet specific administration requirements.

Asset class Fair value measured at:Land Market selling priceBuildings exc. Leasehold improvements Market selling priceLeasehold improvements Depreciated replacement costPlant & equipment Market Selling PriceHeritage and cultural assets Market Selling Price

7



Adoption of New Australian Accounting Standard Requirements

No accounting standard has been adopted earlier than the application date as stated in the standard.

Unless alternative treatment is specifically required by an accounting standard, income and expenses are recognised in the Statement of Comprehensive Income when and only when the flow, consumption or loss of economic benefits has occurred and can be reliably measured.

1.3 Significant Accounting Judgements and EstimatesIn the process of applying the accounting policies listed in this note, the entity has made the following judgement that has the most significant impact on the amounts recorded in the financial statements: the fair value of Property, Plant and Equipment has been taken to be the market value of similar assets as determined by an independent valuer.

No accounting assumptions and estimates have been identified that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next accounting period.

1.4 New Australian Accounting Standards

The financial statements are general purpose financial statements and are required by clause 1(b) of Schedule 1 to the Commonwealth Authorities and Companies Act 1997.

a) Finance Minister’s Orders (FMOs) for reporting periods ending on or after 1 July 2011; and b) Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (AASB) that apply for the reporting period.

The financial statements have been prepared on an accruals basis and in accordance with the historical cost convention, except for certain assets and liabilities at fair value. Except where stated, no allowance is made for the effect of changing prices on the results or the financial position.

The financial statements are presented in Australian dollars and values are rounded to the nearest thousand dollars unless otherwise specified.

Unless an alternative treatment is specifically required by an accounting standard or the FMOs, assets and liabilities are recognised in the balance sheet when and only when it is probable that future economic benefits will flow to the entity or a future sacrifice of economic benefits will be required and the amounts of the assets or liabilities can be reliably measured. However, assets and liabilities arising under executor contracts are not recognised unless required by an accounting standard. Liabilities and assets that are unrecognised are reported in the schedule of commitments.

The financial statements have been prepared in accordance with:

1.2 Basis of Preparation of the Financial Statements

Note 1: Summary of Significant Accounting Policies (continued)

8



Effective Application DateAASB 124 'Related Party Disclosures (2009)', AASB 2009-12 'Amendments to Australian Accounting Standards'


Effective Application DateAASB 9 'Financial Instruments' and AASB 2009-11 consequential amendments to other accounting standards resulting from its issue and AASB 2010-7 'Amendments to Australian Accounting Standards arising from AASB 9 (December 2010)'


AASB 2011-3 Amendments to Australian Accounting Standards - Orderly Adoption of Changes to the ABS GFS Manual and Related Amendments (AASB 1049)

1 July 2012 30 June 2013

AASB 13 'Fair Value Measurement' and AASB 2011-8 Amendments to Australian Accounting Standards arising from AASB 13


AASB 2011-9 Amendments to Australian Accounting Standards - Presentation of Items of Other Comprehensive Income

1 July 2012 30 June 2013

AASB 119 Employee Benefits: AASB 2011-10 Amendments to Australian Accounting Standards arising from AASB 119 (2011) & AASB 2011-11 Amendments to AASB 119 (September 2011) arising from Reduced Disclosure Requirements


AASB 2011-13 Amendments to Australian Accounting Standards - Improvements to AASB 1049

1 July 2012 30 June 2013

AASB 2012-2 Amendments to Australian Accounting Standards - Disclosures - Offsetting Financial Assets and Financial Liabilities (AASB 7)


AASB 2012-3 Amendments to Australian Accounting Standards - Offsetting Financial Assets and Financial Liabilities ( AASB 132)


AASB 2012-5 Amendments to Australian Accounting Standards arising from Annual Improvements 2009-2011 Cycle


Other new, amending or revised standards and interpretations that were issued prior to the sign-off date and are applicable to the future reporting period are not expected to have a future financial impact on the entity.

The following amending standards that were issued prior to the sign-off date, are applicable to the current reporting period and do not have a future financial impact on the entity.

Future Australian Accounting Standard Requirements

The following new standards, revised standards, interpretations or amending standards were issued by the Australian Accounting Standards Board prior to the sign-off date, which are expected to have a financial impact on the entity for future reporting periods:


9



Sale of Assets

Gains from disposal of assets are recognised when control of the asset has passed to the buyer.

1.7 Transactions with the Government as OwnerEquity Injections

Amounts that are designated as equity injections for a year are recognised directly in contributed equity in that year.

Restructuring of Administrative Arrangments

Net assets received from or relinquished to another Government entity under a restructuring of administative arrangements are adjusted at their book value directly against contributed equity.

1.6 GainsResources Received Free of Charge

Resources received free of charge are recognised as gains when, and only when, a fair value can be reliably determined and the services would have been purchased if they had not been donated. Use of those resources is recognised as an expense.

Resources received free of charge are recorded as either revenue or gains depending on their nature.

Contributions of assets at no cost of acquisition or for nominal consideration are recognised as gains at their fair value when the asset qualifies for recognition, unless received from another Government entity as a consequence of a restructuring of administrative arrangements (Refer to Note 1.7).

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the entity and the revenue can be reliably measured. Where revenue is received but not earned, it shall be shown as the liability 'unearned revenue'.

Interest revenue is recognised using the effective interest method as set out in AASB 139 Financial Instruments: Recognition and Measurement.

Revenue from rendering of services

CSC receives a share of administration fees collected by ComSuper from participating employer contributors to the Schemes. Any revenue not received by balance date is reflected in the balance sheet as a receivable.

Revenue from interest

1.5 Revenue

CSC may receive supplementary funding from government from time to time to meet specific administration needs.

Revenue from Government


10



The CSS and PSS are defined benefit schemes for Australian Government employees.

The liability for defined benefits is recognised in the financial statements of the Australian Government and is settled by the Australian Government in due course. This liability is reported by the Department of Finance and Deregulation as an administered item. CSC makes employer contributions to the defined benefit schemes at rates determined by an actuary to be sufficient to meet the current cost to the Government and accounts for the contributions as if they were contributions to defined contribution plans.

The PSSap is a defined contribution scheme for Australian Government employees.

Any liability for superannuation recognised as at 30 June represents outstanding contributions for the final fortnight of the year.

The liability for employee benefits includes provision for annual leave and long service leave. No provision has been made for sick leave as all sick leave is non-vesting and the average sick leave taken in future years by employees of the entity is estimated to be less than the annual entitlement for sick leave.

The leave liabilities are calculated on the basis of employees’ remuneration at the estimated salary rates that will be applied at the time the leave is taken, including the entity’s employer superannuation contribution rates to the extent that the leave is likely to be taken during service rather than paid out on termination.

The liability for long service leave has been determined by reference to the work of an actuary as at 30 June 2012. The estimate of the present value of the liability takes into account attrition rates and pay increases through promotion and inflation.Superannuation

CSC's staff are members of various superannuation schemes including CSS, PSS and PSSap.

1.8 Employee BenefitsLiabilities for ‘short-term employee benefits’ (as defined in AASB 119 Employee Benefits ) and termination benefits due within twelve months of the end of reporting period are measured at their nominal amounts.

The nominal amount is calculated with regard to the rates expected to be paid on settlement of the liability.

Other long-term employee benefits are measured as the net total of the present value of the defined benefit obligation at the end of the reporting period minus the fair value at the end of the reporting period of plan assets (if any) out of which the obligations are to be settled directly.

Leave


11



Trade receivables, loans and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as ‘loans and receivables’. Loans and receivables are measured at amortised cost using the effective interest method less impairment. Interest is recognised by applying the effective interest rate.

Impairment of Financial Assets

Financial assets are assessed for impairment at the end of each reporting period.

Financial assets held at amortised cost - if there is objective evidence that an impairment loss has been incurred for loans and receivables or held to maturity investments held at amortised cost, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the asset’s original effective interest rate. The carrying amount is reduced by way of an allowance account. The loss is recognised in the Statement of Comprehensive Income.

CSC classifies its financial assets as loans and receivables.

Effective Interest Method

The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset, or, where appropriate, a shorter period.

Income is recognised on an effective interest rate basis except for financial assets that are recognised at fair value through profit or loss.

Loans and Receivables

A distinction is made between finance leases and operating leases. Finance leases effectively transfer from the lessor to the lessee substantially all the risks and rewards incidental to ownership of leased assets. An operating lease is a lease that is not a finance lease. In operating leases, the lessor effectively retains substantially all such risks and benefits.

Operating lease payments are expensed on a straight-line basis which is representative of the pattern of benefits derived from the leased assets.

1.10 Cash

a) cash on hand; andb) demand deposits in bank accounts with an original maturity of 3 months or less that are readily convertible to known amounts of cash and subject to insignificant risk of changes in value.

1.11 Financial Assets

Cash is recognised at its nominal amount. Cash and cash equivalents includes:

1.9 Leases


12



The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period.

