Product: PSSap MySuper Balanced

Any financial product advice provided in this document is general advice only and has been prepared without taking account of your personal objectives, financial situation or needs. Before acting on any such general advice, you should consider the appropriateness of the advice, having regard to your own objectives, financial situation and needs. You may wish to consult a licensed financial advisor. Before making any decision in relation to a scheme or financial product referred to in this document, you should obtain a copy of the Product Disclosure Statement for that scheme or product. Commonwealth Superannuation Corporation (CSC) ABN: 48 882 817 243 AFSL: 238069 RSEL: L0001397 Trustee of the Public Sector Superannuation accumulation plan (PSSap) ABN: 65 127 917 725 RSE: R1004601

DeterminationBased on the above comparisons and assessments, and taking account of their broader responsibilities as Trustees, the Board have concluded that the PSSap MySuper Balanced product was promoting the financial interests of the beneficiaries during the financial year ended 30 June 2020.

Product comparison keyAbove median (above 60th percentile) Product has higher returns/less risk/lower fees and costs than peers

Below median (below 40th percentile) Product has lower returns/more risk/higher fees and costs than peers

Around median (40th-60th percentile) Product has similar returns/similar risk/similar fees and costs to peers

Primary measure

Secondary measure

Primary measure

Secondary measure

Primary measure

Secondary measure

Product assessment keyAppropriate Product is assessed to perform appropriately for our customers

Primary measure

Secondary measure

Primary measure

Secondary measure

Consider improvements Product can be improved to perform more appropriately for our customers

Product comparisons (compared to all other MySuper products)

Primary measures

Returns after fees, costs and taxes Product Comparison page 3

Level of investment risk Product Comparison page 3

Secondary measures

Fees and costs Product Comparison page 3

Product assessments (appropriateness of product to beneficiaries)

Primary measuresInvestment strategy, including level of investment risk and the return target

Product Assessment page 4

Scale of CSC’s business operations do not disadvantage beneficiaries


Insurance strategy Product Assessment page 6

Secondary measures

Options, benefits and facilities offered Product Assessment page 3

Insurance fees do not inappropriately erode retirement income


Operating costs do not inappropriately affect beneficiaries’ financial interests


Basis of fee setting is appropriate Product Assessment page 20

Product: PSSap MySuper Balanced

Outcomes AssessmentPrefaceA set of dashboards detailing the product’s standing among peers in a set of defined metrics:• Net (Investment) Returns over 1,3,5 and 10 years (subject to option start date)• Level of Investment Risk• Fees and costs

Contents• Part A – PSSap• Part B – ADF Super• Part C – CSCri TRIS• Part D – CSCri RIS

MethodologyThe methodology supporting the assessments is provided at Appendix 1

Assessment KeyAbove median (above 60th percentile) – product has higher returns/less risk/lower fees and costs than peers

Around median (40th-60th percentile) - product has similar returns/similar risk/similar fees and costs to peers

Below median (below 40th percentile) – product has lower returns/more risk/higher fees and costs than peers

Product Comparison Component

2

PART A:

PSSap Product Options

3

Assessment Commentary

Returns after fees, costs and taxes: Shorter-horizon peer underperformance in PSSap MySuper Balanced option is consistent with strategy. Portfolio risk was reduced in February 2020, as

evidence of the COVID-19 pandemic unfolded, and reversed back to a neutral stance from May/June. Our neutral position is calibrated to our implicit liability to our customers, not to peers,

and focuses on preservation of our customers’ retirement funding ratios through generation of high net real returns per unit of risk. This enables manufacture of efficient portfolios with

robust downside protection and consistently manifests in around 85%-87% upside capture of strong market returns and 40% downside avoidance in poor markets, relative to peers.

Level of Investment Risk: The PSSap MySuper Balanced option takes a measurably lower level of investment risk versus competitors in this category.

Fees and Costs: Fees and costs were higher than peers in FY19/20, reflecting our performance fee cycle. Performance fees are used to align our investment managers with our customers.

4


Returns after fees, costs and taxes: The PSSap Aggressive option has performed ahead of peers, ranking consistently in the top quartile across the time periods presented.

Level of Investment Risk: The PSSap Aggressive option takes a measurably lower level of growth-asset exposure versus competitors in this category.


5


Returns after fees, costs and taxes: The PSSap Income Focused option has consistently outperformed the median peer option across all the time periods presented.

Level of Investment Risk: The PSSap Income-Focused option has a level of growth-asset exposure slightly above the median.


6


Returns after fees, costs and taxes: The PSSap Cash option underperformed peers mainly due to our true-to-label risk taking.

Level of Investment Risk: The PSSap Cash option is a pure cash option, in accordance with APRA’s guidelines. It does not take on additional credit risk and duration risk, as some peer

options do in low rate environments.

Fees and Costs: Due to our scale, our fees and costs for the Cash option are low.

7


Returns after fees, costs and taxes: The PSSap Balanced Ancillary option has performed in the median range of our peers across the time periods presented.

