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Commonwealth Superannuation Corporation—Report for 2015-16


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2015-16 A N N UA L R E P O R T

C S C A N N UA L R E P O R T

2 015 - 16

CSC_AR_to_P_2015_16_cover.indd 1 1/11/2016 11:28:17 AM

ANNUAL REPORT 2015-16

CSC ANNUAL REPORT 2015-16 2

ISSN: 2204-3837

© Commonwealth of Australia 2016

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

Commonwealth Superannuation Corporation (CSC) Website: csc.gov.au

Postal address: GPO Box 2252 Canberra ACT 2601

Phone: 02 6272 9000

Fax: 02 6263 6900

ABN: 48 882 817 243

RSEL: L0001397

Annual report: csc.gov.au/reports-and-information/annual-reports

Superannuation schemes

CSS ABN: 19 415 776 361

RSE: R1004649

USI: 19415776361001

Website: css.gov.au

Annual report: css.gov.au/forms-and-publications/publications

PSS ABN: 74 172 177 893

RSE: R1004595

USI: 74172177893001

Website: pss.gov.au

Annual report: pss.gov.au/forms-and-publications/publications

MilitarySuper ABN: 50 925 523 120

RSE: R1000306

USI: 50925523120001

Website: militarysuper.gov.au

Annual report: militarysuper.gov.au/forms-and-publications/publications

PSSap ABN: 65 127 917 725

RSE: R1004601

USI: 65127917725001

Website: pssap.gov.au

Annual report: pssap.gov.au/forms-and-publications/publications

DFRB Website: csc.gov.au

Annual report: csc.gov.au/reports-and-information/annual-reports

DFRDB Website: dfrdb.gov.au

Annual report: dfrdb.gov.au/forms-and-publications/publications

1922 Scheme Website: csc.gov.au

Annual reports: csc.gov.au/reports-and-information/annual-reports

PNG Scheme Website: csc.gov.au

Annual reports: csc.gov.au/reports-and-information/annual-reports

Note: All statistics are derived solely from records available to CSC 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.

CSC ANNUAL REPORT 2015-16 3

Letter of Transmittal

Senator the Hon Mathias Cormann Minister for Finance Parliament House Canberra ACT 2600

Dear Minister

I am pleased to provide you with the annual report of the Commonwealth Superannuation Corporation (CSC) for the year ended 30 June 2016.

CSC is a corporate Commonwealth entity established under section 5 of the Governance of Australian Government Superannuation Schemes Act 2011 (the GAGSS Act) and for the period of this report was subject to the Public Governance, Performance and Accountability Act 2013 (the PGPA Act).

The Board of CSC is responsible for the preparation and contents of the Annual Report 2015-16. This report was approved by the Board on 7 October 2016 and satisfies Division 2 of the GAGSS Act 2011, section 46 of the PGPA Act and Public Governance, Performance and Accountability (Consequential and Transitional Provisions) Rule 2014.

Section 30(4) of the GAGSS Act requires you to cause a copy of this report to be laid before each House of Parliament within 15 sitting days after receipt of this report.

Yours sincerely,

Patricia Cross Chairman

7 October 2016

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Reader’s guide The activities of CSC are guided by legislative and government requirements, and CSC’s vision, mission statement and strategic objectives.

This report describes these activities in the 2015-16 financial year, satisfying the requirements of Division 2 of the GAGSS Act 2011 section 46 of the PGPA Act and Public Governance, Performance and Accountability (Consequential and Transitional Provisions) Rule 2014.

The report is divided into the sections described below.

Introduction This section outlines CSC, its superannuation schemes and members.

Performance This section includes the Chair’s review, CSC’s major achievements in 2015-16, and CSC’s Annual Performance Statement, which is a legislative reporting requirement under the PGPA Act.

CSC Board This section details the composition and responsibilities of the Board, Board remuneration and director indemnity, as well as explaining how the Board’s authority is delegated and how Board performance is reviewed. Directors for 2015-16 are listed along with CSC’s four new directors in 2016-17.

Governance This section outlines the Board’s governance framework and CSC’s regulatory requirements, and explains CSC’s approach to financial and risk management, compliance, fraud control and internal audit.

Investments This section details how investment performance affects a member’s superannuation benefit. It also provides information on CSC’s investment approach, strategy, governance, environmental, social and governance practices, and investment options, and outlines investment performance to 30 June 2016.

Super schemes This section outlines the functions CSC performs in relation to its super schemes (as set out under its governing legislation) and details CSC’s performance in relation to these functions for each super scheme in 2015-16 (excluding ADF Super and ADF Cover, which both began on 1 July 2016).

Financial statements These sections contain audited financial statements for each Fund and CSC.

Appendices The report includes appendices on legislative changes (excluding changes to scheme legislation and trust deeds in the reporting year, which are described in the Super schemes section) and a glossary.

There is also a list of specific reporting requirements for CSC and an index.

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Contents Letter of Transmittal 3

Reader’s guide 4

1 Introduction 9

About CSC 10

About CSC’s schemes 10

About CSC’s members 11

2 Performance 13

Report from the Chair 14

CSC’s major achievements 17

CSC’s Annual Performance Statement 18

3 CSC Board 21

CSC Board 22

Board committees 30

4 Governance 33

Introduction 34

5 Investments 37

Introduction 38

How performance affects a member’s benefit 38

Investment approach 38

Investment strategy 38

Investment governance 39

Environmental, social and governance factors 40

Investment options 41

6 Super schemes 45

Introduction 46

CSS 49

PSS 51

MilitarySuper 53

PSSap 56

1922 scheme 59

DFRB, DFRDB and DFSPB 60

PNG 63

7 CSS financial statements 65

8 PSS financial statements 107

9 Militarysuper financial statements 151

10 PSSap financial statements 189

11 CSC financial statements 229

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12 Appendices 275

Appendix 1 276

Changes to CSC’s governing legislation & new military super scheme legislation 276 CSC organisational chart 278

Glossary 279

13 Report requirements 281

14 Index 285

Tables Table 1: CSC’s net investment performance for Default (ie Balanced) Options 15 Table 2: Standing Board committees 30

Table 3: Board and standing Board committee meeting attendance in 2015-16 31 Table 4: CSC’s public market equities carbon footprint at 30 June 2016 41

Table 5: Investment options at 30 June 2016 41

Table 6: CSS investment performance to 30 June 2016 43

Table 7: PSS investment performance to 30 June 2016 43

Table 8: MilitarySuper investment performance to 30 June 2016 43

Table 9: PSSap investment performance to 30 June 2016 44

Table 10: CSCri investment performance to 30 June 2016 44

Table 11: Defined benefit scheme service standard in 2015-16 46

Table 12: Defined contribution scheme service standard in 2015-16 46

Table 13: Full invalidity pensions in CSS 50

Table 14: New partial invalidity applications in CSS 50

Table 15: Complaints received in CSS 50

Table 16: New full invalidity pensions in PSS 52

Table 17: Partial invalidity applications in PSS 52

Table 18: Complaints received in PSS 52

Table 19: Initial invalidity classifications in MilitarySuper 54

Table 20: Complaints received in MilitarySuper 55

Table 21: PSSap withdrawals 57

Table 22: CSCri roll ins 57

Table 23: CSCri pension payments and lump sum withdrawals 57

Table 24: TPD claims in PSSap 57

Table 25: Income protection claims in PSSap 58

Table 26: Complaints received in PSSap 58

Table 27: Initial invalidity classifications in DFRDB 61

Table 28: Complaints received in DFRDB 62

Table 29: Index of CSC’s annual reporting requirements 282

Charts Chart 1: Workshops and seminars on public sector schemes 47

Chart 2: Seminars on military schemes 48

Chart 3: One-on-one information sessions for military scheme members 48

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Chart 4: CSS members & pensioners over five years 49

Chart 5: CSS member contributions 49

Chart 6: CSS employer contributions 49

Chart 7: CSS pension payments over five years 50

Chart 8: CSS lump sum payments over five years 50

Chart 9: PSS members & pensioners over five years 51

Chart 10: PSS member contributions over five years 51

Chart 11: PSS employer contributions over five years 51

Chart 12: PSS pension payments over five years 52

Chart 13: PSS lump sum payments over five years 52

Chart 14: MilitarySuper members & pensioners over five years 53

Chart 15: MilitarySuper member contributions over five years 53

Chart 16: MilitarySuper Ancillary contributors over five years 54

Chart 17: MilitarySuper pension payments over five years 54

Chart 18: MilitarySuper lump sum payments over five years 54

Chart 19: Invalidity classifications in MilitarySuper 55

Chart 20: PSSap members over five years 56

Chart 21: PSSap member contributions over five years 56

Chart 22: PSSap employer contributions 57

Chart 23: 1922 scheme pensioners over five years 59

Chart 24: 1922 scheme pension payments over five years 59

Chart 25: DFRB pensioners over five years 60

Chart 26: DFRDB members & pensioners over five years 60

Chart 27: DFRDB member contributions over five years 61

Chart 28: DFRDB lump sum payments over five years 61

Chart 29: New invalidity classifications by service in DFRDB 62

Chart 30: PNG pensioners over five years 63

Chart 31: PNG pension payments over five years 63

1INTRODUCTION

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INTRODUCTION

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About CSC CSC was established on 1 July 2011, following the passage of legislation to merge the Boards responsible for the public sector and military superannuation schemes and Funds.

CSC manages 11 super schemes (outlined on pages 10-11) and provides superannuation services to Australian Government employees and members of the Australian Defence Force (ADF). CSC’s primary function is to administer the schemes and manage and invest the Funds in the best interests of all members and in accordance with the provisions of the various acts and deeds that govern the schemes.

Vision CSC’s vision is to grow the wealth of Australian Government employees and members of the ADF for their retirement.

Mission statement > Achieve consistent long-term investment return targets within a structured risk framework.

> Provide information and services to members that are relevant, reliable and helpful.

Strategic objectives 1. Achieve investment excellence:

> offer investment options and services appropriate to member needs

> for the default Funds, achieve an average investment return of the Consumer Price Index (CPI) + 3.5% per annum over 10 years with negative returns expected in three to four out of every 20 years.

2. Achieve industry best practice in member interaction:

> provide useful education and financial advice services for members

> support employers to assist service delivery

> work with administrators to achieve best possible scheme administration services.

3. Be a capable, efficient and sustainable organisation:

> achieve excellence in Board governance policy and practice

> attract and retain high quality people

> retain existing members and attract eligible employees.

Legislative objectives and functions CSC’s objectives and functions as set out under its governing legislation are to:

> administer the schemes and manage and invest the Funds

> receive payments from employers in accordance with scheme legislation

> pay superannuation benefits to or in respect of members

> provide information about scheme benefits or potential benefits

> provide advice to the Minister for Finance on proposed changes to the scheme legislation or trust deeds.

About CSC’s schemes

Regulated schemes Regulated superannuation schemes must comply with the Superannuation Industry (Supervision) Act 1993 (the SIS Act) so as to be entitled to concessional tax treatment.

CSC is trustee of five regulated public sector and military schemes:

> the Commonwealth Superannuation Scheme (CSS) established on 1 July 1976 by the Superannuation Act 1976 (the CSS Act)

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> the Public Sector Superannuation Scheme (PSS) established on 1 July 1990 by the Superannuation Act 1990 (the PSS Act)

> the Military Superannuation and Benefits Scheme (MilitarySuper) established on 1 October 1991 by the Military Superannuation and Benefits Act 1991 (the MilitarySuper Act)

> the Public Sector Superannuation accumulation plan (PSSap) established on 1 July 2005 by the Superannuation Act 2005 (the PSSap Act), which also offers under its trust deed an account-based pension product called Commonwealth Superannuation Corporation retirement income (CSCri)

> the ADF Super scheme (ADF Super) established on 1 July 2016 by the Australian Defence Force Superannuation Act 2015 (the ADF Super Act).

Exempt public sector schemes Exempt public sector schemes are not regulated under the SIS Act.

CSC administers six exempt public sector and military schemes:

> the scheme established under the Superannuation Act 1922 (the 1922 Act)

> the Defence Forces Retirement Benefits Scheme (DFRB) established in 1948 by the Defence Forces Retirement Benefits Act 1948 (the DFRB Act)

> the Defence Force Retirement and Death Benefits Scheme (DFRDB) established by the Defence Force Retirement and Death Benefits Act 1973 (the DFRDB Act)

> the Papua New Guinea Scheme (PNG) constituted under the Superannuation (Papua New Guinea) Ordinance 1951 and administered in accordance with section 38 of the Papua New Guinea (Staffing Assistance) Act 1973 (the PNG Act)

> the Defence Force (Superannuation) (Productivity Benefit) Determination (DFSPB), issued under the Defence Act 1903. It is paid for by the Department of Defence and has accrued on behalf of ADF members since 1 January 1988

> the ADF Cover scheme (ADF Cover) established on 1 July 2016 by the Australian Defence Force Cover Act 2015 (the ADF Cover Act).

About CSC’s members CSC’s schemes generally consist of two types of members: contributors, who are employed by a participating scheme employer (usually an Australian Government entity) or are members of the ADF; and deferred benefit members or preservers who do not contribute to their scheme because they no longer work for a participating employer or are no longer ADF members. These members maintain an account within their scheme and under scheme rules can generally become contributors again if they join a participating employer or rejoin the ADF.

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

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

Depending on scheme rules, scheme membership may also include former spouses following a family law split, who are known as associates; spouses and eligible children of deceased pensioners or members; and members who under scheme rules hold a benefit in a second scheme (MilitarySuper or PSSap), who are known in their second scheme as Ancillary members.

2PERFORMANCE

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Report from the Chair The 2015-16 financial year marked a milestone for the Australian superannuation industry.

The Government accepted the Financial System Inquiry’s recommended objective for superannuation: “to provide income in retirement to substitute or supplement the Age Pension”. The forthcoming legislation changes will see a shift in the focus of the superannuation industry from the accumulation of a lump sum balance to the provision of a retirement income for retirees. This change is consistent with CSC’s long-held objective of growing our members’ superannuation savings to help them to achieve an adequate income in their retirement.

Proposed changes to super Major changes to Australia’s superannuation system were also proposed in the May 2016 Federal Budget, most of which were planned to take effect on 1 July 2017. Further announcements were made by the Government on 15 September 2016.

If these changes are legislated, they will affect our members to varying degrees, dependent on where they are positioned in their work-life cycle and existing superannuation savings. CSC will continue to help members manage any changes through our Customer Information Centre, super scheme seminars and workshops, and fee-for-service personal financial advice services.

Investment performance in 2015-16 2015-16 challenged investment markets with a major decline in oil prices and doubts about the resilience of global economic growth. By considering these potential risks,

in the context of our longer investment horizon, CSC was able to ensure that all of its investment options met or exceeded their net real return objectives over the three years to June 2016.

That the shorter period of the 2015-16 financial year provided only modest investment returns was not overly surprising. CSC increased its allocation to defensive assets within its Balanced (default) and Aggressive options, in the middle of the financial year, in response to the ongoing challenges facing global policymakers and investment markets - specifically, lower levels of potential global economic growth, historically low interest rates, significant levels of debt, fully-valued asset prices and the potential for some market liquidity challenges. These actions partially insulated our portfolios from the weakness in equity markets in the latter half of 2015-16 and, importantly, provided CSC with the opportunity to buy back into equity markets, at lower prices, in the wake of the “Brexit” event, late in the financial year.

It is important to remember that CSC takes a long-term approach to investment, to match our superannuation-member’s horizon. There will be periods - as we experienced in 2015-16 - where we take actions to limit the potential for capital loss, or where the returns available to prudent risk-taking, mean that our investment performance is lower than we would expect over the long-term.

Our investment strategy has a keen focus on avoiding loss when we perceive risk to be elevated, so that the probability of achieving the investment objectives that are relevant to our members, over their time horizons, remains high. This means that, compared to other superannuation funds, we generally deliver greater preservation of our members’ balances through periods of negative investment returns.

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Over the long-run, as we preserve more capital in weak markets and capture most of the returns in strong markets, the cumulative return on our members’ superannuation balances will be very competitive and consistent.

Indeed, over the past decade, when equity markets have been strong, our default investment options - in which nine out of 10 CSC superannuation members invest - performed healthily and, on average, captured up to 88% of the returns generated by the average Australian superannuation fund. In contrast, when equity markets were falling, our default portfolios avoided more than 48% of the negative returns delivered by the average Australian superannuation fund (ex the financial crisis).

These default options have all achieved their investment return target of CPI plus 3.5% per annum after fees and taxes over the full seven year cycle to 30 June 2016 (table 1). This has been achieved within their risk limits, which constrain the number of negative returns in any 20 year period, to no more than three to four years.

Table 1: CSC’s net investment performance for Default (ie Balanced) Options

1 year % 3 years %

5 years % 7 years %

CSS 1.9 8.4 8.2 8.5

PSS 1.7 8.3 8.2 8.4

MilitarySuper 1.9 8.3 7.3 6.2

PSSap 1.8 8.4 8.2 8.3

Note: Net of fees and taxes returns over periods of one, three, five and seven years to 30 June 2016.

CSC’s primary savings vehicle for post-retirement members, the “Income-focused” option for our CSCri product, generated a robust 6.5% net return over 2015-16. This was well above its net return objective of CPI plus 2% per annum. And continues the strong performance history of this option, which has generated an average real return that is 3.1% per annum in excess of its real return objective

over the last three years. This consistently strong performance reflects the option’s asset allocation management and its exposure to CSC’s direct, unlisted core property portfolio.

Despite the potential for some cyclical variations in different regions, we expect the level of global economic growth and interest rates to remain low, on average, relative to the past three decades. This is likely to result from the combination of structural influences, like demographics and technological change, as well as lower reliance on credit. In such a world, it will be increasingly important for superannuants to consider not just their investment returns, but also their contribution rates and years in the workforce, when planning for their retirement.

In this regard, CSC is focused on continuously improving our understanding of the unique characteristics of our member-base - demographics; account balances at different work-life phases; life-stage-fit investment option choices; and adequacy rates, as defined by ASFA’s “comfortable standard” in retirement. This helps us to refine and tailor our investment objectives and strategies to better service our unique member requirements.

A member focus One of CSC’s key values is our “focus on members.” This value is reflected in all of our operations. The integration of CSC and defined-benefit scheme administrator, ComSuper, was a major focus of work in 2015-16. As a unified team, we can now work together to continually increase the efficiency with which we provide all of the services our members require to prepare well for, and be provided well for, in retirement.

During the year we agreed five new values for CSC’s unified team (see box), with the first value being “focus on members.”

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We are also very conscious of how complex and confusing superannuation can seem. Our strategic objectives include supporting our members to make sound decisions about their own retirement choices, easily and with confidence.

Consistent with this strategic intent, CSC offers only three pre-mixed investment options, which represent each of the critical stages in the journey towards retirement adequacy for our members.

Giving our members reasons to choose CSC While all of our superannuation members are, or have been, Australian Public Service or ADF employees, most of them have a choice in where to invest their superannuation. CSC strives to be an industry leader and a natural choice for our members.

Our organisation actively supports innovation and encourages all of our employees to be constantly thinking about ways to ensure that CSC is a best-practice provider of investment returns and superannuation services to our members.

Over 2015-16, this intent was reflected in:

> Initiation of upgrades to our IT platforms, to support increased operational flexibility and more robust administration of our defined-benefit schemes.

> Investment in both our human and technology capital, to increase our ability to understand the defining characteristics of our members better, and support tailoring of our products and services.

> Streamlining of our internal communication processes and systems to increase the speed and efficiency with which we can respond to our member enquiries.

> Reviewing our external communication platforms, to the same ends.

New products and services CSC worked closely with the Government in 2015-16 on the development of two new military super schemes - ADF Super and ADF Cover. These new super schemes commenced on 1 July 2016 so ADF entrants can now choose to join ADF Super. This reform also meant the closure of the MilitarySuper defined benefit scheme to new members on 30 June 2016.

The two new military super schemes increase the number of super schemes that CSC manages on behalf of current and former ADF members and public sector employees to 11.

In May 2016, the Government announced that PSSap scheme members who leave Commonwealth employment, may continue to contribute to PSSap. This is a very important and welcome reform because it removes a constraint on our members by enabling them to continue to choose CSC as their superannuation provider, should they wish to do so, if their employment within the public sector is interrupted or ends.

CSC values Focus On Members Members’ interests are our business.

Think Boldly We improve business outcomes by encouraging creativity and innovation.

Be Fair We treat others how we wish to be treated.

Listen Openly and Talk Straight We communicate respectfully and honestly.

Work Together We work in a supportive and collaborative way.

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CSC Board of directors Three changes were made to the CSC Board at the end of 2015-16. The terms of Mr John McCullagh, Dr Michael Vertigan and Mr Peter Feltham ended on 30 June 2016. The term of Ms Lyn Gearing ended on 12 September 2016. I would like to take this opportunity to thank John, Michael, Peter and Lyn for the professionalism and dedication they demonstrated throughout their terms. The skills, knowledge and experience which they brought to Board discussions and decisions made a significant contribution to our members, by helping the Board achieve its strategic milestones during their terms.

I welcome our new CSC Board members - Mr Garry Hounsell, Mr Sunil Kemppi, Air Vice Marshal Tony Needham (all of whom commenced on 1 July 2016), and Mrs Ariane Barker (who commenced on 13 September 2016). Their appointments mean that the Board continues to have a diverse mix of directors with the relevant skills and experience to effectively govern

CSC, the administration of complex schemes and the $37 billion in funds we manage on behalf of our members.

I would also take the opportunity to extend my thanks to all of the CSC Board of directors and staff who worked effectively and collegiately throughout the past year, to deal constructively with intense organisational-structure change and challenging investment markets.

And, as always, on behalf of everyone at CSC, I thank our more than 725,000 superannuation members and pensioners for their continued trust in CSC as the guardian of their superannuation funds - a responsibility we all take very seriously.

Patricia Cross Chair

CSC’s major achievements Long-term investment performance exceeded target

Over the rolling three year period to 30 June 2016, CSC’s default accumulation option achieved its annual real return performance target of 3.5% within Board approved risk limits.

Values for merged CSC agreed

Five new CSC values (outlined on page 16) were set for CSC’s unified staff group.

New military super schemes launched

ADF Super and ADF Cover opened with regulatory approvals, systems and processes in place.

Government announced PSSap membership to include post Commonwealth employment

PSSap members will be able to contribute to their PSSap account regardless of their employment status once the relevant legislation is passed in Parliament.

Long-term technology strategy developed

The intent of this strategy is to ensure CSC’s investment and service functions remain enabled through secure and resilient IT infrastructure.

Innovation program launched

The intent of this innovation program is to enhance CSC’s capability to deliver member value in a complex and competitive market.

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CSC’s Annual Performance Statement Introductory statement This Annual Performance Statement is prepared for section 39(1) of the PGPA Act. In the opinion of the directors of CSC, the performance statement accurately presents CSC’s performance for the financial year ended 30 June 2016 and complies with subsection 39(2) of the PGPA Act.

CSC’s purpose CSC’s purpose is to grow the wealth of Australian Government employees and members of the Australian Defence Force for their retirement as the trustee of the Australian Government’s public sector and military superannuation schemes.

In CSC’s 2015-16 PGPA Corporate Plan and in the 2015-16 Portfolio Budget Statements, CSC’s two stated Outcomes were:

Outcome Contributions to Outcome

1 Retirement benefits for past, present and future Australian Government employees and members of the Australia Defence Force through investment and administration of their superannuation funds and schemes.

Programme 1.1: Superannuation scheme governance

The key objective for CSC in achieving its outcome is to maximise members’ superannuation account balances.

2 To provide access to Australian Government superannuation benefits and information, through developing members’ understanding of the schemes, paying benefits and managing member details, for current and former Australian Government employees and members of the Australian Defence Force.

Programme 2.1: Superannuation administration services

CSC’s administration service delivery requirements are driven by:

> legislative change;

> demand associated with the number of scheme members and employing entities;

> regulators; and

> the portfolio entities responsible for the schemes’ policies and framework.

Program 1.1 results: Superannuation scheme governance Performance criteria Results

> CSC meets its long term investment performance target of a real return of 3.5% over a prospective rolling three year horizon, achieved within Board approved risk parameters.

> Compliance with the relevant laws.

> Meet obligations as Registrable Superannuation Entity (RSE) licensee and Australian Financial Services (AFS) Licence holder.

> Administration quality as reflected in the satisfaction level of members, beneficiaries and employers with the service provided through its scheme administrators.

> Over the rolling three year period to 30 June 2016, CSC’s default accumulation option achieved its annual real return target of 3.5% within Board approved risk limits.

> All compliance issues were reported and actively managed in accordance with CSC policy.

> All RSE and AFS obligations were met.

> Results against detailed targets are outlined in the table below.

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Program 2.1 results: Superannuation administration services

Performance criteria Results

> 80% of service standards achieved (Proportion of standards achieved).

> Score of 80% or higher in periodic member client satisfaction survey (Quality Service Index).

> 100% of member statements issued by the statutory deadline of 31 December 2015.

> 85% of routine benefit payments processed within five working days.

> 100% of pension payments paid into pensioner bank accounts on time.

> 100% of compliance issues appropriately reported and actively managed.

> 92% of standards achieved.

> Weighted score of 86%.

> 100% issued by statutory deadline.

> 97% of routine benefit payments made within five working days.

> 99.7% of pension payments in bank accounts on time.

> 100% of issues reported and managed.

Criteria source: CSC’s 2015-16 PGPA corporate plan (located at: csc.gov.au/storage/2015-16_PGPA_corpplan.pdf)

Analysis of performance against purpose

Superannuation scheme governance

CSC’s investment return target for the rolling three-year period to 30 June 2016 was achieved despite lower returns in 2015-16 compared to the three previous straight years of very strong net returns. Performance in the financial year to 30 June 2016 was constrained by subdued returns from global equity markets and cash, which were only partially offset by solid returns from property and most fixed interest markets.

Financial market performance throughout 2015-16 was quite volatile. This reflected an environment which was characterised by concerns over a slowdown in economic growth, particularly in China, a significant decline in commodity prices, particularly in oil, and the UK’s decision to exit from the European Union at the end of the year. In response, global central banks maintained very accommodative monetary policies, which helped to buoy the return from fixed interest markets.

Further analysis of CSC’s investment performance is provided in the Chair’s report on pages 14-17. Information on CSC’s

investment approach, strategy and governance is provided in the Investment section of this report on pages 37-44.

All CSC’s compliance, RSE and AFS Licence holder obligations were met in 2015-16 including obtaining the regulatory approvals, systems and processes required to open CSC’s two new military superannuation schemes, ADF Super and ADF Cover, on 1 July 2016. Information on CSC’s governance approach is provided in the Governance section of this report on pages 33-35.

Superannuation administration services

Member satisfaction with CSC’s super services was high in 2015-16, in particular for members who called our Customer Information Centre to receive general advice, attended a CSC seminar or webinar to learn more about their scheme, or obtained personal financial advice from an Industry Fund Services (IFS) financial planner. Members reported, on average, a high level of satisfaction with the quality of the service provided to them and a high level of satisfaction with the improvement in their knowledge as a result of the service provided to them.

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More information about CSC’s superannuation services is provided on pages 47-48, including information on the ‘fee for service’ financial advice available to CSC members through CSC’s partnership with IFS.

Administration service standards were also maintained to a high level in 2015-16, with the most challenging area of work continuing to be the area of invalidity casework and reconsiderations for CSC’s military schemes.

CSC’s pension payment target was not achieved because of an error by CSC’s bank resulting in 1% of pension payments due on 9 July 2015 not being received in pensioners’ bank accounts until the next day.

The bank acknowledged its responsibility for the error, offered its apologies to CSC, and processes were reviewed to minimise any risk of a recurrence. CSC’s ability to meet this performance target is partly subject to the performance of CSC’s bank and pensioners’ banks, and a very small number of payments will always be rejected (eg due to changes in bank accounts not communicated to CSC).

Further information on the administration of CSC’s super schemes, including the service standards set for and achieved during 2015-16, is provided in the Super Schemes section of this report on pages 45-63.

3CSC BOARD

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CSC Board CSC’s governing legislation establishes the CSC Board. The function of the Board is to ensure that CSC performs its functions as outlined in the governing legislation in a proper, efficient and effective manner. The Board has the power to do all things necessary for or in connection with the performance of its functions.

This section details the composition and responsibilities of the Board, Board remuneration and director indemnity, as well as explaining how the Board’s authority is delegated and how Board performance is reviewed. Directors for 2015-16 are listed, along with CSC’s three new directors in 2016-17.

Composition The Board consists of an independent Chair and 10 other directors. Of the 10 other directors, 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.

The Minister for Finance (the Minister) chooses the remaining five directors in consultation with the Defence Minister. The Minister appoints all directors.

The Chair of the Board is appointed by the Minister after consultation with the Defence Minister. The Minister must obtain the Board’s agreement to a person whom the Minister proposes to appoint as the Chair. All directors must meet the fitness and propriety standards under the SIS Act.

Responsibilities The Board is responsible for the sound and prudent management of CSC’s superannuation schemes. Directors and CSC employees are required to comply with the Board’s governance policy framework.

The framework includes policies such as the Board Charter, Conflicts Management Policy and Framework, Fit and Proper, Board Renewal and Board Performance Evaluation.

Delegated authority CSC may delegate its powers under scheme legislation. The Board has delegated authority for many activities, corporate and investment matters, and scheme administration.

Delegations are regularly reviewed to ensure currency. Employees exercising delegations are accountable to the CEO who is responsible to the Board. Even if within delegated powers, matters that are sensitive or extraordinary would typically be referred by the CEO to the Board.

Performance review The performance of the Board is formally evaluated each year, covering the Board as a whole, the Chair, individual directors and the Board committees. An evaluation of the Board may examine a range of matters including performance relative to objectives, fulfilment of responsibilities, structure and skills, strategic direction and planning, policy development and monitoring and supervision.

A performance evaluation conducted by an external consultant in the period of March to April 2016 showed a high level of satisfaction with the Board’s performance.

All directors participate in ongoing professional development activities and there is a standing Board agenda item for open discussion and meeting evaluation. Directors can also comment about the means by which Board papers are submitted and how the conduct of Board meetings can be improved in open Board meeting discussions and through formal meeting evaluations.

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Remuneration The Remuneration Tribunal, established under the Remuneration Tribunal Act 1973, determines the remuneration of directors including the Chair and members of the Audit and Risk Management Committee and the reconsideration committees. Remuneration is disclosed in CSC’s annual financial statements included in this report.

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

Directors in 2015-16

Mrs Patricia Cross

Appointed 1 July 2014 to 30 June 2017

> Chair of the Board > Chair of the Board Governance Committee > Chair of the Remuneration and HR Committee

Mrs Cross is a director of Macquarie Group Limited (since 2013), Macquarie Bank Limited (since 2013), Aviva plc (since 2013). Having begun her career in public service with Congressman John Rousselot (1979-1981), Mrs Cross went on to gain extensive international financial services experience with Chase Manhattan Bank and Chase Investment Bank (1981-1987), Banque Nationale de Paris (1987-1988) and National Australia Bank (1988-1996). Since 1996 she has served as a public company director for Suncorp-Metway Limited (1996-2000), AMP Limited (2000-2003), Wesfarmers Ltd (2003-2010), Qantas Airways Limited (2004-2013) and National Australia Bank (2005-2013). She was also Chairman of Qantas Superannuation Limited (2002-2005), Deputy Chairman of the Transport Accident Commission of Victoria (1997-2001) and a founding director of the Grattan Institute (2008-2015).

Mrs Cross has held a number of honorary government positions, including with the Financial Sector Advisory Council, Companies and Securities Advisory Committee, Panel of Experts to Australia as a Financial Centre Forum and Sydney APEC Business Advisory Council.

She is an Australian Indigenous Education Foundation Ambassador, and has previously served on a wide range of not for profit boards, including the Murdoch Children’s Research Institute (2002-2011). She is the Co-Chair of WomenCorporateDirectors in Australia (since 2014) and is the Chair of the 30% Club in Australia (since 2015). In 2001, Mrs Cross received the Australian Centenary Medal for service to Australian society through the finance industry. Mrs Cross has a BSc (Hons) from Georgetown University.

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Mr Anthony (Tony) Cole, AO

Reappointed 1 July 2016 to 30 June 2017

> Director since 1 July 2011 > Member of the Board Governance Committee > Member of the Remuneration and HR Committee

Mr Cole is a former Asia Pacific business leader of the global consulting, outsourcing and investment company, Mercer (1996-2011). He stood down from all management and board roles at Mercer in 2011, but continued to work with Mercer on a part time basis in a limited role until 2015. Before joining Mercer he was an executive director of the Life Investment and Superannuation Association of Australia (1994-1996). Mr Cole has also held a number of senior federal government appointments including Secretary to the Treasury (1990-1993).

Mr Cole is a member of the Advisory Board of the Northern Territory Treasury Corporation (since 1995), a director of the Board of Australian Ethical Investments Limited (since 2012), a panel member of the Fairwork Minimum Pay Group (since 2013), a member of the Business Investment Committee of the NSW Treasury Corporation (since 2015) and was formerly the Chairman of the Advisory Board of the Melbourne Institute of Applied Economic and Social Research (2002-2012).