Supplier and other payables are recognised at amortised cost. Liabilities are recognised to the extent that the goods or services have been received (and irrespective of having been invoiced).

1.13 Acquisition of AssetsAssets are recorded at cost on acquisition except as stated below. The cost of acquisition includes the fair value of assets transferred in exchange and liabilities undertaken. Financial assets are initially measured at their fair value plus transaction costs where appropriate.

Assets acquired at no cost, or for nominal consideration, are initially recognised as assets and income at their fair value at the date of acquisition, unless acquired as a consequence of restructuring of administrative arrangements. In the latter case, assets are initially recognised as contributions by owners at the amounts at which they were recognised in the transferor’s accounts immediately prior to the restructuring.

1.12 Financial LiabilitiesFinancial liabilities are classified as other financial liabilities. Financial liabilities are recognised and derecognised upon ‘trade date’.Other Financial Liabilities

Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. These liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis.


1.14 Property, Plant and Equipment Asset Recognition Threshold

Purchases of property, plant and equipment are recognised initially at cost in the balance sheet, except for purchases costing less than $2,000, which are expensed in the year of acquisition (other than where they form part of a group of similar items which are significant in total).

The initial cost of an asset includes an estimate of the cost of dismantling and removing the item and restoring the site on which it is located. This is particularly relevant to ‘make good’ provisions in property lease taken up by the entity where there exists an obligation to restore the property to its original condition. These costs are included in the value of the entity's leasehold improvement with a corresponding provision for the ‘make good’ recognised.

13



Fair values for each class of asset are determined as shown below: Asset class Leasehold improvements Infrastructure, plant and equipment

2012 2011Leasehold improvements Lease term Lease termInfrastructure, plant and equipment 3 to 10 years 3 to 10 years

Depreciation rates (useful lives), residual values and methods are reviewed at each reporting date and necessary adjustments are recognised in the current, or current and future reporting periods, as appropriate.

Depreciation rates applying to each class of depreciable asset are based on the following useful lives:

Fair value measurementDepreciated replacement costMarket selling price

Following initial recognition at cost, property, plant and equipment are carried at fair value less subsequent accumulated depreciation and accumulated impairment losses. Valuations are conducted with sufficient frequency to ensure that the carrying amounts of assets do not differ materially from the assets’ fair values as at the reporting date. The regularity of independent valuations depends upon the volatility of movements in market values for the relevant assets. Revaluation adjustments are made on a class basis. Any revaluation increment is credited to equity under the heading of asset revaluation reserve except to the extent that it reverses a previous revaluation decrement of the same asset class that was previously recognised in the surplus/deficit. Revaluation decrements for a class of assets are recognised directly in the surplus/deficit except to the extent that they reverse a previous revaluation increment for that class.

Revaluations

Any accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the asset and the asset restated to the revalued amount.

Depreciation

Depreciable property, plant and equipment assets are written-off to their estimated residual values over their estimated useful lives to CSC using, in all cases, the straight-line method of depreciation.


14



CSC is exempt from all forms of taxation except Fringe Benefits Tax (FBT) and the Goods and Services Tax (GST).

Revenues, expenses and assets are recognised net of GST except: a) where the amount of GST incurred is not recoverable from the Australian Taxation Office; and b) for receivables and payables.

1.15 IntangiblesCSC's intangibles comprise of purchased software for internal use. These assets are carried at cost less accumulated amortisation and accumulated impairment losses.

Software is amortised on a straight-line basis over its anticipated useful life. The useful life of the entity's software assets is 4 years (2010-11: 4 years).

All software assets were assessed for indications of impairment as at 30 June 2012.

1.16 Taxation

Impairment

All assets were assessed for impairment at 30 June 2012. Where indications of impairment exist, the asset’s recoverable amount is estimated and an impairment adjustment made if the asset’s recoverable amount is less than its carrying amount.

The recoverable amount of an asset is the higher of its fair value less costs to sell and its value in use. Value in use is the present value of the future cash flows expected to be derived from the asset. Where the future economic benefit of an asset is not primarily dependent on the asset’s ability to generate future cash flows, and the asset would be replaced if the entity were deprived of the asset, its value in use is taken to be its depreciated replacement cost.

Derecognition

An item of property, plant and equipment is derecognised upon disposal or when no further future economic benefits are expected from its use or disposal.


15



Note 2: Events After the Reporting Period

No matters have occurred since 30 June 2012 that have materially affected, or may materially affect, the operations of CSC, the results of those operations, or the financial position of CSC in the future financial years.

16



Note 3: Expenses

2012 2011 $’000 $’000

Note 3A: Employee BenefitsWages and salaries (10,567) (8,717)Superannuation:

Defined contribution plans (822) (618)Defined benefit plans (455) (466)

Leave and other entitlements (522) (61)Total employee benefits (12,366) (9,862)

Note 3B: SuppliersGoods and servicesConsultants (1,279) (610)Contractor (4,894) (3,601)Other (559) (332)Total goods and services (6,732) (4,543)

Goods and services are made up of:Provision of goods – external parties (378) (226)Rendering of services – related entities (583) (388)Rendering of services – external parties (5,771) (3,929)Total goods and services (6,732) (4,543)

Other supplier expensesOperating lease rentals – external parties:

Minimum lease payments (1,601) (1,029)Workers compensation expenses (70) (25)Total other supplier expenses (1,671) (1,054)Total supplier expenses (8,403) (5,597)

Note 3C: Depreciation and AmortisationDepreciation:

Leasehold Improvement (483) (328)Infrastructure, plant & equipment (267) (190)

Total depreciation (750) (518)

Amortisation:Intangibles (129) (45)

Total amortisation (129) (45)Total depreciation and amortisation (879) (563)

Note 3D: Write-Down and Impairment of AssetsAsset write-downs and impairments from:

Other -carrying value of assets disposed - (39)Total write-down and impairment of assets - (39)

17



Note 4: Income

2012 2011 OWN-SOURCE REVENUE $’000 $’000

Note 4A: Sale of Goods and Rendering of ServicesRendering of services - related entities 6,839 4,301 Rendering of services - external parties 14,918 11,862 Total sale of goods and rendering of services 21,757 16,163

Note 4B: InterestDeposits 118 -Total interest 118 -

Note 4C: Other RevenueGain on Sale of Assets 3 31 Total other revenue 3 31

18



Note 5: Financial Assets

2012 2011 $’000 $’000

Note 5A: Cash and Cash EquivalentsSpecial Accounts - 1,992 Cash on hand or on deposit 4,772 -Total cash and cash equivalents 4,772 1,992

Note 5B: Trade and Other ReceivablesGoods and Services:

Goods and services - related entities 1,150 1,303 Total receivables for goods and services 1,150 1,303

Other receivables:GST receivable from the Australian Taxation Office - 31 Accrued revenue - 62

Total other receivables - 93 Total trade and other receivables (net) 1,150 1,396

Receivables are expected to be recovered in:No more than 12 months 1,150 1,396

Total trade and other receivables (net) 1,150 1,396

Receivables are aged as follows:Not overdue 1,150 1,396

Total receivables (net) 1,150 1,396

19



Note 6: Non-Financial Assets

2012 2011 $’000 $’000

Note 6A: Property, Plant and Equipment

Gross carrying value (at fair value) 4,874 3,875 Accumulated depreciation (1,116) (366)

Total property, plant and equipment 3,758 3,509

Property, plant & equipment Total

$’000 $’000As at 1 July 2011Gross book value 3,875 3,875 Accumulated depreciation and impairment (366) (366)Net book value 1 July 2011 3,509 3,509 Additions

By purchase 782 782From acquisition of entities or operations (including restructuring)* 217 217

Depreciation expense (750) (750)Net book value 30 June 2012 3,758 3,758

Net book value as of 30 June 2012 represented by:Gross book value 4,874 4,874 Accumulated depreciation and impairment (1,116) (1,116)Net book value 30 June 2012 3,758 3,758

Note 6B: Reconciliation of the Opening and Closing Balances of Property, Plant and Equipment (2011-12)

* Property, plant and equipment with a net book value of $0.217m were acquired as a result of a merger (see Note 1.1) during the year.

20



Property, plant & equipment Total

$’000 $’000As at 1 July 2010Gross book value 3,054 3,054 Accumulated depreciation and impairment (1,161) (1,161)Net book value 1 July 2010 1,893 1,893 Additions

By purchase 2,173 2,173 Revaluations recognised in the operating result (asset) (1,161) (1,161)Revaluations recognised in the operating result (depreciation) 1,161 1,161 Depreciation expense (518) (518)Disposals:

Gross book value (191) (191)Depreciation expense 152 152

Net book value 30 June 2011 3,509 3,509

Net book value as of 30 June 2011 represented by:Gross book value 3,875 3,875 Accumulated depreciation and impairment (366) (366)Net book value 30 June 2011 3,509 3,509

2012 2011 $’000 $’000

Note 6C: IntangiblesComputer software:

Purchased 567 349 Accumulated amortisation (174) (45)

Total computer software 393 304

Note 6B (Cont'd): Reconciliation of the Opening and Closing Balances of Property, Plant and Equipment (2010-11)

No intangibles are expected to be sold or disposed of within the next 12 months.