Level of Investment Risk: The PSSap Balanced Ancillary option takes a measurably lower level of investment risk versus competitors in this category.

Fees and Costs: Fees and costs were higher than peers in FY19/20 reflecting our performance fee cycle. Performance fees are used to align our investment managers with our customers.

8

PART B:

ADF Super

9


Returns after fees, costs and taxes: Shorter-horizon peer underperformance in the ADF Super MySuper Balanced option is consistent with strategy. Portfolio risk was reduced in February

2020, as evidence of the COVID-19 pandemic unfolded, and reversed back to a neutral stance from May/June. Our neutral position is calibrated to our implicit liability to our customers, not

to peers, and focuses on preservation of our customers’ retirement funding ratios through generation of high net real returns per unit of risk. This enables manufacture of efficient portfolios

with robust downside protection and consistently manifests in around 85%-87% upside capture of strong market returns and 40% downside avoidance in poor markets, relative to peers.

Level of Investment Risk: The ADF Super MySuper Balanced option takes a measurably lower level of investment risk versus competitors in this category.


10


Returns after fees, costs and taxes: The ADF Super Aggressive option has performed ahead of peers, ranking in the top quartile for both time periods presented.

Level of Investment Risk: The ADF Super option takes a measurably lower level of growth-asset exposure versus competitors in this category.

Fees and Costs: Fees and costs were higher than peers in FY19/20, reflecting our performance fee cycle. Performance fees are used to align our investment managers with our customers..

11


Returns after fees, costs and taxes: The ADF Super Income Focused option has consistently outperformed the median peer option across both time periods presented.

Level of Investment Risk: The ADF Super Income-Focused option has a level of growth-asset exposure slightly above the median.


12


Returns after fees, costs and taxes: The ADF Super Cash option underperformed peers mainly due to our true-to-label risk taking.

Level of Investment Risk: .The ADF Super Cash option is a pure cash option, in accordance with APRA’s guidelines. It does not take on additional credit risk and duration risk, as some peer


Fees and Costs: Due to our scale, our fees and costs for the Cash option are low.

13

PART C:

CSCri TRIS

14


Returns after fees, costs and taxes: The CSCri TRIS Aggressive option has performed ahead of peers, ranking in the top quartile for both time periods presented.

Level of Investment Risk: The CSCri TRIS Aggressive option takes a measurably lower level of growth-asset exposure versus competitors in this category.


15

Assessment

Returns after fees, costs and taxes: The CSCri TRIS Balanced option has performed around median compared to peers for both time periods presented.

Level of Investment Risk: The CSCri TRIS Balanced option takes a measurably lower level of investment risk versus competitors in this category.


16


Returns after fees, costs and taxes: The CSCri TRIS Income Focused option has outperformed the median peer option for both time periods presented.

Level of Investment Risk: The CSCri TRIS Income-Focused option has a level of growth asset exposure slightly above the median.


17


Returns after fees, costs and taxes: The CSCri TRIS Cash option underperformed peers mainly due to our true-to-label risk taking.

Level of Investment Risk: The CSCri TRIS Cash option is a pure cash option, in accordance with APRA’s guidelines. It does not take on additional credit risk and duration risk, as some peer


Fees and Costs: Reflecting the relatively small scale of this option vs that of peer options in this category, fees and costs were higher than peers in FY19/20.

18

PART D:

CSCri RIS

19


Returns after fees, costs and taxes: The CSCri RIS Aggressive option has performed ahead of peers, consistently ranking in the top quartile for the time periods presented.

Level of Investment Risk: The CSCri RIS Aggressive option has an above median level of growth asset exposures.


20


Returns after fees, costs and taxes: Shorter-horizon peer underperformance in the CSCri RIS Balanced option is consistent with strategy. Portfolio risk was reduced in February 2020, as

evidence of the COVID-19 pandemic unfolded, and reversed back to a neutral stance from May/June. Our neutral position is calibrated to our implicit liability to our customers, not to peers,

and focuses on generating high net real returns per unit of risk. This enables manufacture of efficient portfolios with robust downside protection. The CSCri RIS Balanced option has

outperformed the median over longer time periods.

Level of Investment Risk: The CSCri RIS Balanced option has an above median level of growth asset exposures


21


Returns after fees, costs and taxes: The CSCri RIS Income Focused option has consistently outperformed the median peer option across all the time periods presented.

Level of Investment Risk: The CSCri RIS Income-Focused option has a median level of growth asset exposure.

Fees and Costs: Fees and costs were higher than peers in FY19/20.

22


Returns after fees, costs and taxes: The CSCri RIS Cash option underperformed peers mainly due to our true-to-label risk taking.

Level of Investment Risk: The CSCri RIS Cash option is a pure cash option, in accordance with APRA’s guidelines. It does not take on additional credit risk and duration risk, as some peer


Fees and Costs: Fees and costs were higher than peers in FY19/20, due to the relatively small scale of this option.