Mr Cole has a Bachelor of Economics from Sydney University. In 1995 he was appointed an Officer in the Order of Australia (AO) for services to government and industry. He was made a life member of the Investment Management Consultants Association in 2012.

The Hon. Chris Ellison

Appointed 1 July 2014 to 30 June 2017

> Member of the Board Governance Committee > Member of the Remuneration and HR Committee

The Hon. Chris Ellison is a director of the University of Notre Dame and The Australian Organisational Excellence Foundation (since 2014), an advisory director of Tropical Forests Corporation (since 2009), Governor of the University of Notre Dame in Western Australia (since 2009), Chair of Taylors College Academic Board, UWA (since 2010), a member of the Study Group Academic Council (since 2014) and Deputy Chair of Trinity College, Perth (since 2010). He is also a member of the WA Law Society and Chair of the SAS Regiment Resources Fund fundraising committee. He was previously a director of Doric Construction Group (2011-2015) and Chairman of Australia’s North West Tourism Board (2011-2015).

He was a Cabinet Minister in the Howard Government and in the Ministry for over 10 years (1997-2007). He held a number of portfolios including Justice and Customs and he remains Australia’s longest serving Justice Minister. He has also held a legal practising certificate for over 30 years.

He has a B.Juris and LLB both from the University of Western Australia.

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Mr Peter Feltham

Appointment ended 30 June 2016

> Director since 1 July 2011 > Nominee of the President of the ACTU > Member of the Audit and Risk Management Committee (at 30 June 2016) > Member of the APS Reconsideration Advisory Committee (at 30 June 2016)

Mr Feltham was a trustee of the predecessor organisations ARIA and the PSS and CSS Boards (2005-2011). He is a senior industrial officer with the Community and Public Sector Union (CPSU), and 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 the state and national level as both an employee and official. Previous to this, Mr Feltham worked for 10 years in the federal public service. He has also been a director of a credit union and has been a Justice of the Peace since 1999.

Ms Nadine Flood

Reappointed 1 July 2014 to 30 June 2017

> Director since 1 July 2011 > Nominee of the President of the ACTU > Member of the Audit and Risk Management Committee

Ms Flood is the National Secretary of the CPSU (since 2010), a director of Shared Advantage Pty Ltd (since 2011), a member of the ACTU Growth and Campaign Committee (since 2010), a member of ACTU Executive (since 2009), Vice President of the Australian Council of Trade Unions (since 2015) and a member of the ALP National Executive (since 2015).

Ms Flood was also a Board member of the Centre for Policy Development (2010-2015) and a member of the ALP National Policy Forum (2013-2016). Ms Flood has a Bachelor of Economics degree from Macquarie University.

Ms Lyn Gearing

Reappointed 13 September 2013 to 12 September 2016

> Director since 13 September 2011 > Member of the Audit and Risk Management Committee

Ms Gearing has many years of experience in superannuation, funds management, corporate finance and management consulting. Ms Gearing was a director of the Garvan Research Foundation (2005-2014) and a non-executive director of Queensland Investment Corporation (2008-2013), IMB Limited (2003-2012) and Hancock Natural Resources Australasia Limited (2003-2011). Ms Gearing is currently a Director of the Queens Club Limited.

Ms Gearing was also the Chief Executive of State Super (STC, FTC) from 1997 to 2002.

Ms Gearing has a Bachelor of Commerce degree, a Diploma in Valuations and a Certificate in Business Studies (Real Estate). She is a fellow of the Australian Institute of Company Directors and the Association of Superannuation Funds of Australia.

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Ms Winsome Hall

Reappointed 1 July 2016 to 30 June 2019

> Director since1 July 2011 > Nominee of the President of the ACTU > Member of the Board Governance Committee > Member of the Remuneration and HR Committee

Ms Hall was a trustee of the predecessor organisations ARIA and the CSS and PSS Boards (1996-2011). She is Chair of Zurich Australia Superannuation Pty Ltd (since 2010), is an independent non-executive director of the commercialisation fund Medical Research Commercialisation Fund (since 2007) as a nominee of Australian Super and Chair of the Women in Super NSW Mother’s Day Classic (since 2013).

Ms Hall has previously been a non-executive director of various financial sector companies including Colonial First State Private Capital Limited (2001-2008), State Super Financial Services (2006-2009) and the Financial Industry Complaints Scheme (2004-2008) and was a non-executive director of the commercial fund Uniseed (2005-2015). She has also been a member of the Financial Complaints Scheme Panel, best practice advisor to the Association of Superannuation Funds Australia, Senior Advisor, Prime Minister and Cabinet, and Secretary of the ACT Branch of the CPSU. Ms Hall has a Bachelor of Arts degree from the Australian National University.

Mr John McCullagh

Appointment ended on 30 June 2016

> Director since 2011 > Nominee of the Chief of the Defence Force > Member of the Audit and Risk Management Committee > Chairman of the APS Reconsideration Advisory Committee

> Deputy Chairman of the MilitarySuper Reconsideration Committee > Deputy Chairman of the Defence Force Case Assessment Panel

Mr McCullagh is a director of the Board of the Yowani Country Club Limited (since 2011) and a member of the ACT Capital Metro Business Reference Group (since 2016). He formerly held the position of CEO to the Military Superannuation and Benefits Board (2004-2008) and was a member of the transition team established to implement the government’s reforms affecting Australian Government superannuation schemes (2009-2011). Mr McCullagh attended the University of Adelaide, Graduate School of Management, the Public Service Commission Advanced Executive Program, has a Diploma of Financial Services, and is a fellow of the Australian Institute of Company Directors.

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Ms Peggy O’Neal

Reappointed 1 July 2014 to 30 June 2017

> Director since 1 July 2011 > Member of the Board Governance Committee > Member of the Remuneration and HR Committee > Member of the APS Reconsideration Advisory Committee

Ms O’Neal is a former partner of law firm Herbert Smith Freehills (1995-2009) and then a consultant (2009-2011), specialising in superannuation and financial services law. She continues to act as a consultant to Lander & Rogers, Melbourne (since 2011). Ms O’Neal also serves as a director of NAB subsidiaries (all superannuation fund trustee companies), MLC Nominees (since 2011), NULIS Nominees (since 2011) and PFS Nominees (since 2011). She is an independent member of the Audit, Risk and Compliance Committee of UniSuper Ltd (since 2009), an independent member of the External Compliance Committee for Vanguard Investments Australia (since 2009), the President of the Richmond Football Club (since 2013, having been a director from 2005) and a director of Womens’ Housing Limited (since 2013). Ms O’Neal was Chair of the Victorian Government Taskforce on Women in Sport and Recreation (2014-2015).

Ms O’Neal is a fellow of the Australian Institute of Company Directors and an emeritus member of the Law Council of Australia Superannuation Committee. She has a Bachelor of Arts degree from Virginia Polytechnic Institute and State University, and a Juris Doctor, University of Virginia, having requalified to practise law in Australia at the University of Melbourne. She has also completed the ASFA Diploma in Superannuation Management.

Air Vice Marshal Margaret Staib, AM, CSC

Appointed 2 May 2014 to 1 May 2017

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

Air Vice Marshal Staib is a director of the Australian Strategic Policy Institute (since 2015) and a member of the Royal Australian Air Force Active Reserve (since 2012), following a distinguished career over three decades in the permanent Air Force. Her military service included holding the position of Commander Joint Logistics and Commandant of the Australian Defence Force Academy.

Air Vice Marshal Staib formerly held the position of Chief Executive Officer of Airservices Australia (2012-2015). She was also a member of the Industry Advisory Board for the Centre for Aeronautical and Aviation Leadership of Embry-Riddle Aeronautical University (2010-2015). She is also a Certified Practising Logistician and a Fellow of the Chartered Institute of Logistics and Transport.

Air Vice Marshal Staib holds a Bachelor of Business Studies, Master of Business Logistics and Master of Arts in Strategic Studies. She has received the United States Meritorious Service Medal, the Outstanding Contribution to Supply Chain Management in Australia Award and was appointed in 2009 as a member in the Military Division of the Order of Australia. In 2000 Air Vice Marshal Staib’s contribution and leadership in the field of ADF Aviation Inventory Management was recognised when she was awarded the Conspicuous Service Cross.

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Dr Michael John Vertigan, AC

Appointment ended on 30 June 2016

> Director since 1 July 2011 > Chairman of the 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 Superannuation Fund (2004-2008) and former Secretary of the Victorian (1993-1998) and Tasmanian (1989-1993) Departments of Treasury and Finance and has held a number of academic appointments.

Dr Vertigan holds a number of other appointments to government and private sector bodies including former Chairman of the Australian Maritime College Board (2012-2016). He is a former director of Aurora Energy (2010-2014) a former member of the Standing Committee on Energy and Resources Board Appointments Panel (2008-2014). He was an independent member of the Tasmanian Government GBE Director Appointments (2008-2015), Chair of the Panel of Experts for the NBN Cost Benefit Analysis and Review of Regulation (2013-2014), a member of the Australian Treasury Advisory Council (2014-2015) and former Chair of the Review of Governance of the Australian Energy Market (2015).

Dr Vertigan has a Bachelor of Economics (Hons) from the University of Tasmania and a PhD from the University of California (Berkeley). Dr Vertigan was made a Companion of the Order of Australia in 2004. He is a fellow of the Australian Institute of Company Directors (since 1998) and of the Institute of Public Administration of Australia (since 1994).

New Directors in 2016-17

Ms Ariane Barker

Appointed 13 September 2016 to 12 September 2019

Mrs Barker is General Manager, Products and Markets at JBWere (since 2015). Mrs Barker is also a Board Director at IDP Education (since 2015); a member of the Investment Committee and Development Board at the Murdoch Childrens Research Institute (since 2011); and a member of the Community Advisory Committee at the Royal Victorian Eye and Ear Hospital (since 2013). Mrs Barker was previously a Board Director at Taralye, The Oral Language Centre for Deaf Children (2011-2014).

Mrs Barker has over 20 years of experience in international banking and finance, including roles as Director, Equities Division at HSBC (2005-2008); Executive Director, Equities Division at Goldman Sachs (Asia) (2000-2002); and Associate - Capital Markets at Merrill Lynch International (1994-1999).

Mrs. Barker has a Bachelor of Arts degree in Economics and Mathematics from Boston University and is a Fellow of the Australian Institute of Company Directors.

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Mr Garry Hounsell

Appointed 1 July 2016 to 30 June 2019

> Member of the Audit and Risk Management Committee

Mr Hounsell is a non executive director at Treasury Wine Estates Limited (since 2012), Dulux Group Limited (since 2010), Spotless Group Holdings Limited (since 2010), Integral Diagnostics Limited (since 2015), Investec Aircraft Syndicate Limited (since 2012), and McFarlane Burnet Institute of Public Research and Public Health (since 2013).

Mr Hounsell is also a member of Advisory Boards for Acciona Australia and Asia (since 2015), PanAust Limited (since 2015), Rothschild Australia Limited (since 2012), Charter Keck Cramer (since 2013), and Investec Global Aircraft Fund (since 2007).

Mr Hounsell was previously executive director, Victoria at Investec Bank (2005-2007); Senior Partner at Ernst and Young Australia (2002-2004); CEO and Managing Partner Australia at Arthur Andersen (2001-2002); Managing Partner Australia, Audit and Business Advisory at Arthur Andersen (1998-2001); and Partner at Arthur Andersen (1989-1998).

Mr Hounsell was previously the Chairman of Emitch Limited (2006-2008) and PanAust Limited (2008-2015). He was also previously a director at Orica Limited (2004-2013), Nufarm Limited (2004-2012), Qantas Airways Limited (2005-2015), and Mitchell Communication Group Limited (2008-2010).

Mr Hounsell has a Bachelor of Business (Accounting) from the Swinburne Institute of Technology (1975) and is a Fellow of Chartered Accountants Australia and New Zealand, and a fellow of the Australian Institute of Company Directors.

Air Vice-Marshal Tony Needham, AM

Appointed 1 July 2016 to 30 June 2019

> Nominee of the Chief of the Defence Force > Deputy Chairman of the MilitarySuper Reconsideration Committee > Deputy Chairman of the Defence Force Case Assessment Panel

Air Vice-Marshal Needham is a member of the Royal Australian Air Force Active Reserve (since early 2016), following a distinguished career over three decades in the permanent Air Force (1978 to 2015). His military service included holding the position of Head People Capability, Department of Defence (2014-2015) and Deputy Commander, Joint Task Force 633, Middle East (2013). Air Vice-Marshal Needham also served as a Commissioner of the Military Rehabilitation and Compensation Commission (2014-2015) and Chair of the Defence Force Recruiting Board of Management (2014-2015).

Air Vice-Marshal Needham holds a Master of Arts in Strategic Studies, Deakin University, Graduate Diploma in Management Studies and is a Graduate of the Australian Institute of Company Directors. Air Vice-Marshal Needham was appointed as a member in the Order of Australia in 2005 primarily for work in the personnel area for the RAAF.

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Mr Sunil Kemppi

Appointed 1 July 2016 to 30 June 2019

> Nominee of the President of the ACTU

Mr Kemppi is a Senior Industrial Officer with the Community and Public Sector Union (CPSU), where he provides industrial and legal advice (since 2015). Mr Kemppi is an Australian legal practitioner and has worked within the trade union movement since 2009.

Mr Kemppi served as a director for the Victorian Contract Cleaning Industry Portable Long Service Leave Fund Pty Ltd (2014-2015).

Mr Kemppi has been an Organiser, Industrial Officer and Lead Industrial Officer with United Voice (2009-2015), CSO and Trustee Service Consultant with Australian Administrative Services (2006-2009), and Market Research Interviewer for the National Australia Bank (2004-2006).

Mr Kemppi is a Juris Doctor and has a Graduate Diploma of Legal Practice, a Bachelor of Arts (Pol. Phil.), and a Graduate Diploma of Journalism.

Board committees The Board has established committees to assist it in carrying out its responsibilities. Committee members are appointed by the Board. Each committee has its own documented and Board-approved terms of reference, which are reviewed from time to time.

The Board has three standing committees: the Audit and Risk Management Committee; the Remuneration and HR Committee; and the Board Governance Committee.

Table 2: Standing Board committees

Committee Purpose Membership

Audit and Risk Management Committee

To assist the Board in discharging its responsibilities by providing an objective non-executive review of the financial reporting and risk management framework. Functions include:

> integrity of financial reports

> significant financial and accounting issues and policies

> regulatory requirements and compliance

> assurances on internal control and compliance systems

> operational risk and risk management framework

> audit effectiveness, independence, scope and planning

> overseeing CSC’s risk profile upon events of change.

Up to 30 June 2016:

> Michael Vertigan, AC (Chairman)

> Peter Feltham

> Nadine Flood

> Lyn Gearing

> John McCullagh.

From 1 July 2016:

> Michael Vertigan, AC (Chairman) until 31 October 2016

> Lyn Gearing

> Margaret Staib, AM, CSC

> Nadine Flood

> Garry Hounsell.

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Committee Purpose Membership

Board Governance Committee

To assist the Board by advising and making recommendations on issues relevant to the corporate governance of CSC and the identification, education and evaluation of directors. Functions include

> review of Board governance policies and procedures

> review of the skills of the Board and its committees

> review performance and re-appointment of directors

> identifying and recommending potential new directors

> succession planning for the Chair, Board and the CEO

> overseeing induction and ongoing education for directors

> evaluation processes for Board, committees and directors.

> Patricia Cross (Chair)

> Tony Cole, AO

> The Hon. Chris Ellison

> Winsome Hall

> Peggy O’Neal.

Remuneration and HR Committee

To assist the Board by advising and making recommendations on issues relevant to its Remuneration Policy and human resource obligations. Functions include:

> review and recommendations on the Remuneration Policy

> recommendations on certain remuneration

> compliance with relevant law and regulations

> setting and monitoring CEO key performance objectives.

> Patricia Cross (Chair)

> Tony Cole, AO

> The Hon. Chris Ellison

> Winsome Hall

> Peggy O’Neal.

Table 3: Board and standing Board committee meeting attendance in 2015-16

Board meetings (8)

Audit and Risk Management (ARM) Committee meetings (6)

Board Governance Committee meetings (3)

Remuneration and HR Committee meetings (3)

Attended Eligible to attend Attended Eligible to attend

Attended Eligible to attend Attended Eligible to attend

Patricia Cross 7 8 N/A N/A 2 3 2 3

Tony Cole, AO 8 8 N/A N/A 3 3 3 3

The Hon. Chris Ellison 8 8 N/A N/A 3 3 3 3

Peter Feltham 8 8 6 6 N/A N/A N/A N/A

Nadine Flood 6 8 5 6 N/A N/A N/A N/A

Lyn Gearing 8 8 6 6 N/A N/A N/A N/A

Winsome Hall 8 8 N/A N/A 3 3 3 3

John McCullagh 8 8 6 6 N/A N/A N/A N/A

Peggy O’Neal 8 8 N/A N/A 3 3 3 3

Margaret Staib, AM, CSC 8 8 N/A N/A N/A N/A N/A N/A

Michael Vertigan, AC 7 8 6 6 N/A N/A N/A N/A

The Board has also established two reconsideration committees and the Defence Force Case Assessment Panel, pursuant to scheme legislation, which reconsider certain decisions made under scheme legislation on the application of affected members. The two reconsideration committees are:

> the APS (Australian Public Sector schemes) Reconsideration Advisory Committee > the MSB (MilitarySuper) Reconsideration Committee.

The Board may establish other committees from time to time.

4GOVERNANCE

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Introduction The CSC Board aspires to achieve best practice and to be a leader in governance policy and practice.

The Board’s governance framework includes the following policies:

> Board Charter

> Board Performance Evaluation

> Board Renewal Policy

> Fit and Proper Policy

> Governance Statement

> Outsourcing Policy

> Conflicts Management Framework and Policy

> Whistleblower Protection Policy.

All policies except for the Conflicts Management Framework and Policy are available on the CSC website at csc.gov.au

This section details CSC’s regulatory requirements, approach to financial management and risk management, compliance program, and the fraud control and internal audit measures in place.

Regulatory requirements CSC is established under the GAGSS Act and is responsible for the super schemes covered in this report. CSC’s objectives and functions as set out in its governing legislation are outlined in this report on page 10. CSC’s governing legislation also establishes accountability arrangements for CSC, including annual reports to the Parliament and audited financial statements.

CSC is a holder of a Registrable Superannuation Entity (RSE) licence and an Australian Financial Services (AFS) licence, meaning it is regulated by the Australian Securities and Investments Commission under the Corporations Act 2001 and the Australian Prudential Regulation Authority under the

Superannuation Industry (Supervision) Act 1993. CSC must uphold the conditions of both licences and comply with financial services law.

CSC is also bound by provisions of the various acts and deeds that establish and govern its schemes. The regulated schemes must be managed and invested in accordance with the CSS Act, the PSS Act, the MilitarySuper Act and the PSSap Act, together with the relevant trust deeds under these Acts.

The unregulated schemes are established by and must be administered in accordance with the 1922 Act, the DFRB Act, the DFRDB Act, the PNG Act, and the ADF Cover Act, as relevant.

Financial management CSC’s finances are managed in accordance with the PGPA Act, CSC’s governing legislation and relevant scheme legislation. A Board approved budget is in place and the Board has delegated authority to make and implement certain financial decisions to individual staff.

Risk management CSC has a comprehensive Risk Management Strategy which describes CSC’s strategy for managing risk and the key elements of its risk management framework. CSC’s Strategy meets APRA’s requirements under Prudential Standard SPS 220 and is supported by CSC’s Risk Appetite Statement. Both the Strategy and Statement are reviewed at least annually and updated as required.

Compliance A detailed compliance program underpins CSC’s Risk Management Strategy, satisfying the requirements of CSC’s AFS licence. Staff and service providers must submit positive certification that they are compliant with all relevant legislative

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requirements, contractual provisions, regulatory policy and service standards, as well as any relevant licence conditions. Any instance of non-compliance must be reported.

The Audit and Risk Management Committee oversees compliance reporting, including remediation if a breach has occurred. CSC has a Breach and Compliance Policy that describes CSC’s requirements for compliance and breach reporting, which is provided to CSC’s service providers.

Fraud control CSC has a Fraud Control and Corruption Plan in place which was reviewed during the year and meets the Commonwealth Fraud Control Guidelines.

Internal audit The Audit and Risk Management Committee agrees an annual internal audit plan. In drawing up the plan, the Committee takes into account previously identified risks, the results and recommendations of previous internal and external audits, legislative and regulatory changes and requirements, and anticipated business changes. Audits can be initiated at any time by the Board or the Audit and Risk Management Committee to address changes to business priorities or to CSC’s risk profile.

5INVESTMENTS

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Introduction CSC manages and invests six Funds:

> the CSS Fund

> the PSS Fund

> the MilitarySuper Fund

> the PSSap Fund

> the CSCri Fund

> the ADFSuper Fund.

This section details how investment performance of these Funds affects a member’s superannuation benefit. It also provides information on CSC’s investment approach, strategy, governance, environmental, social and governance practices, and investment options, and outlines investment performance to 30 June 2016.

How performance affects a member’s benefit The impact of investment performance on a member’s benefit differs across the schemes. For PSS contributors, investment returns do not affect their final benefit because they have a defined benefit. Performance has a greater impact on contributor and deferred benefit members in CSS and preservers in PSS because in those circumstances it does directly influence a member’s final benefit.

Investment returns also affect the Australian Government’s financial outlays on members’ benefits in some circumstances, such as in the case of PSS contributors.

For MilitarySuper, investment performance directly affects the member benefit for all members and a small part of the employer benefit for contributing members.

Benefits in PSSap, ADF Super and CSCri are directly affected by investment performance.

The 1922, DFRB, DFRDB and the PNG schemes are unfunded superannuation schemes. CSC does not invest the monies of these schemes.

Investment approach Part of CSC’s mission is to achieve consistent long-term returns within a structured risk framework. To achieve this, CSC manages and invests each Fund so as to achieve its stated investment objective, having regard to strictly-defined risk limits. Each Fund is also managed in a way that allows for the payment of monies to meet scheme member benefit payments, achieves equity among all members, and exercises reasonable care and prudence to maintain and grow the Funds.

CSC jointly invests the Funds in one pooled investment trust, providing economies of scale benefits to members in each regulated scheme.

Investment options in each Fund gain exposure to various asset classes, and professional external investment managers are responsible for the management of the investments.

A target asset allocation and asset allocation ranges are set for each investment option.

Investment strategy CSC’s investment strategy is focused on the provision of financial adequacy in retirement for all scheme members. The level of risk taking is measured and focused on maximising the probability of achieving targeted return objectives for each investment option.

This approach should manifest in the following pattern of returns: CSC investment portfolios should help to preserve wealth, to some extent, through periods of negative equity market returns. The cost of this is that CSC’s investment portfolio returns may lag other funds through periods of strong positive equity market returns. Note that through these periods of strong equity

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market returns, CSC member returns should be well in excess of their targeted objectives. Over the full investment horizon, as more capital is preserved in weak markets and most of the returns are captured in strong markets, the cumulative return will be very competitive and the volatility of returns will be reduced.

Investment governance CSC’s investment governance is focused on managing risk and is driven by our primary objective to achieve stated investment objectives within strictly defined risk limits. The CSC Board has agreed and established a comprehensive investment governance framework, which includes a clear statement of Board and Executive responsibilities.

The CSC Board Sound and prudent management of the assets of the schemes is the responsibility of the Board. It sets, reviews and oversees the investment strategy, mission statement and core investment beliefs; approves and monitors investment strategies for each investment option; agrees the budget; and determines appropriate delegations.

To approve CSC’s investment strategy, regard is had to factors such as CSC’s size as measured by funds under management and scheme membership, perceived competitive advantages, member demographics and the broader investment environment.

To approve an investment strategy for an individual investment option, the Board considers the objective in terms of return and risk measures and the investment horizon.

Management of investment activities is delegated by the Board to relevant staff. Reports are made to the Board on approved investment policies. Reports are also presented and discussed at every Board meeting on

investment performance, liquidity, risk, manager and portfolio activity, portfolio structure, capital allocation and the risk budget.

CSC’s investment team CSC’s investment team advises the Board on investments, implements Board-approved strategies and manages all investments within Board-approved delegations. Led by the Chief Investment Officer (CIO), the team manages the investments in a manner consistent with the Board’s investment strategy, decisions on asset allocation, and detailed investment policies.

The team performs two major functions:

> Formulating investment strategy, option design, risk budget deployment and monitoring the evolving risks and opportunities in the Fund as well as the broader financial markets.

> Identifying the most efficient implementation channels for investment strategies, with ‘efficiency’ defined as the highest prospective, net return per unit of risk.

Both functions are well resourced with specialist senior investment managers who report directly to the CIO and are supported by investment analysts.

CSC’s Investment Operations team Responsibilities of the Investment Operations team include:

> implementation of investment team decisions, in accordance with Board-approved delegations

> management of the custodial relationship and its associated activities

> attribution of investment performance, and

> investment manager compliance and operational due diligence.

The team is led by the General Manager (GM), Investment Operations. The GM, Investment Operations and the CIO report independently to the CEO.

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Investment managers Under scheme legislation, CSC is required to invest through external investment managers. On the recommendation of the Executive, the Board approves the appointment of managers as ‘investment grade managers’ that may be funded at any time by CSC.

Investment managers are identified for their specific expertise and invest according to individual mandates set by CSC which are designed to address CSC’s specific portfolio requirements. These mandates provide CSC’s directions on investment types to be held, the maximum and minimum holdings for each investment type and target rates of return and risk limits.

Investment managers are paid a fee generally based, in part, on the value of assets managed on behalf of CSC, but importantly, where possible, on the basis of their performance both in terms of returns and risk taking.

Fees reflect investment costs applicable to each particular asset class category and the investment style employed by each manager.

Some managers may be paid a performance fee for exceeding a pre-determined benchmark or hurdle rate of return, within specified risk limits. The performance fee is generally a share of any excess risk-adjusted performance above an agreed benchmark return.

Environmental, social and governance factors CSC is responsible for ensuring that member Funds are not exposed to undue risk because of poor governance. We actively pursue principles of good governance in our own operations and seek them in the companies in which we invest.

Poor environmental, social and governance (ESG) performance in an investment can indicate poor corporate management and may lead to a decline in investment value. CSC has implemented a number of investment governance practices, including:

> casting proxy votes in Australian and international companies in which we invest

> publicly communicating our ESG policy and practices

> governance research and engagement through Regnan, which provides governance research and engagement services to CSC and its other institutional investors.

Principles for Responsible Investment (PRI) CSC is a founding signatory of the United Nations supported Principles for Responsible Investment, which provides a framework for institutional investors to align investment activities with the broader interests of society while maximising long-term returns for their beneficiaries.

The six Principles are:

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

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

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

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

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

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

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Montreal Carbon Pledge CSC is also a signatory to the PRI Montreal Carbon Pledge which aims to increase investor awareness, understanding and management of climate change-related impacts, risks and opportunities. We commit to measuring and disclosing, on at least an annual basis, the carbon footprint of our public market equities portfolio.

As the table below indicates, CSC’s public market equities portfolio’s carbon footprint (as at 30 June 2016) is estimated to be lower than its benchmark by 4 million tonnes of CO2 emissions per AUD million invested.

Table 4: CSC’s public market equities carbon footprint at 30 June 2016

CSC listed equities CSC Benchmark Difference

Carbon Footprint* 134 138 -4

Coverage** 89% 92% -4%

* Carbon Footprint is measured in Tonnes of C02e (Scope 1 + Scope 2) per AUD million invested (as at 30 June 2016).

** Carbon emissions data is sourced from MSCI ESG Research and covers the MSCI ACWI universe of companies. For more information visit msci.com

Investment options Table 5: Investment options at 30 June 2016

Investment option (scheme)

Objective Risk Minimum

suggested time frame

Target asset allocation (ranges)

CSCri target asset allocation (ranges) Band Label

Cash (CSS, PSS, MilitarySuper, PSSap and CSCri)

To preserve capital and earn a pre-tax return in line with that of the Bloomberg AusBond Bank Bill Index by investing 100% in cash assets

One Very

low

1 year Cash 100% (100%) Cash 100%

Income Focused (MilitarySuper, PSSap and CSCri)

To outperform the CPI by 2% per annum over 10 years

Three Low to medium 5 years Cash 30% (10-100%) Fixed interest 20%

(10-100%)

Equities 15% (0-40%)

Property 24% (0-35%)

Infrastructure 1% (0-35%)

Other 10% (0-70%)

Cash 35% (10-100%)

Fixed interest 20% (10-100%)

Equities 10% (0-40%)

Property 24% (0-35%)

Infrastructure 1% (0-35%)

Other 10% (0-70%)

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Investment option (scheme)

Objective Risk Minimum

suggested time frame

Target asset allocation (ranges)

CSCri target asset allocation (ranges) Band Label

Default Fund (CSS/PSS)

Balanced (MilitarySuper)

MySuper Balanced and Balanced (PSSap)

Balanced (CSCri)

To outperform the CPI by 3.5% per annum over 10 years

Five Medium to high 10 years Cash 15% (0-65%) Fixed interest 14%

(0-65%)

Equities 45% (15-75%)

Property 10% (5-25%)

Infrastructure 1% (0-20%)

Other 15% (0-30%)

Cash 19% (0-65%)

Fixed interest 15% (0-65%)

Equities 40% (15-75%)

Property 10% (5-25%)

Infrastructure 1% (0-20%)

Other 15% (0-30%)

Aggressive (MilitarySuper, PSSap and CSCri)

To outperform the CPI by 4.5% per annum over 10 years

Six High 15 years Cash 3% (0-35%)

Fixed Interest 5% (0-35%)

Equities 65% (20-95%)

Property 16% (0-50%)

Infrastructure 1% (0-50%)

Other 10% (0-70%)

Cash 3% (0-35%)

Fixed Interest 5% (0-35%)

Equities 60% (20-95%)

Property 16% (0-50%)

Infrastructure 1% (0-50%)

Other 15% (0-70%)

Note: investment risk bands and labels (used by CSC’s standard risk measure) are explained in the Investment Options and Risk booklet, which is part of each scheme’s Product Disclosure Statement (PDS).

Investment performance Investment performance for each option is calculated after fees and taxes. Performance is calculated based on the actual value of investment option assets as at the end of the quoted performance period (which is 1 July 2015 to 30 June 2016 for this report) and is indicative only of the performance that a member achieves on their investment.

The following performance figures are based on final valuations as at 30 June 2016. Past performance is no indication of future performance.

Earning rates (for CSS and PSS) and unit prices (for MilitarySuper, PSSap and CSCri) are needed for daily member transactions and will determine the actual performance a member achieves based on the timing of their individual transactions. The earning rates and unit prices are determined based on the best available information at the time they are declared. Valuations are fed into the calculations for earning rates and unit prices as soon as practical after they are received.

Using earning rates or unit prices to calculate an investment performance figure for the 1 July 2015 to 30 June 2016 period will provide similar but not identical rates to the investment performance figures published below.

Analysis of CSC’s investment performance is included in the Chair’s report on pages 14-17 and in the Annual Performance Statement on pages 18-20.

Table 5: Investment options at 30 June 2016 (continued)

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Table 6: CSS investment performance to 30 June 2016

Options Objective 1 year

(%)

3 years (%) pa

5 years (%) pa

10 years (%) pa

Default Fund To outperform the CPI by 3.5% per annum over 10 years

1.9 8.4 8.2 5.5

Cash Investment Option

To preserve capital and earn a pre-tax return in line with that of the Bloomberg AusBond Bank Bill Index by investing 100% in cash assets

1.8 2.0 2.5 3.6

Table 7: PSS investment performance to 30 June 2016

Options Objective 1 year

(%)

3 years (%) pa

5 years (%) pa

10 years (%) pa

Default Fund To outperform the CPI by 3.5% per annum over 10 years

1.7 8.3 8.2 5.5

Cash Investment Option

To preserve capital and earn a pre-tax return in line with that of the Bloomberg AusBond Bank Bill Index by investing 100% in cash assets

1.7 2.0 2.5 3.6

Table 8: MilitarySuper investment performance to 30 June 2016

Options Objective 1 year

(%)

3 years (%) pa

5 years (%) pa

10 years (%) pa

Cash To preserve capital and

earn a pre-tax return in line with that of the Bloomberg AusBond Bank Bill Index by investing 100% in cash assets

1.7 2.0 2.5 3.6

Income Focused

To outperform the CPI by 2% per annum over 10 years 6.1 6.3 5.6 4.1

Balanced (default)

To outperform the CPI by 3.5% per annum over 10 years 1.9 8.3 7.3 4.3

Aggressive To outperform the CPI by 4.5% per annum over 10 years

1.5 9.9 8.3 3.8

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Table 9: PSSap investment performance to 30 June 2016

Options Objective 1 year

(%)

3 years (%) pa

5 years (%) pa

10 years (%) pa

Cash To preserve capital and

earn a pre-tax return in line with that of the Bloomberg AusBond Bank Bill Index by investing 100% in cash assets

1.8 2.0 2.6 3.6

Income Focused

To outperform the CPI by 2% per annum over 10 years 5.7 6.2 6.4 5.2

MySuper Balanced (default)

To outperform the CPI by 3.5% per annum over 10 years

1.8 8.4 8.2 5.5

Ancillary Balanced

To outperform the CPI by 3.5% per annum over 10 years

1.7 8.3 8.3 6.0

Aggressive To outperform the CPI by 4.5% per annum over 10 years

1.4 10.1 9.4 5.9

Table 10: CSCri investment performance to 30 June 2016

Options 1 year (%) 3 years (%) pa

Cash 2.2 2.4

Income Focused (default) 6.5 7.0

Balanced 2.2 9.5

Aggressive 1.5 11.1

Note: the date of inception of the Cash, Income Focused and Balanced options was 7 May 2013 and 25 June 2013 for the Aggressive Option.