21



Computer software

purchased Total$’000 $’000

As at 1 July 2011Gross book value 349 349Accumulated amortisation and impairment (45) (45)Net book value 1 July 2011 304 304Additions

By purchase 218 218Amortisation (129) (129)Net book value 30 June 2012 393 393

Net book value as of 30 June 2012 represented by:Gross book value 567 567Accumulated amortisation and impairment (174) (174)Net book value 30 June 2012 393 393

Computer software

purchased Total$’000 $’000

As at 1 July 2010Gross book value 181 181 Accumulated amortisation and impairment (30) (30)Net book value 1 July 2010 151 151 Additions

By purchase 198 198 Revaluations recognised in the operating result (asset) (30) (30)Revaluations recognised in the operating result (amortisation) 30 30 Amortisation (45) (45)Net book value 30 June 2011 304 304

Net book value as of 30 June 2011 represented by:Gross book value 349 349 Accumulated amortisation and impairment (45) (45)Net book value 30 June 2011 304 304

Note 6D (Cont'd): Reconciliation of the Opening and Closing Balances of Intangibles (2010-11)

Note 6D: Reconciliation of the Opening and Closing Balances of Intangibles (2011-12)

22



Note 7: Payables

2012 2011 $’000 $’000

Note 7A: SuppliersTrade creditors and accruals (71) (69)Total supplier payables (71) (69)

Supplier payables expected to be settled within 12 months:Related entities (71) (69)

Total Supplier payables expected to be settled within 12 months (71) (69)

Note 7B: Other PayablesWages and salaries (310) (328)Prepayments received/unearned income - (1,044)GST payable to ATO (609) -Other - accrued expense (996) (305)Lease incentive liability (912) (469)Total other payables (2,827) (2,146)

Total other payables are expected to be settled in:No more than 12 months (2,827) (2,146)More than 12 months - -

Total other payables (2,827) (2,146)

23



Note 8: Provisions

2012 2011 $’000 $’000

Note 8A: Employee ProvisionsLeave (1,882) (1,147)Other (5) (2)Total employee provisions (1,887) (1,149)

Employee provisions are expected to be settled in:No more than 12 months (805) (626)More than 12 months (1,082) (523)

Total employee provisions (1,887) (1,149)

Note 8B: Other ProvisionsProvision for make good (140) -Provision for surplus lease (100) -Total other provisions (240) -

Other provisions are expected to be settled in:No more than 12 months (100) -More than 12 months (140) -

Total other provisions (240) -

24



Note 9: Restructuring

2012 2011

$’000 $’000FUNCTIONS ASSUMED 1

Assets recognised 2Cash on hand or on deposit 917 -Goods and services receivable - external parties 406 -GST receivable from the Australian Taxation Office 99 -Prepayment 28 -Property, Plant and Equipment 217 -

Total assets recognised 1,667 -

Liabilities recognisedTrade creditors and accruals (1) -Wages and salaries (47) -Unearned income (25) -GST payable to ATO (78) -Other - accrued expense (325) -Employee Provisions (182) -Other Provisions (28) -

Total liabilities recognised (686) -Net assets/(liabilities) assumed for no consideration 3 981 -

2. The restructure is assumed at 1July 2012.3. In respect of functions assumed, the net book values of assets and liabilities were transferred to the entity for no consideration.

1. Functions assumed as a result of a change in responsibilities of CSC on 1 July 2011 (Note 1.1).

25



Note 10: Cash Flow Reconciliation

2012 2011 $’000 $’000

Reconciliation of cash and cash equivalents as per Balance Sheet to Cash Flow Statement

Cash and cash equivalents as per:Cash flow statement 4,772 1,992 Balance sheet 4,772 1,992 Difference - -

Reconciliation of net cost of services to net cash from operating activities:Net contribution by services 230 133

Adjustments for non-cash itemsDepreciation / amortisation 879 563 Gain on disposal of assets - 39

Changes in assets / liabilities(Increase) / decrease in receivables for goods and services 559 (378)Increase / (decrease) in prepayments received/unearned income (1,041) 48 (Increase) / decrease in GST receivable 130 (179)Decrease in accrued revenue 62 67 Increase / (decrease) in employee provisions 556 42 Increase / (decrease) in supplier payables 1 (98)Increase in accrued expense 366 168 Increase / (decrease) in accrued wages and salaries (65) 175 Increase in GST payable 531 8 Increase / (decrease) in lease incentive liability 443 (57)Increase / (decrease) in other provisions 212 -Net cash from operating activities 2,863 531

26



Note 11: Directors Remuneration

2012 2011 No. No.

The number of non-executive directors of the entity included in these numbers are shown below in the relevant remuneration bands:

$0 to $29,999 - 2 $30,000 to $59,999 1 3 $60,000 to $89,999 8 2 $90,000 to $119,999 1 1 $150,000 to $179,999 1 -

Total 11 8

$ $

Total remuneration received or due and receivable by directorsof the entity 930,353 452,707

27



2012 2011 $ $

Short-term employee benefits:

Salary (2,053,195) (2,054,891)Annual leave accrued (62,870) 13,127 Performance bonuses (480,480) (649,667)Motor vehicle and other allowance (368) (1,795)

Total short-term employee benefits (2,596,913) (2,693,226)

Post-employment benefits:Superannuation (260,759) (236,605)

Total post-employment benefits (260,759) (236,605)

Other long-term benefits:Long service leave (137,022) (32,805)

Total other long-term benefits (137,022) (32,805)

Termination benefits (123,103) -

Total employee benefits (3,117,797) (2,962,636)

Notes:

Note 12: Senior Executive Remuneration

Note 12A: Senior Executive Remuneration

1. Note 12A was prepared on an accrual basis (so the performance bonus expenses disclosed above differ from the cash 'Bonus paid' in Note 12B).

2. Note 12A excludes acting arrangements and part-year service where remuneration expensed was less than $150,000.

28



Average annual reportable remuneration¹

Senior Executives

Reportable salary²

Contributed superannuation³

Reportable allowances⁴

Bonus paid⁵ Total

No. $ $ $ $Total remuneration (including part-time arrangements):

$210,000 to $239,999 4 147,658 36,487 - 26,046 210,191 $240,000 to $269,999 2 194,447 34,247 368 33,322 262,384 $540,000 to $569,999 1 379,421 108,899 - 58,262 546,582 $840,000 to $869,999 1 550,647 25,000 - 277,437 853,084

Total 8

Average annual reportable remuneration¹

Senior Executives

Reportable salary²



Bonus paid⁵ Total

No. $ $ $ $Total remuneration (including part-time arrangements):

$150,000 to $179,999 1 130,358 29,512 - 11,929 171,800 $210,000 to $239,999 2 152,256 43,667 - 29,723 225,648 $240,000 to $269,999 1 174,947 39,058 - 35,097 249,103 $510,000 to $539,999 1 344,086 108,294 441 82,166 534,988 $630,000 to $659,999 1 467,032 9,227 1,354 165,000 642,614 $840,000 to $869,999 1 532,859 25,012 - 296,029 853,901

Total 7Notes:

6. Various salary sacrifice arrangements were available to senior executives including superannuation, motor vehicle and expense payment fringe benefits. Salary sacrifice benefits are reported in the 'reportable salary' column, excluding salary sacrificed superannuation, which is reported in the 'contributed superannuation' column.

1. This table reports substantive senior executives who received remuneration during the reporting period. Each row is an averaged figure based on headcount for individuals in the band.2. 'Reportable salary' includes the following: a) gross payments (less any bonuses paid, which are separated out and disclosed in the 'bonus paid' column); and b) reportable fringe benefits (at the net amount prior to 'grossing up' to account for tax benefits).3. The 'contributed superannuation' amount is the average actual superannuation contributions paid to senior executives in that reportable remuneration band during the reporting period, including any salary sacrificed amounts, as per the individuals' payslips.4. 'Reportable allowances' are the average actual allowances paid as per the 'total allowances' line on individuals' payment summaries.5. 'Bonus paid' represents average actual bonuses paid during the reporting period in that reportable remuneration band. The 'bonus paid' within a particular band may vary between financial years due to various factors such as individuals commencing with or leaving the entity during the financial year.