23

APPENDIX 1:

Assessment Methodology

1. Reporting on MySuper products is based on the methodology set out in APRA Prudential Practice Guide SPS 516 Business Performance Review i.e. using data published in APRA’s MySuper Quarterly Statistics provided under APRA Reporting Standard SRS 702.0 Investment Performance (SRS 702.0) and Reporting Standard SRS 700.0 Product Dashboard (SRS 700.0) as follows:

a) ‘fees and costs’ - utilise ‘representative’ member fees and costs at item 4.4 of SRS 702.0; b) ‘the return’ – utilise ’net return’ at item 4.3 of SRS 702.0; and c) ‘the level of investment risk’ – utilise ‘level of investment risk’ at item 3 of SRS 700.0.

2. Reporting on products other than MySuper products is based on the relevant SuperRatings SR50 index data for each investment option.

3. Comparisons are made based on the universe of comparable products i.e. all products in APRA’s MySuper Quarterly Statistics for CSC’s MySuper products, and all of the products in the relevant SuperRatings SR50 index for CSC’s other products.

4. Comparison of investment returns (representative member investment performance) is conducted for 1, 3, 5 and 10 year periods, subject to the start date of the investment

option.

5. Data used is for the year (or years) ended 30 June 2020 where available. Fees and costs data for products other than MySuper products is based on the 31 October 2020 SuperRatings data, which included CSC’s fees and costs for the year ended 30 June 2020 for the first time following an update to our Product Disclosure Statements. Fees and costs data for peer products other than MySuper products may not be directly comparable as a result, but it was the best data available at the time of making the assessment.

Outcomes AssessmentPrefaceAs part of the legislative outcomes assessment, our defined contribution products must be assessed against criteria under the Superannuation Industry (Supervision) Act 1993 (the SIS Act).

Specific CriteriaAssessment against the specific criteria is provided in this report as follows:A. Options, Benefits and Facilities; Investment Strategy; Insurance Strategy and FeesB. Scale AssessmentC. Operating Cost AssessmentD. Setting of Fees

MethodologyThe methodology supporting the assessments is provided at Appendix 1.

Regulatory ReferencesRelevant legislative references are provided in Appendix 2.

Assessment KeyAppropriate – product is assessed to perform appropriately for our customers.

Consider improvements – product can be improved to perform more appropriately for our customers.

Product Assessment Component

2

PART A: Options, benefits and facilities

Investment Strategy

Insurance Strategy and Fees

3

Product Assessment: February 2021 PSSAP – OPTIONS, BENEFITS AND FACILITIES

WHAT ARE WE ASSESSING?: Whether the options, benefits and facilities offered under our PSSap products are appropriate for our customers.

WHAT PRODUCTS ARE COVERED BY THE ASSESSMENT?

PSSap MySuper Balanced and all other PSSap investment options that customers can choose to invest in.

WHAT DATA AND INFORMATION WILL WE USE TO MAKE THE ASSESSMENT?

The assessment shall be based on the 2020 PSSap SuperRatings Benchmark Report. The Benchmark report compares options, benefits and facilities across a range of metrics, across many superannuation funds (the universe of funds covered a maximum of 394 products through to a minimum of 71 funds, depending on the quality of responses received). The SuperRatings Ratings methodology is set out on pages 249-274 of their report.

WHAT DOES THE DATA AND INFORMATION DEMONSTRATE?

SuperRatings Element

SuperRatings Rating

SuperRatings Commentary

Overall fund rating

Platinum

A “best value for money” super fund that is well balanced across all key assessment criteria in a robust, secure and proven risk framework. Overall Snapshot SuperRatings believes CSC PSSap has delivered high quality outcomes to members, as evidenced by a clear strategic planning process, strong growth and net benefit outcomes, while ensuring it maintains a strong position within the low operating cost quadrant. This positions the fund well to deliver value for money, as well as cost effective and efficient services to members, while undertaking further investment in its products and services.

Investment

Above Benchmark

Fees and Charges

Benchmark

Insurance Covers and Costs

Above Benchmark

Member Servicing

Above Benchmark

Administration

Above Benchmark

Governance

Above Benchmark

WHAT IS OUR ASSESSMENT?

Options, benefits and facilities for our PSSap products are appropriate for our customers as evidenced by their strong ratings across key elements of SuperRatings broad-based, independent, benchmark assessment.

4

Product Assessment: February 2021 INVESTMENT STRATEGY

WHAT ARE WE ASSESSING?: Whether the investment strategy for CSC products, including the level of investment risk and return target, is appropriate for

our customers.


PSSap MySuper Balanced and all other PSSap investment options that customers can choose to invest in

ADFSuper MySuper Balanced and all other ADFSuper investment options that customers can choose to invest in.

CSCri TRIS and RIS investment options that customers can choose to invest in.