6SUPER SCHEMES

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Introduction CSC manages 11 super schemes for Australian Government employees and members of the ADF. The functions CSC performs in relation to its super schemes are set out in its governing legislation (outlined on page 10-11 of this report). This section details CSC’s performance in relation to these functions for each scheme in 2015-16 (excluding ADF Super and ADF Cover, which both began on 1 July 2016).

Scheme administration Administering CSC’s super schemes involves:

> calculating and paying benefits,

> responding to member and employer enquiries, and

> maintaining accounts for contributors, preservers and pensioners.

These functions are performed directly by CSC for the defined benefit public sector and military schemes. Scheme administration functions for PSSap, CSCri and ADFSuper are contracted to Pillar Administration.

To monitor and manage scheme administration performance, CSC has identified service levels for all its schemes, including in its contractual arrangements with Pillar Administration.

2015-16 performance against services levels for each super scheme is detailed below. Further detail is included in the Annual Performance Statement on pages 18-20.

Defined benefit schemes

Table 11: Defined benefit scheme service standard in 2015-16

CSS* PSS*

APS Total*

DFRDB Military ADF total Total across DB schemes

Number of service standards 64 65 101 64 71 135 236

Number of standards met

60 62 97 60 61 121 218

% achieved 94% 95% 96% 94% 86% 90% 92%

* CSS and PSS schemes share a number of service standards and as such the scheme APS total results do not reconcile.

Defined contribution schemes

Table 12: Defined contribution scheme service standard in 2015-16

PSSap CSCri

Total across DC schemes

Number of service standards

102 75 177

Number of standards met 88 73 161

% achieved 86% 97% 91%

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Review of decisions and complaints

Decisions of CSC and its delegates are subject to both internal review (the reconsideration process) and external review (review by other bodies).

CSC has formal procedures in place to resolve member complaints. These 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).

The number of complaints received in 2015-16 is shown in the individual superannuation scheme sub-sections included below in this section of the report.

Information & advice Part of CSC’s mission is to provide information and services that are relevant, reliable and helpful to members. Our services are designed to give our members the information, education and financial advice they need to make informed decisions about their superannuation, including:

> general information over the phone and online,

> secure management of their account online

> education and general advice at a public or workplace seminar, online webinar or one-on-one information session, and

> personal financial advice from a qualified financial planner from Industry Fund Services (IFS).

Personal financial advice

CSC partners with experienced financial planners from IFS to make a comprehensive personal financial advice service available to CSC scheme members.

IFS is responsible for the advice provided generally on a fee-for-service basis to CSC scheme members. All IFS advisers are licensed financial planners and authorised representatives of IFS. At 30 June 2016, there were nine IFS advisers based in Canberra, Sydney, Melbourne and Brisbane, dedicated to CSC scheme members (compared to seven advisers at 30 June 2015).

The services offered to CSC scheme members include face-to-face and phone-based personal financial advice.

During 2015-16, CSC scheme members reported on average a very good to high level of satisfaction with the personal financial advice and service provided to them.

Public & workplace seminars

CSC scheme members can attend public and workplace seminars, as well as online webinars on their super scheme. Members can also attend sessions on specific topics such as their annual statement, the online calculator for defined benefit schemes known as i-Estimator, and redundancy. Seminars and webinars are presented by CSC’s team of Member Education Consultants.

Chart 1: Workshops and seminars on public sector schemes

0

100

200

300

400

500

600

2015-16 2014-15 2013-14 2012-13 2011-12

In 2015-16, almost 14,000 members attended a public sector scheme seminar or webinar. Members reported a high level of satisfaction

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with the quality of the service provided to them and a high level of satisfaction with the improvement in their knowledge about superannuation as a result of them attending their seminar or webinar. More than nine in 10 members who evaluated a CSC seminar or webinar reported that they would recommend the seminar or webinar to another member.

Chart 2: Seminars on military schemes

0

20

40

60

80

100

2015-16 2014-15 2013-14 2012-13 2011-12

In 2015-16, over 5,000 members attended military scheme seminars run by CSC (which was slightly more than the number of members who attended seminars in 2014-15).

Members of the military schemes can also attend free one-on-one information sessions at locations around Australia. General information is provided on a range of topics, from scheme benefits to contribution and investment options.

Chart 3: One-on-one information sessions for military scheme members

0

500

1,000

1,500

2,000

2,500

3,000

3,500

2015-16 2014-15 2013-14 2012-13 2011-12

In 2015-16, 96% of members who evaluated their one-on-one information reported that they would recommend CSC’s one-on-one information service to another member.

Scheme legislation & trust deeds Changes are made to scheme legislation and trust deeds from time-to-time. Changes made during 2015-16 are detailed in the individual scheme sub-sections of this chapter.

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CSS

Overview of CSS CSS is a public sector scheme established on 1 July 1976 by the CSS Act. It closed to new members on 30 June 1990. CSS is a hybrid scheme (part accumulation and defined benefit) where benefits derive from a member and employer component.

The member component is the accumulation part. It consists of member contributions and Fund earnings. The employer component is the defined benefit part. It comprises two parts; the first is unfunded and generally paid as a lifetime non-commutable indexed pension (lifetime pensions are paid by the Australian Government). The second part is the employer productivity contributions, made-up of contributions and Fund earnings.

CSS membership Chart 4: CSS members & pensioners over five years

0

20,000

40,000

60,000

80,000

100,000

120,000

2016 2015 2014 2013 2012

Deferred Pensioners Contributors

Note: figures are at 30 June of each year; ‘pensioners’ represent the number of pension accounts, not the exact number of pensions (eg multiple recipients such as a spouse and orphan children may be paid under one account).

Administration of CSS

Member contributions

Contributors can make basic and supplementary contributions, both of which are made from after-tax income. Contributors can also make voluntary payments into PSSap (refer to the PSSap part for details).

Chart 5: CSS member contributions

0

$20m

$40m

$60m

$80m

$100m

2015-16 2014-15 2013-14 2012-13 2011-12

Note: this chart shows basic and supplementary contributions.

Employer contributions

Employers pay a fortnightly contribution, which is the productivity component. It is based on the member’s super salary.

Chart 6: CSS employer contributions

0

$5m

$10m

$15m

$20m

$25m

$30m

$35m

2015-16 2014-15 2013-14 2012-13 2011-12

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Benefit payments

Pensions and lump sums

Benefits in CSS are paid in most cases when a member exits the scheme at retirement. Generally benefits cannot be paid until minimum retirement age is reached. Pensions are generally paid to former scheme members who have exited CSS. Pension payments are paid by the Australian Government.

Chart 7: CSS pension payments over five years

0

$500m

$1,000m

$1,500m

$2,000m

$2,500m

$3,000m

$3,500m

$4,000m

2015-16 2014-15 2013-14 2012-13 2011-12

Chart 8: CSS lump sum payments over five years

0

$100m

$200m

$300m

$400m

$500m

$600m

2015-16 2014-15 2013-14 2012-13 2011-12

Note: lump sums are paid from the CSS Fund and by the Australian Government.

Death and invalidity

CSS provides partial invalidity, full invalidity and death benefits.

Benefits are based on the entitlement the individual member would have received if they

had worked to their maximum retirement age (generally age 65), subject to any pre-existing medical conditions being assessed.

Table 13: Full invalidity pensions in CSS

2014-15 2015-16

Full invalidity pensioners

28 21

Note: this table shows the number of new invalidity retirement certificates issued in the relevant reporting year (not the total number of invalidity pensioners).

Partial invalidity

A benefit is paid as a partial invalidity pension, which is a form of income maintenance, when a member’s salary is permanently reduced because of a medical condition.

Table 14: New partial invalidity applications in CSS

2014-15 2015-16

New applications 1 1

Note: this table shows assessed applications including retrospective applications in the relevant reporting year.

Complaints

Table 15: Complaints received in CSS

2014-15 2015-16

Complaints received 41 19

All 2015-16 complaints have been resolved. Most complaints related to benefit payments.

Scheme legislation changes The Acts and Instruments (Framework Reform) (Consequential Provisions) Act 2015 made consequential amendments to the Superannuation Act 1976 as a result of changes made to the Legislative Instruments Act 2003 including the renaming of that Act to the Legislation Act 2003. The Statute Law Revision Act (No.2) 2015 made changes to the Superannuation Act 1976 to modernise the language used in describing the CPI indexation arrangements.

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PSS PSS is a public sector scheme established on 1 July 1990 by the PSS Act. It closed to new members on 30 June 2005. PSS is a defined benefit scheme where benefits generally derive from a member and employer component.

The member component consists of member contributions and Fund earnings. The employer components comprise two parts; the first being employer productivity contributions plus Fund earnings, with the second part being the unfunded ‘benefit balance’, which is determined at the time a member exits relevant public sector employment.

Members on retirement can convert 50% or more of their final benefit to a lifetime non-commutable indexed pension paid by the Australian Government.

PSS membership Chart 9: PSS members & pensioners over five years

0

20,000

40,000

60,000

80,000

100,000

120,000

2015-16 2014-15 2013-14 2012-13 2011-12

Preservers Pensioners Contributors

Note: figures are at 30 June of each year; ‘pensioners’ represent the number of pension accounts, not the exact number of pensions (eg multiple recipients such as a spouse and orphan children may be paid under one account).

Administration of PSS

Member contributions

Contributors can contribute up to 10% of their salary for super purposes. Contributions are made from after-tax income. Contributors can also make voluntary payments into PSSap (refer to the PSSap section for details).

Chart 10: PSS member contributions over five years

0

$100m

$200m

$300m

$400m

$500m

$600m

$700m

800

2015-16 2014-15 2013-14 2012-13 2011-12

Employer contributions

Employers pay a fortnightly contribution, which is the productivity component. It is based on the member’s super salary.

Chart 11: PSS employer contributions over five years

0

$50m

$100m

$150m

$200m

$250m

2015-16 2014-15 2013-14 2012-13 2011-12

Benefit payments

Pensions and lump sums

Benefits in PSS are paid in most cases when a member exits the scheme at retirement.

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Generally benefits cannot be paid until minimum retirement age is reached. Pensions are generally paid to former scheme members who have exited PSS. Pension payments are paid by the Australian Government.

Chart 12: PSS pension payments over five years

0

$300m

$600m

$900m

$1,200m

$1,500m

2015-16 2014-15 2013-14 2012-13 2011-12

Chart 13: PSS lump sum payments over five years

0

$100m

$200m

$300m

$400m

$500m

$600m

$700m

$800m

2015-16 2014-15 2013-14 2012-13 2011-12

Note: lump sums are paid from the PSS Fund and by the Australian Government.

Death and invalidity

PSS provides partial invalidity, full invalidity and death benefits, and contributors can purchase additional death and invalidity cover, subject to those members meeting underwriting requirements.

Benefits are based on the entitlement the individual member would have received if they had worked to age 60, subject to any pre-existing medical conditions being assessed. Benefits for

contributors after reaching age 60 are based on the age retirement pension that would have been payable to them.

Table 16: New full invalidity pensions in PSS

2014-15 2015-16

Full invalidity pensioners

250 234

Note: this table shows the number of new invalidity retirement certificates issued in the relevant reporting year (not the total number of invalidity pensioners).

Partial invalidity

A benefit is paid as a partial invalidity pension, which is a form of income maintenance, when a member’s salary is permanently reduced because of a medical condition.

Table 17: Partial invalidity applications in PSS

2014-15 2015-16

New applications 55 81

Note: this table shows assessed applications including retrospective applications in the relevant reporting year.

Complaints

Table 18: Complaints received in PSS

2014-15 2015-16

Complaints received 106 58

All 2015-16 complaints have been resolved. Complaints generally related to information provided to members, benefit payments and rollovers.

Scheme legislation & trust deed changes The Acts and Instruments (Framework Reform) (Consequential Provisions) Act 2015 made consequential amendments to the Superannuation Act 1990 as a result of changes made to the Legislative Instruments Act 2003 including the renaming of that Act to the Legislation Act 2003.

No changes were made to the PSS Trust Deed.

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MilitarySuper MilitarySuper was established on 1 October 1991 by the MilitarySuper Act. MilitarySuper closed to new ADF entrants on 30 June 2016. ADF Super is now available to new ADF entrants. MilitarySuper members may choose to move to ADF Super or remain in MilitarySuper.

MilitarySuper is a hybrid scheme (part accumulation and defined benefit). Benefits derive from a member and employer component. The member component is the accumulation part. It consists of member contributions, any amounts notionally brought over from DFRDB, plus Fund earnings on those amounts. The employer component is the defined benefit part. It is based on a member’s period of membership and final average salary. It is unfunded except for the portion relating to the employer 3% productivity contributions paid each fortnight to the Fund by the Department of Defence. Unfunded benefits are paid by the Australian Government.

MilitarySuper offers an Ancillary membership to eligible DFRDB members and their spouses who wish to make additional contributions and transfers.

MilitarySuper membership Chart 14: MilitarySuper members & pensioners over five years

0

20,000

40,000

60,000

80,000

100,000

120,000

2015-16 2014-15 2013-14 2012-13 2011-12

Preservers Pensioners Contributors

Note: figures are at 30 June of each year; Ancillary members are not included; ‘pensioners’ represent the number of

pension accounts, not the exact number of pensions (eg multiple recipients such as a spouse and orphan children may be paid under one account).

Administration of MilitarySuper

Member contributions

The basic contribution rate is 5% of salary, including higher duties and the qualification and skills element of certain environmental allowances. Members can contribute up to 10% of their superannuation salary. Ancillary contributions are also accepted into the Fund from members, including both pre and post-tax contributions such as additional personal, salary sacrifice and spouse contributions.

Chart 15: MilitarySuper member contributions over five years

0

$50m

$100m

$150m

$200m

$250m

$300m

$350m

2015-16 2014-15 2013-14 2012-13 2011-12

Note: this chart shows basic and Ancillary contributions.

Ancillary contributions

Ancillary contributions can be made by contributing MilitarySuper and DFRDB members to build a separate superannuation benefit called an Ancillary benefit. It accrues as a separate accumulation interest, which has Fund earnings applied in line with the relevant investment returns. Ancillary contributions do not impact the member’s employer benefit in MilitarySuper or DFRDB.

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Chart 16: MilitarySuper Ancillary contributors over five years

0

1,000

2,000

3,000

4,000

5,000

2015-16 2014-15 2013-14 2012-13 2011-12

Benefit payments Pensions and lump sums

Members who exit the scheme are entitled to receive a member-financed benefit regardless of their reason for leaving the ADF. Exiting members are also entitled to an employer-financed benefit, the amount of which varies based on the reason for their scheme exit. The employer-financed benefit is generally preserved until the member reaches their minimum preservation age.

Chart 17: MilitarySuper pension payments over five years

0

$100m

$200m

$300m

$400m

$500m

2015-16 2014-15 2013-14 2012-13 2011-12

Chart 18: MilitarySuper lump sum payments over five years

0

$50m

$100m

$150m

$200m

2015-16 2014-15 2013-14 2012-13 2011-12

Note: lump sums are paid from the MilitarySuper Fund and by the Australian Government.

Death and invalidity MilitarySuper provides partial invalidity, full invalidity and death benefits.

If a member becomes disabled and unable to continue their ADF service, invalidity benefits can help them to resettle into civilian employment.

Invalidity classifications

There are three levels of invalidity classifications:

> Class A: Significant incapacity,

> Class B: Moderate incapacity,

> Class C: Low incapacity (no entitlement to an invalidity pension).

Table 19: Initial invalidity classifications in MilitarySuper

2014-15 2015-16

Initial classifications

1040 829

Pensions granted 821 749

Pensions not granted

219 80

Note: figures in the table vary slightly to invalidity exits quoted elsewhere due to some cases relating to members discharged in the previous financial year; these figures do not include members who were medically discharged under Rule 32 with no invalidity pension payable having been deemed by a delegate of the Board to have been retired on a pre-existing condition within two years of enlistment.

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Chart 19: Invalidity classifications in MilitarySuper

0

100

200

300

400

500

Air Force Navy Army

Class A Class B Class C

Invalidity classification review

Members classified Class A or Class B are not guaranteed an invalidity benefit for their lifetime and may be subject to periodic medical reviews by CSC or its delegate until the member reaches age 55. Members can also initiate a classification level review.

Members classified Class C at retirement are not subject to periodic reviews but can request the initial classification be reconsidered. Their request must be made within 30 days of when the initial classification was determined.

Complaints

Table 20: Complaints received in MilitarySuper

2014-15 2015-16

Complaints received 32 32

All 2015-16 complaints have been resolved. Complaints generally related to information provided to members, benefit payments and rollovers.

Scheme legislation & trust deed changes The Military Superannuation and Benefits Act 1991 was amended to close the scheme to new members and adjust the process for re-entering members from 1 July 2016.

The Acts and Instruments (Framework Reform) (Consequential Provisions) Act 2015 amended the Military Superannuation and Benefit Act

1991 to update references to the Legislative Instruments Act to the Legislation Act 2003. These amendments commenced on 5 March 2016.

The Trust Deed to the Act was amended to facilitate the introduction of ADF Super and to make some minor administrative amendments. These took effect from September 2015.

The Trust Deed to the Act was further amended to ensure that ADF members must retire before receiving their benefit, rather than being treated as a ‘preserved member’ on the basis they had transferred to ADF Super. This took effect from 1 July 2016.

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PSSap PSSap is a public sector scheme established on 1 July 2005 by the PSSap Act. It is an accumulation plan. Members and employers pay money into the Fund, with investment returns calculated as a compound average rate of return after fees and taxes have been deducted. PSSap is open to eligible employees of participating employers under choice of fund legislation. Employers contribute 15.4% per annum on behalf of their employees.

PSSap also offers an Ancillary membership to eligible CSS and PSS members to make additional super contributions and transfers, and an account-based pension product known as CSCri (Commonwealth Superannuation Corporation retirement income) to eligible public sector scheme members.

PSSap membership Chart 20: PSSap members over five years

0

20,000

40,000

60,000

80,000

100,000

2015-16 2014-15 2013-14 2012-13 2011-12

Preservers Contributors

Note: figures are at 30 June of each year; Ancillary members are not included.

Administration of PSSap

Member contributions

PSSap contributors can make before and after- tax voluntary contributions.

Chart 21: PSSap member contributions over five years

0

$10m

$20m

$30m

$40m

$50m

2015-16 2014-15 2013-14 2012-13 2011-12

Ancillary contributions

Ancillary contributions can be made by contributing CSS and PSS members who also join PSSap to build a separate superannuation benefit. Their benefit in PSSap has unit prices applied in line with the investment returns of the Fund and does not impact their CSS or PSS benefit in any way.

Ancillary memberships have been available since 1 July 2013. In 2015-16, almost $87 million in Ancillary contributions (in the form of salary sacrifice, personal (after tax) contributions, spouse contributions, and super transfers) were made (compared to $54 million in 2014-15).

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Employer contributions

PSSap contributors receive 15.4% employer contributions.

Chart 22: PSSap employer contributions

0

$200m

$400m

$600m

$800m

$1,000m

$1,200m

2015-16 2014-15 2013-14 2012-13 2011-12

Benefit payments

The two most common reasons why superannuation benefits are paid out of the PSSap Fund are for the purpose of retirement and to consolidate funds into another super fund.

Table 21: PSSap withdrawals

2014-15 2015-16

Total withdrawals ($) 376.612m 425.331m

CSCri

CSCri is an account-based pension product offered to public sector scheme members. Lump sum amounts can be rolled into CSCri for the purpose of receiving regular income payments from superannuation in retirement or in the transition to retirement.

Table 22: CSCri roll ins

2014-15 2015-16

Total roll ins ($) 67.864m 103.954m

Table 23: CSCri pension payments and lump sum withdrawals

2014-15 2015-16

Payments and withdrawals ($)

9.73m 24.763m

Insurance benefits

During 2015-16, eligible PSSap members received an automatic level of death, total and permanent disability (TPD) and income protection cover, and could apply to vary, increase, decrease or opt out of their cover. These insurance arrangements are detailed below.

On 1 October 2016, new insurance arrangements (called lifePLUS cover) were introduced, making the insurance cover offered through PSSap available to eligible PSSap preserved and Ancillary members for the first time. lifePLUS cover has two offerings: lifePLUS auto cover and lifePLUS choice cover.

All insurance cover for PSSap members (including lifePLUS cover) that is detailed in this report is provided by the Insurer, AIA Australia Limited ABN 79 004 837 861, AFSL 230043).

Death and TPD

During 2015-16, cover provided a lump sum payment on death or TPD. The level of cover changed automatically based on a member’s age, unless the member had fixed cover in place, which remained the same until the cover ceased or until the member advised that they wish to opt out of that level of cover.

Members could choose death and TPD cover or death only cover.

Table 24: TPD claims in PSSap

2014-15 2015-16

TPD claims assessed 124 153

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Income protection cover

During 2015-16, cover provided an income stream paid monthly in arrears, which covered (by default) 75% of an eligible member’s base salary for up to two years when that member was unable to return to work due to disability caused by sickness or injury.

Table 25: Income protection claims in PSSap

2014-15 2015-16

IP claims assessed 194 247

Complaints

Table 26: Complaints received in PSSap

2014-15 2015-16

Complaints received 118 123

All 2015-16 complaints have been resolved. Most complaints related to superannuation policy and customer service.

Scheme legislation & trust deed changes The Acts and Instruments (Framework Reform) (Consequential Provisions) Act 2015 made consequential amendments to the Superannuation Act 1990 as a result of changes made to the Legislative Instruments Act 2003 including the renaming of that Act to the Legislation Act 2003.

No changes were made to the PSSap Trust Deed.

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1922 scheme The 1922 scheme, which was established under the 1922 Act, is a closed public sector scheme which solely comprises pensioners. Contributing members transferred to CSS when that scheme opened on 1 July 1976. The 1922 Act continues to provide for payment of pensions, deferred benefit entitlements and any reversionary pensions that become payable.

1922 scheme membership Chart 23: 1922 scheme pensioners over five years

0

1,000

2,000

3,000

4,000

5,000

2015-16 2014-15 2013-14 2012-13 2011-12

Note: figures are at 30 June of each year; ‘pensioners’ represent the number of pension accounts, not the exact number of pensions (eg multiple recipients such as a spouse and orphan children may be paid under one account).

Administration of 1922 scheme

Benefit payments

Chart 24: 1922 scheme pension payments over five years

0

$30m

$60m

$90m

$120m

$150m

2015-16 2014-15 2013-14 2012-13 2011-12

Note: 1922 scheme pensions are paid by the Australian Government.

Scheme legislation & trust deed changes The Statute Law Revision Act (No.2) 2015 made changes to the Superannuation Act 1922 to modernise the language used in describing the CPI indexation arrangements. The Statute Law Revision Act (No.1) 2016 made changes to the Superannuation Act 1922 to modernise language relating to provisions describing offences. These amendments commenced 10 December 2016 and 10 March 2016 respectively.

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DFRB, DFRDB and DFSPB

DFRB DFRB is a closed military scheme with no contributing members. Established in 1948 by the DFRB Act, this scheme closed to new contributors on 30 September 1972 (contributing members at that time transferred to DFRDB on 1 October 1972). DFRB continues to provide for the benefit entitlements of members who ceased to be contributors before 1 October 1972 and for reversionary benefits to eligible spouses and children.

DFRDB DFRDB is also a closed military defined benefit scheme. Established by the DFRDB Act, the scheme closed to new ADF entrants on 1 October 1991 when MilitarySuper was established. DFRDB provides superannuation for ADF members who became contributors on or after 1 October 1972 and for contributors of DFRB on 30 September 1972 who compulsorily transferred to DFRDB on 1 October 1972.

DFSPB DFRDB members are also entitled to a productivity benefit under the Defence Force (Superannuation) (Productivity Benefit) Determination (DFSPB), issued under the Defence Act 1903. It is paid by the Department of Defence when a member’s DFRDB benefits are paid.

Membership

DFRB

Chart 25: DFRB pensioners over five years

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

2015-16 2014-15 2013-14 2012-13 2011-12

Note: figures are at 30 June of each year; ‘pensioners’ represent the number of pension accounts, not the exact number of pensions (eg multiple recipients such as a spouse and orphan children may be paid under one account).

DFRDB

Chart 26: DFRDB members & pensioners over five years

0

10,000

20,000

30,000

40,000

50,000

60,000

2015-16 2014-15 2013-14 2012-13 2011-12

Pensioners Members

Note: figures are at 30 June of each year; ‘pensioners’ represent the number of pension accounts, not the exact number of pensions (eg multiple recipients such as a spouse and orphan children may be paid under one account); pensioners who re-enter for less than 12 months do not contribute to DFRDB, continue to receive a pension and are not eligible for invalidity; pensioners who re-enter for greater than 12 months become contributors, their pension is suspended and they are eligible for invalidity.

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Scheme administration

DFRDB member contributions

DFRDB members contribute 5.5% of their fortnightly salary for super purposes until they reach 40 years of effective service, at which time they can no longer contribute. Contributors can also make voluntary payments into MilitarySuper, known as ancillary contributions (refer to the MilitarySuper part for details).

Chart 27: DFRDB member contributions over five years

0

$5m

$10m

$15m

$20m

2015-16 2014-15 2013-14 2012-13 2011-12

DFRDB benefit payments

Lump sum payments

ADF members retiring from the ADF can commute part of their DFRDB benefit to receive early payment of their retirement pension as a lump sum. In this case, their retirement pension is permanently reduced irrespective of how long they live. Retiring members can receive a maximum commutation lump sum of up to five times the value of their annual pension.

Chart 28: DFRDB lump sum payments over five years

0

$20m

$40m

$60m

$80m

$100m

$120m

2015-16 2014-15 2013-14 2012-13 2011-12

Invalidity benefits

DFRDB provides partial invalidity, full invalidity and death benefits. If a member becomes disabled and unable to continue their ADF service, invalidity benefits can help them to resettle into civilian employment.

There are three levels of invalidity classifications:

> Class A: Significant incapacity,

> Class B: Moderate incapacity,

> Class C: Low incapacity (no entitlement to an invalidity pension).

Table 27: Initial invalidity classifications in DFRDB

2014-15 2015-16

Initial classifications

54 43

Pensions granted 38 42

Pensions not granted

16 1

Note: these figures may vary slightly to invalidity exits quoted elsewhere due to some cases relating to members discharged in the previous financial year.

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Chart 29: New invalidity classifications by service in DFRDB

0

5

10

15

20

Air Force Navy Army

Class A Class B Class C

Note: this table shows the number of new invalidity retirement certificates issued in 2015-16 (not the total number of invalidity pensioners).

Invalidity classification review

Periodic medical reviews of DFRDB invalidity recipients are no longer conducted. However, if an invalidity recipient believes their retiring impairment has deteriorated, they can initiate a review of their invalidity classification level. Recipients classified as Class C must make their reconsideration request within 30 days of when the initial classification was determined.

Complaints

Table 28: Complaints received in DFRDB

2014-15 2015-16

Complaints received 25 15

All 2015-16 complaints have been resolved. Complaints generally related to customer service, benefit payments and the administration of pensions.

Scheme legislation & trust deed changes

The DFRB Act

The Statute Law Revision Act (No. 1) 2016 amended the DFRB Act to reflect new legislative drafting practice. These amendments commenced on 10 March 2016.

The Defence Legislation Amendment (First Principles) Act 2015 amended the DFRB Act to reflect new control and administration arrangements. These amendments commenced on 1 July 2016.

The DFRDB Act

The Defence Force Retirement and Death Benefits Act 1973 was amended to close the scheme to re-entering members and to make some minor administrative amendments. This change took effect from 1 July 2016.

The DFSPB Act

There were no changes to the DFSPB Act.

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PNG PNG is a closed public sector scheme with no contributing members. Constituted under the Superannuation (Papua New Guinea) Ordinance 1951, PNG 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 PNG Act.

PNG membership Chart 30: PNG pensioners over five years

0

50

100

150

200

250

2015-16 2014-15 2013-14 2012-13 2011-12

Note: figures are at 30 June of each year; ‘pensioners’ represent the number of pension accounts, not the exact number of pensions (eg multiple recipients such as a spouse and orphan children may be paid under one account).

Administration of PNG

Benefit payments

Chart 31: PNG pension payments over five years

0

$2m

$4m

$6m

$8m

$10m

2015-16 2014-15 2013-14 2012-13 2011-12

Note: 1922 scheme pensions are paid by the Australian Government.

Scheme legislation & trust deed changes No changes were made to the Papua New Guinea (Staffing Assistance) Act 1973 or the Papua New Guinea (Staffing Assistance) (Superannuation) Regulations.

7CSS FINANCIAL STATEMENTS

CSC ANNUAL REPORT 2015-16

CSS FINANCIAL STATEMENT S

66

COMMONWEALTH SUPERANNUATION SCHEME (ABN 19415776361)

REPORT BY THE INDEPENDENT APPROVED AUDITOR TO THE MINISTER FOR FINANCE AND MEMBERS OF THE SCHEME

I have audited the financial statements of Commonwealth Superannuation Scheme for the year ended 30 June 2016 comprising the Statement of Net Assets, the Statement of Changes in Net Assets, a Summary of Principal Accounting Policies and other explanatory notes.

Auditor’s Opinion

In my opinion:

(a) the financial statements are in the form as agreed by the Minister for Finance;

(b) present fairly, in all material respects, in accordance with Australian Accounting Standards the net assets of Commonwealth Superannuation Schemes as at 30 June 2016 and the changes in net assets for the year ended 30 June 2016;

(c) the financial statements are based on proper accounts and records; and

(d) the receipt of money into the Fund, and the payment of money out of the Scheme and the investment of money standing to the credit of the Scheme during the year have been in accordance with the Trust Deed.

Trustee’s responsibility for the financial statements

The superannuation entity's trustee is responsible for the preparation and fair presentation of the financial statements in accordance with Australian Accounting Standards and the form agreed with the Minister for Finance and the requirements of the Superannuation Industry (Supervision) Act 1993 (SIS Act) and the Superannuation Industry (Supervision) Regulations 1994 (SIS Regulations). The trustee is also responsible for such internal control as the trustee determines is necessary to enable the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s responsibility

My responsibility is to express an opinion on the financial statements based on my audit. I have conducted an independent audit of the financial statements in order to express an opinion on them to the members of the Commonwealth Superannuation Scheme and the Minister for Finance.

GPO Box 707 CANBERRA ACT 2601 19 National Circuit BARTON ACT Phone (02) 6203 7300 Fax (02) 6203 7777

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Commonwealth Superannuation Scheme (ABN 19 415 776 361)

The Board of Directors hereby states that in its opinion:

(a)

(b)

(c)

(d)

(e)

(f)

Patricia Cross Nadine Flood

Chairman 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 this 27th day of September 2016 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' ;

the attached financial statements give a true and fair view of the net assets of the Scheme as at 30 June 2016 and the changes in net assets of the Scheme for the year ended 30 June 2016;

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 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 Scheme

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Commonwealth Superannuation Scheme Statement of Changes in Net Assets For the Year Ended 30 June 2016

Note 2016 2015

$'000 $'000

3 768 774 4 049 149

Net investment revenue Interest 890 1 159

Changes in net market values 5c 69 811 419 409

70 701 420 568

Contribution revenue Member contributions 6a 71 403 76 836

Employer contributions 6a 19 682 22 135

Government co-contributions 6a 53 56

Low income superannuation contributions 6a 6 9

Net appropriation from Consolidated Revenue Fund 6b 3 699 888 3 633 802 3 791 032 3 732 838

Total revenue 3 861 733 4 153 406

Benefits paid 6b (4 295 986) (4 430 071)

9 (861) (216)

Total expenses (4 296 847) (4 430 287)

(435 114) (276 881)

Income tax expense 7a (3 087) (3 494)

(438 201) (280 375)

3 330 573 3 768 774

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 Scheme

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CSS FINANCIAL STATEMENT S

70

Commonwealth Superannuation Scheme Statement of Net Assets As at 30 June 2016

Note 2016 2015

$'000 $'000

Investments Pooled superannuation trust 4 3 299 587 3 763 252

Total investments 3 299 587 3 763 252

Other assets Cash and cash equivalents 43 110 25 562

Sundry debtors 8 316 427

Total other assets 43 426 25 989

Total assets 3 343 013 3 789 241

Benefits payable 8 587 16 859

Amounts due to other superannuation schemes 9 861 216

Current tax liabilities 7b 2 981 3 382

Deferred tax liabilities 7c 11 10

Total liabilities 12 440 20 467

3 330 573 3 768 774

The attached notes form part of these financial statements.