2012

2011

Note 12B: Average Annual Remuneration Packages and Bonus Paid for Substantive Senior Executives as at the end of the Reporting Period

29


212 CSC Annual Report to Parliament 2011-12 CSS, PSS, PSSap, 1922 Scheme & PNG Scheme CSC Annual Report to Parliament 2011-12 CSS, PSS, PSSap, 1922 Scheme & PNG Scheme 213 212 CSC Annual Report to Parliament 2011-12 CSS, PSS, PSSap, 1922 Scheme & PNG Scheme

Average annual reportable remuneration¹ Staff

Reportable salary²



Bonus paid⁵ Total

No. $ $ $ $ $Total remuneration (including part-time arrangements):

$180,000 to $209,999 3 161,588 28,957 - 18,777 209,322 $210,000 to $239,999 2 189,468 20,705 210 20,142 230,525 $300,000 to $329,999 2 240,511 46,601 - 35,983 323,095 $330,000 to $359,999 1 262,379 46,759 - 44,945 354,083 $390,000 to $419,999 1 319,762 42,332 - 49,271 411,365 $480,000 to $509,999 1 295,308 41,257 - 163,108 499,673

Total 10

Average annual reportable remuneration¹ Staff

Reportable salary²



Bonus paid⁵ Total

No. $ $ $ $ $Total remuneration (including part-time arrangements):

$180,000 to $209,999 1 147,235 31,182 - 31,266 209,683 $300,000 to $329,999 2 209,390 61,575 - 41,684 312,649 $390,000 to $419,999 1 230,313 99,920 - 64,720 394,953 $450,000 to $479,999 2 222,810 103,784 - 134,525 461,119 $510,000 to $539,999 1 196,123 68,209 - 265,928 530,260

Total 7Notes:

Note 12C: Other Highly Paid Staff

6. Various salary sacrifice arrangements were available to other highly paid staff including superannuation, motor vehicle and expense payment fringe benefits. Salary sacrifice benefits are reported in the 'reportable salary' column, excluding salary sacrificed superannuation, which is reported in the 'contributed superannuation' column.

2012

2011

1. This table reports staff: a) who were employed by the entity during the reporting period; b) whose reportable remuneration was $150,000 or more for the financial period; and c) were not required to be disclosed in Tables A, B or director disclosures.Each row is an averaged figure based on headcount for individuals in the band.2. 'Reportable salary' includes the following: a) gross payments (less any bonuses paid, which are separated out and disclosed in the 'bonus paid' column); and b) reportable fringe benefits (at the net amount prior to 'grossing up' to account for tax benefits).

3. The 'contributed superannuation' amount is the average actual superannuation contributions paid to senior executives in that reportable remuneration band during the reporting period, including any salary sacrificed amounts, as per the individuals' payslips.4. 'Reportable allowances' are the average actual allowances paid as per the 'total allowances' line on individuals' payment summaries.5. 'Bonus paid' represents average actual bonuses paid during the reporting period in that reportable remuneration band. The 'bonus paid' within a particular band may vary between financial years due to various factors such as individuals commencing with or leaving the entity during the financial year.

30



Note 13: Remuneration of Auditors

2012 2011 $’000 $’000

The fair value of the services provided: Financial statement audit services - free of charge - 31 Financial statement audit services 30 -

30 31

Additional audit services were provided by ANAO through Deloitte relating to the Australian Financial Services Licence to the value of $7,700 (2011: $7,095).

No other services were provided to CSC by the ANAO or Deloitte.

Financial statement audit services were provided to the entity by the Australian National Audit Office (ANAO) through its contracted service provider Deloitte Touche Tohmatsu (Deloitte). Fees for the service are as follows:

31



2012 2011 $'000 $'000

Note 14A: Categories of Financial InstrumentsFinancial AssetsLoans and receivables:

Cash and cash equivalents 4,772 1,992 Trade receivables 1,150 1,303 GST receivable from the Australian Taxation Office - 31

Carrying amount of financial assets 5,922 3,326

Financial LiabilitiesAt amortised cost:

Supplier payables (71) (69)Lease incentive liability (912) (469)GST payable to the Australian Taxation Office (609) -Accrued expenses (996) (305)Wages and salaries (310) (328)

Carrying amount of financial liabilities (2,898) (1,171)

The carrying amount of the financial assets and financial liabilities is equivalent to their fair value.

Note 14B: Net Income and Expense from Financial AssetsLoans and receivablesInterest revenue 118 -Net gain from loans and receivables 118 -

Note 14C: Credit Risk

Note 14: Financial Instruments

CSC is exposed to minimal credit risk as financial assets comprise cash at bank and trade receivables. CSC has exposure to an Australian bank of $4,771,844 at 30 June 2012 (2011: $1,991,621). The maximum exposure to credit risk is the risk that arises from potential default of a debtor. This amount is equal to the total amount of trade receivables (2012: $1,150,463 and 2011: $1,303,000). Trade receivables are usually limited to the ARIA Investment Trust and Australian Government agencies. CSC has assessed the risk of the default on payment and has determined there is no credit risk to CSC. CSC holds no collateral to mitigate against credit risk. No receivables are past due or impaired at the balance date (2011: Nil).

32



Note 14D: Liquidity Risk

The entity has no derivative financial liabilities in both the current and prior year.

Maturities for financial liabilities 2012On 1 to 2 2 to 5 > 5

demand years years years Total$'000 $'000 $'000 $'000 $'000

Supplier payables - (71) - - - (71)Lease incentive liability - (156) (213) (543) - (912)GST payable to the Australian Taxation Office - (609) - - - (609)Accrued expenses - (996) - - - (996)Wages and salaries - (310) - - - (310)

Total - (2,142) (213) (543) - (2,898)

Maturities for financial liabilities 2011On 1 to 2 2 to 5 > 5

demand years years years Total$'000 $'000 $'000 $'000 $'000

Supplier payables - (69) - - - (69)Lease incentive liability - (282) (72) (115) - (469)GST payable to the Australian Taxation Office - - - - - -Accrued expenses - (305) - - - (305)Wages and salaries - (328) - - - (328)

Total - (984) (72) (115) - (1,171)

Note 14E: Market Risk

CSC is not exposed to market risk.

within 1

$'000year

year$'000

CSC's financial liabilities are payables. The exposure to liquidity risk is based on the notion that CSC will encounter difficulty in meeting its obligations associated with financial liabilities. This is highly unlikely as CSC's cash receipts are primarily received from Australian Government agencies and the ARIA Investment Trust. CSC manages its budgeted funds to ensure it has adequate funds to meet payments as they fall due. In addition, CSC has policies in place to ensure timely payments are made when due and has no past experience of default.

within 1

33



Note 15: Assets Held in Trust

Monetary assets

2012 2011 $'000 $'000

CSSOpening balance 4 619 878 4 789 427Closing balance 4 227 634 4 619 878

PSSOpening balance 12 534 422 11 443 051Closing balance 13 021 478 12 534 422

PSSapOpening balance 2 884 013 2 049 103Closing balance 3 672 761 2 884 013

MSBSOpening balance 3 878 664 -Closing balance 4 022 194 -

Shown below are the values of gross assets held in trust by CSC in its capacity as trustee of the CSS, PSS, PSSap and MSBS.

34



2012 2011 $’000 $’000

DepartmentalExpenses 21,648 16,061 Own-source income 21,878 16,194 Net cost of/(contribution by) outcome delivery (230) (133)

2012 2011 $’000 $’000

Expenses:Employees (12,366) (9,862)Suppliers (8,403) (5,597)Depreciation and Amortisation (879) (563)Write-down and impairment of assets - (39)

Total (21,648) (16,061)

Income:Sale of goods and rendering of services 21,757 16,163 Other gains 3 31 Interest 118 -

Total 21,878 16,194

AssetsCash and cash equivalents 4,772 1,992 Trade and other receivables 1,150 1,396 Property, plant and equipment 3,758 3,509 Intangibles 393 304

Total 10,073 7,201

LiabilitiesSuppliers (71) (69)Other payables (2,827) (2,146)Employee provisions (1,887) (1,149)Other provisions (240) -

Total (5,025) (3,364)

Note 16: Reporting of Outcomes

Outcome 1

Note 16B: Major Classes of departmental Expenses, Income, Assets and Liabilities by Outcomes

CSC receives departmental funding which is to be used solely for the Outcome specified in Note 1.1.

Note 16A: Net Cost of Outcome Delivery

Outcome 1

35

appendices14 appendix a changes to legislation

appendix b CSC organisational chart

appendix c CSC functional chart

appendix d access to information

appendix e publications

appendix f CSC contact officer

appendix g list of requirements

appendix h new consultancies

appendix i advertising/research

appendix j national disability strategy

appendix k summary resource table by outcomes

appendix l glossary

14appendices


Appendix A – Changes to legislation

CSC merger legislationA legislative package comprising the Governance of Australian Government Superannuation Schemes Act 2011, ComSuper Act 2011 and the Superannuation Legislation (Consequential and Transitional Provisions) Act 2011 was passed by Parliament on 21 June 2011, which, amongst other things, consolidated the trusteeship of the main Australian Government public sector and military superannuation Schemes. As a result ARIA, the Military Superannuation and Benefits Board and the Defence Force Retirement and Death Benefits Authority were merged to form a consolidated trustee body, Commonwealth Superannuation Corporation, with effect from 1 July 2011. Various consequential amendments to the Scheme legislation have been made as a result of the trustee consolidation. Scheme rules did not change.