The assessment shall be based on:

Product peer comparisons included elsewhere in the legislative outcomes assessment

Board’s ongoing monitoring and formal review of investment strategy

Relative size of CSC’s business operations, access to investment opportunities and net real returns per unit of risk over long-

term


PSSap product peer comparisons based on risk adjusted returns were strong;

ADF Super product peer comparisons based on risk adjusted returns were strong;

CSCri TRIS and RIS product peer comparisons based on risk adjusted returns were strong;

The Board’s ongoing monitoring and formal review of investment strategy is as follows:

Element

Outcome CSC Board Meeting Date

Minute No(s):

Investment Governance Framework (‘IGF’) including investment strategy

CSC’s investment governance framework, documented within “Investment Portfolio Design & Management Framework” - approved.

25/09/2019 Minute No. 1956, Agenda item 14

Note mapped compliance of IGF with APRA’s SPS530 requirements

25/09/2019 Minute No. 1957, Agenda Item 15.

Investment strategy review

Willis Towers Watson (‘WTW’) independent review of liquidity risk stress tests.

19/03/2020 Minute No. 2068, Agenda Item 17.

Review investment strategy - Approve asset allocation targets, default funds and the two other pre mixed options - approved.

25/09/2019 21/11/2019

Minute No. 1956, Agenda item 14 Minute No. 1988, Agenda item 10.1

Investment strategy execution

Execution of investment strategy has been undertaken consistent with the IGF, reviewed every Board meeting

All meetings held in 2020

Various

5

Independent, comprehensive triennial review of IGF

The Board noted that accordance with CSC’s governance process and APRA’s Superannuation Prudential Standard SPS 530, WTW was retained to independently review and evaluate CSC’s Investment Portfolio Design Management Framework in October 2019. The Board noted that the review was favourable and any suggestions for improvement were modest and will be incorporated into CSC’s next regular review of the framework.

21/11/2019 Minute No 1991, Agenda Item 18

Independent, annual asset allocation review

Noted the independent annual review by the asset consultant Willis Towers Watson of CSC’s investment strategy for the three pre mixed investment options.

05/02/2020 Minute No. 2041, Agenda Item 10

Do investment outcomes remain appropriate for the membership?

1. Funding ratios by cohort: the estimated proportion of ASFA Comfortable Standard deliverable in retirement. The weighted average funding ratio is 121% across PSSap and ADFSuper.

2. Member ratios by cohort: the estimated proportion of our customers on track to ASFA Comfortable Standard by retirement at age 65. 68% of PSSap full-time customers and 89% of ADF Super customers are on track to achieve ASFA comfortable standard at retirement. See Appendix 7.

Investment outcomes remain appropriate for our customers in both PSSap and ADFSuper.

Drivers of net return Net real returns per unit of risk above SuperRatings median over long-terms horizons - see Appendix 8. Expected Upside/Downside capture ratios vs peers. Appendix 10 % of capital written off No breaches of delegated authorities

Balanced Option is in the second quartile, and both the Aggressive and Income Focused Options are in the first quartile, demonstrating above average net real returns over long-term horizons (being 3, 5, 7 and 10 years). Across all options, over a 10 year period CSC captured 85% or more of the upside returns of our peers, and avoided over 39% of the downside returns of our peers. No capital written off in FY 2019/2020. No breaches of delegated authorities in FY 2019/2020.


The investment strategy for our products, including the level of investment risk and return target, is appropriate for our customers.

6

Product Assessment: February 2021 INSURANCE STRATEGY AND FEES

WHAT ARE WE ASSESSING?: Whether the insurance strategy for PSSap and ADFSuper products is appropriate for our customers

Insurance fees do not inappropriately erode retirement income


PSSap MySuper Balanced and all other PSSap investment options that customers can choose to invest in

ADFSuper MySuper Balanced and all other ADFSuper investment options that customers can choose to invest in



the insurance assessment in the 2020 PSSap SuperRatings Benchmark Report (as covered in the options, benefits and facilities section);

the insurance assessment in the 31 August 2020 ADF Super SuperRatings Fundamentals report (as covered in the options, benefits and facilities section);

the Board’s annual review and approval of the Insurance Management Framework (‘IMF’) and Insurance Strategy.


The 2020 PSSap SuperRatings Benchmark Report rated the PSSap insurance offering as “above benchmark”;

The 2020 ADFSuper Super Ratings Fundamentals Report rated the Insurance Covers and Costs for ADFSuper as “benchmark”;

The Board’s review and approval of the Insurance Management Framework (‘IMF’) and Insurance Strategy occurred as follows:

Element Outcome CSC Board Meeting Date

Minute No(s):

Appropriateness of insurance strategy

Section 52(7) of the Superannuation Industry (Supervision) Act 1993 and APRA Prudential Standard SPS 250 requires the provision of insurance benefits to customers as part of standard superannuation offerings. CSC provides Death and Total and Permanent Disability (TPD) and Income Protection (IP) cover to eligible PSSap (lifePLUS Cover) and ADFSuper (lifePLUS Protect) customers. These products fall within the scope of SPS250. The ADF Cover scheme provides default insurance benefits to serving ADF members outside of ADF Super and is not part of the ADF Super product assessment.