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

Commonwealth Superannuation Scheme

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71

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

1. DESCRIPTION OF THE SCHEME

2.

(a) Statement of Compliance

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).

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 was historically conducted on behalf of the Trustee by ComSuper. Following the passage of the Governance of Australian Government Superannuation Schemes Legislation Amendment Bill 2015 on 15 June 2015, ComSuper was merged into CSC on 1 July 2015. CSC continues to be the trustee of the public sector and defence force superannuation schemes and now also performs the scheme administration activities formerly undertaken by ComSuper.

The principal place of business and registered office of the Trustee is Level 8, 121 Marcus Clarke Street, Canberra ACT 2601.

BASIS OF PREPARATION

The financial report of the Scheme is a general purpose financial report which has been prepared in accordance with 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' . For the purposes of preparing financial statements, the Scheme is a not-for-profit entity.

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.

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

The financial statements of the Scheme were authorised for issue by the Directors on 27 September 2016.

Commonwealth Superannuation Scheme

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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

2.

(a) Statement of Compliance (continued)

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' (noting however that AASB 1056 'Superannuation Entities' replaces AAS 25 'Financial Reporting by Superannuation Plans' ).

BASIS OF PREPARATION (continued)

The key impacts on the financial statements of the Scheme include:

AASB 1056 'Superannuation Entities' was issued on 5 June 2014. It replaces AAS 25 'Financial Reporting by Superannuation Plans' with effect for annual reporting periods beginning on or after 1 July 2016 but can be applied earlier. The Trustee has elected not to early adopt AASB 1056 'Superannuation Entities' .

AASB 1056 'Superannuation Entities'

• Preparation of five primary financial statements (rather than the current two), being:

• Additional disclosures on estimates, disaggregated information, financial risk management and policies for managing defined benefit liabilities.

• The recognition of an ‘employer sponsor receivable’ to recognise the Commonwealth Government’s legislated obligation under the Superannuation Act 1976 (as amended) to meet the shortfall between the liability for accrued benefits and the fair value of the net assets available to meet that liability. Based on the fair value of net assets at 30 June 2016 and the most recent valuation of member benefits liabilities (as referred to above), the employer sponsor receivable at 30 June 2016 would be $63.7 billion.

• The recognition of member benefits as a liability on the face of the Statement of Financial Position measured at each reporting date. As disclosed in Note 14, the liability for accrued member benefits at 30 June 2014 (being the date of the most recent valuation by Mercer Consulting (Australia) Pty Ltd) was $67.0 billion.

- Statement of Financial Position; - Income Statement;

- Statement of Changes in Equity/Reserves; - Statement of Cash Flows; and - Statement of Changes in Member Benefits.

Commonwealth Superannuation Scheme

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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

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 2018 30 June 2019

1 January 2018 30 June 2019

1 January 2016 30 June 2017

1 January 2016 30 June 2017

1 January 2016 30 June 2017

1 January 2016 30 June 2017

AASB 15 'Revenue from Contracts with Customers', AASB 2014-5 'Amendments to Australian Accounting Standards arising from AASB 15', and AASB 2015-8 'Amendments to Australian Accounting Standards - Effective Date of AASB 15'

AASB 2014-10 'Amendments to Australian Accounting Standards - Sale or Contribution of Assets between an Investor and its Associate or Joint Venture'

AASB 2015-1 'Amendments to Australian Accounting Standards - Annual Improvements to Australian Accounting Standards 2012-2014 Cycle'

AASB 9 'Financial Instruments', and the relevant amending standards

BASIS OF PREPARATION (continued)

AASB 1056 requires the measurement approach of ‘fair value through profit or loss’ for all assets and liabilities, except for specific exemptions including member benefits, tax assets and liabilities and employer sponsor receivables. The investments of the Scheme are currently already measured at redemption price at the close of business on the last business day of the reporting period and therefore this change in measurement approach will have no impact on the valuation of the Scheme’s investments. The Standard also requires that where the Scheme has an obligation under insurance arrangements provided to members, any insurance contract liabilities are to be measured in a manner consistent with the way in which defined benefit member liabilities are measured.

Other Standards in issue but not effective

In addition to AASB 1056 'Superannuation Entities' , the following Standards were in issue but not yet effective at the date of authorisation of the financial report. It is anticipated that the adoption of the Standards disclosed below will not have a material financial impact on the financial report of the Scheme:

AASB 2015-2 'Amendments to Australian Accounting Standards - Disclosure Initiative: Amendments to AASB 101'

AASB 2015-5 'Amendments to Australian Accounting Standards - Investment Entities: Applying the Consolidation Exemption'

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CSS FINANCIAL STATEMENT S

74

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

2.

(a) Statement of Compliance (continued)

Effective for annual reporting periods

beginning on or after 1 July 2015

(b) Functional and presentation currency

(c) Use of judgements and estimates

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.

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.

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.

AASB 2015-3 'Amendments to Australian Accounting Standards arising from the Withdrawal of AASB 1031 Materiality'

Standard / Interpretation

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 disclosures or amounts reported in these financial statements but may affect the accounting for future transactions or arrangements.

Commonwealth Superannuation Scheme

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75

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

3. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES

(a) Assets

(i)

(ii)

(b) Cash and Cash Equivalents

(c) Foreign Currency Transactions

The accounting policies set out below have been applied in preparing the financial statements for the year ended 30 June 2016 and the comparative information presented in these financial statements for the year ended 30 June 2015.

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.

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. If the price used is the selling or redemption price a deduction for selling costs has already been included. Otherwise, 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 and cash equivalents include 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.

Commonwealth Superannuation Scheme

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CSS FINANCIAL STATEMENT S

76

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

3. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (continued)

(d) Payables

Benefits payable

Sundry payables and amounts due to other schemes

(e) Operational risk reserve

(f) Derivatives

(g) Revenue

The Scheme does not enter into derivative financial instruments.

Benefits payable to a member are recognised where a valid withdrawal notice has been received from the employer sponsor, and approved, 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.

The purpose of the operational risk reserve (ORR) is to provide adequate financial resources to address losses arising from an operational risk event. The ORR is operated in accordance with an ORR policy. The level of the reserve is determined by the Trustee Directors and reviewed annually, based on an assessment of the risks faced by the Fund. The transferred assets underlying the ORR are held in separate cash options of the ARIA Investments Trust and income earned on these assets is recognised in the reserve.

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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

3. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (continued)

(g) Revenue (continued)

Investment revenue

Contribution Revenue

(h) Expenses

(i) 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. As the Scheme invests in the ARIA Investments Trust ('AIT'), which is a pooled superannuation trust, tax on this investment revenue is paid by the AIT.

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).

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).

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.

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

Interest revenue is recognised on an accrual basis.

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78

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

3. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (continued)

(i) Income Tax (continued)

Deferred tax (continued)

Current and deferred tax for the period

(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.

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

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.

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.

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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

3. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (continued)

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

4. INVESTMENTS

2016 2015

$'000 $'000

Pooled Superannuation Trust - ARIA Investments Trust 3 299 587 3 763 252 3 299 587 3 763 252

5. CHANGES IN NET MARKET VALUES

2016 2015

$'000 $'000

(a) Investments held at 30 June:

Pooled Superannuation Trust - ARIA Investments Trust 65 429 382 096 65 429 382 096

(b) Investments realised during the year:

Pooled Superannuation Trust - ARIA Investments Trust 4 382 37 313 4 382 37 313

(c) Total changes in net market values of investments 69 811 419 409

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 an expense item.

Receivables and payables are recognised inclusive of GST.

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

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80

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

6. FUNDING ARRANGEMENTS

(a) Contributions

Member Contributions

Employer Contributions

Transferring Superannuation Benefits From Other Funds

Government Co-Contributions

Low Income Superannuation 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 years ended 30 June 2016 and 30 June 2015, the Commonwealth Government contributed $0.50 for every $1.00 of eligible personal after-tax member contributions paid to the Scheme up to a maximum of $500 per member.

The low income super contribution (LISC) is a Commonwealth Government superannuation payment of up to $500 for the financial years 2012-13 to 2016-17. LISC payments are recognised as revenue when received.

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 from the Consolidated Revenue Fund, and the Commonwealth Government then assumes responsibility for funding the benefit.

Of the total benefits payable at 30 June 2016, $0.103 million (2015: $0.216 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.

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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

6. FUNDING ARRANGEMENTS

(b) Benefits (continued)

2016 2015

$'000 $'000

Gross Appropriation from Consolidated Revenue Fund 4 295 420 4 429 547

(595 532) (795 745)

Net Appropriation 3 699 888 3 633 802

Consolidated Revenue Fund Lump-sum benefits 305 436 528 286

Pensions 3 989 984 3 901 261

4 295 420 4 429 547

CSS Fund Lump-sum benefits 566 524

Total benefits paid 4 295 986 4 430 071

(c) Costs of Managing, Investing and Administering the Scheme

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.

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

less: Transfers from CSS Fund to Consolidated Revenue Fund

The costs of member administration were met by ComSuper until 30 June 2015. Following the passage of the Governance of Australian Government Superannuation Schemes Legislation Amendment Bill 2015 on 15 June 2015, ComSuper was merged into CSC on 1 July 2015. From this date, the costs of member administration are being met by CSC. CSC continues to be the trustee of the Scheme and now also performs the scheme administration activities formerly undertaken by ComSuper.

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82

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

6. FUNDING ARRANGEMENTS (continued)

(c) Costs of Managing, Investing and Administering the Scheme (continued)

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

2016 2015

$'000 $'000

Investment Investment manager fees 3 505 5 135

Custodian fees 502 630

Investment consultant and other service provider fees 423 481

Other investment expenses 261 287

Total direct investment expenses 4 691 6 533

Regulatory fees 491 686

Other operating expenses 2 308 3 227

Total costs 7 490 10 446

2016 2015

$'000 $'000

Trustee costs 14 786 1 166

ComSuper costs - 12 123

Total 14 786 13 289

Sponsoring employers contributed the following to Scheme administration costs:

Administrative fees are paid to CSC by employing agencies 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 prior to 1 July 2015).

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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

7. INCOME TAX

2016 2015

$'000 $'000

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

Tax expense comprises: Current tax expense 3 086 3 494

1 -

Total tax expense 3 087 3 494

(435 114) (276 881)

Income tax expense / (benefit) calculated at 15% (65 267) (41 532)

(10 589) (11 504)

Benefits paid 644 398 664 511

Net appropriation from Consolidated Revenue Fund (554 983) (545 070) Investment revenue already taxed (10 472) (62 911)

Total tax expense 3 087 3 494

(b) Current tax liabilities

Current tax payables: Provision for current year income tax 2 981 3 382

2 981 3 382

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

Deferred tax expense / (income) 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, Government co-contributions and low income superannuation contributions

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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

7. INCOME TAX (continued)

(c) Deferred tax balances

2016 2015

$'000 $'000

Deferred tax liabilities comprise: Temporary differences 11 10

11 10

Taxable and deductible temporary differences arise from the following:

2016 Opening

balance Charged to income Closing

balance

$'000 $'000 $'000

Gross deferred tax liabilities: Interest receivable 10 1 11

10 1 11

Net deferred tax liabilities / (assets) 10 1 11

2015 Opening

balance Charged to income Closing

balance

$'000 $'000 $'000

Gross deferred tax liabilities: Interest receivable 10 - 10

10 - 10

Net deferred tax liabilities / (assets) 10 - 10

8.

2016 2015

$'000 $'000

Receivable from the ARIA Investments Trust 18 30

Interest receivable 72 65

Surcharge tax 123 116

103 216

Total 316 427

There are no receivables that are past due or impaired (2015: nil).

SUNDRY DEBTORS

Amount to be appropriated from Consolidated Revenue Fund

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85

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

9.

10. OPERATIONAL RISK RESERVE

2016 2015

$'000 $'000

Opening balance 7 234 4 572

Transfers to reserve 4 240 2 541

Earnings on reserve 162 121

Closing balance 11 636 7 234

11. AUDITOR'S REMUNERATION

Amounts paid or payable to the Australian National Audit Office for audit services:

2016 2015

$ $

Financial statements 63 325 67 325

Regulatory returns and compliance 35 175 35 175

Total 98 500 102 500

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.

No other services were provided by the Australian National Audit Office or Deloitte Touche Tohmatsu 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 2016 (2015: 2 elections).

The audits were provided by the Australian National Audit Office. The audit fees will be charged against the assets of the ARIA Investments Trust that are referable to the Fund.

The value of contributions transferrable for members who elected to transfer from CSS to PSS is $861,061 at 30 June 2016 (2015: $215,828). This is payable to PSS.

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86

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

12. UNALLOCATED INCOME

2016 2015

$'000 $'000

Opening balance of unallocated income 33 767 43 030

Add: Earnings of fund for the year 70 671 420 506

Less: Earnings allocation to members' accounts (58 893) (427 107)

(4 402) (2 662)

Closing balance of unallocated income 41 143 33 767

13. VESTED BENEFITS

2016 2015

$billion $billion

The vested benefits amount is made up of:

Funded component 3.3 3.8

Unfunded component 63.5 64.1

66.8 67.9

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

Funded component 3.3 3.8

Net assets 3.3 3.8

Surplus / (deficiency) - -

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.

Unallocated income is included in the net assets available to pay benefits at the end of the financial year. The closing balance represents approximately 1.25% (2015: 0.90%) of the members' funded entitlements as at 30 June 2016.

An actuarial estimate of vested benefits at 30 June 2016 is $66.8 billion (2015: $67.9 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 2016 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.

The net assets of the Scheme includes $11,635,787 of assets backing the operational risk reserve (2015: $7,234,437).

Less: Transfers to and earnings on operational risk reserve

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.

Unallocated income primarily represents timing differences, including the difference between investment valuations applied in daily earnings rates and the confirmed investment values published in these financial statements.

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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

14. LIABILITY FOR ACCRUED BENEFITS

Accrued benefits as at 30 June were:

2014 2011

$billion $billion

Funded component 4.1 4.6

Unfunded component 62.8 59.9

66.9 64.5

The net assets compared to the liability for accrued benefits as at 30 June are: 2014 2011

$billion $billion

Funded accrued benefits 4.1 4.6

Net assets 4.1 4.6

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 that, pursuant to the Superannuation Act 1976 (as subsequently amended), will be funded 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 2014. A summary of the report is attached.

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CSS FINANCIAL STATEMENT S

88

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

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 the 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 RSE licence 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 in the AIT. 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, which is the carrying value, approximates fair value. Changes in net market value are recognised in the Statement of Changes in Net Assets.

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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

15. FINANCIAL INSTRUMENTS (continued)

(e) Financial risk management objectives

(f) Credit risk

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 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 which address the investment strategy and objectives and risk mitigation strategies including risk mitigation relating to the use of derivatives.

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'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.

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CSS FINANCIAL STATEMENT S

90

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

15. FINANCIAL INSTRUMENTS (continued)

(f) Credit risk (continued)

2016 2015

$'000 $'000

Investments Pooled Superannuation Trust - ARIA Investments Trust 3 299 587 3 763 252 Other financial assets Cash and cash equivalents 43 110 25 562

Sundry debtors 316 427

Total 3 343 013 3 789 241

(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 holds actively-traded, highly-liquid investments to meet anticipated funding requirements.

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 largest exposure to a single counterparty is to cash held by the investment master custodian Northern Trust. 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 2016 or 30 June 2015.

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.

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

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

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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

15. FINANCIAL INSTRUMENTS (continued)

(g) Liquidity risk (continued)

Financial Liabilities maturity profile:

Less than 3 months 3 months to 1 year 1-5 years

Over 5 years Total

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

30 June 2016

861 - - - 861

Benefits payable 8 587 - - - 8 587

Vested benefits 66 800 000 - - - 66 800 000

Total financial liabilities 66 809 448 - - - 66 809 448

30 June 2015

216 - - - 216

Benefits payable 16 859 - - - 16 859

Vested benefits 67 904 000 - - - 67 904 000

Total financial liabilities 67 921 075 - - - 67 921 075

(h) Market risk

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.

Amounts due to other superannuation schemes

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 currency 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.

The following tables summarise the maturity profile of the Scheme’s financial liabilities. Vested benefits have been included in the less than three months column, as this is the amount that members could call upon as at reporting date. This is the earliest date on which the Scheme can be required to pay members’ vested benefits. However, members may not necessarily call upon amounts vested to them during this time. The tables have been drawn up based on the contractual undiscounted cash flows of financial liabilities based on the earliest date on which the Scheme can be required to pay. The tables include both interest and principal cash flows.

Amounts due to other superannuation schemes

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.

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CSS FINANCIAL STATEMENT S

92

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

15. FINANCIAL INSTRUMENTS (continued)

(h) Market risk (continued)

Foreign currency risk

Interest rate risk

2016

43 110 (129) (129) 129 129

2015

25 562 (102) (102) 102 102

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

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 $' 000 Changes in net assets

The following table illustrates the Scheme's sensitivity to a 0.3% p.a. (2015: 0.4%) 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 0.3% (2015: 0.4%) 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

Net assets available 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 2016 and 30 June 2015 had a maturity profile of less than one month.

Cash and cash equivalents

-0.3% +0.3%

-0.4% +0.4%

Cash and cash equivalents

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 2015 reporting period.

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. However, the Scheme is indirectly exposed to foreign currency risk from the international assets held in the AIT, and it is managed in accordance with the Trustee’s approved investment strategy. 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.

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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

15. FINANCIAL INSTRUMENTS (continued)

(h) Market risk (continued)

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 Scheme's investment in AIT is exposed to market price risk in respect of the latter's holdings of equity securities and unit 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.

Other price risk 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.

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 5.0% (2015: 6.5%) represents the average annual volatility in the default option unit price of the Scheme's investment in the AIT. For the Cash Option and the investments backing the operational risk reserve a factor of 0.3% (2015: 0.4%) 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 by the volatility factor at the reporting date, and all other variables were held constant, the financial result would have improved/(deteriorated) as follows:

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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

15. FINANCIAL INSTRUMENTS (continued)

(h) Market risk (continued)

2016

Default option -/+5.0% 2 967 973 (148 399) (148 399) 148 399 148 399

Cash option -/+0.3% 319 996 (960) (960) 960 960

Operational risk reserve -/+0.3% 8 490 (25) (25) 25 25

Operational risk reserve (AIT) 1 -/+0.3% 3 128 (9) (9) 9 9

3 299 587 (149 393) (149 393) 149 393 149 393

2015

Default option -/+6.5% 3 514 788 (228 461) (228 461) 228 461 228 461

Cash option -/+0.4% 241 260 (965) (965) 965 965

Operational risk reserve -/+0.4% 7 204 (29) (29) 29 29

3 763 252 (229 455) (229 455) 229 455 229 455

Other price risk (continued)

In the Trustee's opinion, the sensitivity analysis at reporting date is representative of the other market price exposures during the financial year.

ARIA Investments Trust:

Total increase / (decrease)

Total increase / (decrease)

1 In accordance with the Australian Prudential Regulatory Authority Prudential Practice Guide SPG 114 - Operational Risk Financial Requirement (SPG 114) a separate option for the Operational Risk Reserve has been created to reflect that the scheme invests through a Pooled Superannuation Trust.

Financial Assets

Changes in net assets

Net assets available to pay benefits

Changes in net assets

Net assets available to pay benefits

Price risk $' 000

ARIA Investments Trust:

Financial Assets

Carrying amount $'000

Change in price

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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

15. FINANCIAL INSTRUMENTS (continued)

(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

2016 Financial Assets Pooled superannuation trust - 3 299 587 - 3 299 587

2015 Financial Assets Pooled superannuation trust - 3 763 252 - 3 763 252

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 not based on observable market data.

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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

16.RELATED PARTIES

(a) Trustee

(b) Key Management Personnel

Winsome Hall

Paul Abraham

Helen Ayres Corporate Secretary (Resigned 30 June 2016) Peter Carrigy-Ryan Chief Executive Officer Philip George

Richard Hill

Leonie McCracken General Manager, Operations (Resigned 18 March 2016) Bronwyn McNaughton General Counsel Christine Pearce General Manager, Member & Employer Services Sarah Rodgers General Manager, People & Culture (Resigned 3 August 2016) Alison Tarditi Chief Investment Officer Andy Young General Manager, Finance & Risk

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 2016:

Peggy O'Neal Margaret Staib

Christopher Ellison

Michael Vertigan (term ended 30 June 2016)

Lyn Gearing (term ended 12 September 2016)

Commonwealth Superannuation Corporation (CSC) was the Trustee throughout the reporting period. No fees were charged by CSC for acting as Trustee of the Scheme during the reporting period.

John McCullagh (term ended 30 June 2016)

The Directors of CSC throughout the year ended 30 June 2016 were:

Tony Cole Patricia Cross (Chairman)

Peter Feltham (term ended 30 June 2016) Nadine Flood

General Manager, Investment Operations (Commenced 21 March 2016)

General Manager, Scheme Administration (Commenced 1 July 2015) General Manager, Information Technology (Commenced 28 September 2015)

The following Directors were appointed subsequent to year-end:

Garry Hounsell (appointed 1 July 2016) Anthony Needham (appointed 1 July 2016) Sunil Kemppi (appointed 1 July 2016)

Ariane Barker (appointed 13 September 2016)

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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

16.RELATED PARTIES (continued)

(c) Key Management Personnel Compensation

2016 2015

$ $

Short-term employee benefits 198 762 157 368

Post-employment benefits 21 851 18 136

Other long-term benefits 15 755 12 018

236 368 187 522

(d) Investing entities

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

Throughout the year ended 30 June 2016, 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 is charged 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.

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

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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

16. RELATED PARTIES (continued)

(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

Share of Net Income after tax

2016 2015 2016 2015

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

ARIA Investments Trust 3 299 587 3 763 252 69 811 419 409

3 299 587 3 763 252 69 811 419 409

(e) Transactions with director-related entities

17. COMMITMENTS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS

18. SUBSEQUENT EVENTS

No other matters have arisen since 30 June 2016 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 2016 (2015: $nil).

The Scheme had no capital or other expenditure commitments at 30 June 2016 (2015: $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 2016 (2015: $nil).

Until 10 August 2015, Margaret Staib was Chief Executive Officer and a director of Airservices Australia, which made employer superannuation contributions of $704,887 to the Scheme between 1 July 2015 and 10 August 2015 (2015: $6,849,216). The contributions were made at arm’s length as part of a normal employer relationship on terms and conditions no more favourable than if the employer had not been a director-related entity.

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INFORMATION REQUIRED FOR PURPOSES OF AUSTRALIAN ACCOUNTING STANDARD AAS 25 RELATING TO THE ACTUARIAL INVESTIGATION OF THE COMMONWEALTH SUPERANNUATION SCHEME

AS AT 30 JUNE 2014

Purpose of Report This statement has been prepared for the purposes of AAS 25 as at 30 June 2014 for the Commonwealth Superannuation Scheme (CSS or the Scheme) at the request of the Commonwealth Superannuation Corporation (CSC).

This extract summarises the actuarial investigation of the Scheme as at 30 June 2014 carried out by Mercer Consulting (Australia) Pty Limited with a report by Richard Boyfield FIAA and David Knox FIAA. It has been prepared for the purposes of inclusion with the Scheme’s financial statements 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 2014 66.9 68.7

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.

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8PSS FINANCIAL STATEMENTS

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PUBLIC SECTOR SUPERANNUATION SCHEME (ABN 74172177893)

REPORT BY THE INDEPENDENT APPROVED AUDITOR TO THE MINISTER FOR FINANCE AND MEMBERS OF THE SCHEME

I have audited the financial statements of Public Sector Superannuation Scheme for the year ended 30 June 2016 comprising the Statement of Net Assets, the Statement of Changes in Net Assets, a Summary of Principal Accounting Policies and other explanatory notes.

Auditor’s Opinion

In my opinion:

(a) the financial statements are in the form as agreed by the Minister for Finance;

(b) present fairly, in all material respects, in accordance with Australian Accounting Standards the net assets of Public Sector Superannuation Scheme as at 30 June 2016 and the changes in net assets for the year ended 30 June 2016;

(c) the financial statements are based on proper accounts and records; and

(d) the receipt of money into the Fund, and the payment of money out of the Scheme and the investment of money standing to the credit of the Scheme during the year have been in accordance with the Trust Deed.

Trustee’s responsibility for the financial statements

The superannuation entity's trustee is responsible for the preparation and fair presentation of the financial statements in accordance with Australian Accounting Standards and the form agreed with the Minister for Finance and the requirements of the Superannuation Industry (Supervision) Act 1993 (SIS Act) and the Superannuation Industry (Supervision) Regulations 1994 (SIS Regulations). The trustee is also responsible for such internal control as the trustee determines is necessary to enable the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s responsibility

My responsibility is to express an opinion on the financial statements based on my audit. I have conducted an independent audit of the financial statements in order to express an opinion on them to the members of the Public Sector Superannuation Scheme and the Minister for Finance.

My audit has been conducted in accordance with the Australian National Audit Office Auditing Standards, which incorporate the Australian Auditing Standards. These Standards require that I comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance as to whether the financial statements are free of material misstatement.

GPO Box 707 CANBERRA ACT 2601 19 National Circuit BARTON ACT Phone (02) 6203 7300 Fax (02) 6203 7777

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Public Sector Superannuation Scheme (ABN 74 172 177 893)

Statement by the Trustee of the Public Sector Superannuation Scheme ('Scheme')

The Board of Directors hereby states that in its opinion:

(a)

(b)

(c)

(d)

(e)

(f)

Patricia Cross Nadine Flood

Chairman Director

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

the operations of the PSS Fund were conducted in accordance with the Governance of Australian Government Superannuation Schemes Act 2011 , the Superannuation Act 1990 , the Trust Deed establishing the Scheme, 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 this 27th day of September 2016 in accordance with a resolution of directors of the Commonwealth Superannuation Corporation (ABN 48 882 817 243) as Trustee of the 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' ;

the attached financial statements give a true and fair view of the net assets of the Scheme as at 30 June 2016 and the changes in net assets of the Scheme for the year ended 30 June 2016;

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 the Trustee in accordance with sub-section 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;

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Public Sector Superannuation Scheme Statement of Changes in Net Assets For the Year Ended 30 June 2016

Note 2016 2015

$'000 $'000

Net assets available to pay benefits at the start of the financial year 17 845 076 16 562 516

Net investment revenue Interest 851 1 379

Changes in net market values 5c 347 672 1 952 653

348 523 1 954 032

Contribution revenue Member contributions 6a 599 667 592 796

Employer contributions 6a 211 918 212 306

Government co-contributions 6a 1 456 1 830

Low income superannuation contributions 6a 353 400

Net appropriation from Consolidated Revenue Fund 6b 646 170 308 279 Transfers from the Commonwealth Super Scheme 9 861 216

1 460 425 1 115 827

Other revenue Insurance proceeds 2 350 2 582

Insurance premiums 2 681 2 314

5 031 4 896

Total revenue 1 813 979 3 074 755

Benefits paid 6b (1 714 743) (1 757 782)

Insurance expense (2 681) (2 314)

Total expenses (1 717 424) (1 760 096)

Change in net assets before income tax 96 555 1 314 659

Income tax expense 7a (31 978) (32 099)

Change in net assets after income tax 64 577 1 282 560

Net assets available to pay benefits at the end of the financial year 17 909 653 17 845 076

The attached notes form part of these financial statements.

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Public Sector Superannuation Scheme Statement of Net Assets As at 30 June 2016

Note 2016 2015

$'000 $'000

Investments Pooled superannuation trust 4 17 891 656 17 856 161

Total investments 17 891 656 17 856 161

Other assets Cash and cash equivalents 59 465 36 659

Sundry debtors 8 2 989 5 262

Deferred tax assets 7c 153 122

Total other assets 62 607 42 043

Total assets 17 954 263 17 898 204

Benefits payable 11 562 20 071

Sundry payables 1 226 1 096

Current tax liabilities 7b 31 822 31 961

Total liabilities 44 610 53 128

Net assets available to pay benefits at the end of the financial year 17 909 653 17 845 076

The attached notes form part of these financial statements.

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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

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).

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 was historically conducted on behalf of the Trustee by ComSuper. Following the passage of the Governance of Australian Government Superannuation Schemes Legislation Amendment Bill 2015 on 15 June 2015, ComSuper was merged into CSC on 1 July 2015. CSC continues to be the trustee of the public sector and defence force superannuation schemes and now also performs the scheme administration activities formerly undertaken by ComSuper.

The principal place of business and registered office of the Trustee is Level 8, 121 Marcus Clarke Street, Canberra ACT 2601.

The financial report of the Scheme is a general purpose financial report which has been prepared in accordance with 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' . For the purposes of preparing financial statements, the Scheme is a not-for-profit entity.

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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

2. BASIS OF PREPARATION (continued)

(a) Statement of compliance (continued)

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

The financial statements of the Scheme were authorised for issue by the Trustee on 27 September 2016.

On review of the provisions of the Trust Deed of the investment entity, the ARIA Investments Trust (AIT), the Trustee has determined that no one investor can be regarded to have control over the AIT. Hence, the financial statements of the Scheme are prepared on a stand-alone basis.

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.

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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

2. BASIS OF PREPARATION (continued)

(a) Statement of compliance (continued)

AASB 1056 'Superannuation Entities'

• The recognition of member benefits as a liability on the face of the Statement of Financial Position measured at each reporting date. As disclosed in Note 14, the liability for accrued member benefits at 30 June 2014 (being the date of the most recent valuation by Mercer Consulting (Australia) Pty Ltd) was $63.5 billion.

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' (noting however that AASB 1056 'Superannuation Entities' replaces AAS 25 'Financial Reporting by Superannuation Plans' ).

AASB 1056 'Superannuation Entities' was issued on 5 June 2014. It replaces AAS 25 'Financial Reporting by Superannuation Plans' with effect for annual reporting periods beginning on or after 1 July 2016 but can be applied earlier. The Trustee has elected not to early adopt AASB 1056 'Superannuation Entities'.

• The recognition of an ‘employer sponsor receivable’ to recognise the Commonwealth Government’s legislated obligation under the Superannuation Act 1990 (as amended) to meet the shortfall between the liability for accrued benefits and the fair value of the net assets available to meet that liability. Based on the fair value of net assets at 30 June 2016 and the most recent valuation of member benefits liabilities (as referred to above), the employer sponsor receivable at 30 June 2016 would be $45.6 billion.

• Additional disclosures on estimates, disaggregated information, financial risk management and policies for managing defined benefit liabilities.

The key impacts on the financial statements of the Scheme include:

• Preparation of five primary financial statements (rather than the current two), being:

- Statement of Financial Position; - Income Statement; - Statement of Changes in Equity/Reserves; - Statement of Cash Flows; and - Statement of Changes in Member Benefits.

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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

2. BASIS OF PREPARATION (continued)

(a) Statement of compliance (continued)

Other Standards in issue but not effective

Standard / Interpretation Effective for annual

reporting periods beginning on or after

Expected to be initially applied in the financial year ending 1 January 2018 30 June 2019

1 January 2018 30 June 2019

1 January 2016 30 June 2017

1 January 2016 30 June 2017

1 January 2016 30 June 2017

1 January 2016 30 June 2017

AASB 15 'Revenue from Contracts with Customers', AASB 2014-5 'Amendments to Australian Accounting Standards arising from AASB 15', and AASB 2015-8 'Amendments to Australian Accounting Standards - Effective Date of AASB 15'

AASB 2015-1 'Amendments to Australian Accounting Standards - Annual Improvements to Australian Accounting Standards 2012-2014 Cycle'

AASB 2014-10 'Amendments to Australian Accounting Standards - Sale or Contribution of Assets between an Investor and its Associate or Joint Venture'

AASB 2015-2 'Amendments to Australian Accounting Standards - Disclosure Initiative: Amendments to AASB 101'

AASB 1056 requires the measurement approach of ‘fair value through profit or loss’ for all assets and liabilities, except for specific exemptions including member benefits, tax assets and liabilities and employer sponsor receivables. The investments of the Scheme are currently already measured at redemption price at the close of business on the last business day of the reporting period and therefore this change in measurement approach will have no impact on the valuation of the Scheme’s investments. The Standard also requires that where the Scheme has an obligation under insurance arrangements provided to members, any insurance contract liabilities are to be measured in a manner consistent with the way in which defined benefit member liabilities are measured.

In addition to AASB 1056 'Superannuation Entities' , the following Standards were in issue but not yet effective at the date of authorisation of the financial report. It is anticipated that the adoption of the Standards disclosed below will not have a material financial impact on the financial report of the Scheme:

AASB 9 'Financial Instruments', and the relevant amending standards

AASB 2015-5 'Amendments to Australian Accounting Standards - Investment Entities: Applying the Consolidation Exemption'

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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

2. BASIS OF PREPARATION (continued)

(a) Statement of compliance (continued)

Effective for annual reporting periods

beginning on or after 1 July 2015

(b) Functional and presentation currency

(c)

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.