Governance of Australian Government Superannuation Schemes Act 2011 The Acts Interpretation Amendment Act 2011 updated cross-references to the Acts Interpretation Act 1901 in the Governance of Australian Government Superannuation Schemes Act 2011. This was due to numbering changes of certain sections of the Acts Interpretation Act 1901. This amendment had effect from 27 December 2011.

Superannuation Act 1976 (the CSS Act) The Acts Interpretation Amendment Act 2011 updated cross-references to the Acts Interpretation Act 1901 in the CSS Act. This was due to numbering changes of certain sections of the Acts Interpretation Act 1901. This amendment had effect from 27 December 2011.

The Financial Framework Legislation Amendment Act (No. 2) 2012 amended the CSS Act to deal with certain issues with drawing upon appropriations from the Consolidated Revenue Fund (CRF) to pay benefits for members of the 1922 Scheme and the CSS, to limit CSC’s power to recover incorrectly paid benefits where those benefits were directly from the CRF, and to allow for recoverable payments from the CRF to be made validly under appropriation in situations where no such valid appropriation previously existed. The amendments also provide that the CEO of ComSuper can recover those payments made from the CRF in circumstances where the obligations to recover those payments under the Financial Management and Accountability Act 1997 allow. These amendments had effect from 29 June 2012.

14appendices


Superannuation Act 1990 (the PSS Act) The Acts Interpretation Amendment Act 2011 updated cross-references to the Acts Interpretation Act 1901 in the PSS Act. This was due to numbering changes of certain sections of the Acts Interpretation Act 1901. This amendment had effect from 27 December 2011.

The Financial Framework Legislation Amendment Act (No. 2) 2012 amended the PSS Act to deal with certain issues with drawing upon appropriations from the Consolidated Revenue Fund (CRF) to pay benefits for members of the PSS, to allow for recoverable payments from the CRF to be made validly under appropriation in situations where no such valid appropriation previously existed. The amendments also provide that the CEO of ComSuper can recover those payments made from the CRF in circumstances where the obligations to recover those payments under the Financial Management and Accountability Act 1997 allow. These amendments had effect from 29 June 2012.

From 1 July 2011, the 34th and the 35th Amending Deeds to the PSS Trust Deed took effect. The 34th Amending Deed amended the Trust Deed to allow PSS members who continue in employment between ages 70 and 75 to continue to accrue employer benefits in the Scheme. The 35th Amending Deed made changes to the Trust Deed consequential to the merger legislation (see above). From 5 August 2011, the 36th Amending Deed took effect. The 36th Amending Deed amended the Trust Deed as a consequence of amendments to the Remuneration Tribunal Act 1973 relating to the determining salary for Departmental Secretaries, and updated a reference to the Public Service Act 1922 in Rule 6.4.6.

Superannuation Act 2005 (the PSSap Act) The Acts Interpretation Amendment Act 2011 updated cross-references to the Acts Interpretation Act 1901 in the PSSap Act. This was due to numbering changes of certain sections of the Acts Interpretation Act 1901. This amendment had effect from 27 December 2011.

From 1 July 2011, the 5th Amending Deed to the PSSap Trust Deed took effect. The 5th Amending Deed made changes to the Trust Deed consequential to the merger legislation (see previous page). From 16 February 2012, the 6th Amending Deed took effect. The 6th Amending Deed amended the Trust Deed as a consequence of amendments to the Remuneration Tribunal Act 1973 relating to the determination of salary for departmental secretaries.

14appendices


Appendix B – CSC organisational chart at 30 June 2012

CSC’s Executive TeamAt 30 June 2012, CSC’s Executive Team comprised the CEO and seven direct reports.

Peter Carrigy-Ryan – Chief Executive Officer Responsible for management of CSC and implementing the strategy and policies of the CSC Board

Alison Tarditi – Chief Investment Officer Responsible for management of investments, investment risk, Fund performance and ensuring the CSC Board is provided with impartial investment advice

Helen Ayres – Corporate Secretary Responsible for the Corporate Secretary function and CSC Board services

Bronwyn McNaughton – Senior Executive Legal & Risk Responsible for management of legal advice, organisational risk management, and audit and compliance programs

Leonie McCracken – Senior Executive Operations Responsible for oversight of investment operations, and treasury and tax functions including management of custody arrangements

Kevin Thompson – Senior Executive Finance & Technology Responsible for financial management, corporate finance and information technology

Christine Pearce – Senior Executive Member & Employer Services Responsible for oversight of strategies, policies and practices for member and employer services, communications and related functions

Kim Kirsten – Senior Executive HR & Business Services Responsible for human resources and business services covering office management

14appendices


Appendix C – CSC functional chartIllustration 1: CSC functional chart

CSC

Funds*

Member payments

Benefitpayments

AdministrationInvestment

CustodianInvestmentmanagers

Employer productivity

contributions

Safekeeping of assets

Transaction processing

Fund accounting

Unitpricing

Member records

Benefit information

*Benefit payments for CSS, MilitarySuper, PSS and the 1922 Scheme, DFRB Scheme, DFRDB Scheme, PNG Scheme and DFSPB are paid from the Australian Government’s Consolidated Revenue Fund.

14appendices


Appendix D – Access to information

Freedom of information

Organisation, functions and decision making powersCSC’s functions and powers are set out in section 8 of the Governance of Australian Government Superannuation Schemes Act 2011. The general functions of ComSuper, the administrator of the CSS, PSS and PSSap (under contract to Pillar), are described in the main body of this report and detailed in the ComSuper Annual Report to Parliament 2011/12.

The authority for CSC to delegate its powers and functions is contained in section 36 of the Governance of Australian Government Superannuation Schemes Act 2011.

Informal consultative arrangementsInformal arrangements exist whereby the national, state and territory branches of the Superannuated Commonwealth Officers’ Association (SCOA) and those unions whose members are covered by the CSS, PSS and PSSap may make representations relating to the general administration of the Schemes. Requests for consultation and representations relating to policy aspects of the Schemes and their underlying legislation are referred to the Superannuation Branch of the Department of Finance and Deregulation, which has responsibility for advising the Minister for Finance and Deregulation on such matters.

Categories of documentsCSC does not maintain any categories of documents that are open to public access as part of a public register or otherwise. Fact sheets that describe various aspects of the superannuation Schemes, and annual reports, are made available to the public free of charge upon request.

They are also available free of charge via the CSC website. ComSuper, and in relation to PSSap members Pillar under contract to ComSuper, keeps and maintains member records.

Facilities for accessFacilities for viewing member records or other documents are provided at the offices of ComSuper, the scheme administrator, in Canberra. Copies of publications may be obtained by writing to ComSuper. Publications may be inspected. Information about facilities for access by people with a disability can be obtained by contacting the FOI Unit at the address and telephone numbers shown under ‘Freedom of information procedures’ on the next page.

14appendices


Freedom of information proceduresMatters associated with the administration of the Freedom of Information Act 1982 (FOI Act) relating to members and their personal information are dealt with by ComSuper’s Information and Complaints Services Team for PSS and CSS members and Pillar for PSSap members.

Enquiries relating to the disclosure of information about members of the CSS and PSS under provisions of the FOI Act should be made in writing to:

Postal address: Information and Complaints Services ComSuper GPO Box 2252 Canberra ACT 2601

Phone: 02 6272 9080

Fax: 02 6272 9804

TTY: 02 6272 9827

Email: [email protected]

Enquiries relating to the disclosure of information about members of the PSSap under the provisions of the FOI Act should be made in writing to:

Postal address: Pillar Locked Bag 9300 Wollongong BC NSW 2500

Phone: 1300 725 171


Matters relating to the management and investment of the Schemes and to investment governance are dealt with by CSC. Enquiries should be addressed to CSC:

Postal address: GPO Box 1907, Canberra ACT 2601

Phone: (02) 6263 6999


14appendices


Table A1: Freedom of information requests in 2011/12

CSS PSS PSSap 1922 Scheme

PNG Scheme

Total

Total number of requests 39 42 0 0 0 81

Number fully granted 36 39 0 0 0 75

Number partially granted 1 1 0 0 0 2

Number refused 1 0 0 0 0 1

Number transferred to other agencies 1 0 0 0 0 1

Number of requests for internal review under section 15B

0 0 0 0 0 0

Number of requests for review by the Information Commissioner (part VII of the FOI Act)

0 0 0 0 0 0

FOI requests not finalised – consultation in progress

0 0 0 0 0 0

Number withdrawn 0 2 0 0 0 2

Note: This table includes both CSC and ComSuper statistics.