The Insurance Management Framework (IMF) documents CSC’s management of the group insurance offer to PSSap and ADFSuper customers. The Board reviewed the IMF in November 2020. The review focused on the insurer relationship, the insurance arrangements with the insurer and the processes/ procedures associated with making insurance benefits available to PSSap and ADFSuper customers.

19/11/2020 Minute No. 2217, Agenda Item 12

7

Inappropriate erosion of retirement income of those beneficiaries

The Board noted that the insurance strategy for the product was appropriate to its beneficiaries and has appropriate fees, which do not inappropriately erode the retirement income of those beneficiaries, based on fees as a percentage of the average customer’s salary. The Board noted that the Insurance Management Framework has been updated to reflect the new ADF Super group insurance product and requirements of the “Putting Members Interests First” (PMIF) bill.

The Board resolved to approve CSC’s Insurance Strategy.


The insurance strategy for our PSSap products is appropriate for our PSSap customers.

The insurance strategy for our ADFSuper products is appropriate for our ADFSuper customers.

PSSap Insurance fees do not inappropriately erode retirement income.

ADFSuper Insurance fees do not inappropriately erode retirement income.

8

Product Assessment: February 2021 ADFSUPER – OPTION, BENEFITS AND FACILITIES WHAT ARE WE ASSESSING?: Whether the options, benefits and facilities offered under our ADFSuper products are appropriate for our customers.


ADFSuper MySuper Balanced and all other ADFSuper investment options that customers can choose to invest in.


The assessment shall be based on the ADFSuper SuperRatings Fundamentals Report dated 31 August 2020. SuperRatings compares options, benefits and facilities across a range of metrics, across many superannuation funds (SuperRatings covers 113 MySuper products and 327 superannuation accumulation products).



SuperRartings Ratings


Overall fund rating Gold A “good value for money” superannuation fund that is strong in nearly all assessment areas but with average features and/or performance in one or more of our assessment criteria.

Investment Above Benchmark

Fees and Charges Average

Insurance Covers and Costs Average

Member Servicing Above Benchmark

Administration Above Benchmark

Governance Above Benchmark


Options, benefits and facilities for our ADFSuper products are appropriate for our customers as evidenced by their strong ratings across key elements of SuperRatings broad-based, independent, benchmark assessment.

9

Product Assessment: February 2021 CSCRI – OPTIONS, BENEFITS AND FACILITIES WHAT ARE WE ASSESSING?: Whether the options, benefits and facilities offered under our CSCri products are appropriate for our customers.


All CSCri TRIS and RIS investment options that customers can choose to invest in.


The assessment shall be based on the 2020 CSCri SuperRatings Benchmark Report. The Benchmark report compares options, benefits and facilities across a range of metrics, across many pension funds (the universe of funds covered a maximum of 394 products through to a minimum of 71 funds, depending on the quality of responses received). The SuperRatings Ratings methodology is set out on pages 86-97 of the report – it lists 184 comparator pension products.



SuperRartings Ratings


Overall fund rating Platinum A “best value for money” pension fund that is well balanced across all key assessment criteria in a robust, secure and proven risk framework. Overall Snapshot SuperRatings believes CSCri has delivered high quality outcomes to members, as evidenced by a clear strategic planning process, strong growth and net benefit outcomes, while ensuring it maintains a strong position within the low operating cost quadrant. This positions the fund well to deliver value for money, as well as cost effective and efficient services to members, while undertaking further investment in its products and services.

Investment Well Above Benchmark

Fees and Charges Benchmark

Product Flexibility Benchmark

Member Servicing Above Benchmark

Administration Above Benchmark

Governance Above Benchmark


Options, benefits and facilities for our CSCri products are appropriate for our customers as evidenced by their strong ratings across key elements of SuperRatings broad-based, independent, benchmark assessment.

10

PART B:

Scale Assessment – Investment Scale and Administrative Scale

11

Product Assessment: February 2021 SCALE: PSSAP, ADFSUPER, CSCRI WHAT ARE WE ASSESSING?: Whether because of the investment scale of, and within, CSC’s business operations, beneficiaries within PSSap, ADFSuper and

CSCri are disadvantaged


All PSSap, ADFSuper and CSCri investment options.


Relative size of CSC’s business operations

Access to investment opportunities

Investment cost across different investment types

Long term net investment returns


Element

Commentary / Situation

Outcome / Evidence of no disadvantage

Relative size of CSC’s business operations

Investment in CSC’s five regulated schemes is pooled in the ARIA Investment Trust (‘AIT’). CSC’s total funds under management (i.e. the AIT) was $48.5bn as at 30 June 2020.

On a consolidated basis, CSC is the 13 largest fund among APRA regulated

funds. This mid-range scale is considered a competitive advantage – see below.