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

Use of judgements and estimates

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

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.

Standard / Interpretation

AASB 2015-3 'Amendments to Australian Accounting Standards arising from the Withdrawal of AASB 1031 Materiality'

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 disclosures or amounts reported in these financial statements but may affect the accounting for future transactions or arrangements:

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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

3. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES

(a)

Net market values have been determined as follows:

(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

(c) Foreign Currency Transactions

The accounting policies set out below have been applied in preparing the financial statements for the year ended 30 June 2016 and the comparative information presented in these financial statements for the year ended 30 June 2015.

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. If the price used is the selling or redemption price a deduction for selling costs has already been included. Otherwise, as selling costs are generally immaterial, net market value approximates fair value unless otherwise stated.

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

Assets

The Scheme does not undertake transactions denominated in foreign currencies.

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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

3. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (continued)

(d)

Benefits payable

Sundry payables

(e) Operational risk reserve

(f) Derivatives

(g) Revenue

Investment revenue

The purpose of the operational risk reserve (ORR) is to provide adequate financial resources to address losses arising from an operational risk event. The ORR is operated in accordance with an ORR policy. The level of the reserve is determined by the Trustee Directors and reviewed annually, based on an assessment of the risks faced by the Fund. The transferred assets underlying the ORR are held in separate cash options of the ARIA Investments Trust and income earned on these assets is recognised in the reserve.

The Scheme does not 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, 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:

Interest revenue is recognised on an accrual basis.

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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

3. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (continued)

(g) Revenue (continued)

Investment revenue (continued)

Contribution Revenue

(h) Expenses

(i) Income Tax

Current tax

Deferred tax

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. As the Scheme invests in the ARIA Investments Trust ('AIT'), which is a pooled superannuation trust, tax on this investment revenue is paid by the AIT.

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).

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.

Employer and member contributions, transfers from funds other than the Commonwealth Superannuation Scheme (CSS), superannuation co-contributions and low income superannuation 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).

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.

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3. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (continued)

(i) Income Tax (continued)

Deferred tax (continued)

Current and deferred tax for the period

(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.

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

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122

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

3. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (continued)

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

4. INVESTMENTS

2016 2015

$'000 $'000

Pooled Superannuation Trust - ARIA Investments Trust 17 891 656 17 856 161 17 891 656 17 856 161

5. CHANGES IN NET MARKET VALUES

2016 2015

$'000 $'000

(a) Investments held at 30 June:

Pooled Superannuation Trust - ARIA Investments Trust 346 553 1 926 206 346 553 1 926 206

(b) Investments realised during the year:

Pooled Superannuation Trust - ARIA Investments Trust 1 119 26 447 1 119 26 447

(c) Total changes in net market values of investments 347 672 1 952 653

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 an expense item.

Receivables and payables are recognised inclusive of GST.

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

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6. FUNDING ARRANGEMENTS

(a) Contributions

Member Contributions

Employer Contributions

Transferring Superannuation Benefits From Other Funds

Government Co-Contributions

Low Income Superannuation Contributions

(b) Benefits

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 years ended 30 June 2016 and 30 June 2015, the Commonwealth Government contributed $0.50 for every $1.00 of eligible personal after-tax member contributions paid to the Scheme up to a maximum of $500 per member.

The low income super contribution (LISC) is a Commonwealth Government superannuation payment of up to $500 for the financial years 2012-13 to 2016-17. LISC payments are recognised as revenue when received.

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 from the Consolidated Revenue Fund, and the Commonwealth Government then assumes responsibility for funding the benefit.

Of the total benefits payable as at 30 June 2016, $1.88 million (2015: $4.81 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.

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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

6. FUNDING ARRANGEMENTS (continued)

(b) Benefits (continued)

2016 2015

$'000 $'000

Gross Appropriation from Consolidated Revenue Fund 1 679 618 1 723 136

(1 033 448) (1 414 857)

Net Appropriation 646 170 308 279

Consolidated Revenue Fund Lump-sum benefits 423 240 643 716

Pensions 1 256 378 1 079 420

1 679 618 1 723 136

PSS Fund Lump-sum benefits 35 125 34 646

Total benefits paid 1 714 743 1 757 782

(c) Costs of Managing, Investing and Administering the Scheme

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.

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

less: Transfers from PSS Fund to Consolidated Revenue Fund

The costs of member administration were met by ComSuper until 30 June 2015. Following the passage of the Governance of Australian Government Superannuation Schemes Legislation Amendment Bill 2015 on 15 June 2015, ComSuper was merged into CSC on 1 July 2015. From this date, costs of member administration are being met by CSC. CSC continues to be the trustee of the Scheme and now also performs the scheme administration activities formerly undertaken by ComSuper.

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6. FUNDING ARRANGEMENTS (continued)

(c) Costs of Managing, Investing and Administering the Scheme (continued)

2016 2015

$'000 $'000

Investment Investment manager fees 17 742 22 598

Custodian fees 2 540 2 774

Investment consultant and other service provider fees 2 143 2 118

Other investment expenses 1 319 1 265

23 744 28 755

Regulatory fees 2 024 2 242

Other operating expenses 11 680 14 917

Total costs 37 448 45 914

Sponsoring employers contributed the following to Scheme administration costs:

2016 2015

$'000 $'000

Trustee costs 29 318 2 070

ComSuper costs - 26 861

Total 29 318 28 931

Administrative fees are paid to CSC by employing agencies 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 prior to 1 July 2015).

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

Total direct investment expenses

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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

7. INCOME TAX

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

2016 2015

$'000 $'000

32 009 32 096

- 132

- (132)

(31) 3

31 978 32 099

96 555 1 314 659

14 483 197 199

(90 286) (89 240)

Insurance proceeds (353) (387)

Benefits paid 257 211 263 667

(96 926) (46 242)

Investment revenue already taxed (52 151) (292 898)

- 132

- ( 132)

Total tax expense 31 978 32 099

(b) Current tax liabilities

Current tax payables: Provision for current year income tax 31 822 31 961

31 822 31 961

Income tax expense calculated at 15%

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

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:

Net appropriation from Consolidated Revenue Fund

Deferred tax expense relating to the origination and reversal of temporary differences

Tax expense comprises: Current tax expense

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

Total tax expense

Increase in net assets for the year before income tax

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

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

Member contributions, Government co-contributions and low income superannuation contributions

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

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7. INCOME TAX (continued)

2016 2015

$'000 $'000

(c) Deferred tax balances

Deferred tax asset / (liabilities): Temporary differences 153 122

153 122

Taxable and deductible temporary differences arise from the following:

2016 Opening

balance Charged to income Closing

balance

$'000 $'000 $'000

Gross deferred tax assets / (liabilities): Interest receivable (12) 3 (9)

Insurance premiums payable 134 28 162

122 31 153

2015 Opening

balance Charged to income Closing

balance

$'000 $'000 $'000

Gross deferred tax assets / (liabilities): Interest receivable (7) (5) (12)

Insurance premiums payable - 134 134

(7) 129 122

8. SUNDRY DEBTORS

2016 2015

$'000 $'000

Receivable from the ARIA Investments Trust 189 160

Interest receivable 60 78

861 216

1 879 4 808

2 989 5 262

There are no receivables that are past due or impaired (2015: nil).

Amount to be appropriated from Consolidated Revenue Fund Amounts due from the CSS Fund

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9.

10. OPERATIONAL RISK RESERVE

2016 2015

$'000 $'000

Opening balance 30 648 17 494

Transfers to reserve 31 722 12 671

Earnings on reserve 755 483

Closing balance 63 125 30 648

11. AUDITOR'S REMUNERATION

2016 2015

$ $

Amounts paid or payable to the Australian National Audit Office for audit services:

Financial statements 63 325 67 325

Regulatory returns and compliance 35 175 35 175

Total 98 500 102 500

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 $861,061 at 30 June 2016 (2015: $215,828). 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 2016 (2015: 2 elections).

The audits were provided by the Australian National Audit Office. The audit fees will be charged against the assets of the ARIA Investments Trust that are referable to the Fund.

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.

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129

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

12. UNALLOCATED INCOME

2016 2015

$'000 $'000

Opening balance of unallocated income 47 418 116 205

Add: Earnings of Fund for the year 348 332 1 953 780

Less: Earnings allocation to members' accounts (302 533) (2 009 413) Less: Transfers to and earnings on operational risk reserve (32 477) (13 154) Closing balance of unallocated income 60 740 47 418

13. VESTED BENEFITS

2016 2015

$billion $billion

The vested benefits amount is made up of:

Funded component 17.9 17.8

Unfunded component 62.9 58.8

80.8 76.6

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

Funded component 17.9 17.8

Net assets 17.9 17.8

Surplus / (deficiency) - -

The net assets of the Scheme includes $63,125,021 of assets backing the operational risk reserve (2015: $30,647,739).

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.

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 2016 is $80.8 billion (2015: $76.6 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 2016 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 is included in the net assets available to pay benefits at the end of the financial year. The closing balance is approximately 0.34% (2015: 0.27%) of the members' funded entitlements as at 30 June 2016.

Unallocated income primarily represents timing differences, including the difference between investment valuations applied in daily earnings rates and the confirmed investment values published in these financial statements.

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130

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

14. LIABILITY FOR ACCRUED BENEFITS

2014 2011

$billion $billion

Accrued benefits as at 30 June were:

Funded component 16.6 12.5

Unfunded component 46.9 33.1

63.5 45.6

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

Funded accrued benefits 16.6 12.5

Net assets 16.6 12.5

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 that, pursuant to the Superannuation Act 1990 (as amended), will be funded 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 2014. A summary of the review is attached.

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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

15. FINANCIAL INSTRUMENTS

(a) Financial instruments management

(b) Significant accounting policies

(c) Capital risk management

(d) Categories of financial instruments

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 RSE licence 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 in the AIT. 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.

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 the 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 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, which is the carrying value, approximates fair value. Changes in net market value are recognised in the Statement of Changes in Net Assets.

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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

15. FINANCIAL INSTRUMENTS (continued)

(e) Financial risk management objectives

(f) Credit risk

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.

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 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 which address the investment strategy and objectives and risk mitigation strategies including risk mitigation relating to the use of derivatives.

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'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.

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15. FINANCIAL INSTRUMENTS (continued)

(f) Credit risk (continued)

2016 2015

$'000 $'000

Investments Pooled Superannuation Trust - ARIA Investments Trust 17 891 656 17 856 161 Other financial assets Cash and cash equivalents 59 465 36 659

Sundry debtors 2 989 5 262

17 954 110 17 898 082

(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 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.

The largest exposure to a single counterparty is to cash held by the investment master custodian Northern Trust. 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 2016 or 30 June 2015.

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.

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

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

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134

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

15. FINANCIAL INSTRUMENTS (continued)

(g) Liquidity risk (continued)

Financial Liabilities maturity profile:

Less than 3 months 3 months to 1 year 1-5 years

Over 5 years Total

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

30 June 2016 Benefits payable 11 562 - - - 11 562

Sundry payables 1 226 - - - 1 226

Vested benefits 80 847 001 - - - 80 847 001

Total financial liabilities 80 859 789 - - - 80 859 789

30 June 2015 Benefits payable 20 071 - - - 20 071

Sundry payables 1 096 - - - 1 096

Vested benefits 76 567 000 - - - 76 567 000

Total financial liabilities 76 588 167 - - - 76 588 167

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.

The following tables summarise the maturity profile of the Scheme’s financial liabilities. Vested benefits have been included in the less than three months column, as this is the amount that members could call upon as at reporting date. This is the earliest date on which the Scheme can be required to pay members’ vested benefits. However, members may not necessarily call upon amounts vested to them during this time. The tables have been drawn up based on the contractual undiscounted cash flows of financial liabilities based on the earliest date on which the Scheme can be required to pay. The tables include both interest and principal cash flows.

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.

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15. FINANCIAL INSTRUMENTS (continued)

(h) Market risk

Foreign currency risk

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 currency 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 2015 reporting period.

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. However, the Scheme is indirectly exposed to foreign currency risk from the international assets held in the AIT, and it is managed in accordance with the Trustee’s approved investment strategy. 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.

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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

15. FINANCIAL INSTRUMENTS (continued)

(h) Market risk (continued)

Interest rate risk

2016

59 465 (178) (178) 178 178

2015

36 659 (147) (147) 147 147

-0.3% +0.3%

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 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 2016 and 30 June 2015 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 0.3% p.a. (2015: 0.4%) 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 0.3% (2015: 0.6%) 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 Changes in net assets

Net assets available to pay

benefits

Changes in net assets

Net assets available to pay

benefits

Cash and cash equivalents

-0.4% +0.4%

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 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.

Cash and cash equivalents

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15. FINANCIAL INSTRUMENTS (continued)

(h) Market risk (continued)

The Scheme's investment in AIT is exposed to market price risk in respect of the latter's holdings of equity securities and unit 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 5.0% (2015: 6.5%) represents the average annual volatility in the default option unit price of the Scheme's investment in the AIT. For the Cash Option and the investments backing the operational risk reserve a factor of 0.3% (2015: 0.4%) 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 by the volatility factor at the reporting date, and all other variables were held constant, the financial result would have improved/(deteriorated) as follows:

Other price risk (continued)

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15. FINANCIAL INSTRUMENTS (continued)

(h) Market risk (continued)

2016

Default Option -/+5.0% 17 774 127 ( 888 706) ( 888 706) 888 706 888 706

Cash option -/+0.3% 54 592 (164) (164) 164 164

Operational risk reserve -/+0.3% 44 497 (133) (133) 133 133

-/+0.3% 18 440 ( 55) ( 55) 55 55

17 891 656 ( 889 058) ( 889 058) 889 058 889 058

2015

Default Option -/+6.5% 17 779 082 (1 155 640) (1 155 640) 1 155 640 1 155 640

Cash option -/+0.4% 46 591 (186) (186) 186 186

Operational risk reserve -/+0.4% 30 488 (122) (122) 122 122

17 856 161 (1 155 948) (1 155 948) 1 155 948 1 155 948

Carrying amount $'000

Price risk $' 000

Other price risk (continued)

In the Trustee's opinion, the sensitivity analysis at reporting date is representative of the other market price exposures during the financial year.

Total increase / (decrease)

Change in price

Financial Assets ARIA Investments Trust:

Financial Assets ARIA Investments Trust:

Net assets available to pay

benefits

Changes in net assets

Total increase / (decrease)

Net assets available to pay

benefits

Changes in net assets

Operational risk reserve (AIT)1

1 In accordance with the Australian Prudential Regulatory Authority Prudential Practice Guide SPG 114 - Operational Risk Financial Requirement (SPG 114) a separate option for the Operational Risk Reserve has been created to reflect that the scheme invests through a Pooled Superannuation Trust.

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15. FINANCIAL INSTRUMENTS (continued)

(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

2016 Financial Assets Pooled superannuation trust - 17 891 656 - 17 891 656

2015 Financial Assets Pooled superannuation trust - 17 856 161 - 17 856 161

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 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.

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 not based on observable market data.

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

Public Sector Superannuation Scheme

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140

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

16. RELATED PARTIES

(a) Trustee

(b)

Paul Abraham

Helen Ayres Corporate Secretary (Resigned 30 June 2016) Peter Carrigy-Ryan Chief Executive Officer Philip George

Richard Hill

Leonie McCracken General Manager, Operations (Resigned 18 March 2016) Bronwyn McNaughton General Counsel Christine Pearce General Manager, Member & Employer Services Sarah Rodgers General Manager, People & Culture (Resigned 3 August 2016) Alison Tarditi Chief Investment Officer Andy Young General Manager, Finance & Risk

Commonwealth Superannuation Corporation (CSC) was the Trustee throughout the reporting period. 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 2016:

Peggy O'Neal

Michael Vertigan (term ended 30 June 2016)

Tony Cole

Peter Feltham (term ended 30 June 2016) Nadine Flood

John McCullagh (term ended 30 June 2016)

The Directors of CSC throughout the year ended 30 June 2016 were:

Margaret Staib

Winsome Hall

Key Management Personnel

Patricia Cross (Chairman) Christopher Ellison

Lyn Gearing (term ended 12 September 2016)

The following Directors were appointed subsequent to year-end:

Ariane Barker (appointed 13 September 2016) Garry Hounsel (appointed 1 July 2016) Anthony Needham (appointed 1 July 2016) Sunil Kemppi (appointed 1 July 2016)

General Manager, Investment Operations (Commenced 21 March 2016)

General Manager, Scheme Administration (Commenced 1 July 2015)

General Manager, Information Technology (Commenced 28 September 2015)

Public Sector Superannuation Scheme

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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

16. RELATED PARTIES (continued)

(c) Key Management Personnel Compensation

2016 2015

$ $

Short-term employee benefits 1 001 033 792 557

Post-employment benefits 110 051 91 337

Other long-term benefits 79 347 60 526

1 190 431 944 420

(d) Investing entities

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 is charged 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.

Throughout the year ended 30 June 2016, 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, Public Sector Superannuation Accumulation Plan and the Military Superannuation and Benefits Scheme. 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:

Public Sector Superannuation Scheme

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142

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

16. RELATED PARTIES (continued)

(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

Share of Net Income after tax

2016 2015 2016 2015

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

ARIA Investments Trust 17 891 656 17 856 161 347 672 1 952 653

17 891 656 17 856 161 347 672 1 952 653

(e) Transactions with director-related entities

Until 10 August 2015, Margaret Staib was Chief Executive Officer and a director of Airservices Australia, which made employer superannuation contributions of $15,131 to the Scheme between 1 July 2015 and 10 August 2015 (2015: $125,231). The contributions were made at arm’s length as part of a normal employer relationship on terms and conditions no more favourable than if the employer had not been a director-related entity.

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 2016 (2015: $nil).

Public Sector Superannuation Scheme

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143

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

17. COMMITMENTS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS

18. SUBSEQUENT EVENTS

No matters have arisen since 30 June 2016 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 Scheme had no capital or other expenditure commitments as at 30 June 2016 (2015: $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 (including insurance benefits) 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 2016 (2015: $nil).

Public Sector Superannuation Scheme

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144

CSC ANNUAL REPORT 2015-16

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145

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PSS FINANCIAL STATEMENT S

146

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147

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PSS FINANCIAL STATEMENT S

148

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149

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150

9MILITARYSUPER FINANCIAL STATEMENTS

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MILITARY SUPERANNUATION AND BENEFITS FUND (ABN 50925523120)

REPORT BY THE INDEPENDENT APPROVED AUDITOR TO THE MINISTER FOR FINANCE AND MEMBERS OF THE FUND

I have audited the financial statements of Military Superannuation And Benefits Fund for the year ended 30 June 2016 comprising the Statement of Net Assets, the Statement of Changes in Net Assets, a Summary of Principal Accounting Policies and other explanatory notes.

Auditor’s Opinion

In my opinion:

(a) the financial statements are in the form as agreed by the Minister for Finance;

(b) present fairly, in all material respects, in accordance with Australian Accounting Standards the net assets of Military Superannuation And Benefits Fund as at 30 June 2016 and the changes in net assets for the year ended 30 June 2016;

(c) the financial statements are based on proper accounts and records; and

(d) the receipt of money into the Fund, and the payment of money out of the Fund and the investment of money standing to the credit of the Fund during the year have been in accordance with the Trust Deed.

Trustee’s responsibility for the financial statements

The superannuation entity's trustee is responsible for the preparation and fair presentation of the financial statements in accordance with Australian Accounting Standards and the form agreed with the Minister for Finance and the requirements of the Superannuation Industry (Supervision) Act 1993 (SIS Act) and the Superannuation Industry (Supervision) Regulations 1994 (SIS Regulations). The trustee is also responsible for such internal control as the trustee determines is necessary to enable the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s responsibility

My responsibility is to express an opinion on the financial statements based on my audit. I have conducted an independent audit of the financial statements in order to express an opinion on them to the members of the Military Superannuation And Benefits Fund and the Minister for Finance.

My audit has been conducted in accordance with the Australian National Audit Office Auditing Standards, which incorporate the Australian Auditing Standards. These Standards require that I comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance as to whether the financial statements are free of material misstatement.

GPO Box 707 CANBERRA ACT 2601 19 National Circuit BARTON ACT Phone (02) 6203 7300 Fax (02) 6203 7777

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Military Superannuation and Benefits Fund (ABN 50 925 523 120)

The Board of Directors hereby states that in its opinion:

(a)

(b)

(c)

(d)

(e)

(f)

Patricia Cross Nadine Flood

Chairman Director

Statement by the Trustee of the Military Superannuation and Benefits Fund ('Fund')

the operations of the Military Superannuation and Benefits Scheme (Scheme) (defined at Note 1) were conducted in accordance with the Governance of Australian Government Superannuation Schemes Act 2011 , the Military Superannuation and Benefits Act 1991 , the Trust Deed establishing the Fund, 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 this 27th day of September 2016 in accordance with a resolution of Directors of Commonwealth Superannuation Corporation (ABN 48 882 817 243) as Trustee of the Fund.

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' ;

the attached financial statements give a true and fair view of the net assets of the Military Superannuation and Benefits Fund No. 1 (defined in Note 1) as at 30 June 2016 and the changes in net assets of the Fund for the year ended 30 June 2016;

at the date of this statement there are reasonable grounds to believe that the Fund 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 the Trustee in accordance with sub-section 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;

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

Military Superannuation and Benefits Fund

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Military Superannuation and Benefits Fund

Note 2016 2015

$'000 $'000

6 798 396 5 765 203

Net Investment revenue Interest 664 746

Changes in net market values 5c 143 002 725 257

143 666 726 003

Contribution revenue Member contributions 6a 315 948 271 124

Employer contributions 6a 180 264 177 979

Government co-contributions 6a 2 060 2 509

Low income superannuation contributions 6a 790 909

6b 499 906 439 406

998 968 891 927

Total revenue 1 142 634 1 617 930

Benefits paid 6b (617 963) (557 928)

Total expenses (617 963) (557,928)

524 671 1 060 002

Income tax expense 7a (27 137) (26 809)

497 534 1 033 193

7 295 930 6 798 396

The attached notes form part of these financial statements.

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

Net appropriation from Consolidated Revenue Fund

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

Statement of Changes in Net Assets For the Year Ended 30 June 2016

Change in net assets before income tax

Change in net assets after income tax

Military Superannuation and Benefits Fund

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Military Superannuation and Benefits Fund

Note 2016 2015

$'000 $'000

Investments Pooled superannuation trust 4 7 261 675 6 792 394

Total Investments 7 261 675 6 792 394

Other assets Cash and cash equivalents 62 107 34 019

Sundry debtors 8 4 009 4 120

Total other assets 66 116 38 139

Total assets 7 327 791 6 830 533

Benefits payable 4 395 5 140

Sundry payables 409 256

Current tax liabilities 7b 27 049 26 733

Deferred tax liabilities 7c 8 8

Total liabilities 31 861 32 137

7 295 930 6 798 396

The attached notes form part of these financial statements.

Statement of Net Assets As at 30 June 2016

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

Military Superannuation and Benefits Fund

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157

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

1. DESCRIPTION OF THE SCHEME AND THE FUND

2. BASIS OF PREPARATION

(a) Statement of compliance

The Military Superannuation and Benefits Scheme ('Scheme') (ABN 50 925 523 120) is a hybrid accumulation-defined benefits scheme which provides benefits to its members under the Military Superannuation and Benefits Act 1991 . The Trustee of the Scheme is Commonwealth Superannuation Corporation (CSC) (ABN 48 880 817 243).

The Scheme is operated for the purpose of providing members of the Australian Defence Force (and their dependants or beneficiaries) with lump sum and pension benefits upon retirement, termination of service, death or disablement. For the purposes of the Scheme, the Military Superannuation and Benefits Fund No. 1 (Fund) accepts employer contributions from the Department of Defence, other government contributions, members’ contributions, transfers from other superannuation funds, and contributions made by members for the benefit of their spouse.

Administration of member records, contributions receipts and benefit payments were historically conducted on behalf of the Trustee by ComSuper. Following the passage of the Governance of Australian Government Superannuation Schemes Legislation Amendment Bill 2015 on 15 June 2015, ComSuper was merged into CSC on 1 July 2015. CSC continues to be the trustee of the public sector and defence force superannuation schemes and now also performs the scheme administration activities formerly undertaken by ComSuper.

The financial report of the Fund is a general purpose financial report which has been prepared in accordance with 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'. For the purposes of preparing financial statements, the Fund is a not-for-profit entity.

The principal place of business and registered office of the Trustee is Level 8, 121 Marcus Clarke Street, Canberra ACT 2601.

The Scheme was closed to new members from 30 June 2016 and a new accumulation plan, Australian Defence Force (ADF) Super was established for new members of the Australian Defence Force from 1 July 2016, together with a new invalidity scheme, ADF Cover.

Military Superannuation and Benefits Fund

4

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158

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

2. BASIS OF PREPARATION (continued)

(a) Statement of compliance (continued)

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

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.

The financial statements of the Fund were authorised for issue by the Directors of the Trustee on 27 September 2016.

Military Superannuation and Benefits Fund

5

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159

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

2. BASIS OF PREPARATION (continued)

(a) Statement of compliance (continued)

AASB 1056 'Superannuation Entities'

• The recognition of member benefits as a liability on the face of the Statement of Financial Position measured at each reporting date. As disclosed in Note 12, the liability for accrued member benefits at 30 June 2014 (being the date of the most recent valuation by the Australian Government Actuary) was $32.5 billion.

• The recognition of an ‘employer sponsor receivable’ to recognise the Commonwealth Government’s legislated obligation under the Military Superannuation and Benefits Act 1991 to meet the shortfall between the liability for accrued benefits and the fair value of the net assets available to meet that liability. Based on the fair value of net assets at 30 June 2015 and the most recent valuation of member benefits liabilities (as referred to above), the employer sponsor receivable at 30 June 2015 would be $25.7 billion.

• Additional disclosures on estimates, financial risk management and policies for managing defined benefit liabilities.

AASB 1056 'Superannuation Entities' was issued on 5 June 2014. It replaces AAS 25 'Financial Reporting by Superannuation Plans' with effect for annual reporting periods beginning on or after 1 July 2016 but can be applied earlier. The Trustee has elected not to early adopt AASB 1056 'Superannuation Entities'.

The key impacts on the financial statements of the Fund include: • Preparation of five primary financial statements (rather than the current two), being:

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' (noting however that AASB 1056 'Superannuation Entities' replaces AAS 25 'Financial Reporting by Superannuation Plans').

- Statement of Financial Position; - Income Statement; - Statement of Changes in Equity/Reserves; - Statement of Cash Flows; and - Statement of Changes in Member Benefits.

Military Superannuation and Benefits Fund

6

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160

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

2. BASIS OF PREPARATION (continued)

(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 2018 30 June 2019

1 January 2018 30 June 2019

1 January 2016 30 June 2017

1 January 2016 30 June 2017

1 January 2016 30 June 2017

1 January 2016 30 June 2017 AASB 2015-5 'Amendments to Australian Accounting Standards - Investment Entities: Applying the Consolidation Exemption'

AASB 2015-1 'Amendments to Australian Accounting Standards - Annual Improvements to Australian Accounting Standards 2012-2014 Cycle'

AASB 9 'Financial Instruments', and the relevant amending standards

AASB 2014-10 'Amendments to Australian Accounting Standards - Sale or Contribution of Assets between an Investor and its Associate or Joint Venture'

AASB 15 'Revenue from Contracts with Customers', AASB 2014-5 'Amendments to Australian Accounting Standards arising from AASB 15', and AASB 2015-8

AASB 2015-2 'Amendments to Australian Accounting Standards - Disclosure Initiative: Amendments to AASB 101'

AASB 1056 requires the measurement approach of ‘fair value through profit or loss’ for all assets and liabilities, except for specific exemptions including member benefits, tax assets and liabilities and employer sponsor receivables. The investments of the Fund are currently already measured at redemption price at the close of business on the last business day of the reporting period and therefore this change in measurement approach will have no impact on the valuation of the Fund’s investments.

Other Standards in issue but not effective

In addition to AASB 1056 'Superannuation Entities' , the following Standards were in issue but not yet effective at the date of authorisation of the financial report. It is anticipated that the adoption of the Standards disclosed below will not have a material financial impact on the financial report of the Scheme:

Military Superannuation and Benefits Fund

7

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161

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

2. BASIS OF PREPARATION (continued)

(a) Statement of compliance (continued)

Effective for annual reporting periods

beginning on or after 1 July 2015

(b) Functional and presentation currency

(c) Use of judgements and estimates

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.

Standard / Interpretation

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.

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.

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

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 disclosures or amounts reported in these financial statements but may affect the accounting for future transactions or arrangements.

AASB 2015-3 'Amendments to Australian Accounting Standards arising from the Withdrawal of AASB 1031 Materiality'

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

Military Superannuation and Benefits Fund

8

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162

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

3. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES

(a) Assets

Net market values have been determined as follows:

(i)

(ii)

(b) Cash and cash equivalents

(c) Foreign Currency Transactions

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

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

The Fund does not undertake transactions denominated in foreign currencies.

The accounting policies set out below have been applied in preparing the financial statements for the year ended 30 June 2016 and the comparative information presented in these financial statements for the year ended 30 June 2015.

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.

Financial assets (being investments in a pooled superannuation trust, cash at bank and sundry debtors) are recognised on the date the Fund 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. If the price used is the selling or redemption price a deduction for selling costs has already been included. Otherwise, as selling costs are generally immaterial, net market value approximates fair value unless otherwise stated.

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.

Military Superannuation and Benefits Fund

9

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163

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

3. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (continued)

(d) Payables

Benefits payable

Sundry Payables

(e) Operational risk reserve

(f) Derivatives

(g) Revenue

Investment revenue

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, 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.

The Fund does not 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. Specific revenues are recognised as follows:

Interest revenue is recognised on an accrual basis.

The purpose of the operational risk reserve (ORR) is to provide adequate financial resources to address losses arising from an operational risk event. The ORR is operated in accordance with an ORR policy. The level of the reserve is determined by the Trustee Directors and reviewed annually, based on an assessment of the risks faced by the Fund. The transferred assets underlying the ORR are held in separate cash options of the ARIA Investments Trust and income earned on these assets is recognised in the reserve.

Military Superannuation and Benefits Fund

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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

3. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (continued)

(g) Revenue (continued)

Investment revenue (continued)

Contribution revenue

(h) Expenses

(i) Income Tax

Current tax

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.

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.

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.

Income tax on 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. As the Scheme invests in the ARIA Investments Trust ('AIT'), which is a pooled superannuation trust, tax on this investment revenue is paid by the AIT.

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

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).

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).

Military Superannuation and Benefits Fund

11

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165

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

3. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (continued)

(i) Income Tax (continued)

Deferred tax (continued)

Current and deferred tax for the period

(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 12.

The liability for accrued benefits is measured by an independent actuary on at least a triennial 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 Fund 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 Fund intends to settle its current tax assets and liabilities on a net basis.

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

Military Superannuation and Benefits Fund

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166

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

3. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (continued)

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

4. INVESTMENTS

2016 2015

$'000 $'000

7 261 675 6 792 394

7 261 675 6 792 394

5. CHANGES IN NET MARKET VALUES OF INVESTMENTS 2016 2015

$'000 $'000

(a) Investments held at 30 June:

142 476 718 187

(b) Investments realised during the year:

526 7 070

(c) 143 002 725 257

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

Total changes in net market values of investments

Pooled Superannuation Trust - ARIA Investments Trust

Pooled Superannuation Trust - ARIA Investments Trust

Pooled Superannuation Trust - ARIA Investments Trust

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 an expense item.

Receivables and payables are recognised inclusive of GST.

Military Superannuation and Benefits Fund

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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

6. FUNDING ARRANGEMENTS

(a) Contributions

Member Contributions

Employer Contributions

Transferring Superannuation Benefits From Other Funds

Government Co-Contributions

Low Income Superannuation Contributions

(b) Benefits

Members contribute to the Fund each fortnight at optional rates ranging from a minimum of 5% of salary, to a maximum of 10% of salary. The contribution rates were the same in the prior year.

In general, when a benefit becomes payable to a member, the accumulated member and employer contributions held in the Fund in respect of the member are transferred to the Consolidated Revenue Fund (CRF) which pays out the total benefit (both funded and unfunded components).

Appropriation refers to the total amount paid from the CRF. The appropriation from CRF shown in the Statement of Changes in Net Assets is the net amount after taking into account transfers from the Fund to the CRF.

The benefits payable from the Scheme comprise a lump sum of accumulated member contributions and a defined benefit financed by the employer and calculated on the basis of the member’s final average salary and length of service. The defined benefit may be taken as a lump sum or as a pension or as a combination of lump sum and pension. The defined benefit consists of a funded component (the accumulated value of contributions made to the Fund by the Department of Defence) and an unfunded component (the balance of the defined benefit).

The Department of Defence contributes to the Fund each fortnight in respect of each member at the rate of 3% of the member’s salary. The contribution rates were the same in the prior year. Employers may also make salary sacrifice contributions (before tax) and Ordinary Time Earnings top up contributions to the Fund on behalf of members.

For the financial years ended 30 June 2016 and 30 June 2015, the Commonwealth Government contributed $0.50 for every $1.00 of eligible personal after-tax member contributions paid to the Fund up to a maximum of $500 per member.