Agencies subject to the FOI Act are required to publish information to the public as part of the Information Publication Scheme (IPS). This requirement is in Part II of the FOI Act and has replaced the former requirement to publish a section 8 statement in an annual report. Each agency must display on its website a plan showing what information it publishes in accordance with the IPS requirements. CSC’s IPS is available at http://csc.gov.au/reports-and-information/information-publication-scheme/

14appendices


Appendix E – PublicationsCSC publishes the following communications, publications and fact sheets for the benefit of members and employers. We also provide calculators and a wide range of other tools and information for members online.

CSC annual reportCSC Annual Report to Parliament – CSS, PSS, PSSap, 1922 Scheme & PNG Scheme CSC Annual Report to Parliament – MilitarySuper CSC Annual Report to Parliament – DFRB Scheme, DFRDB Scheme & DFSPB

APS employer publications

NewslettersEmployer news – issued monthly online On the case – issued quarterly online

Quick guidesMembership eligibility Part-time members Death of a contributing member quickguide Casuals Continuous service and membership numbers How to complete departmental reports for CSS and PSS members Tax file numbers 0% member contributions in the CSS and PSS Salary reductions Transition to retirement (CSS only) Part-time members (CSS only) Commencing new members (PSSap only) Ceasing members (PSSap only) PSS members ceasing scheme membership – administration arrangements PSS members election to cease membership

Training notesPSSap training notes Employer training manual (Under review)

PSS training notes Contributions Employer productivity superannuation contributions General benefit accrual Medical status of scheme members

14appendices


Membership Part-time and casual membership Reduction in salary for superannuation Salary for superannuation Shift allowance

CSS training notes Contributions Employer productivity superannuation contributions General benefit accrual Membership Permanent part-time membership Reduction in salary for superannuation Shift allowance

Other Employer services online CSS PIP application – help sheet PSS PIP application – help sheet PSS PIP review – help sheet

CSS publications

PublicationsCSS Product Disclosure Statement

> Investment options and risk document

> Fees and other costs document

> Tax and your CSS super document

Financial Services Guide Market volatility and your super – 5 steps to guide you through CSS benefit tables Family law and splitting super

NewslettersAspire... your super update – issued online Pensioner news – issued twice a year via mail

Fact sheetsAccessing your super information online Age retirement benefits Allocation of CSS fund earnings Cash Investment Option Changing to permanent part-time Contributing to CSS Death benefits

14appendices


Early access to benefits Invalidity benefits Leave without pay Postponement of benefits Preservation of benefits Retrenchment Salary reduction and your super Super co-contributions Super contributions surcharge Tax and your CSS benefit Tax and your CSS pension Transfers in to your CSS Transition to retirement

PSS publications

PublicationsPSS Product Disclosure Statement



> Tax and your PSS super document

> Additional death and invalidity cover document

Financial Services Guide Market volatility and your super Family law and super splitting Explore... your expanded options booklet


Fact sheetsAdditional death and invalidity cover Allocation of PSS fund earnings Cash Investment Option for preserved benefit and associate members Ceasing your PSS membership Changing to part time employment Contributing to PSS Death benefits Early access for super benefits Accessing your super info online How the 1 July 2007 changes affect you in the PSS (contributor) How the 1 July 2007 changes affect you in the PSS (preserver)

14appendices


Invalidity benefits Leave without pay Maximum benefit limits Multiple PSS memberships Preservation of benefits Rolling money into the PSS Retrenchment benefits Salary reductions and your PSS super Super co-contributions Super contributions surcharge Tax and your PSS benefit Tax and your PSS pension Transition to retirement

PSSap publications

PublicationsPSSap Product Disclosure Statement



> Tax and your PSSap super document

> Insurance and your PSSap super document

Financial Services Guide Your quick guide to PSSap Market volatility and your super


Fact sheetsBeneficiary nomination Contributions to PSSap Dependants and PSSap How the changes to tax on super affect you in the PSSap Income protection claims Insurance Super co-contributions Your super salary and PSSap Tax and your PSSap super Transfers to PSSap Type of employment Withdrawing your super from PSSap

14appendices


Appendix F – CSC contact officerInformation relating to CSC and the Schemes it manages is made available on request to members of parliament and members of the public. This report has been designed to provide basic information. Requests for more detailed information should be directed to:

Web: www.csc.gov.au

Postal address: GPO Box 1907 Canberra ACT 2601

Phone: 02 6263 6999

Fax: 02 6263 6900

TTY: 02 6272 9827


14appendices


Appendix G – List of requirementsCSC has endeavoured where appropriate to comply with the ‘Requirements for Annual Reports’, although this is not a departmental report. Details of the scheme administrator’s (ComSuper and Pillar Administration) operations are provided separately in the Commissioner for Superannuation Annual Report 2011/12.

Description Requirement Page

Letter of transmittal Mandatory iii

Table of contents Mandatory v

Index Mandatory 242

Glossary Mandatory 240

Contact officer Mandatory 231

Internet home page address and internet address for report Mandatory ii

Review by Secretary

Review by departmental secretary Mandatory 5-10

Summary of significant issues and developments Suggested 2, 5-10, 37-42

Overview of department’s performance and financial results Suggested 2, 5-10, 37-45

Outlook for following year Suggested 3, 10

Significant issues and developments – portfolio If applicable, suggested

Not applicable

Departmental Overview

Role and functions Mandatory 6-7, 12-17, 223

Organisational structure Mandatory 222

Outcome and program structure Mandatory 23

Where outcome and program structures differ from PB Statements/PAES or other additional appropriation bills (other portfolio statements), details of variation and reasons for change

Mandatory Not applicable

Portfolio structure If applicable, mandatory

Not applicable

Report on performance

Review of performance during the year in relation to programs and contribution to outcomes

Mandatory 2-3, 5-10, 25-29, 31-47, 49-53, 56-57

Actual performance in relation to deliverables and KPIs set out in PB Statements/PAES or other portfolio statements

Mandatory 2-3, 5-10, 25-29, 31-47, 49-53, 56-57

Where performance targets differ from the PBS/PAES, details of both former and new targets, and reasons for the change


Narrative discussion and analysis of performance Mandatory 2-3, 5-10, 25-29, 31-47, 49-53, 56-57

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Trend information Mandatory 50-51, 57-58

Significant changes in nature of principal functions/services Suggested iv, 2, 6-7, 12, 220-221

Performance of purchaser/provider arrangements If applicable, mandatory

55-62

Factors, events or trends influencing departmental performance Suggested 6-7, 9, 37-45

Contribution of risk management in achieving objectives Suggested 21-23

Social inclusion outcomes If applicable, mandatory

Not applicable

Performance against service charter customer service standards, complaints data, and the department’s response to complaints

If applicable, mandatory

Not applicable

Discussion and analysis of the department’s financial performance Mandatory 20-21

Discussion of any significant changes from the prior year, from budget or anticipated to have a significant impact on future operations

Mandatory 3, 9-10, 37-45

Agency resource statement and summary resource tables by outcomes Mandatory 239

Management and Accountability

Corporate Governance

Agency heads are required to certify that their agency comply with the Commonwealth Fraud Control Guidelines


Statement of the main corporate governance practices in place Mandatory 21-23

Names of the senior executive and their responsibilities Suggested 222

Senior management committees and their roles Suggested –

Corporate and operational planning and associated performance reporting and review

Suggested 18-19

Approach adopted to identifying areas of significant financial or operational risk

Suggested 22

Policy and practices on the establishment and maintenance of appropriate ethical standards

Suggested 21-22

How nature and amount of remuneration for SES officers is determined Suggested 19

External Scrutiny

Significant developments in external scrutiny Mandatory 59-62

Judicial decisions and decisions of administrative tribunals Mandatory 59-61

Reports by the Auditor-General, a Parliamentary Committee or the Commonwealth Ombudsman

Mandatory 61

Management of Human Resources

Assessment of effectiveness in managing and developing human resources to achieve departmental objectives

Mandatory 19

Workforce planning, staff turnover and retention Suggested 19

Impact and features of enterprise or collective agreements, individual flexibility arrangements (IFAs), determinations, common law contracts and AWAs

Suggested Not applicable

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Training and development undertaken and its impact Suggested 18-19

Work health and safety performance Suggested 20

Productivity gains Suggested Not applicable

Statistics on staffing Mandatory 19

Enterprise or collective agreements, IFAs, determinations, common law contracts and AWAs


Performance pay Mandatory 19

Assessment of effectiveness of assets management If applicable, mandatory

Not applicable

Assessment of purchasing against core policies and principles Mandatory Not applicable

New consultancy services contracts during the year Mandatory 21

Absence of provisions in contracts allowing access by the Auditor-General


Contracts exempt from the AusTender Mandatory Not applicable

Financial Statements Mandatory 63-218

Other Mandatory Information

Work health and safety (Schedule 2, Part 4 of the Work Health and Safety Act 2011)

Mandatory 20

Advertising and market research (Section 311A of the Commonwealth Electoral Act 1918) and statement on advertising campaigns

Mandatory 237

Ecologically sustainable development and environmental performance (Section 516A of the Environment Protection and Biodiversity Conservation Act 1999)

Mandatory 21

Compliance with the agency’s obligations under the Carer Recognition Act 2010

If applicable, mandatory

Not applicable

Grant programs Mandatory –

Disability reporting – explicit and transparent reference to agency-level information available through other reporting mechanisms


Information Publication Scheme statement Mandatory 226

Correction of material errors in previous annual report If applicable, mandatory

Not applicable

List of requirements Mandatory 232-234

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Appendix H – New consultanciesCSC engages consultants where specialist skill or expertise is required or where internal resources are unavailable. Consultants are typically engaged to:

> investigate or diagnose a defined issue

> carry out defined reviews or evaluations

> provide independent advice, information or solutions to assist CSC in its decision making.