Access to investment opportunities

Via the AIT, beneficiaries are able to access a broad investment universe, including both listed and unlisted assets, across most investment risk factors. The absence of any particular risk factor exposure in the investment portfolio results from a discrete investment decision and is not the result of any scale constraint. CSC can provide beneficiaries with access to a very broad range of listed and unlisted investment opportunities across any investment risk factor that CSC expects will be adequately compensated for with net return over the investment horizon.

i. Board approved investment universe, internally and externally reviewed - see Appendix 3.

ii. Scale is sufficiently large to provide investment capability (and investments in) larger scale or illiquid investment opportunities but not so large as to eliminate access to smaller-scale and active management of all relevant market segments.

iii. CSC’s liquidity and solvency is such that it does not present a constraint on capital allocation to illiquid assets as otherwise approved in the Investment Governance Framework and investment strategies.

12

CSC’s investment strategy capitalises on organisational comparative advantages to access the highest risk- adjusted returns possible, within the Board’s approved risk budget limits.

i. Access via tailored mandates rather than pooled vehicles: CSC evaluates how to leverage its scale to maximum advantage for members, by matching its proportion of risk allocation (reflected consistently in mandate and investment sizes) with appropriate shares of manager (and/or strategy) capacity.

ii. Even when CSC is a price-taker, it is able to negotiate beneficial terms and fee agreements that better align the manager (or strategy) to CSC’s member objectives (Agenda Item 20, Minute 1919, 15 August 2019 CSC Board Meeting).

iii. Tailored mandates mean asset ownership remains with CSC members and costs and terms can be negotiated. CSC views this as a comparative advantage.

iv. Comparative advantage is reflected in below market-standard base fees for most of CSC’s listed managers; performance fees that variously account for adequate return hurdles; clawbacks or high-water marks for better alignment; risk sharing; and contracted mandate terms consistent with CSC’s liquidity preferences.

Investment cost across different investment types

Where CSC is not a price taker i. Investment management costs are consistent with, if not lower than estimated industry averages – see Appendix 4

ii. Investment team has the ability to negotiate: a. lower direct investment management costs b. non-standard performance fees that account for the

manager’s return-per-unit-of-risk generated; management fees as a pre-payment not addition to performance fees; adequate return hurdles above which performance fees are relevant; and high water marks and fee clawbacks through periods of underperformance

c. terms that support CSC’s specific liquidity preferences in those markets where investments are semi-liquid.

Where CSC is a price taker i. Below industry standard management and performance fee rates on investments in skill-based strategies, and industry standard rates on private equity partnerships.

ii. CSC’s Early Stage Investment Manager Seeding Program (Minute No 1595, Agenda Item 13, March 2018 CSC Board meeting) enables CSC’s members to pay concessional fees, in the form of revenue sharing, for early-stage investment talent.

13

iii. CSC’s expanding co-investment program in private equity partnerships is also expected to result in lower costs for accessing high-quality private asset investments.

iv. CSC’s advisory fee budget is concentrated in the sectors to ensure the highest probability of securing first-quartile performance to underwrite the expected net returns from these higher-cost sectors.


Detailed in product peer comparisons elsewhere in this outcomes assessment

i. No evidence of scale disadvantages. ii. CSC’s net return per unit of investment risk taken is consistently

competitive versus Australian peers. For the same level of risk, CSC generates a superior return both compared to peers and to a passive equity index.

WHAT IS OUR ASSESSMENT? CSC’s level of investment scale provides relative advantage to PSSap, ADFSuper and CSCri beneficiaries through: (a) access to a broad range of investment opportunities; (b) competitive investment costs across different investment types; (c) competitive long term net returns to PSSap, ADFSuper and CSCri customers.

14

Product Assessment: February 2021 SCALE: PSSAP; ADFSUPER; CSCRI

WHAT ARE WE ASSESSING?: Whether because of the administrative scale of, and within, the RSE licensee’s business operations, beneficiaries within PSSap, ADFSuper and CSCri are disadvantaged




Membership numbers and demographics for PSSap, ADF Super and CSCri Trend: Membership accounts APRA Heat Map Sustainability Measures Trend: Active member ratio vs. change in member accounts Ability to attract and retain staff Operating Costs


Element

Commentary


Membership number and demographics

Refer to graph at Appendix 5 There is a strong number of members and good spread of member demographics.

Trend: Membership Accounts

Refer to Appendix 6 Overall membership growth across products, no diminution of membership accounts over time.

APRA Heat Map Sustainability measures, December 2020

APRA Heat Map Sustainability measures are all positive indicating that scale is supporting a likely ability to continue to deliver quality member outcomes into the future – no expected administrative scale disadvantage.

Ability to attract and retain staff

Voluntary attrition of permanent staff for the 12 months to 30 June 2020 is 8.6%, below industry benchmark of 12%. Involuntary attrition of permanent staff for the 12 months to 30 June 2020 is 3.3%. This is slightly below the industry benchmark of 5%.

Levels of staff attrition do not disadvantage beneficiaries

15

Operating Costs

Refer to Part C examining operating costs.

Operating costs are comparatively low and do not disadvantage beneficiaries.


PSSap, ADFSuper & CSCri beneficiaries are not disadvantaged due to the administrative scale of CSC’s business operations.