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

The low income super contribution (LISC) is a Commonwealth Government superannuation payment of up to $500 for the financial years 2012-13 to 2016-17. LISC payments are recognised as revenue when received.

Military Superannuation and Benefits Fund

14

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MILITARYSUPER FINANCIAL STATEMENT S

168

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

6. FUNDING ARRANGEMENTS (continued)

(b) Benefits (continued)

2016 2015

$'000 $'000

Gross Appropriation from Consolidated Revenue Fund 584 376 524 153 (84 470) (84 747)

Net Appropriation 499 906 439 406

Consolidated Revenue Fund Lump-sum benefits 137 149 150 098

Pensions 447 227 374 055

584 376 524 153

Military Superannuation & Benefits Fund Lump-sum benefits 33 587 33 775

Total benefits paid 617 963 557 928

(c) Costs of managing, investing and administering the Fund

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

Of the total benefits payable as at 30 June 2016, $2.23 million (2015: $2.72 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.

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

less: Transfers from Fund to Consolidated Revenue Fund

The costs of member administration were met by ComSuper until 30 June 2015. Following the passage of the Governance of Australian Government Superannuation Schemes Legislation Amendment Bill 2015 on 15 June 2015, ComSuper was merged into CSC on 1 July 2015. From this date, costs of member administration are being met by CSC. CSC continues to be the trustee of the Scheme and now also performs the scheme administration activities formerly undertaken by ComSuper.

Military Superannuation and Benefits Fund

15

CSC ANNUAL REPORT 2015-16

9

169

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

6. FUNDING ARRANGEMENTS (continued)

(c) Costs of managing, investing and administering the Fund (continued)

2016 2015

$'000 $'000

Investment Investment manager fees 6 975 8 235

Custodian fees 998 1 011

Investment consultant and other service provider fees 842 772

Other investment expenses 519 461

Total direct investment expenses 9 334 10 479

Regulatory fees 895 956

Other operating expenses 4 592 5 175

Total costs 14 821 16 610

Sponsoring employers contributed the following to Scheme administration costs:

2016 2015

$'000 $'000

Trustee costs 20 446 1 528

ComSuper costs - 19 661

Total 20 446 21 189

Administrative fees are paid to CSC by the Department of Defence 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 prior to 1 July 2015).

Expenses met by the AIT and referable to the Fund are:

Military Superannuation and Benefits Fund

16

CSC ANNUAL REPORT 2015-16

MILITARYSUPER FINANCIAL STATEMENT S

170

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

7. INCOME TAX

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

2016 2015

$'000 $'000

Tax expense comprises: Current tax expense 27 137 26 812

- (2)

Under / (over) provided in prior years - (1)

Total tax expense 27 137 26 809

Increase in net assets for the year before income tax 524 671 1 060 002

Income tax expense calculated at 15% 78 701 159 000

(47 822) (41 179)

Benefits paid 92 694 83 689

Appropriation from Consolidated Revenue Fund (74 986) (65 911)

Investment revenue already taxed (21 450) (108 789)

Prior year under / (over) provision - (1)

Total tax expense 27 137 26 809

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:

Add / (less) permanent differences - items not assessable or deductible Member contributions, Government co-contributions and low income superannuation contributions

Deferred tax expense / (income) relating to the originiation and reversal of temporary differences

Military Superannuation and Benefits Fund

17

CSC ANNUAL REPORT 2015-16

9

171

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

7. INCOME TAX (continued)

2016 2015

$'000 $'000

(b) Current tax liabilities

Current tax payables: Provision for current year income tax 27 049 26 733

27 049 26 733

(c) Deferred tax balances

Deferred tax liabilities comprise: Temporary differences 8 8

8 8

Taxable and deductible temporary differences arise from the following:

2016 Opening

balance Charged to income Closing

balance

$'000 $'000 $'000

Gross deferred tax liabilities: Interest receivable 8 - 8

8 - 8

Net deferred tax liabilities 8 - 8

2015 Opening

balance Charged to income Closing

balance

$'000 $'000 $'000

Gross deferred tax liabilities: Interest receivable 10 ( 2) 8

10 ( 2) 8

Net deferred tax liabilities 10 ( 2) 8

Military Superannuation and Benefits Fund

18

CSC ANNUAL REPORT 2015-16

MILITARYSUPER FINANCIAL STATEMENT S

172

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

8. SUNDRY DEBTORS

2016 2015

$'000 $'000

Receivable from the ARIA Investments Trust 90 68

Interest receivable 50 56

Amount to be appropriated from Consolidated Revenue Fund 3 869 3 996 4 009 4 120

No sundry debtors are past due or impaired (2015: Nil).

9. OPERATIONAL RISK RESERVE

2016 2015

$'000 $'000

Opening balance 11 292 5 997

Transfers to reserve 14 032 5,125

Earnings on reserve 290 170

Closing balance 25 614 11 292

10. AUDITOR'S REMUNERATION

2016 2015

$ $

Financial statements 63 325 67 325

Regulatory returns and compliance 35 175 35 175

Total 98 500 102 500

Amounts paid or payable to the Australian National Audit Office for audit services:

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 Fund during the reporting period.

The audits were provided by the Australian National Audit Office. The audit fees will be charged against the assets of the ARIA Investments Trust that are referable to the Fund.

Military Superannuation and Benefits Fund

19

CSC ANNUAL REPORT 2015-16

9

173

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

11. VESTED BENEFITS

2016 2015

$billion $billion

The vested benefits amount is made up of :

Funded component 7.3 6.8

Unfunded component 29.0 26.3

36.3 33.1

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

Funded component 7.3 6.8

Net assets 7.3 6.8

Surplus / (deficiency) - -

The net assets of the Fund includes $25,614,196 of assets backing the operational risk reserve (2015: $11,292,399).

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 2016 is $36.3 billion (2015: $33.1 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 2016 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.

Military Superannuation and Benefits Fund

20

CSC ANNUAL REPORT 2015-16

MILITARYSUPER FINANCIAL STATEMENT S

174

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

12. LIABILITY FOR ACCRUED BENEFITS

2014 2011

$billion $billion

Accrued benefits as at 30 June were:

Funded component 5.8 3.7

Unfunded component 26.7 19.3

32.5 23.0

The net assets of the Fund compared to the liability for accrued benefits are as follows:

Funded component 5.8 3.7

Net assets 5.8 3.7

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 Fund, and an unfunded component that, pursuant to the Military Superannuation and Benefits Act 1991 , will be funded 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 the Australian Government Actuary as part of a comprehensive review as at 30 June 2014. A summary of the review is attached.

Military Superannuation and Benefits Fund

21

CSC ANNUAL REPORT 2015-16

9

175

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

13. 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.

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 RSE licence 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 in the AIT. 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 Fund 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, which is the carrying value, approximates fair value. Changes in net market value are recognised in the Statement of Changes in Net Assets.

The investments of the Fund (other than cash held for managing contribution receipts, benefit payments and tax payments) comprise units in the 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 Fund and is in accordance with the Fund'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.

Military Superannuation and Benefits Fund

22

CSC ANNUAL REPORT 2015-16

MILITARYSUPER FINANCIAL STATEMENT S

176

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

13. FINANCIAL INSTRUMENTS (continued)

(e) Financial risk management objectives

The Fund'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 Fund and is in accordance with its investment strategy.

The Trustee's internal investment team monitors and manages the financial risks relating to the Fund'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 Fund is exposed to a variety of financial risks as a result of its pooled investment in the 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 Fund's risk management and investment policies, approved by the Trustee, seek to minimise the potential adverse effects of these risks on the Fund’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 Fund. Consistent with regulatory requirements, the Trustee has developed, implemented and maintains a Risk Management Framework to identify the policies, procedures, processes and controls that comprise its risk management and control systems for the Fund and for the Fund's investments through the AIT. The overall investment strategy of the Fund is set out in the Trustee's approved investment policies which address the investment strategy and objectives and risk mitigation strategies including risk mitigation relating to the use of derivatives.

Military Superannuation and Benefits Fund

23

CSC ANNUAL REPORT 2015-16

9

177

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

13. FINANCIAL INSTRUMENTS (continued)

(f) Credit risk

2016 2015

$'000 $'000

Investments Pooled Superannuation Trust - ARIA Investments Trust 7 261 675 6 792 394 Other financial assets Cash and cash equivalents 62 107 34 019

Sundry debtors 4 009 4 120

7 327 791 6 830 533

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

The largest exposure to a single counterparty is to cash held by the investment master custodian Northern Trust. 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 2016 or 30 June 2015.

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

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

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Fund. In its capacity as trustee of the 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 Fund's exposure to its counterparties are continuously monitored by the Trustee.

Military Superannuation and Benefits Fund

24

CSC ANNUAL REPORT 2015-16

MILITARYSUPER FINANCIAL STATEMENT S

178

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

13. FINANCIAL INSTRUMENTS (continued)

(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 undertakes forecasting and scenario testing of the cashflow requirements of the Fund to ensure timely access to sufficient cash and holds actively-traded, highly-liquid investments to meet anticipated funding requirements. 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.

The Trustee's approach to managing liquidity is to ensure that the Fund will always have sufficient liquidity to meet its liabilities as they fall due. On resignation the member benefit accrued before 30 June 1999 can be paid as a lump sum but the balance must be preserved until the member’s preservation age, either in the Fund or another complying superannuation fund. The employer benefit, including productivity component, must be preserved in the Fund. The unfunded component of benefit payments is financed by the Commonwealth, from the CRF. As such there is minimal liquidity risk.

The Fund's exposure to liquidity risk is therefore limited to those circumstances in which the Scheme Rules allow members to withdraw benefits.

Military Superannuation and Benefits Fund

25

CSC ANNUAL REPORT 2015-16

9

179

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

13. FINANCIAL INSTRUMENTS (continued)

(g) Liquidity risk (continued)

Financial Liabilities maturity profile:

Less than 3 months 3 months to 1 year 1-5 years

Over 5 years Total

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

30 June 2016 Sundry payables 409 - - - 409

Benefits payable 4 395 - - - 4 395

Vested benefits 36 317 000 - - - 36 317 000

Total financial liabilities 36 321 804 - - - 36 321 804

30 June 2015 Sundry payables 256 - - - 256

Benefits payable 5 140 - - - 5 140

Vested benefits 33 111 000 - - - 33 111 000

Total financial liabilities 33 116 396 - - - 33 116 396

(h) Market risk

Foreign currency risk

The following tables summarise the maturity profile of the Fund’s financial liabilities. Vested benefits have been included in the less than three months column, as this is the amount that members could call upon as at reporting date. This is the earliest date on which the Fund can be required to pay members’ vested benefits. However, members may not necessarily call upon amounts vested to them during this time. The tables have been drawn up based on the contractual undiscounted cash flows of financial liabilities based on the earliest date on which the Fund can be required to pay. The tables include both interest and principal cash flows.

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 currency 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 Fund's exposure to market risk or the manner in which it manages and measures that risk since the 2015 reporting period.

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

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.

Military Superannuation and Benefits Fund

26

CSC ANNUAL REPORT 2015-16

MILITARYSUPER FINANCIAL STATEMENT S

180

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

13. FINANCIAL INSTRUMENTS (continued)

(h) Market risk (continued)

Foreign currency risk (continued)

Interest rate risk

62 107 (186) (186) 186 186

34 019 (136) (136) 136 136

The Fund does not undertake any transactions in foreign currency and is therefore not directly exposed to foreign currency risk. However, the Fund is indirectly exposed to foreign currency risk from the international assets held in the AIT, and it is managed in accordance with the Trustee’s approved investment strategy. The AIT enters into forward foreign exchange contracts to hedge into Australian dollars some of the currency exposure arising from the 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, remain unhedged due to lack of suitable currency instruments for hedging.

Cash and cash equivalents

-0.4% +0.4%

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 Fund 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 2016 and 30 June 2015 had a maturity profile of less than one month.

The Fund is indirectly exposed to interest rate risk through its investments in the 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 Fund's sensitivity to a 0.3% p.a. (2015: 0.4%) 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 0.3% (2015: 0.4%) at reporting date, and all other variables were held constant, the financial result would have improved / (deteriorated) as demonstrated:

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

2015

Changes in net assets

Net assets available to pay

benefits

Changes in net assets

Net assets available to pay benefits

-0.3% +0.3%

Carrying amount $'000

Interest rate risk $' 000

2016

Military Superannuation and Benefits Fund

27

CSC ANNUAL REPORT 2015-16

9

181

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

13. FINANCIAL INSTRUMENTS (continued)

(h) Market risk (continued)

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

The Fund's investment in AIT is exposed to market price risk in respect of the latter's holdings of equity securities and unit 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 Fund'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 Fund's sensitivity to a reasonably possible change in the value of its investment in AIT, based on risk exposures at reporting date. The volatility factors shown represent the average annual volatility of comparable option prices expected for the Fund's investment in the ARIA Investments Trust. For the Cash Option and the investments backing the operational risk reserve, a factor of 0.3% (2015: 0.4%) 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 by the volatility factor at reporting date, and all other variables were held constant, the financial result would have improved/(deteriorated) as follows:

Military Superannuation and Benefits Fund

28

CSC ANNUAL REPORT 2015-16

MILITARYSUPER FINANCIAL STATEMENT S

182

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

13. FINANCIAL INSTRUMENTS (continued)

(h) Market risk (continued)

2016

Balanced Option -/+5.2% 6 678 489 (347 281) (347 281) 347 281 347 281

Cash Option -/+0.3% 57 126 (171) (171) 171 171

Income Focused Option -/+2.0% 39 881 (718) (718) 718 718

Aggressive Option -/+6.4% 460 655 (29 482) (29 482) 29 482 29 482

Operational risk reserve -/+0.3% 18 040 (54) (54) 54 54

-/+0.3% 7 484 (22) (22) 22 22

7 261 675 (377 728) (377 728) 377 728 377 728

2015

Balanced Option -/+5.4% 6 284 941 (339 387) (339 387) 339 387 339 387

Cash Option -/+0.4% 40 221 (161) (161) 161 161

Income Focused Option -/+2.0% 27 355 (547) (547) 547 547

Aggressive Option -/+6.6% 428 653 (28 291) (28 291) 28 291 28 291

Operational risk reserve -/+0.4% 11 224 (45) (45) 45 45

6 792 394 (368 431) (368 431) 368 431 368 431

Other price risk (continued)

In the Trustee's opinion, the sensitivity analysis at reporting date is representative of the other market price exposures during the financial year.

Operational risk reserve AIT1

1 In accordance with the Australian Prudential Regulatory Authority Prudential Practice Guide SPG 114 - Operational Risk Financial Requirement (SPG 114) a separate option for the Operational Risk Reserve has been created to reflect that the scheme invests through a Pooled Superannuation Trust.

Changes in net assets

Total increase / (decrease)

Net assets available to pay

benefits

Financial Assets ARIA Investments Trust :

Total increase / (decrease)

ARIA Investment Trust : Financial Assets

Change in price

Carrying amount $'000

Price risk $' 000

Changes in net assets

Net assets available to pay

benefits

Military Superannuation and Benefits Fund

29

CSC ANNUAL REPORT 2015-16

9

183

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

13. FINANCIAL INSTRUMENTS (continued)

(i) Fair value measurement

Level 1 Level 2 Level 3 Total

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

2016 Financial Assets Pooled superannuation trust - 7 261 675 - 7 261 675

2015 Financial Assets Pooled superannuation trust - 6 792 394 - 6 792 394

Reconciliation of Level 3 net market value measurements There were no Level 3 financial assets or liabilities for the period.

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

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

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.

The Fund'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).

Net market value measurements recognised in the Statement of Net Assets The following table provides an analysis of the Fund'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.

Military Superannuation and Benefits Fund

30

CSC ANNUAL REPORT 2015-16

MILITARYSUPER FINANCIAL STATEMENT S

184

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

14. RELATED PARTIES

(a) Trustee

(b)

Paul Abraham

Helen Ayres Corporate Secretary (Resigned 30 June 2016) Peter Carrigy-Ryan Chief Executive Officer Philip George

Richard Hill

Leonie McCracken General Manager, Operations (Resigned 18 March 2016) Bronwyn McNaughton General Counsel Christine Pearce General Manager, Member & Employer Services Sarah Rodgers General Manager, People & Culture (Resigned 3 August 2016) Alison Tarditi Chief Investment Officer Andy Young General Manager, Finance & Risk

Nadine Flood Lyn Gearing (term ended 12 September 2016)

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 Fund throughout the year ended 30 June 2016:

The following Directors were appointed subsequent to year-end:

Ariane Barker (appointed 13 September 2016) Garry Hounsell (appointed 1 July 2016) Anthony Needham (appointed 1 July 2016) Sunil Kemppi (appointed 1 July 2016)

General Manager, Investment Operations (Commenced 21 March 2016)

General Manager, Scheme Administration (Commenced 1 July 2015)

Michael Vertigan (term ended 30 June 2016)

General Manager, Information Technology (Commenced 28 September 2015)

Commonwealth Superannuation Corporation (CSC) was the Trustee throughout the reporting period. No fees were charged by CSC for acting as Trustee of the Scheme during the reporting period.

Key Management Personnel

Tony Cole Patricia Cross (Chairman)

Peter Feltham (term ended 30 June 2016)

Winsome Hall John McCullagh (term ended 30 June 2016)

Margaret Staib

The Directors throughout the year ended 30 June 2016 and to the date of the report were:

Christopher Ellison Peggy O'Neal

Military Superannuation and Benefits Fund

31

CSC ANNUAL REPORT 2015-16

9

185

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

14. RELATED PARTIES (continued)

(c) Key Management Personnel Compensation

2016 2015

$ $

Short-term employee benefits 394 602 312 422

Post-employment benefits 43 382 36 005

Other long-term benefits 31 278 23 859

469 262 372 286

(d) Investing entities

The Trustee of the Fund, 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.

Throughout the year ended 30 June 2016, the Fund's only investment has 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 aggregate compensation of the key management personnel is set out below:

The compensation of key management personnel (including Directors) related to investment management is charged against the assets of the AIT that are referable to the Fund.

The Fund 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.

Aggregate compensation in relation to the Fund 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 other investors in AIT throughout the year were the Commonwealth Superannuation Scheme, the Public Sector Superannuation Scheme and the Public Sector Superannuation Accumulation Plan. All investing transactions are conducted under normal industry terms and conditions.

Military Superannuation and Benefits Fund

32

CSC ANNUAL REPORT 2015-16

MILITARYSUPER FINANCIAL STATEMENT S

186

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

14. RELATED PARTIES (continued)

(d) Investing entities (continued)

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

Net Market Value of Investment Net Market Value of

Investment

Share of Net

Income/ (Loss) after tax

Share of Net

Income/ (Loss) after tax

2016 2015 2016 2015

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

ARIA Investments Trust 7 261 675 6 792 394 143 002 725 257

7 261 675 6 792 394 143 002 725 257

15. COMMITMENTS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS

16. SUBSEQUENT EVENTS

No other matters have arisen since 30 June 2016 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 Fund and the investment of its money from the assets of the AIT that are referable to the Fund (see Note 6(c)). No fees were charged for acting as Trustee during the year ended 30 June 2016 (2015: $nil).

The Fund had no capital or other expenditure commitments at 30 June 2016 (2015: $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 Fund 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 Fund.

There were no other contingent liabilities or contingent assets for the Fund at 30 June 2016 (2015: $nil).

The Scheme was closed to new members from 30 June 2016 and a new accumulation plan, Australian Defence Force (ADF) Super was established for new members of the Australian Defence Force from 1 July 2016, together with a new invalidity scheme, ADF Cover.

Military Superannuation and Benefits Fund

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187

17 August, 2015

MILITARY SUPERANNUATION AND BENEFITS SCHEME

SUMMARY OF THE 2014 LONG TERM COST REPORT

1. A report on the long term cost of the Military Superannuation Schemes which includes the Military Superannuation and Benefits Scheme (MSBS), was carried out using data as at 30 June 2014 by the Australian Government Actuary.

2. The standard defined benefit section of the MSBS is partially funded and has an underlying Government guarantee. Member contributions and the employer 3% Productivity Benefit contributions are paid into the MSBS Fund. Any MSBS benefit payment amounts not paid from Fund assets are paid from Consolidated Revenue.

3. From 1 July 2008, following changes in the Superannuation Guarantee regime, additional employer superannuation contributions have been paid into the Ancillary Section of the MSBS in respect of allowances that are regarded as being part of Ordinary Time Earnings but are not included in the existing definition of superannuation salary. These additional contributions are payable in respect of serving ADF members in both MSBS and DFRDB. The Ancillary Section also includes salary sacrifice contributions, amounts transferred into the scheme and spouse contributions. The Ancillary Section is fully funded and provides lump sum accumulation benefits.

4. Projections of the actual annual employer cash costs of the military schemes (MSBS, DFRDB and DFRB) as a percentage of Gross Domestic Product (GDP) were made over a period of 41 years. Projections were done on two bases. The first assumed that MSBS would remain open to new members indefinitely. The second assumed that the MSBS would be closed to new members from 1 July 2016 in line with Government announcements. Both of these projections showed a progressive fall in the combined cash cost of the three schemes as a percentage of GDP. Given the underlying Government guarantee, I was therefore of the opinion that the financial position of the schemes as at 30 June 2014 was satisfactory.

5. The value of net assets of the MSBS available to pay benefits as at 30 June 2014 reported in the audited financial statements of the Fund was $5,765 million. Included in this are Ancillary Section accounts totalling $658 million.

6. The value of accrued benefits for the combined defined benefit section and the Ancillary Section of the MSBS using the actuarial Projected Unit Credit (PUC) methodology as at 30 June 2014 was $32.5 billion. This comprised $26.7 billion in unfunded accrued benefits and $5.8 billion in funded accrued benefits. The value of accrued benefits is the present value of the portion of projected benefit payments that had accrued in respect of membership of the MSBS to 30 June 2014. The employer component of the benefits for contributors was apportioned on the basis used to calculate accrued benefits for purposes of Australian Accounting Standard AASB 119.

7. As would be expected in a substantially unfunded arrangement, the value of total accrued benefits is more than the audited value of scheme assets at the same date.

Military Superannuation and Benefits Fund

34

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MILITARYSUPER FINANCIAL STATEMENT S

188

10PSSAP FINANCIAL STATEMENTS

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PSSAP FINANCIAL STATEMENT S

190

PUBLIC SECTOR SUPERANNUATION ACCUMULATION PLAN (ABN 65127917725)

REPORT BY THE INDEPENDENT APPROVED AUDITOR TO THE MINISTER FOR FINANCE AND MEMBERS OF THE SCHEME

I have audited the financial statements of Public Sector Superannuation Accumulation Plan for the year ended 30 June 2016 comprising the Operating Statement, the Statement of Financial Position, the Statement of Cash Flows, a Summary of Principal Accounting Policies and other explanatory notes.

Auditor’s Opinion

In my opinion:

(a) the financial statements are in the form as agreed by the Minister for Finance;

(b) present fairly, in all material respects, in accordance with Australian Accounting Standards the net assets of Public Sector Superannuation Accumulation Plans as at 30 June 2016 and the changes in net assets for the year ended 30 June 2016;

(c) the financial statements are based on proper accounts and records; and

(d) the receipt of money into the Fund, and the payment of money out of the Scheme and the investment of money standing to the credit of the Scheme during the year have been in accordance with the Trust Deed.

Trustee’s responsibility for the financial statements

The superannuation entity's trustee is responsible for the preparation and fair presentation of the financial statements in accordance with Australian Accounting Standards and the form agreed with the Minister for Finance and the requirements of the Superannuation Industry (Supervision) Act 1993 (SIS Act) and the Superannuation Industry (Supervision) Regulations 1994 (SIS Regulations). The trustee is also responsible for such internal control as the trustee determines is necessary to enable the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s responsibility

My responsibility is to express an opinion on the financial statements based on my audit. I have conducted an independent audit of the financial statements in order to express an opinion on them to the members of the Public Sector Superannuation Accumulation Plan and the Minister for Finance.

My audit has been conducted in accordance with the Australian National Audit Office Auditing Standards, which incorporate the Australian Auditing Standards. These Standards require that I comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance as to whether the financial statements are free of material

GPO Box 707 CANBERRA ACT 2601 19 National Circuit BARTON ACT Phone (02) 6203 7300 Fax (02) 6203 7777

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192

Public Sector Superannuation Accumulation Plan (ABN 65 127 917 725)

The Board of Directors hereby states that in its opinion:

(a)

(b)

(c)

(d)

(e)

(f)

Patricia Cross Nadine Flood

Chairman Director

Statement by the Trustee of the Public Sector Superannuation Accumulation Plan ('Plan')

the financial statements are in a form agreed by the Minister for Finance and the Trustee in accordance with sub-section 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;

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

the operations of the Plan were conducted in accordance with the Governance of Australian Government Superannuation Schemes Act 2011 , the Superannuation Act 2005, the Trust Deed establishing the Plan, 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 this 27th day of September 2016 in accordance with a resolution of directors of Commonwealth Superannuation Corporation (ABN 48 882 817 243) as Trustee of the Plan:

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' ;

the attached financial statements give a true and fair view of the financial position as at 30 June 2016, the operating result for the year ended 30 June 2016, and the cash flows for the year ended 30 June 2016;

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

Public Sector Superannuation Accumulation Plan

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193

Public Sector Superannuation Accumulation Plan Operating Statement For the Year Ended 30 June 2016

Note 2016 2015

$'000 $'000

Net investment revenue Interest 2 784 3 394

Changes in net market values 5c 161 812 785 756

164 596 789 150

Contribution revenue Member contributions 6a 48 416 28 820

Employer contributions 6a 1 085 316 986 722

Transfers from other funds 6a 296 715 227 453

Government co-contributions 6a 186 206

Low income superannuation contributions 6a 3 412 3 536

1 434 045 1 246 737

Other revenue Insurance proceeds 20 318 22 026

Other revenue 71 220

20 389 22 246

Total revenue 1 619 030 2 058 133

Expenses Insurance expense 39 218 36 571

Other administration expenses 10 179 188

Total expenses 49 397 36 759

1 569 633 2 021 374

Income tax expense 7a (161 040) (143 121)

1 408 593 1 878 253

The attached notes form part of these financial statements.

Benefits accrued as a result of operations before income tax

Benefits accrued as a result of operations after income tax

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PSSAP FINANCIAL STATEMENT S

194

Public Sector Superannuation Accumulation Plan Statement of Financial Position As at 30 June 2016

Note 2016 2015

$'000 $'000

Investments Pooled superannuation trust 4 8 774 324 7 780 748

Total investments 8 774 324 7 780 748

Other assets Cash and cash equivalents 8a 201 204 155 169

Sundry debtors 9 458 249

Deferred tax asset 7c 474 404

Total other assets 202 136 155 822

Total assets 8 976 460 7 936 570

Liabilities Benefits and pensions payable 1 260 912

Sundry payables 10 6 680 3 373

Current tax liabilities 7b 160 702 142 959

Total liabilities 168 642 147 244

Net assets available to pay benefits 8 807 818 7 789 326

Represented by:

Liability for accrued benefits Allocated to members' accounts 8 751 495 7 760 286

Operational risk reserve 13a 30 960 19 309

Other funds not allocated to members' accounts 13b 25 363 9 731

Total liability for accrued benefits 12 8 807 818 7 789 326

The attached notes form part of these financial statements.

Public Sector Superannuation Accumulation Plan

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195

Public Sector Superannuation Accumulation Plan Statement of Cash Flows For the Year Ended 30 June 2016

Note 2016 2015

$'000 $'000

Cash flows from operating activities Contributions received -Employer 1 085 242 986 886

Member 48 416 28 820

Transfers from other funds 296 715 227 453

Government co-contributions 186 206

Low income superannuation contributions 3 412 3 536

Interest received 2 802 3 473

Other revenue received 71 220

Insurance proceeds 20 318 22 026

Insurance expense paid (38 770) (36 650)

Other administration expenses paid (7 344) (63)

Benefits and pensions paid (389 753) (358 556)

Income tax paid (143 428) (140 678)

Net cash inflows from operating activities 8b 877 867 736 673

Cash flows from investing activities

61 198 68 411

Purchases of units in pooled superannuation trust (893 030) (811 192)

Net cash outflows from investing activities (831 832) (742 781)

Net increase / (decrease) in cash held 46 035 (6 108)

Cash at the beginning of the financial year 155 169 161 277

Cash at the end of the financial year 8a 201 204 155 169

The attached notes form part of these financial statements.

Proceeds from sales of units in pooled superannuation trust

Public Sector Superannuation Accumulation Plan

4

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PSSAP FINANCIAL STATEMENT S

196

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

1. DESCRIPTION OF THE PLAN

2. BASIS OF PREPARATION

(a) Statement of compliance

The financial statements of the Plan were authorised for issue by the Directors on 27 September 2016.

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 administration of member records, contributions receipts and benefit payments was conducted on behalf of the Trustee by ComSuper until 4 December 2014. ComSuper contracted Pillar Administration ('Pillar') to perform these duties. On 4 December 2014 the PSSap scheme administration contract was novated from ComSuper to CSC.

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 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' . For the purposes of preparing financial statements, the Plan is a not-for-profit entity.

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

Following the passage of the Governance of Australian Government Superannuation Schemes Legislation Amendment Bill 2015 , scheme administration costs for the Plan are being paid for by members from 1 July 2015. Prior to this date, administration expenses were met by government appropriation and a share of administrative fees paid by employing agencies.

Public Sector Superannuation Accumulation Plan

5

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197

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

2. BASIS OF PREPARATION (continued)

(a) Statement of compliance (continued)

AASB 1056 'Superannuation Entities'

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' (noting however that AASB 1056 'Superannuation Entities' replaces AAS 25 'Financial Reporting by Superannuation Plans').

• the preparation of five primary financial statements (rather than the current three), being: - Statement of Financial Position; - Income Statement;

- Statement of Changes in Equity/Reserves; - Statement of Cash Flows; and - Statement of Changes in Member Benefits.

AASB 1056 requires the measurement approach of ‘fair value through profit or loss’ for all assets and liabilities, except for specific exemptions including member benefits, tax assets and liabilities and employer sponsor receivables. The investments of the Plan are currently already measured at redemption price at the close of business on the last business day of the reporting period and therefore this change in measurement approach will have no impact on the valuation of the Plan's investments.

The key impacts on the financial statements of the Plan includes:

• additional disclosures on disaggregated information.

AASB 1056 'Superannuation Entities' was issued on 5 June 2014. It replaces AAS 25 'Financial Reporting by Superannuation Plans' with effect for annual reporting periods beginning on or after 1 July 2016 but can be applied earlier. The Trustee has elected not to early adopt AASB 1056 'Superannuation Entities' .

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PSSAP FINANCIAL STATEMENT S

198

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

2. BASIS OF PREPARATION (continued)

(a) Statement of compliance (continued)

Other Standards in issue but not effective

Standard / Interpretation Effective for

annual reporting periods beginning on or after

Expected to be initially applied in the financial year ending

1 January 2018 30 June 2019

1 January 2018 30 June 2019

1 January 2016 30 June 2017

1 January 2016 30 June 2017

1 January 2016 30 June 2017

1 January 2016 30 June 2017

AASB 15 'Revenue from Contracts with Customers', AASB 2014-5 'Amendments to Australian Accounting Standards arising from AASB 15', and AASB 2015-8 'Amendments to Australian Accounting Standards - Effective Date of AASB 15'

AASB 9 'Financial Instruments', and the relevant amending standards

In addition to AASB 1056 'Superannuation Entities' , the following Standards were in issue but not yet effective at the date of authorisation of the financial report. It is anticipated that the adoption of the Standards disclosed below will not have a material financial impact on the financial report of the Plan:

AASB 2015-5 'Amendments to Australian Accounting Standards - Investment Entities: Applying the Consolidation Exemption'

AASB 2014-10 'Amendments to Australian Accounting Standards - Sale or Contribution of Assets between an Investor and its Associate or Joint Venture'

AASB 2015-1 'Amendments to Australian Accounting Standards - Annual Improvements to Australian Accounting Standards 2012-2014 Cycle'

AASB 2015-2 'Amendments to Australian Accounting Standards - Disclosure Initiative: Amendments to AASB 101'

Public Sector Superannuation Accumulation Plan

7

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199

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

2. BASIS OF PREPARATION (continued)

(a) Statement of compliance (continued)

Effective for annual reporting periods beginning on or after

1 July 2015

(b) Functional and presentation currency

(c) Use of judgements and estimates

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 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 or disclosures reported in these financial statements but may affect the accounting for future transactions or arrangements.

Standard / Interpretation

AASB 2015-3 'Amendments to Australian Accounting Standards arising from the Withdrawal of AASB 1031 Materiality'

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

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.

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.

Public Sector Superannuation Accumulation Plan

8

CSC ANNUAL REPORT 2015-16

PSSAP FINANCIAL STATEMENT S

200

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

3. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES

(a) Assets

Net market values have been determined as follows:

(i)

(ii)

(b) Cash and Cash Equivalents

(c) Foreign Currency Transactions

The Plan does not undertake transactions denominated in foreign currencies.