These consultancies are distinguished from other service provider contracts by the nature of the work performed, which typically involves the application of expert professional skills and the exercising of expert judgement.

CSC administration consultanciesTable A2 provides details of consultancies engaged by CSC during 2011/12 with a contract value, GST inclusive, of $10 000 or more.

Table A2: New consultancies in 2011/12

Consultant name

Description

Value $

Selection method

Principle justification

Australian Government Actuary Actuarial Services 13 895 Direct B

Exceptional People Succession Planning and Development Program Advice

19 650 Direct B

Governance Matters Pty Ltd Board Performance Evaluations

31 953 Direct B

GPS Personnel Services Superannuation Product Advice

34 730 Direct B

Strategic Renewal Consulting CSC Audit & Risk Committee Advice

15 091 Direct B

M H Carnegie & Co Pty Ltd Analysis Advice on Investment Fund

71 500 Direct B

Total new consultancies 186 819

Selection method categories

Selection methods used for consultancies are categorised as follows:

Open tender Public tenders are sought from the marketplace using national and major metropolitan newspaper advertising.

Select tender Tenders are invited from a short list of competent suppliers.

Direct sourcing Single supplier invited to bid reflecting unique qualifications or circumstances.

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Justification categories

A Need for access to the latest technology.

B Need for specialised skills.

C Need for an independent view.

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Appendix I – Advertising/researchDuring 2011/12, expenditure for advertising and market research on contracts individually more than $11 200 (inclusive of GST) amounted to $194 860 (inclusive of GST).

The following list contains details of payments, as required under section 311A of the Commonwealth Electoral Act 1918. All amounts include GST.

Table A3: Advertising and market research expenditure 2011/12

Organisation Purpose Expenditure $

Ipsos Member related research 41 520

GFK Blue Moon Research & Planning

Member related research and market research

153 340

Total 194 860

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Appendix J – National Disability StrategySince 1994, Commonwealth departments and agencies have reported on their performance as policy adviser, purchaser, employer, regulator and provider under the Commonwealth Disability Strategy. In 2007/08, reporting on the employer role was transferred to the Australian Public Service Commission’s State of the Service Report and the APS Statistical Bulletin. These reports are available at www.apsc.gov.au. From 2010/11, departments and agencies are no longer required to report on these functions.

The Commonwealth Disability Strategy has been overtaken by a new National Disability Strategy which sets out a ten year national policy framework for improving life for Australians with disability, their families and carers. A high level report to track progress for people with disability at a national level will be produced by the Standing Council on Community, Housing and Disability Services to the Council of Australian Governments and will be available at www.fahcsia.gov.au

The Social Inclusion Measurement and Reporting Strategy agreed by the Government in December 2009 will also include some reporting on disability matters in its regular ‘How Australia is Faring’ report and, if appropriate, in strategic change indicators in agency Annual Reports. More detail on social inclusion matters can be found at www.socialinclusion.gov.au

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Appendix K – Summary resource table by outcomesOutcome 1: Retirement benefits for past, present and future Australian Government employees and members of the Australian Defence Force through investment and administration of their superannuation Funds and Schemes.

Table A4: Summary resource by outcome

Budget 2011/12

$’000

Actual expenses 2011/12

$’000

Variation

$’000

Price of departmental outputs

Output Group 1.1 – Superannuation scheme governance

Revenue from other sources 24 506 21 648 2 858

Total price of Outputs 24 506 21 648 2 858

Total for Outcome 1 24 506 21 648 2 858

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Appendix L – GlossaryAAT Administrative Appeals Tribunal

AAT Act Administrative Appeals Tribunal Act 1975

ABM Accrued Benefit Multiple

ADF Australian Defence Force

AD(JR) Act Administrative Decisions (Judicial Review) Act 1977

ACTU Australian Council of Trade Unions

AFS licence Australian Financial Services licence

AGEST Australian Government Employees Superannuation Trust

APRA Australian Prudential Regulation Authority

APS Australian public service

ASFA Association of Superannuation Funds of Australia

ASIC Australian Securities and Investments Commission

ASX Australian Stock Exchange

ARIA Australian Reward Investment Alliance

CAC Act Commonwealth Authorities and Companies Act 1997

CPI Consumer Price Index

CPSU Community and Public Sector Union

CRF Australian Government Consolidated Revenue Fund

CSC Commonwealth Superannuation Corporation

CSS Commonwealth Superannuation Scheme

CSS Act Superannuation Act 1976

DFRB Scheme Defence Forces Retirement Benefits Scheme

DFRDB Scheme Defence Force Retirement and Death Benefits Scheme

DFRDB Authority Defence Force Retirement and Death Benefits Authority

DFSPB Defence Force (Superannuation) (Productivity Benefits) Scheme

ESG environmental social and corporate governance

FBT fringe benefits tax

FOI freedom of information

FOI Act Freedom of Information Act 1982

FSC Financial Services Council

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IPS Information Publication Scheme

MilitarySuper Military Superannuation and Benefits Scheme

MSB Board Military Superannuation and Benefits Board

Pillar Pillar Administration

PNG Act Papua New Guinea (Staffing Assistance) Act 1973

PNG Scheme Papua New Guinea Scheme

PSS Public Sector Superannuation Scheme

PSS Act Superannuation Act 1990

PSSap Public Sector Superannuation accumulation plan

PSSap Act Superannuation Act 2005

RAC Reconsideration Advisory Committee

RBA Reserve Bank of Australia

RSE licence Registrable Superannuation Entity licence

SCOA Superannuated Commonwealth Officers’ Association

SCT Superannuation Complaints Tribunal

SIS Act Superannuation Industry (Supervision) Act 1993

SRC Act Superannuation (Resolution of Complaints) Act 1993

UNPRI United Nations Principles for Responsible Investment

WCAG Web Content Accessibility Guidelines

WWF World Wildlife Fund

1922 Act Superannuation Act 1922

AAdministrative Appeals Tribunal 60, 218AGEST 16, 218Association of Superannuation Funds of

Australia (ASFA) 32, 61Australian Council of Trade Unions 7, 12Australian Government Employees

Superannuation Trust 13Australian Human Rights Commission 60Australian Institute of Company Directors 14Australian Maritime Safety Authority 13Australian Office of Financial Management 13Australian Prudential Regulation Authority

(APRA) 9, 19, 23, 218Australian Reward Investment Alliance (ARIA)

47Australian Securities and Investments

Commission (ASIC) 32AustralianSuper 15Ayres, Helen 200

BBenefit 57

employer 199member 61paid 198retirement 206

CCarbon Disclosure Project 21CARE Super 15Carrigy-Ryan, Peter 2, 7, 200

Centre for Investor Education 15Cole AO, Anthony (Tony) 13Cole, Tony 17Colonial First State Infrastructure and Private

Equity 15Comcare 20Commonwealth Fraud Control Guidelines 23,

211Commonwealth Ombudsman 60-61, 211Commonwealth Superannuation Corporation

(CSC) ii, iv, 12

Advertising 197, 212-213, 215Board 2, 9, 12, 18Board Committees vi, 17

APS Scheme Reconsideration Advisory Committee 17

Audit and Risk Management Committee 2, 14-17, 22-23

Defence Force Case Assessment Panel 13, 15, 17

Human Resources Committee 2, 13-14, 17-18

Military Superannuation and Benefits Scheme Reconsideration Committee 17

Breach and Compliance Policy 22Chairman iv, vi, 2-3, 7, 12-13, 15-18, 200Chief Executive Officer 2, 7, 12, 200Contact officer vii, 197, 209Directors 12, 14, 18, 21Employees vi, 2, 6-7, 18-20, 23, 28, 56, 217ESG and Proxy Voting Policies 47Financial management vi, 20, 200Financial statements iv, vii, 6, 12, 21, 26, 165Information Publication Scheme (IPS) 204Internal governance 19Investment team 32Licences 22

Australian Financial Services (AFS) 22-23Registrable Superannuation Entity (RSE)

22-23Operating Policy 9Outcomes and program structure vi, viii, 23Professional development and performance

review 18Renewal Policy 9Research vii, viii, 21, 46-47, 197, 212, 215Resources vi, 19-20, 200, 211, 213Scheme overview vi, viii, 26