16

PART C:

Operating Cost Assessment

17

Product Assessment: February 2021 PSSAP; ADFSUPER; CSCRI WHAT ARE WE ASSESSING?: Whether the operating costs of the RSE licensee’s business operations are inappropriately affecting the financial interests of

those beneficiaries




PSSap comparative costs per member and costs per active member

CSCcri fees and charges

ADFSuper fees and charges

Costs per Customer



Element

Commentary


PSSap comparative cost per member and per active member

Detailed in 2020 Super Ratings Benchmark Report

“Overall, CSC PSSap’s operating cost metrics are strong relative to industry peers, with the fund positioned within the lowest cost quadrant.” SuperRatings Benchmark Report 2020, Page 10

CSCri fees and charges

Detailed in the SuperRatings Pension Benchmark Report 2020 The fund’s assessment has been rated “Benchmark” i.e. average.

ADFSuper fees and charges

No SuperRatings Benchmark report was prepared for ADFSuper, however the operating costs are consistent with PSSap

See PSSap above

Cost per Customer Relationship between number of accounts and operating costs of business operations - includes trends in cost per member measures. Appendix 9.

Base investment fees per member have remained stable since 2015.

Performance fees have resulted in higher total investment costs per member in the last two years.

Both base investment fees and performance fees are forecast to be lower in 2020/21 as our investment fee savings measures start to materialise.

Corporate costs per member have been relatively stable since 2016

18


Detailed in Product Comparison: returns after fees, costs and taxes have been assessed against peers in all products.

CSC’s net return per unit of investment risk taken is consistently competitive versus Australian peers. There is no evidence that CSC’s operating costs are inappropriately affecting financial interests of beneficiaries through poor net investment returns.


The operating costs of CSC’s business operations are not inappropriately affecting the financial interests of beneficiaries.

19

PART D:

Setting of fees

20

Product Assessment: February 2021 PSSAP; ADFSUPER; CSCRI WHAT ARE WE ASSESSING?: Whether the basis for the setting of fees is appropriate for PSSap, ADFSuper and CSCri beneficiaries





Review of the Cost Recovery and Allocation of Costs Policy


Element Commentary Outcome / Evidence of no disadvantage

Setting of fees Cost Recovery and Allocation of Costs Policy details how fees charged to members comply with the SIS Act and documents the processes that allocate costs between interests in MySuper products and other Choice products.

CSC allocates costs fairly and reasonably across all fund members,

including the MySuper members, in accordance with the processes

detailed in the policy; costs are continually monitored to ensure

accruals are fairly based; accruals are applied through the daily unit

price which impacts only those members who transact, at the time

they transact, and in proportion to the nature and size of their

transactions. This avoids cross-subsidisation across classes of

beneficiaries.

Allocation of costs processes comply with the MySuper

requirement that costs be fairly and reasonably allocated across

the MySuper product and choice products.


The basis for the setting of fees is appropriate for PSSap, ADFSuper and CSCri beneficiaries.

21

APPENDIX 1:

Assessment Methodology

1. Comparative information shall be limited to publicly available data.

2. The assessment of whether options, benefits and facilities are appropriate shall be determined with reference to the following elements of the most recent SuperRatings benchmark report available for the products:

a) Overall fund rating; b) Investments; c) Insurance; d) Fees and Charges; e) Member Servicing; f) Administration; g) Governance.

Ratings (as per SuperRatings) are as follows: Benchmark Assessment Scoring:

Benchmark Assessment Scoring Roadsign CSC Rating Well Above Benchmark 75%–100% 110/ Excellent Appropriate Above Benchmark 51%–74% 80/Good Appropriate Benchmark 26%–50% 60/ Average Appropriate Below Benchmark below 25% 40/Below Average Consider Improvements

3. The insurance assessments shall be made based on the outcomes of the Board’s review of the Insurance Strategy and Insurance Management

Framework, which reference Section 52 (7) of SIS and APRA Prudential Standard SPS 250 Insurance in Superannuation.

4. Assessment of the appropriateness of investment strategy for beneficiaries, including the level of risk and the return target, shall be based on:

a) the Board’s ongoing assessment of investment strategy execution at each Board meeting; b) the Board’ regular reviews of investment strategy; c) the Board’s (at least) triennial review of the Investment Governance Framework referenced to APRA Prudential Standard SPS 530 Investment

Governance; d) independent annual asset allocation reviews; e) independent, comprehensive triennial reviews of the Investment Governance Framework.

5. In assessing scale and operating costs, application will be to the total pool of assets in the ARIA Investments Trust (‘AIT’). The AIT is a Pooled Superannuation Trust. Contributions from all MySuper, choice and defined benefit products that CSC manages are pooled into the AIT for the benefit

22

of all CSC-governed scheme members.

6. Disadvantage due to scale shall be assessed by reference to:

a) Investment scale:

i. Access to investment opportunities; ii. Level and change in investment costs and negotiating power with regard to different investments held; iii. Total net return expected to accrue to members.

b) Administrative scale

i. Member demographics and trends; ii. Cost per member measures; iii. Ability to attract and retain key staff.