The accounting policies set out below have been applied in preparing the financial statements for the year ended 30 June 2016 and the comparative information presented in these financial statements for the year ended 30 June 2015.

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.

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.

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

Public Sector Superannuation Accumulation Plan

9

CSC ANNUAL REPORT 2015-16

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201

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

3. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (continued)

(d) Payables

Benefits payable

Sundry payables

(e) Operational risk reserve

(f) Derivatives

(g) Revenue

Investment revenue

The Plan does not 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. Specific revenues are recognised as follows:

The purpose of the operational risk reserve (ORR) is to provide adequate financial resources to address losses arising from an operational risk event. The ORR is operated in accordance with an ORR policy. The level of the reserve is determined by the Trustee Directors and reviewed annually, based on an assessment of the risks faced by the Fund. The transferred assets underlying the ORR are held in separate cash options of the ARIA Investments Trust and income earned on these assets is recognised in the reserve.

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.

Interest revenue is recognised on an accrual basis.

Public Sector Superannuation Accumulation Plan

10

CSC ANNUAL REPORT 2015-16

PSSAP FINANCIAL STATEMENT S

202

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

3. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (continued)

(g) Revenue (continued)

Investment revenue (continued)

Contribution revenue

Other revenue

(h) Expenses

(i) 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.

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. As the Plan invests in the ARIA Investments Trust ('AIT'), which is a pooled superannuation trust, tax on this investment revenue is paid by the AIT.

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).

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).

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

Insurance claim amounts on a group life policy and compensation payments from the administrator are recognised on a cash basis.

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.

Public Sector Superannuation Accumulation Plan

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203

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

3. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (continued)

(j) Income Tax (continued)

Deferred tax

Current and deferred tax for the period

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 and liabilities on a net basis.

Current and deferred tax for the period is recognised as an expense or benefit in the Operating Statement.

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.

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.

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.

Public Sector Superannuation Accumulation Plan

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CSC ANNUAL REPORT 2015-16

PSSAP FINANCIAL STATEMENT S

204

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

3. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (continued)

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

Receivables and payables are recognised inclusive of GST.

4. INVESTMENTS

2016 2015

$'000 $'000

8 774 324 7 780 748

8 774 324 7 780 748

5. CHANGES IN NET MARKET VALUE OF INVESTMENTS 2016 2015

$'000 $'000

(a) Investments held at 30 June:

Pooled superannuation trust - ARIA Investments Trust 161 271 775 091

(b) Investments realised during the year:

Pooled superannuation trust - ARIA Investments Trust 541 10 665

(c) Total changes in net market values of investments 161 812 785 756

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

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205

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

6. FUNDING ARRANGEMENTS

(a) Contributions

Employer Contributions

Member Contributions

Transferring superannuation from other funds

Spouse Contributions

Government Co-Contributions

Low income superannuation contributions

(b) Benefits paid

2016 2015

$'000 $'000

Lump sum benefits paid and payable 380 955 353 025

Pensions paid and payable 9 146 4 954

Total 390 101 357 979

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.

The low income super contribution (LISC) is a Commonwealth Government superannuation payment of up to $500 for the financial years 2012-13 to 2016-17. LISC payments are recognised as revenue when received.

Where members invest in a standard or transition retirement income stream (pension) via the Commonwealth Superannuation Corporation retirement income product (CSCri), regular income payments are made to the member from the Plan. Standard retirement income stream members also have access to ad hoc withdrawals.

Employers contribute at least 15.4% (2015: 15.4%) of employee's superannuation salary to the Plan, subject to superannuation law. Employers may also make salary sacrifice contributions (before tax) to the Plan on behalf of members.

Members may make voluntary contributions to the Plan in the form of personal contributions (after tax).

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 years ended 30 June 2016 and 30 June 2015, the Commonwealth Government contributed $0.50 for every $1.00 of eligible personal after-tax member contributions paid to the Scheme up to a maximum of $500 per member.

Public Sector Superannuation Accumulation Plan

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PSSAP FINANCIAL STATEMENT S

206

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

6. FUNDING ARRANGEMENTS (continued)

(c) Costs of Managing, Investing and Administering the Plan

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

2016 2015

$'000 $'000

Investment Investment manager fees 8 216 9 207

Custodian fees 1 176 1 130

Investment consultant and other service provider fees 992 863

Other investment expenses 611 515

Total direct investment expenses 10 995 11 715

Regulatory fees 1 029 1 021

Other operating expenses 5 409 5 786

Total costs 17 433 18 522

Sponsoring employers contributed the following to Plan administration costs:

2016 2015

$'000 $'000

Trustee costs - 5 446

ComSuper costs - 7 977

Total - 13 423

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.

From 1 July 2015, following the passage of the Governance of Australian Government Superannuation Schemes Legislation Amendment Bill 2015 , scheme administration costs for PSSap are being paid for by members and are disclosed as ‘other administration expenses’ in the Operating Statement.

Prior to this date the costs of member administration were met by CSC (and ComSuper prior to the novation of the Pillar Administration scheme administration contract from ComSuper to CSC on 4 December 2014). These expenses were met by administrative fees paid by employing agencies. Transactions in respect of the receipt of these fees from employing agencies and the costs of administration were brought to account in the financial statements of the Trustee and ComSuper in the prior year.

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207

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

7. INCOME TAX

(a) Income tax recognised in Operating Statement 2016 2015

$'000 $'000

Tax expense comprises: Current tax expense 160 702 143 115

(70) -

407 6

Total tax expense 161 040 143 121

1 569 633 2 021 374

Income tax expense calculated at 15% 235 445 303 206

Insurance proceeds (3 048) (3 304)

Investment revenue already taxed (24 272) (117 863)

(46 737) (38 108)

Death benefit increase (Anti-Detriment) (774) (617)

No-TFN Tax and Offset 19 ( 199)

Under / (over) provision for income tax in previous year 407 6

Total tax expense 161 040 143 121

Member contributions, government co-contributions, low income superannuation contributions and transfers from other superannuation funds

The prima facie income tax expense on benefits accrued as a result of operations before income tax reconciles to the income tax expense in the financial statements as follows:

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

Deferred tax expense / (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

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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

7. INCOME TAX (continued)

2016 2015

$'000 $'000

(b) Current tax balances

Current tax payables: Provision for current year income tax 160 702 142 959

160 702 142 959

(c) Deferred tax balances

Deferred tax asset: Temporary differences 474 404

474 404

Taxable and deductible temporary differences arise from the following:

2016 Opening

balance Charged to income Closing

balance

$'000 $'000 $'000

Interest receivable (35) 2 (33)

Insurance premiums payable 439 68 507

404 70 474

2015 Opening

balance Charged to income Closing

balance

$'000 $'000 $'000

Interest receivable (47) 12 (35)

Insurance premiums payable 451 (12) 439

404 - 404

Gross deferred tax assets / (liabilities):

Gross deferred tax assets / (liabilities):

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209

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

8. CASH FLOW INFORMATION

2016 2015

$'000 $'000

(a) Reconciliation of Cash

Cash at bank 201 204 155 169

(b)

1 408 593 1 878 253

Less: Lump sum benefits paid and payable (380 955) (353 025)

Pensions paid and payable (9 146) (4 954)

(161 812) (785 756)

Add back:

(Increase)/decrease in interest receivable 18 79

(Increase)/decrease in GST receivable (159) (14)

(Increase)/decrease in deferred tax asset (70) -

Increase/(decrease) in benefits and pensions payable 348 (577)

Increase/(decrease) in sundry payables 3 307 352

Increase/(decrease) in current tax liabilities 17 743 2 315

Net cash inflows from operating activities 877 867 736 673

9. SUNDRY DEBTORS

2016 2015

$'000 $'000

Receivable from the ARIA Investments Trust 68 -

Interest receivable 217 235

GST receivable 173 14

458 249

No sundry debtors are past due or impaired (2015: Nil).

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

Benefits accrued as a result of operations after income tax

Increase in net market value of investments

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210

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

10. SUNDRY PAYABLES

2016 2015

$'000 $'000

Insurance premiums payable 3 376 2 928

Employer contributions refundable 102 176

Other payables 3 202 269

6 680 3 373

11. AUDITOR'S REMUNERATION

2016 2015

$ $

Financial statements 49 000 49 000

45 000 45 000

Total 94 000 94 000

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

Amounts paid or payable to the Australian National Audit Office for audit services:

Regulatory returns and compliance

The audits were provided by the Australian National Audit Office. The audit fees will be charged against the assets of the 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.

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211

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

12. LIABILITY FOR ACCRUED BENEFITS

2016 2015

$'000 $'000

Liability for accrued benefits at beginning of the year 7 789 326 6 269 052

Add:

1 408 593 1 878 253

Less: Lump sum benefits paid and payable (380 955) (353 025)

Pensions paid and payable (9 146) (4 954)

Net change 1 018 492 1 520 274

Liability for accrued benefits at the end of the year 8 807 818 7 789 326

13. FUNDS NOT ALLOCATED TO MEMBER ACCOUNTS 2016 2015

$'000 $'000

(a) Operational Risk Reserve

19 309 6 280

Transfers to reserve 11 240 12 745

Earnings on reserve 411 284

Closing balance 30 960 19 309

(b) Other Funds Not Allocated to Members' Accounts

17 870 4 576

7 491 (182)

Bank interest 2 129 4 534

Other (2 127) 803

25 363 9 731

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

Benefits accrued as a result of operations after income tax

Opening balance

Valuation differences between unit pricing and financial statements

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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

14. GUARANTEED BENEFITS

15. VESTED BENEFITS

The vested benefits amount is made up of:

2016 2015

$'000 $'000

Members' account balances at 30 June 8 751 495 7 760 286

17 870 4 576

Vested benefits 8 769 365 7 764 862

Net assets available to pay benefits 8 807 818 7 789 326

No guarantees have been made in respect of any part of the liability for accrued benefits.

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.

Employer contributions (net of contributions tax) and member transfers received prior to year-end but not allocated at balance date

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213

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

16. 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 Plan (other than cash held for managing contribution receipts, insurance expenses, benefit payments and tax payments) comprise units in the 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.

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 RSE licence 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 in the AIT. This is required to be maintained in cash or cash equivalents. The Trustee of the Plan 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, which is the carrying value, approximates fair value. Changes in net market value are recognised in the Operating Statement.

Public Sector Superannuation Accumulation Plan

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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

16. FINANCIAL INSTRUMENTS (continued)

(e) Financial risk management objectives

(f) Credit risk

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 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 which address the investment strategy and objectives and risk mitigation strategies including risk mitigation relating to the use of derivatives.

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.

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.

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.

The Plan is exposed to a variety of financial risks as a result of its pooled investments in the 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 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.

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215

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

16. FINANCIAL INSTRUMENTS (continued)

(f) Credit risk (continued)

2016 2015

$'000 $'000

Investments

8 774 324 7 780 748

Other financial assets Cash and cash equivalents 201 204 155 169

Sundry debtors 285 235

Total financial assets 8 975 813 7 936 152

(g) Liquidity risk

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

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

The largest exposure to a single counterparty is to cash held by the investment master custodian Northern Trust. 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 2016 or 30 June 2015.

Pooled Superannuation Trust - ARIA Investments Trust

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 or tax liabilities.

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 holds 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.

Public Sector Superannuation Accumulation Plan

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PSSAP FINANCIAL STATEMENT S

216

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

16. FINANCIAL INSTRUMENTS (continued)

(g) Liquidity risk (continued)

Financial Liabilities maturity profile:

Less than 3 months 3 months to 1 year 1-5 years

Over 5 years Total

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

Benefits and pensions payable 1 260 - - - 1 260

Sundry payables 6 680 - - - 6 680

Vested benefits 8 769 365 - - - 8 769 365

Total financial liabilities 8 777 305 - - - 8 777 305

Benefits and pensions payable 912 - - - 912

Sundry payables 3 373 - - - 3 373

Vested benefits 7 764 862 - - - 7 764 862

Total financial liabilities 7 769 147 - - - 7 769 147

The following tables summarise the maturity profile of the Plan’s financial liabilities. Vested benefits have been included in the less than three months column, as this is the amount that members could call upon as at reporting date. This is the earliest date on which the Plan can be required to pay members’ vested benefits. However, members may not necessarily call upon amounts vested to them during this time. The tables have been drawn up based on the contractual undiscounted cash flows of financial liabilities based on the earliest date on which the Plan can be required to pay. The tables include both interest and principal cash flows.

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.

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.

30 June 2015

30 June 2016

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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

16. FINANCIAL INSTRUMENTS (continued)

(h) Market risk

Foreign currency risk 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 Plan does not undertake any transactions in foreign currency and is therefore not directly exposed to foreign currency risk. However, the Plan is indirectly exposed to foreign currency risk from the international assets held in the AIT, and it is managed in accordance with the Trustee’s approved investment strategy. 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.

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 currency 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 2015 reporting period.

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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

16. FINANCIAL INSTRUMENTS (continued)

(h) Market risk (continued)

Interest rate risk

Benefits accrued Net assets available

to pay benefits

Benefits accrued Net assets available

to pay benefits

2016 Cash and cash equivalents 201 204 (604) (604) 604 604

2015 Cash and cash equivalents 155 169 (621) (621) 621 621

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 $' 000 Carrying 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.

-0.4% +0.4%

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 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 payments. All holdings at 30 June 2016 and 30 June 2015 had a maturity profile of less than one month.

The following table illustrates the Plan's sensitivity to a 0.3% p.a. (2015: 0.4%) increase or decrease in interest rates, 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 0.3% (2015: 0.4%) at reporting date, and all other variables were held constant, the financial result would have improved/(deteriorated) as demonstrated:

-0.3% +0.3%

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.

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219

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

16.FINANCIAL INSTRUMENTS (continued)

(h) Market risk (continued)

Other price risk (continued) The Plan's investment in AIT is exposed to market price risk in respect of the latter's holdings of equity securities and unit 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. The volatility factors represent the average annual historical volatility in the investment option unit prices. For the Cash Option and the investments backing the operational risk reserve a factor of 0.3% (2015: 0.4%) 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 by the volatility factor at the reporting date, and all other variables were held constant, the financial result would have improved/ (deteriorated) as follows:

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220

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

16.FINANCIAL INSTRUMENTS (continued)

(h) Market risk (continued)

Other price risk (continued)

Balanced -/+5.0% 49 926 (2 496) (2 496) 2 496 2 496

Aggressive -/+7.0% 510 418 (35 729) (35 729) 35 729 35 729

Cash -/+0.3% 132 513 (398) (398) 398 398

Income Focused -/+2.0% 158 478 (3 170) (3 170) 3 170 3 170

MySuper Balanced -/+5.0% 7 697 307 (384 865) (384 865) 384 865 384 865 CSCri Cash -/+0.3% 14 573 (44) (44) 44 44

CSCri Aggressive -/+7.0% 13 131 (919) (919) 919 919

CSCri Balanced -/+5.4% 78 408 (4 234) (4 234) 4 234 4 234

CSCri Income Focused -/+2.3% 88 678 (2 040) (2 040) 2 040 2 040

-/+0.3% 20 937 (63) (63) 63 63

-/+0.3% 9 955 (30) (30) 30 30

8 774 324 (433 988) (433 988) 433 988 433 988

2016

Total

Operational risk reserve option Operational risk reserve (AIT)1

1 In accordance with the Australian Prudential Regulatory Authority Prudential Practice Guide SPG 114 - Operational Risk Financial Requirement (SPG 114) a separate option for the Operational Risk Reserve has been created to reflect that the scheme invests through a Pooled Superannuation Trust.

Carrying amount $'000 Benefits

accrued

Change in price

ARIA Investments Trust:

Net assets available to pay

benefits

Net assets available to pay

benefits

Benefits accrued

Price risk $' 000

Financial Assets

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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

16.FINANCIAL INSTRUMENTS (continued)

(h) Market risk (continued)

Other price risk (continued)

Balanced -/+4.8% 26 346 (1 265) (1 265) 1 265 1 265

Aggressive -/+10.0% 407 832 (40 783) (40 783) 40 783 40 783

Cash -/+0.4% 95 075 (380) (380) 380 380

Income Focused -/+2.9% 115 925 (3 362) (3 362) 3 362 3 362

MySuper Balanced -/+6.5% 7 004 957 (455 322) (455 322) 455 322 455 322 CSCri Cash -/+0.4% 7 304 (29) (29) 29 29

CSCri Aggressive -/+11.0% 9 877 (1 086) (1 086) 1 086 1 086

CSCri Balanced -/+7.1% 46 488 (3 301) (3 301) 3 301 3 301

CSCri Income Focused -/+3.3% 47 635 (1 572) (1 572) 1 572 1 572

-/+0.4% 19 309 (77) (77) 77 77

7 780 748 (507 177) (507 177) 507 177 507 177

Net assets available to pay

benefits

ARIA Investments Trust:

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 $' 000

Financial Assets

Total

Benefits accrued Net assets

available to pay benefits

Benefits accrued

2015

Operational risk reserve options

Public Sector Superannuation Accumulation Plan

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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

16. FINANCIAL INSTRUMENTS (continued)

(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

2016 Financial Assets Pooled superannuation trust - 8 774 324 - 8 774 324

2015 Financial Assets Pooled superannuation trust - 7 780 748 - 7 780 748

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

Reconciliation of Level 3 net market value measurements

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

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

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.

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.

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.

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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

17.RELATED PARTIES

(a) Trustee

(b)

Paul Abraham

Helen Ayres Corporate Secretary (Resigned 30 June 2016) Peter Carrigy-Ryan Chief Executive Officer Philip George

Richard Hill

Leonie McCracken General Manager, Operations (Resigned 18 March 2016) Bronwyn McNaughton General Counsel Christine Pearce General Manager, Member & Employer Services Sarah Rodgers General Manager, People & Culture (Resigned 3 August 2016) Alison Tarditi Chief Investment Officer Andy Young General Manager, Finance & Risk

Commonwealth Superannuation Corporation (CSC) was the Trustee throughout the reporting period. No fees were charged by CSC for acting as Trustee of the Plan during the reporting period.

Nadine Flood Michael Vertigan (term ended 30 June 2016)

Margaret Staib

Winsome Hall

Peggy O'Neal Christopher Ellison John McCullagh (term ended 30 June 2016)

Key Management Personnel

The Directors of CSC throughout the year ended 30 June 2016 were:

Tony Cole Patricia Cross (Chairman)

Peter Feltham (term ended 30 June 2016)

General Manager, Scheme Administration (Commenced 1 July 2015) General Manager, Information Technology (Commenced 28 September 2015)

General Manager, Investment Operations (Commenced 21 March 2016)

Lyn Gearing (term ended 12 September 2016)

The following Directors were appointed subsequent to year-end:

Ariane Barker (appointed 13 September 2016)

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 2016:

Garry Hounsell (appointed 1 July 2016) Anthony Needham (appointed 1 July 2016) Sunil Kemppi (appointed 1 July 2016)

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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

17.RELATED PARTIES (continued)

(c) Key Management Personnel Compensation

2016 2015

$ $

Short-term employee benefits 464 674 367 900

Post-employment benefits 51 085 42 398

Other long-term benefits 36 833 28 096

552 592 438 394

(d) Investing entities

The compensation of key management personnel (including Directors) related to investment management is charged against the assets of the ARIA Investments Trust that are referable to the Plan.

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 2016, 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, the Commonwealth Superannuation Scheme and the Military Superannuation and Benefits Scheme. All investing transactions are conducted under normal industry terms and conditions.

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:

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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

17. RELATED PARTIES (continued)

(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

Share of Net Income after tax

Share of Net Income after tax

2016 2015 2016 2015

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

ARIA Investments Trust 8 774 324 7 780 748 161 812 785 756

8 774 324 7 780 748 161 812 785 756

The Trustee pays 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 2016 (2015: $nil).

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226

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

18. COMMITMENTS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS

The Plan had no capital commitments at 30 June 2016 (2015: $nil).

The Plan had the following commitments for other expenditure as at 30 June 2016 :

2016 2015

$'000 $'000

BY TYPE Commitments receivable

Net GST recoverable on commitments1 2 667 3 057

2 667 3 057

Commitments payable

Administration expenses2 (39 109) (44 830)

(39 109) (44 830)

Net commitments by type (36 442) (41 774)

BY MATURITY One year or less (9 596) (8 071)

From one to three years (18 026) (17 514)

Over three years (8 820) (16 189)

Total commitments (36 442) (41 774)

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 (including insurance benefits) 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 (2015: $nil).

2 Administration expenses are estimates of project commitments and operational activities, including the outsourcing of administration of the Plan. These expenses will be met through the collection of member administration fees received from members through the redemption of member benefits held by the Plan. Actual expenses will depend on future member numbers.

1 Commitments payable are GST inclusive.

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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2016

19. SUBSEQUENT EVENTS

No matters have arisen since 30 June 2016 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.

Public Sector Superannuation Accumulation Plan

36

11CSC FINANCIAL STATEMENTS

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Peter Carrigy-Ryan Andy Young

Chief Executive Officer General Manager, Finance & Risk 27 September 2016 27 September 2016

STATEMENT BY THE CHAIRMAN, CHIEF EXECUTIVE OFFICER, AND GENERAL MANAGER, FINANCE & RISK

In our opinion, the attached financial statements for the year ended 30 June 2016 comply with subsection 42(2) of the Public Governance, Performance and Accountability Act 2013 (PGPA Act), and are based on properly maintained financial records as per subsection 41(2) of the PGPA Act.

In our opinion, at the date of this statement, there are reasonable grounds to believe that Commonwealth Superannuation Corporation will be able to pay its debts as and when they fall due.

The statement is made in accordance with a resolution of the directors.

Patricia Cross

Chairman 27 September 2016

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CONTENTS

Primary financial statements Statement of Comprehensive Income Statement of Financial Position Statement of Changes in Equity Cash Flow Statement

Notes to the financial statements:

Note 1: Overview Note 2: Expenses Note 3: Own-Source Revenue Note 4: Financial Assets Note 5: Non-Financial Assets Note 6: Payables Note 7: Provisions Note 8: Cash Flow Reconciliation Note 9: Appropriations Note 10: Special Accounts Note 11: Senior Management Personnel Remuneration Note 12: Contingent Assets and Liabilities Note 13: Financial Instruments Note 14: Fair Value Measurements Note 15: Assets Held in Trust Note 16: Restructuring Note 17: Reporting of Outcomes

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Statement of Comprehensive Income for the year ended 30 June 2016

Original 2016

2016 2015 Budget Notes

Notes $'000 $'000 $'000

NET CONTRIBUTION BY SERVICES Expenses Employee benefits 2.1 54,197 833 40,234 a & b

Suppliers 2.2 29,448 12,556 27,926 a & c

Depreciation and amortisation 5.1 5,656 - 5,665

Finance costs 12 - -

Write-down and impairment of assets 2.3 271 - -

Total expenses 89,584 13,389 73,825

LESS: Own-Source Income Own-source revenue Sale of goods and rendering of services 3.1 99,268 13,469 76,825 a & c

Interest 3.2 78 156 - a

Other revenue - 120 -

Total own-source revenue 99,346 13,745 76,825

Net contribution by services 9,762 356 3,000

Surplus for the year 9,762 356 3,000

OTHER COMPREHENSIVE INCOME Changes in asset revaluation reserve 1,172 - - d

Total other comprehensive income 1,172 - -

Total comprehensive income 10,934 356 3,000

The above statement should be read in conjunction with the accompanying notes.

Budget Variances Commentary

Statement of Comprehensive Income

a. Following the passage of the Governance of Australian Government Superannuation Schemes Legislation Amendment Bill 2015 on 15 June 2015, ComSuper was merged into CSC on 1 July 2015. To facilitate post-merger integration, CSC changed its expense payment and fixed asset holding arrangements (refer to Note 1). Whilst the financials of CSC and ComSuper were merged, for the Portfolio Budget Statements the budget did not include consolidation entries or the impact of the change in payment arrangements.

b. The increase in expenses per variance comment a is partially offset by a reduction in average staffing levels versus budget.

c. The increase in expenses per variance comment a is partially offset by differences in timing of incurring expenses, particularly in relation to project work. This has also resulted in a reduction in sale of goods and rendering of services revenue, cash received - sale of goods and rendering of services, and cash used - supplier expenses.

d. Changes in asset revaluation reserve is higher than budget due to the revaluation of leasehold improvements and property, plant and equipment by an independent valuer at 30 June 2016. This has also resulted in an increase in leasehold improvements and property, plant and equipment assets. The revaluation was not included in the budget.

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as at 30 June 2016

Original 2016

2016 2015 Budget Notes

Notes $'000 $'000 $'000

ASSETS Financial Assets Cash and cash equivalents 4.1 41,113 8,845 38,347 e

Trade and other receivables 4.2 3,442 706 424 a & f

Total financial assets 44,555 9,551 38,771

Non-Financial Assets Leasehold improvements 5.1 6,932 - 3,365 a & d

Property, plant and equipment 5.1 4,117 - 3,334 a & d

Intangibles 5.1 20,129 - 19,007 a

Other non-financial assets 5.2 2,018 157 1,567 a

Total non-financial assets 33,196 157 27,273

Total assets 77,751 9,708 66,044

LIABILITIES Payables Suppliers 6.1 4,167 1,965 5,663 a & g

Other payables 6.2 12,939 1,313 9,481 h

Total payables 17,106 3,278 15,144

Provisions Employee provisions 7.1 11,779 - 14,334 a & c

Other provisions 7.2 1,351 - - a & i

Total provisions 13,130 - 14,334

Total liabilities 30,236 3,278 29,478

Net assets 47,515 6,430 36,566

EQUITY Contributed equity 35,475 2,324 14,357 a

Asset revaluation reserve 1,172 - 2,215 a & d

Retained surplus 10,868 4,106 19,994 a

Total equity 47,515 6,430 36,566

The above statement should be read in conjunction with the accompanying notes.

Statement of Financial Position

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Budget Variances Commentary

Statement of Financial Position

a. Refer to Statement of Comprehensive Income note a.

b. Refer to Statement of Comprehensive Income note b.

c. The increase in employee provisions as per variance comment a is partially offset by a reduction in average staffing levels versus budget.

d. Refer to Statement of Comprehensive Income note d.

e. Cash is higher than budget due to the higher surplus for the year and the timing of incurring expenses for project work.

f. Trade and other receivables is also higher than budget due to the timing of raising invoices for the trustee fee from the ARIA Investments Trust.

g. Supplier payables are lower than budget despite the impact of variance comment a, as from 1 July 2015 administration fees relating to the Public Sector Superannuation Accumulation Plan were paid from the plan rather than by CSC.

h. Other payables is higher than budget primarily due to an increase in unearned revenue resulting from the timing of incurring expenses related to project work.

i. Other provisions is also higher than budget as the budget did not include a provision for onerous lease space as the relevant space had not been deemed onerous at the time the budget was developed.

Statement of Financial Position (continued) as at 30 June 2016

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for the year ended 30 June 2016

Original 2016

2016 2015 Budget Notes

Notes $'000 $'000 $'000

CONTRIBUTED EQUITY Opening balance Balance carried forward from previous period 2,324 2,324 14,357 a

Comprehensive income Other comprehensive income - - -

Total comprehensive income - - -

Transactions with owners Contributions by owners Restructuring 16 33,151 - - a

Total transactions with owners 33,151 - -

Closing balance as at 30 June 35,475 2,324 14,357

RETAINED SURPLUS Opening balance Balance carried forward from previous period 4,106 3,750 19,994 a

Comprehensive income Surplus for the year 9,762 356 3,000

Other comprehensive income - - -

Total comprehensive income 9,762 356 3,000

Transactions with owners Distributions to owners Returns on capital Dividends (3,000) - (3,000)

Total transactions with owners (3,000) - (3,000)

Closing balance as at 30 June 10,868 4,106 19,994

ASSET REVALUATION RESERVE Opening balance Balance carried forward from previous period - - 2,215 a

Comprehensive income Other comprehensive income 1,172 - - d

Total comprehensive income 1,172 - -

Closing balance as at 30 June 1,172 - 2,215

Statement of Changes in Equity

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for the year ended 30 June 2016

Original 2016

2016 2015 Budget

Notes $'000 $'000 $'000

TOTAL EQUITY Opening balance Balance carried forward from previous period 6,430 6,074 36,566 a

Adjusted opening balance 6,430 6,074 36,566

Comprehensive income Surplus for the year 9,762 356 3,000

Other comprehensive income 1,172 - - d

Total comprehensive income 10,934 356 3,000

Transactions with owners Distributions to owners Returns on Capital Dividends (3,000) (3,000)

Distributions to owners Restructuring 16 33,151 - - a

Total transactions with owners 30,151 - (3,000)

Closing balance as at 30 June 47,515 6,430 36,566

Statement of Changes in Equity (continued)

Accounting Policy

Restructuring of Administrative Arrangements Net assets received from or relinquished to another Government entity under a restructuring of administrative arrangements are adjusted at their book value directly against contributed equity.

Dividends Dividends are recognised on the date that the dividend is declared and, if not paid by the reporting date, are reflected in the Statement of Financial Position as payables. CSC paid a dividend of $3 million to the Official Public Account in 2015-16 (2014-15: Nil).

Budget Variances Commentary

Statement of Changes in Equity

a. Refer to Statement of Comprehensive Income note a.

d. Refer to Statement of Comprehensive Income note d.

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Original 2016

2016 2015 Budget Notes

Notes $'000 $'000 $'000

OPERATING ACTIVITIES Cash received Sale of goods and rendering of services 101,746 13,812 76,825 a & j

Interest 84 157 - a

Net GST received 639 581 -

Total cash received 102,469 14,550 76,825

Cash used Employee benefits (56,906) (833) (40,234) a & b

Suppliers (29,376) (12,742) (27,536) a & c

Other - - (466)

Total cash used (86,282) (13,575) (68,236)

Net cash from operating activities 8 16,187 975 8,589

INVESTING ACTIVITIES Cash received Proceeds from acquisition of net liabilities from ARIA Investments Trust 772 - - a

Total cash received 772 - -

Cash used Purchase of leasehold improvements (250) - (468)

Purchase of property, plant and equipment (1,533) - (1,125)

Purchase of intangibles (2,983) - (4,072) k

Total cash used (4,766) - (5,665)

Net cash used by investing activities (3,994) - (5,665)

FINANCING ACTIVITIES Cash received Cash and cash equivalents received from restructuring 23,075 - - a

Total cash received 23,075 - -

Cash used Dividend paid (3,000) - (3,000)

Total cash used (3,000) - (3,000)

Net cash from financing activities 20,075 - (3,000)

Net increase/(decrease) in cash held 32,268 975 (76)

Cash and cash equivalents at the beginning of the reporting period 8,845 7,870 9,159

Cash and cash equivalents at the end of the reporting period 4.1 41,113 8,845 9,083

The above statement should be read in conjunction with the accompanying notes.

Cash Flow Statement for the year ended 30 June 2016

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Cash Flow Statement (continued) for the year ended 30 June 2016

Budget Variances Commentary

Cash Flow Statement

a. Refer to Statement of Comprehensive Income note a.

b. Refer to Statement of Comprehensive Income note b.

c. Refer to Statement of Comprehensive Income note c.

j. Cash from sale of goods and rendering of services is also higher than budget due to cash received for the implementation of the Australian Defence Force Superannuation and Cover Schemes.

k. Purchase of intangibles is lower than budget as less costs were capitalised to the build of the Capital 10 system in the 2015-16 financial year.

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NOTE 1: Overview

Assets acquired and liabilities transferred from the AIT on 1 July 2015 in exchange for cash were as follows:

$'000

Assets

Fixed assets and intangibles 2,559

Other receivables 110

Prepayments 279

Total Assets 2,948

Liabilities

Supplier payables (421)

Other payables (479)

Employee provisions (2,353)

Other provisions (467)

Total Liabilities (3,720)

Net Liabilities (772)

Objectives of the Entity

Commonwealth Superannuation Corporation (CSC) (ABN 48 882 817 243) is a corporate Commonwealth entity under the Public Governance, Performance and Accountability Act 2013 . The objective of CSC is to provide retirement and insurance benefits for scheme members and beneficiaries, including past, present and future employees of the Australian Government and other eligible employers and members of the Australian Defence Force, through investment and administration of their superannuation funds and schemes. CSC is a not-for-profit entity. The continued existence of the entity in its present form and with its present programs is dependent on Government policy.

CSC is the trustee responsible for the Public Sector Superannuation Scheme ('PSS'), the Commonwealth Superannuation Scheme ('CSS'), the Public Sector Superannuation Accumulation Plan ('PSSap'), the Military Superannuation and Benefits Scheme ('MSBS'), Australian Defence Force Superannuation Scheme ('ADF Super'), Australian Defence Force Cover Scheme ('ADF Cover'), the Defence Force Retirement and Death Benefits Scheme ('DFRDB'), the Defence Forces Retirement Benefits Scheme ('DFRB'), the Defence Force (Superannuation) (Productivity Benefit) Scheme ('DFSPB'), the Papua New Guinea Scheme ('PNG') and the 1922 Scheme, collectively referred to as 'the Schemes'.