Community and Public Sector Union 14, 218Complaints 55, 59, 61, 211ComSuper ii, 2, 6, 9, 17, 23, 52-53, 56, 61-62,

198-199, 202-204, 210Consolidated Revenue 26, 33, 198-199, 201, 218Consumer Price Index (CPI) 34Credit Suisse Group 13

Index

CSS i-ii, iv, vi-viii, 2, 6, 8-10, 12, 21, 26, 165, 28-29, 32-33, 35, 39-40, 42-43, 50-53, 56-62, 163, 198, 201–221, 207, 218

CSS Actuarial review vi, 28CSS administration iv, vii, 2, 6, 9, 12, 20-21,

23, 26, 28, 37, 52, 55-56, 61-62, 202-203, 205, 213, 217

CSS Cash Investment Option viii, 8, 33, 40, 43, 45, 206-207

CSS component 26-27, 32, 41CSS Default Fund viii, 6, 8, 32-33, 35, 39, 40,

42-44CSS financial statements iv, vii, 6, 12, 21, 26,

165, 96-97, 131CSS Fund vi, viii, 2, 6, 8, 23, 26-28, 32-33, 35-

40, 42-47, 198-201, 213, 218-219,CSS investment performance 2, 6-8, 10, 23,

27, 32-33, 45CSS Long Term Cost Report 28-29CSS overview vi, viii, 26, 28CSS publications ii, 197, 202, 205-207, 208

custodian 2, 9, 21, 37customer information centres 52

Dd’Abbs, Elizabeth 59Defence iv, 2, 6-7, 12-13, 15, 17, 23, 198, 217-218

Australian Defence Force 2, 6, 23, 217-218Chief of the Defence Force 7, 12-13, 15

Defence Force Retirement and Death Benefits Authority (DFRDB Authority) iv, 6

Department of Finance and Deregulation 202Department of the Prime Minister and Cabinet

15DFRB Scheme iv, 6, 12, 26, 205, 218DFRDB Scheme iv, 6, 12, 26, 201, 205, 218Dispute resolution 59

FFederal Budget vi, 10Feltham, Peter 14, 17Financial Industry Complaints Scheme 15Financial Services Council (FSC) 32Flood, Nadine 14, 17Freedom of information (FOI) viii, 61, 202-204Frontier Investment Consulting Pty Ltd 15

GGarvan Research Foundation 14Gearing, Lyn 14, 17GFK Blue Moon Research & Planning 215Global Mining Investments Limited 14Glossary vii, 210, 218Governance Matters Pty Ltd 213

HHaines, Peggy 14, 17Hall, Winsome 15, 17Hyams AM, Tony iv, 3, 7, 13, 17, 200

IIMB Limited 14Investments vi, 14, 22, 32, 36, 218

Allocating earnings vi, 46arrangements vi, 6-7, 9-10, 32, 37, 200, 202,

205, 211asset allocation viii, 32-33, 35, 38Asset class 35, 42-43Derivatives vi, 37Investment managers vi, viii, 36-37objectives vi, viii, 6, 8, 10, 12, 18, 32-34, 40,

47, 211performance iv, vi, vii, viii, 2, 6-8, 10, 12, 18-

19, 21, 23, 26-27, 32-34, 36-37, 39-41, 43-45, 55-56, 200, 210- 212, 216

structure vi, viii, 23, 32, 38, 210Investor Group on Climate Change Australia/

New Zealand 21Ipsos 215

JJP Morgan 9, 37

KKirsten, Kim 200

LLander & Rogers 14Law Council of Australia Superannuation

Committee 14

Legislation vii, 2, 6, 18, 20-23, 33, 36, 61, 197, 198-199, 202

Acts Interpretation Act 1901 198-199Acts Interpretation Amendment Act 2011 198-

199Administrative Appeals Tribunal 1975 (the

AAT Act) 60Administrative Decisions (Judicial Review) Act

1977 (the AD(JR) Act) 61Commonwealth Authorities and Companies

Act 1997 12, 20, 218ComSuper Act 2011 198Corporations Act 2001 12, 20, 23Financial Framework Legislation Amendment

Act (No. 2) 2012 198-199Financial Management and Accountability Act

1997 199Freedom of Information Act 1982 203, 218Governance of Australian Government

Superannuation Schemes Act 2011 iv, 12, 20, 198, 202

Military Superannuation and Benefits Act 1991 23

Occupational Health and Safety (Commonwealth Employment) (OH&S) Act 1991) 20

Papua New Guinea (Staffing Assistance) Act 1973 28, 219

Public Service Act 1922 199Remuneration Tribunal Act 1973 199Safety, Rehabilitation and Compensation Act

1988 20Superannuation Act 1922 (the 1922 Act) 28Superannuation Act 1976 12, 23, 198, 218Superannuation Act 1990 12, 23, 26, 199, 219Superannuation Act 2005 12, 23, 26, 199, 219Superannuation Industry (Supervision) Act

1993 12, 23, 28, 59, 219Superannuation Legislation (Consequential

and Transitional Provisions) Act 2011 198

Superannuation (Papua New Guinea) Ordinance 1951 28

Superannuation (Resolution of Complaints) Act 1993 59, 60, 219

Work Health and Safety Act 2011 20, 212

Letter of transmittal ivLife Investment and Superannuation

Association of Australia 13List of requirements vii, 210, 212

MMatheson, Mr Stevan 59McCracken, Leonie 200McCullagh, John 15, 17McNaughton, Bronwyn 200Melbourne Institute of Applied Economic and

Social Research 13members 2, 6, 8-10, 12, 18, 20,- 23, 26-29,

32-34, 37, 46-47, 49, 52-53, 56, 59, 61, 198-199, 202-203, 205, 207, 209, 217

Contributor 33, 57, 207Deferred 26, 28Pensioner 6, 58Preserved 6, 26, 27, 33, 57, 207

Mercer 13, 28MilitarySuper iv, 2, 6, 12, 21, 26, 32, 56, 201,

205, 219Fund vi, viii, 2, 6, 8, 23, 26-28, 32-33, 35-40,

42-47, 198-201, 213, 218-219Military Superannuation and Benefits Board iv,

6, 15, 198, 219Minister for Finance and Deregulation iv, 7,

12, 202MSCI All Country World (excluding Australia)

Index 34MySuper 2, 10

NNational Disability Strategy vii, 216Northern Territory Treasury Corporation 13Northern Trust Company 2, 6, 9, 37

OOther 12

1922 Scheme i-ii, iv, vi-viii, 2, 6, 10, 12, 28, 51-52, 56, 58-62, 94, 163, 198, 201, 204-205

PPapua and New Guinea Superannuation Fund

28Pearce, Christine 200Pillar Administration ii, 2, 9, 210, 219PNG Scheme i-ii, iv, vi-viii, 2, 6, 10, 12, 26, 28,

51-52, 56, 58-62, 96, 165, 201, 204-205, 219

administration 28overview 28

PSS i, ii, iv, vi-vii, viii, 2, 6, 8-10, 12, 21, 23, 96, 26-29, 32-33, 35, 39-40, 44-46, 50-53, 56-62, 165, 163, 199, 201-208, 219

PSS Accrued Benefit Multiple (ABM) 27PSS Actuarial review 28PSS administration 56PSS Cash Investment Option 33PSS component 27PSS Default Fund 33PSS financial statements vii, 97PSS Fund 207PSS investment performance 33

performance tables 44PSS Long Term Cost Report 28-29PSS overview vi, viii, 26, 28PSS publications 207

PSSap i, ii, iv, vii, viii, 2, 6, 8-10, 12, 21, 23, 96, 26, 165, 27-28, 32-35, 40, 45-46, 50, 52-53, 56-62, 94, 163, 199, 202-205, 208, 219

PSSap administration 2PSSap financial statements 131PSSap Fund 27, 32PSSap investment options viii, 33-34, 40, 46PSSap investment performance 45PSSap overview 27PSSap Trustee Choice 6, 8PSSap publications 208

Publications ii, 197, 202, 205-208

QQueensland Investment Corporation 14

RRegnan 21, 46-47Reserve Bank of Australia 219Richmond Football Club 14

SS&P/ASX 300 Accumulation Index 40-41State Super Financial Services 15Strategic Renewal Consulting 213Superannuated Commonwealth Officers’

Association (SCOA) 202Superannuation Complaints Tribunal (SCT) 59SuperRatings 6, 8Super System Review 10Szondy, Gabriel 15, 17

TTarditi, Alison 200Thompson, Kevin 200

UUBS Australian Bank Bill Index 33-34University of Melbourne 13UN Principles for Responsible Investment 21

VVertigan AC, Dr Michael John 16

WWWF Australia 13

ZZurich Australian Superannuation Pty Limited 15

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Documents

CSC Annual Report to Parliament 2011-12