7. Inappropriate effect on financial interests due to operating costs shall be assessed by reference to trends in operating cost base

8. Appropriateness of fee structures shall be assessed through review of the Cost Recovery and Allocation of Costs Policy

9. Assessments shall be made using the latest available, finalised information or reports at the time of preparing the assessments in November 2020.

23

APPENDIX 2:

Regulatory references to the Superannuation Industry (Supervision) Act 1993

s52(11) - In determining whether the financial interests of the beneficiaries of the entity who hold a MySuper product or choice product are being promoted by the trustee,

the trustee must assess each of the following:

1. s52(11)(a) - whether the options, benefits and facilities offered under the product are appropriate to those beneficiaries

2. s52(11)(b) - whether the investment strategy for the product, including the level of investment risk and the return target, is appropriate to those beneficiaries

3. s52(11)(c) - whether the insurance strategy for the product is appropriate to those beneficiaries

4. s52(11)(d) - whether any insurance fees charged in relation to the product inappropriately erode the retirement income of those beneficiaries

5. s52(11)(e) - any other relevant matters, including any matters set out in the prudential standards:

I. SPS 515 Paragraph 23: Pursuant to section 52(11)(e) of the SIS Act, in determining whether the financial interests of the beneficiaries of the RSE who hold

a MySuper product or choice product are being promoted, an RSE licensee must also assess the following matters:

i. 23(a) - whether because of the scale of, and within, the RSE licensee’s business operations, those beneficiaries are disadvantaged

ii. 23(b) - whether the operating costs of the RSE licensee’s business operations are inappropriately affecting the financial interests of those beneficiaries.

iii. 23(c) – whether the basis for the setting of fees is appropriate for those beneficiaries

24

APPENDIX 3:

Board approved investment universe (as at 30 June 2020)

25

APPENDIX 4:

CSC External Investment Manager Costs (as at 30 June 2020)

Total Investment Management Fees include base fees and performance fees actually paid by CSC (or

invoiced but not paid) over the rolling 12 month reporting period. They do not include performance fee

accruals that remain “unearned” or as yet unrealised by the manager in accordance with their Investment

Management Agreements.

Estimated Industry Average fees for sectors reflect the estimated market price of “generic” access to each

sector on the basis of internal and external surveys of managers. While the fees are reflective of the size of

CSC’s mandates, they do not necessarily reflect CSC’s specific portfolio construction for each sector. For

example, our Australian Equities and International Equities fees reflect our specific blend of active, passive,

small cap and regional exposures. Whereas the estimated industry average fee for those sectors reflect the

“generic” portfolio construction specific to that “average” manager.

% of Sector

FUM

% of Total

FUM

Listed Equities

Australian Equities 0.19% 0.04% 0.48%

Global Equities 0.52% 0.12% 0.48%

Unlisted Capital (Current FY Fee Estimates)

Australian Private Capital 1.80% 0.01% Price taker

International Private Capital 2.41% 0.15% Price taker

Credit

Investment Grade Credit 0.29% 0.01% 0.37%

High Income Debt - - 0.65%

Real Assets

Real Assets 2.79% 0.27% 0.60%

Real Assets Income Focused - - 0.60%

Sovereign Assets

Government Bonds 0.27% 0.01% 0.20%

Emerging Market Government Bonds 0.20% 0.00% 0.35%

Global Inflation Linked Bonds 0.04% 0.00% 0.10%

General Cash 0.02% 0.00% ≤ 0.05%

Skill-Based Strategies

Market Neutral 2.05% 0.22% Price taker

Objective Based Funds 0.30% 0.01% Price taker

Objective Based Funds (Income Focused) 0.44% 0.00% Price taker

Single-Sector Options

Cash 0.02% 0.00% 0.08%

Total Investment

Management Fee

Expressed as:Sector

Estimated

Industry

Average

26

APPENDIX 5:

Membership Demographics

27

APPENDIX 6:

Change in membership accounts

28

APPENDIX 7:

Funding Ratios by Cohort Member ratios by cohort

PSSap / ADF Super funding ratios: 121% across the two DC schemes. PSSap / ADF Super Member ratios: 68% of PSSap full-time customers and 89% of ADF Super customers are on track to achieve ASFA comfortable standard at retirement.

29

APPENDIX 8:

Net real returns per unit of risk above SuperRatings median over long horizons Balanced Options: Income Focused Options:

Aggressive Options:

30

APPENDIX 9:

Costs per Customer

Note: The above is for all CSC’s customers including those in defined benefits schemes.

31

APPENDIX 10: Expected Upside/Downside capture ratios vs peers

Balanced option: for the 10 years to Oct 2020, the Balanced option captured Income Focused option: for the 10 years to Oct 2020, the 86% of the upside returns of our peers and avoided 39% of the downside Income Focused option captured 98% of the upside returns of returns of our peers. our peers and avoided 60% of the downside returns of our peers.

Aggressive option: for the 10 years to Oct 2020, the Aggressive option captured 85% of the upside returns of our peers and avoided 54% of the downside returns of our peers.

Documents

Product: PSSap MySuper Balanced