To facilitate post-merger integration, CSC has also changed its expense payment arrangements, whereby from 1 July 2015 all operational expenses are paid by CSC (formerly these were paid by the AIT). CSC then invoices the AIT for the portion of expenses that are referable to the AIT. Accordingly, on 1 July 2015 CSC aquired all the operational assets and liabilites (principally trade receivables, fixed assets, supplier payables, employee and other provisions) from the AIT at their 30 June 2015 fair values.

Following the passage of the Governance of Australian Government Superannuation Schemes Legislation Amendment Bill 2015 on 15 June 2015, ComSuper was merged into CSC on 1 July 2015. As a result of the merger, the Statutory Agency of ComSuper was abolished, and as at 1 July 2015, the assets and liabilities ceased to be assets and liabilities of ComSuper, and became assets and liabilities of CSC without any conveyance, transfer or assignment. CSC was the successor in law in relation to the assets and liabilities (refer to Note 16 Restructuring).

The Military Superannuation Benefits Scheme (MSBS) was closed to new members from 30 June 2016 and a new accumulation plan, ADF Super, was established for members of the Australian Defence Force from 1 July 2016, together with a new invalidity scheme, ADF Cover.

The Schemes invest solely through the ARIA Investments Trust (AIT) - 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 activities are partly funded through the scheme administration charges collected from employers participating in PSS and CSS, and from members of PSSap, and through negotiated administration charges collected from the Department of Defence. Additional funding may be provided by Government to meet specific administration requirements.

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NOTE 1: Overview (continued)

Standard/ Interpretation Application date for the entity1

AASB 16 'Leases' 1 July 2019

1. The entity’s expected initial application date is when the accounting standard becomes operative at the beginning of the entity’s reporting period.

All other new or revised standards and/or interpretations that were issued prior to the sign-off date and are applicable to future reporting periods are not expected to have a future material impact on the entity’s financial statements.

Adoption of New Australian Accounting Standard Requirements No accounting standard has been adopted earlier than the application date as stated in the standard.

All new or revised standards and/or interpretations that were issued prior to the sign-off date and are applicable to the current reporting period did not have a material effect, and are not expected to have a future material effect, on the entity’s financial statements.

Future Australian Accounting Standard Requirements The following new and revised standards were issued by the Australian Accounting Standards Board prior to the sign-off date and are expected to have a material impact on the entity’s financial statements for future reporting period(s):

AASB 16 introduces a single lessee accounting model and requires a lessee to recognise assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. A lessee is required to recognise a right-of-use asset representing its right to use the underlying leased asset and a lease liability representing its obligations to make lease payments. The principal impact for CSC on adoption of AASB 16 will be to recognise the relevant operating leases (for office accommodation) on the balance sheet as a right of use asset and as a lease liability.

Nature of impending change/s in accounting policy and likely impact on initial application

The financial statements have been prepared on an accrual 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.

The Basis of Preparation

New Accounting Standards

The financial statements are general purpose financial statements and are required by section 42 of the Public Governance, Performance and Accountability Act 2013.

The financial statements have been prepared in accordance with:

a) Public Governance, Performance and Accountability (Financial Reporting) Rule 2015 (FRR) for reporting periods ending on or after 1 July 2015; and b) Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (AASB) that apply for the reporting period.

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NOTE 1: Overview (continued)

- Superannuation benefit payments - Superannuation contributions

Administered assets, liabilities, revenue and expenses are those items which are controlled by the Government and were managed or over sighted by the entity on its behalf including:

Under its legislation, the Income Tax Act is applicable to CSC, however in the normal course of its activities CSC does not generate taxable income under that Act. CSC is liable for Goods and Services Tax (GST) and Fringe Benefits Tax (FBT).

Revenues, expenses, assets and liabilities 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.

CSC is the parent and sole shareholder of ARIA Co Pty Ltd. ARIA Co Pty Ltd is the trustee of the ARIA Alternative Assets Trust and the PSS/CSS Investments Trust. ARIA Co Pty Ltd is not consolidated into CSC’s financial statements as it is a shell company and is considered to be immaterial.

Reporting of Administered activities

Controlled entities

- Superannuation Act 1922 ;

In addition, CSC was delegated third party access rights by Finance for the funding of legal and incidental costs of superannuation claims, and Act of Grace payments. These were appropriated under Appropriation Act (No. 1) 2015-2016 and Appropriation Act (No. 2) 2015-2016 .

The funded components of the CSS and PSS Schemes are reported in their respective financial statements.

DFRB, DFRDB and MSB Schemes Defence has responsibility for managing the legislation and has delegated third party access rights to the appropriations under the following Acts:

Revenue collected by CSC for use by the Government rather than CSC was Administered Revenue. Collections are transferred to the Official Public Account (OPA) maintained by Finance. Conversely, cash is drawn from the OPA to make payments under Parliamentary appropriations on behalf of Government.

Administered Cash Transfers to and from the Official Public Account

- Defence Forces Retirement Benefits Act 1948 ; - Defence Force Retirement and Death Benefits Act 1973 ; and - Military Superannuation Benefits Act 1991 .

The funded components of MSBS are reported in the MSBS financial statements. The DFRB and DFRDB are unfunded Schemes.

DFAT delegated third party access rights to CSC in respect of Papua New Guinea Superannuation Schemes which are appropriated in Appropriation Act (No. 1) 2015-2016 . CSC managed the payment of Pensions under the scheme on behalf of DFAT.

In addition to CSC, the entities responsible for managing the appropriations, Department of Finance (Finance), Department of Defence (Defence) and Department of Foreign Affairs and Trade (DFAT) will make separate disclosures of the contributions and unfunded benefits paid under the 1922, CSS, PSS, PNG, DFRB, DFRDB and MSB schemes.

Finance has responsibility to account for the Commonwealth’s activities in relation to the 1922, CSS and PSS schemes.

- Superannuation Act 1976 ; - Superannuation Act 1990 ; - Same Sex Relationships (Equal Treatment in Commonwealth Laws - Superannuation) Act 2008 ; - Governance of Australian Government Superannuation Schemes Act 2011 - s35(3)(a); and

PNG Scheme

- Governance of Australian Government Superannuation Schemes Act 2011 - s35(4)

Finance has responsibility for managing the legislation and has delegated third party access rights to the appropriations under the following Acts:

Taxation

The FRR requires disclosure where one entity has drawn against a Special Appropriation which is the responsibility of another entity.

1922, CSS and PSS schemes

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NOTE 1: Overview (continued) Events After the Reporting Period

On 30 June 2016, Military Superannuation Benefits Scheme (MSBS) was closed to new members and a new accumulation plan, ADF Super, was established for members of the Australian Defence Force from 1 July 2016, together with a new invalidity scheme, ADF Cover. CSC is the Trustee of ADF Super and ADF Cover. This is estimated to have an immaterial financial impact on the financial statements of CSC.

There were no other subsequent events that had the potential to significantly affect the ongoing structure and financial activities of Commonwealth Superannuation Corporation.

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Note 2: Expenses

2016 2015

$'000 $'000

2.1: Employee Benefits Wages and salaries 41,809 730

Superannuation Defined contribution plans 4,028 65

Defined benefit plans 3,050 38

Leave and other entitlements 5,049 -

Separation and redundancies 261 -

Total employee benefits 54,197 833

2.2: Suppliers Goods and services supplied or rendered Consultants 4,374 3

Contractors 3,660 10,486

Information technology and communications 6,215 -

Insurance 603 472

Printing/stationery 501 -

Property (other than rent) 1,207 -

Training and development 675 40

Travel 1,343 124

Other goods and services 5,633 26

Total goods and services supplied or rendered 24,211 11,151

Goods supplied 861 -

Services rendered 23,350 11,151

Total goods and services supplied or rendered 24,211 11,151

Other supplier expenses Operating lease rentals Minimum lease payments 4,331 1,405

Workers compensation expenses 906 -

Total other suppliers 5,237 1,405

Total suppliers 29,448 12,556

Leasing commitments

Within 1 year 4,047 1,354

Between 1 to 5 years 14,648 5,466

More than 5 years 4,336 212

Total operating lease commitments 23,031 7,032

Operating leases are non-cancellable in the normal course of business. CSC in its capacity as lessee has leases for office accomodation in Canberra City (head office and financial planning office), Belconnen, Sydney, Melbourne and Brisbane. Lease payments are subject to annual increases of the higher of 3.25% or the movement in the Consumer Price Index in the head office, 3.75% fixed annual rate increases in the financial planning office, 3.6% fixed annual rate increases in the Belconnen office and 4% fixed rate annual increases in the Sydney office. The initial period of the head office lease is still current and may be renewed by two further terms of 3 years. The financial planning office lease may be renewed by one period of two years. The Belconnen office and Sydney office leases have no further option for renewal. The Melbourne and Brisbane offices are for fixed terms of twelve months.

Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows:

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Note 2: Expenses (continued)

2016 2015

$'000 $'000

2.3: Write-Down and Impairment of Assets Impairment of financial instruments 6 -

Impairment of intangible assets 244 -

Write-off of property, plant and equipment on disposal 21 -

Total write-down and impairment of assets 271 -

2.4: Remuneration of Auditors

Financial statement audit services 98 22

Regulatory audit services 11 12

109 34

The following additional services were provided by Deloitte:

Internal controls audit 107 -

Project risk advisory services 131 -

238 -

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 services are as follows:

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Note 3: Own-Source Revenue

2016 2015

$'000 $'000

Own-Source Revenue

3.1: Sale of Goods and Rendering of Services Rendering of services 99,268 13,469

Total sale of goods and rendering of services 99,268 13,469

3.2: Interest Deposits 78 156

Total interest 78 156

Accounting Policy Revenue from rendering of services CSC receives scheme administration fees collected from employers participating in PSS and CSS, and from members of PSSap, and through negotiated administration charges collected from the Department of Defence. Additional funding may be provided by Government to meet specific administration requirements.

Revenue is recognised to the extent that is it 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 is shown as the liability 'unearned revenue'. The stage of completion of contracts at the reporting date for the purpose of revenue recognition is determined by reference to: a) services performed to date as a percentage of total services to be performed; or b) the proportion that costs incurred to date bear to the estimated total costs of the transaction. Receivables for goods and services, which have 30 day terms, are recognised at the nominal amounts due less any impairment allowance account. Collectability of debts is reviewed at end of the reporting period. Allowances are made when collectability of the debt is no longer probable.

Accounting Policy Interest revenue is recognised using the effective interest method.

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Note 4: Financial Assets

2016 2015

$'000 $'000

4.1: Cash and Cash Equivalents Cash in special account 27,107 -

Cash on deposit 14,006 8,845

Total cash and cash equivalents 41,113 8,845

4.2: Trade and Other Receivables Good and services receivables Goods and services 2,910 72

Total goods and services receivables 2,910 72

Other receivables:

GST receivable 521 502

Insurance claim receivable - 120

Interest receivable 6 12

Reimbursements 11 -

Total other receivables 538 634

Total trade and other receivables (gross) 3,448 706

Less impairment allowance (6) -

Total trade and other receivables (net) 3,442 706

Trade and other receivables (net) expected to be recovered in:

No more than 12 months 3,438 706

More than 12 months 4 -

Total trade and other receivables (net) 3,442 706

Trade and other receivables (gross) are aged as follows: Not overdue 3,431 706

Overdue by 0 to 30 days 1 -

31 to 60 days - -

61 to 90 days 5 -

More than 90 days 11 -

Total trade and other receivables (gross) 3,448 706

Accounting Policy Cash is recognised at its nominal amount. Cash and cash equivalents includes: a) 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; and b) cash in special accounts.

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Note 4: Financial Assets (continued)

2016 2015

$'000 $'000

4.2: Trade and Other Receivables (continued)

Impairment allowance aged as follows: Not overdue - -

Overdue by 0 to 30 days - -

31 to 60 days - -

61 to 90 days - -

More than 90 days (6) -

Total impairment allowance (6) -

Reconciliation of the Impairment Allowance

Movement in relation to 2016

Goods and services

Other

receivables

Total

$'000 $'000 $'000

As at 1 July 2015 Amounts acquired through restructuring (41) - (41)

Amounts written off 41 - 41

Amounts recovered and reversed - - -

Increase recognised in net contribution by services (6) - (6)

Total as at 30 June 2016 (6) - (6)

Movements in relation to 2015

Goods and services

Other

receivables

Total

$'000 $'000 $'000

As at 1 July 2014 - - -

Amounts written off - - -

Amounts recovered and reversed - - -

Increase recognised in net contribution by services - - -

Total as at 30 June 2015 - - -

Accounting Policy Loans and Receivables Trade receivables, loans and other receivables that have fixed or determinable payments and 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.

Credit terms for goods and services were within 30 days (2015: 30 days).

Accounting Policy Financial assets are assessed for impairment at the end of each reporting period.

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Note 5: Non-Financial Assets Reconciliation of the opening and closing balances of property, plant and equipment and intangibles for 2016

Leasehold Improvements

Property, Plant and Equipment

Intangibles - Computer Software

1

Total

$’000 $’000 $’000 $’000

As at 1 July 2015 Gross book value - - - - Accumulated depreciation, amortisation and impairment - - - -

Total as at 1 July 2015 - - - -

Additions

Purchased 2,167 1,094 217 3,478 Internally developed - - 2,584 2,584 Acquired through restructuring 5,446 3,847 20,572 29,865

Revaluations and impairments recognised in other comprehensive income

541 631 - 1,172

Impairments recognised in net contribution by services - - (244) (244) Depreciation and amortisation (1,222) (1,434) (3,000) (5,656) Disposals

Write off of property, plant and equipment

- (21) - (21)

Total as at 30 June 2016 6,932 4,117 20,129 31,178 Total as at 30 June 2016 represented by: Gross book value 6,932 4,117 23,373 34,422 Accumulated depreciation, amortisation and impairment - - (3,244) (3,244) Total as at 30 June 2016 6,932 4,117 20,129 31,178 1. The carrying amount of computer software includes $0.658 million of purchased software and $19.471 million of internally generated software. A $0.244m impairment loss was recognised for internally developed generated software. No indicators of impairment were found for property, plant and equipment.

No property, plant and equipment or intangibles are expected to be sold or disposed of within the next 12 months.

Revaluations of non-financial assets Contractual commitments for the acquisition of property, plant, equipment and intangible assets 5.1: Reconciliation of the Opening and Closing Balances of Property, Plant and Equipment and Intangibles CSC have contractual commitments totalling $0.330 million for the acquisition of property, plant and equipment and intangible assets. All revaluations were conducted in accordance with the revaluation policy stated at Note 14.1. Independent valuers conducted the revaluations as at 30 June 2016.

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Note 5: Non-Financial Assets (continued) Reconciliation of the opening and closing balances of property, plant and equipment for 2015

Leasehold Improvements Property, Plant and Equipment Intangibles - Computer

Software

Total

$’000 $’000 $’000 $’000

As at 1 July 2014

Gross book value - - - - Accumulated depreciation, amortisation and impairment - - - -

Total as at 1 July 2014 - - - -

Additions Purchased - - - -

Internally developed - - - -

Depreciation and amortisation - - - - Disposals From disposal of entities or operations (including restructuring) - - - - Other - - - -

Total as at 30 June 2015 - - - - Total as at 30 June 2015 represented by Gross book value - - - - Accumulated depreciation, amortisation and impairment - - - - Total as at 30 June 2015 - - - - 5.1: Reconciliation of the Opening and Closing Balances of Property, Plant and Equipment and Intangibles (continued)

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Note 5: Non-Financial Assets (continued)

Accounting Policy Assets 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.

Asset Recognition Threshold Purchases of property, plant and equipment are recognised initially at cost in the statement of financial position, 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 where there exists an obligation to the lessor. These costs are included in the value of the entity's leasehold improvements with a corresponding provision for the ‘make good’ recognised.

Revaluations 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.

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 the entity using, in all cases, the straight-line method of depreciation.

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:

Impairment All assets were assessed for impairment at 30 June 2016. 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 of disposal 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.

Intangibles CSC's intangibles comprise internally developed software and 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 lives of the entity's software are 1 to 10 years.

Purchased or internally developed intangibles are recognised initially at cost in the Statement of Financial Position, except for purchased intangibles costing less than $50,000 or internally developed assets costing less than $100,000. These items are expensed in the year of acquisition (other than where they form part of a group of similar items which are significant in total).

Software assets under development but not yet available for use have been tested for impairment as at 30 June 2016. All software assets in use were assessed for indications of impairment as at 30 June 2016.

Accounting Judgements and Estimates CSC has made judgements in relation to the carrying value of internally generated software. The carrying amount is based on the recoverability as assessed by management given the most recent information available, including an impairment assessment by an independent consultant as at 30 June 2016.

Leasehold improvements

Plant and equipment

2016

Lease terms

3 to 10 years

2015

Lease terms

3 to 10 years

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2016 2015

$'000 $'000

5.2: Other Non-Financial Assets Prepayments 2,018 157

Total other non-financial assets 2,018 157

Other non-financial assets expected to be recovered in:

No more than 12 months 1,740 157

More than 12 months 278 -

Total other non-financial assets 2,018 157

Note 5: Non-Financial Assets (continued)

No indicators of impairment were found for other non-financial assets (2015: Nil).

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Note 6: Payables

2016 2015

$'000 $'000

6.1: Suppliers Trade creditors and accruals 4,167 1,965

Total suppliers 4,167 1,965

Supplier payables expected to be settled in: No more than 12 months 4,167 1,965

More than 12 months - -

Total suppliers 4,167 1,965

Settlement is usually made within 30 days.

6.2: Other Payables Wages and salaries 204 -

Unearned revenue 10,496 76

Lease liabilities 2,167 1,229

Other 72 8

Total other payables 12,939 1,313

Other payables expected to be settled in:

No more than 12 months 7,688 176

More than 12 months 5,251 1,137

Total other payables 12,939 1,313

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Note 7: Provisions

2016 2015

$'000 $'000

7.1: Employee Provisions Leave 11,779 -

Total employee provisions 11,779 -

Employee provisions expected to be settled in: No more than 12 months 4,072 -

More than 12 months 7,707 -

Total employee provisions 11,779 -

2016 2015

$'000 $'000

7.2: Other Provisions Provision for onerous rent 787 -

Provision for restoration obligations 564 -

Total other provisions 1,351 -

Provision for onerous rent

Provision for

restoration obligations

Total other provisions

$’000 $’000 $’000

As at 1 July 2015 - - -

Amounts acquired through restructuring 804 - 804

Amounts transferred from ARIA Investments Trust - 467 467

Additional provisions made - 86 86

Amounts used (105) - (105)

Amounts reversed - - -

Unwinding of discount or change in discount rate 88 11 99

Derecognition of provision - - -

Total as at 30 June 2016 787 564 1,351

Accounting policy Liabilities for short-term employee benefits and termination benefits expected within twelve months of the end of reporting period are measured at their nominal amounts. Leave The liability for employee benefits includes provision for annual leave and long service 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 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 Australian Government short hand method. The estimate of the present value of the liability takes into account attrition rates and pay increases through promotion and inflation. Separation and Redundancy The entity recognises a provision for separation and redundancy benefit payments when it has developed a detailed formal plan for the terminations and has informed those employees affected that it will carry out the terminations. Superannuation Staff are members of the Commonwealth Superannuation Scheme (CSS), the Public Sector Superannuation Scheme (PSS), or the PSS accumulation plan (PSSap), or other superannuation funds held outside the Australian Government. The CSS and PSS are defined benefit schemes for Australian Government employees. The PSSap is a defined contribution scheme. 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 in the Department of Finance’s administered schedules and notes. CSC makes employer contributions to the employees' defined benefit superannuation scheme at rates determined by an actuary to be sufficient to meet the current cost to the Government. CSC accounts for the contributions as if they were contributions to defined contribution plans. Any liability for superannuation recognised as at 30 June represents outstanding contributions.

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Note 7: Provisions (continued)

2016 2015

$'000 $'000

Other provisions are expected to be settled in: No more than 12 months 110 -

More than 12 months 1,241 -

Total other provisions 1,351 -

The entity currently has 3 (2015: Nil) agreements for the leasing of premises which have provisions requiring the entity to restore the premises to their original condition at the conclusion of the lease. The entity has made a provision to reflect the present value of this obligation.

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Note 8: Cash Flow Reconciliation

2016 2015

$'000 $'000

Reconciliation of cash and cash equivalents as per Statement of Financial Position to Cash Flow Statement

Cash and cash equivalents as per Cash Flow Statement 41,113 8,845

Statement of Financial Position 41,113 8,845

Difference - -

Reconciliation of net contribution by services to net cash from/(used by) operating activities Net contribution by services 9,762 356

Adjustments for non-cash items Depreciation / amortisation 5,656 -

Net write down of assets 271 -

Expense non-financial assets on transfer from the AIT 110 -

Movements in assets and liabilities Assets (Increase) / decrease in trade and other receivables (2,250) (517)

(Increase) / decrease in other non-financial assets (153) (157)

Liabilities Increase / (decrease) in supplier payables (406) 653

Increase / (decrease) in other payables 3,168 640

Increase / (decrease) in employee provisions (50) -

Increase / (decrease) in other provisions 79 -

Net cash from operating activities

16,187 975

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258

9.1: Special Appropriations

1

2016 2015

Type Purpose $'000 $'000

Superannuation Act 1922 , Administered

Unlimited Amount

(90,133) -

Superannuation Act 1976 , Administered

Unlimited Amount

(4,216,577) -

Superannuation Act 1990 , Administered

Unlimited Amount

(1,698,336) -

Same Sex Relationships (Equal Treatment in Commonwealth Laws - Superannuation) Act 2008 , Administered

Unlimited Amount

(59) -

Governance of Australian Government Superannuation Schemes Act 2011 - s35(3)(a) in the case of the 1922 Scheme, DFRB, DFRDB, DFSPB or PNG schemes

Unlimited Amount

- -

Governance of Australian Government Superannuation Schemes Act 2011 - s35(4) to reimburse the superannuation funds administered by CSC

Unlimited Amount

(634) -

Defence Forces Retirement Benefits Act 1948 , Administered

Unlimited Amount

(47,419) -

Defence Force Retirement & Death Benefits Act 1973 , Administered

Unlimited Amount

(1,506,904) -

Military Superannuation and Benefits Act 1991 , Administered

Unlimited Amount

(583,909) -

Public Governance, Performance and Accountability Act 2013 Section 77

Refund (54) -

Total (8,144,025) - 1. Amounts exclude recoverable GST.

An Act to make provision for and in relation to an occupational superannuation scheme for, and the payment of other benefits to, members of the Defence Force, and for related purposes.

Note 9: Appropriations Authority

Appropriation applied

An Act to provide superannuation benefits for persons employed by the Commonwealth and by certain Commonwealth Authorities and to make provision for the families of those persons. An Act to make provision for and in relation to an occupational superannuation scheme, known as the Commonwealth Superannuation Scheme, for persons employed by the

Commonwealth and for certain other persons.

An Act to make provision for and in relation to an occupational superannuation scheme for persons employed by the Commonwealth, and for certain other persons. An Act to address discrimination against same

- sex couples and their

children in Commonwealth laws, and for other purposes. An Act to make provision for any money becoming payable by CSC in respect of an action, liability, claim or demand that relates to the 1922 Scheme, DFRB, DFRDB, DFSPB or PNG schemes. An Act to make provision for any money becoming payable by Commonwealth Superannuation Corporation(CSC) in respect of an action, liability, claim or demand that relates to any other cases not

covered in s35(3)(a) of Governance of Australian Government Superannuation Schemes Act 2011.

An Act to provide Retirement Benefits for Members of the Defence Force of the Commonwealth, and for other purposes. An Act to make provision for and in relation to a Scheme for Retirement and Death Benefits for Members of the Defence Force. Repayments required or permitted by law (where no other appropriation for repayment exists).

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9.2: Disclosure by Agent in Relation to Annual and Special Appropriations

1

DFAT

2

2016

$'000

Total receipts - 3,321,707 1,608,049 Total payments ( 6,883) (6,006,827) (2,138,231)

DFAT

2015

$'000

Total receipts - Total payments - 1. Amounts exclude recoverable GST. 2. Department of Foreign Affairs and Trade.

Department of Finance

Department of Defence

Note 9: Appropriations (continued)

$'000

$'000

Department of Finance

Department of Defence

$'000

$'000

-

-

-

-

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260

Note 9: Appropriations (continued)

6. Governance of Australian Government Superannuation Schemes Act 2011;

9.3: Compliance with Statutory Conditions for Payments from the Consolidated Revenue Fund

Section 83 of the Constitution provides that no amount may be paid out of the Consolidated Revenue Fund except under an appropriation made by law.

CSC operates from the CSC Special Account established under the Public Governance, Performance and Accountability Act 2013 Section 80 in providing superannuation administration for Australian Government sponsored superannuation schemes. CSC, as an Agent, has third party access rights for the following Special Appropriations (refer note 9.1):

Department of Finance (Finance) 1. Superannuation Act 1922; 2. Superannuation Act 1976; 3. Superannuation Act 1990; 4. Superannuation Act 2005; 5. Same-Sex Relationships (Equal Treatment in Commonwealth Laws - Superannuation) Act 2008;

7. Annual Appropriation Act 1 (for Compensation & Legal payments and Act of Grace payments); and 8. Annual Appropriation Act 2 (for Act of Grace payments).

Department of Defence (Defence) 1. Defence Forces Retirement Benefits Act 1948; 2. Defence Forces Retirement and Death Benefits Act 1973; and 3. Military Superannuation and Benefits Act 1991.

Department of Foreign Affairs and Trade (DFAT) 1. Annual Appropriation Act 1 (payments are made in accordance with the Papua New Guinea (Staffing Assistance) Act 1973 )

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Note 9: Appropriations (continued)

No.

Value $'000 Recovered $'000 No.

Value $'000 Recovered $'000

DFAT - Annual Administered Appropriation

Papua New Guinea (Staffing Assistance) Act 1973 8 13 12 - - -

Defence - Special Appropriations

Defence Forces Retirement Benefits Act 1948; and

Defence Forces Retirement and Death Benefits Act 1973 - -

Military Superannuation and Benefits Act 1973 19 69 19 - - -

Finance - Special Appropriations

Superannuation Act 1922; and

Superannuation Act 1976 - -

Superannuation Act 1990 122 224 158 - - -

No.

Value $'000 Recovered $'000 No.

Value $'000 Recovered $'000

DFAT - Annual Administered Appropriation

Papua New Guinea (Staffing Assistance) Act 1973 - - - - - -

Defence - Special Appropriations

Defence Forces Retirement Benefits Act 1948; and

Defence Forces Retirement and Death Benefits Act 1973 342 - -

Military Superannuation and Benefits Act 1973 41 1,380 107 - - -

Finance - Special Appropriations

Superannuation Act 1922; and

Superannuation Act 1976 122 - -

Superannuation Act 1990 32 207 149 - - -

Both the Financial Framework Legislation Amendment Act (No.2) 2012 (FFLA Act No.2 (2012)) and the Financial Framework Legislation Amendment Act (No.1) 2013 (FFLA Act No.1 (2013)) require that CSC and the agency responsible for the special appropriation disclose, refer tables below, the number of recoverable overpayments made during the financial year and the balance recovered to 30 June. The following tables set out, as required by the FFLA Act No.2 and FFLA Act No.1, the number and amount of all payments made beyond legislative pre-conditions for the period 1 July 2015 to 30 June 2016:

Legislation / Authority to pay1

Recoverable death payments2 2016 2015

1,004 -

4,059 -

Recoverable payments3

2,614 4,787

610 1,684

66 35 -

38 76 -

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262

Note 9: Appropriations (continued)

1

Legislation Amounts paid under each Act are disclosed in Note 9.1 Special Appropriations and Note 10 Special Accounts.

3

Recoverable payments

Legislative changes made in the FFLA Act No.2 and FFLA Act No.1 provides a mechanism, called a ‘recoverable payment’, to address administrative issues common to CSC, that provides authority for the inadvertent overpayments of some benefits, and for their recovery in line with the duty to pursue recovery of a debt under rule 11 of the Public Governance, Performance and Accountability Rule 2014.

Legislative changes made in the FFLA Act No.2 and FFLA Act No.1 provides a mechanism, called a ‘recoverable death payment’ that provides authority for the inadvertent overpayments of some benefits, and for their recovery in line with the duty to pursue recovery of a debt under rule 11 of the Public Governance, Performance and Accountability Rule 2014 .

2 Recoverable death payments

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Note 10: Special Accounts

2016 2015 2016 2015

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

Balance brought forward from previous period - - - - Adjusted Balance brought forward from previous period - - - - Increases

Amounts transferred through restructuring 23,010 - 6,502 - Other receipts 99,104 - 1,828,647 -

Total increases 122,114 - 1,835,149 -

Available for payments 122,114 - 1,835,149 -

Decreases Departmental

Payments made to suppliers (35,119) - - - Payments made to employees (56,888) - - - Dividend paid (3,000) - - - Total departmental decrease (95,007) - - -Special Public Money Payments made to others - - (1,773,040) -

Total special public money decrease - - (1,773,040) -

Total decreases (95,007) - (1,773,040) -

Total balance carried to the next period

3

27,107 - 62,109 -

1 Appropriation: Public Governance, Performance and Accountability Act 2013 section 80. Establishing Instrument: Section 29E Governance of Australian Government Superannuation Schemes Legislation Amendment Act 2015 2 Appropriation: Public Governance, Performance and Accountability Act 2013 section 78. Establishing Instrument: Financial Management and Accountability Determination 2011/06 3 Amounts differ to the Cash Flow Statement as the balances do not include cash on deposit.

CSC Special Account (Departmental)

1

Services for Other Entities and Trust Moneys - CSC Special Account

(Administered)

2

Purpose: For the receipt and expenditure of monies in connection with the provision of administration, accounting and other support services. Purpose: For the receipt and expenditure of monies in connection with payments made on behalf of CSS, PSS, and MSBS, and for the receipt and expenditure of monies temporarily held on trust or otherwise for the benefit of a person other than the Commonwealth. The Trust monies represent returned benefits which have not yet been subsequently repaid to the member.

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264

Note 11: Senior Management Personnel Remuneration

2016 2015

$ $

Short-term employee benefits Salary 3,533,375 2,689,306

Performance bonuses 1,137,645 1,008,923

Total short-term employee benefits 4,671,020 3,698,229

Post-employment benefits Superannuation 513,522 426,199

Total post-employment benefits 513,522 426,199

Other long-term employee benefits: Annual leave 290,967 224,276

Long-service leave 79,284 58,151

Total other long-term employee benefits

370,251 282,427

Total senior management personnel remuneration 5,554,793 4,406,855

Tony Cole Winsome Hall

Patricia Cross (Chairman) John McCullagh (term ended 30 June 2016)

Christopher Ellison Peggy O'Neal

Margaret Staib

Nadine Flood Michael Vertigan (term ended 30 June 2016)

Lyn Gearing (term ended 12 September 2016)

The following Directors were appointed subsequent to year-end:

Ariane Barker (appointed 13 September 2016) Garry Hounsell (appointed 1 July 2016) Anthony Needham (appointed 1 July 2016) Sunil Kemppi (appointed 1 July 2016)

Paul Abraham General Manager, Investment Operations (Commenced 21 March 2016) Helen Ayres Corporate Secretary (Resigned 30 June 2016)

Peter Carrigy-Ryan Chief Executive Officer

Philip George General Manager, Scheme Administration (Commenced 1 July 2015)

Richard Hill General Manager, Information Technology (Commenced 28 September 2015) Leonie McCracken General Manager, Operations (Resigned 18 March 2016) Bronwyn McNaughton General Counsel

Christine Pearce General Manager, Member & Employer Services

Sarah Rodgers General Manager, People & Culture (Resigned 3 August 2016)

Alison Tarditi Chief Investment Officer

Andy Young General Manager, Finance & Risk

The Directors of CSC throughout the year ended 30 June 2016 were:

Senior management personnel comprise the Directors of CSC and those Executives of CSC that have authority and responsibility for planning, directing and controlling the activities of the entity.

The total number of senior management personnel that are included in the above table are 22 individuals (2015: 19 individuals).

The Directors are either members of the Public Sector Superannuation Scheme (PSS), the Military Superannuation and Benefits Scheme (MSBS), the PSS accumulation plan (PSSap), or other superannuation funds for which CSC is not the trustee.

In addition to the Directors listed above, the following executives of CSC had authority and responsibility for planning, directing and controlling the activities of the entity throughout the year ended 30 June 2016:

Peter Feltham (term ended 30 June 2016)

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Note 12: Contingent Assets and Liabilities

Quantifiable Contingencies

Unquantifiable Contingencies

CSC is not aware of any events that require it to report quantifiable contingencies (2015 Nil).

CSC is not aware of any events that require it to report unquantifiable contingencies (2015 Nil).

Accounting Policy Contingent liabilities and contingent assets are not recognised in the statement of financial position but are reported in the notes. They may arise from uncertainty as to the existence of a liability or asset or represent an asset or liability in respect of which the amount cannot be reliably measured. Contingent assets are disclosed when settlement is probable but not virtually certain and contingent liabilities are disclosed when settlement is greater than remote.

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266

2016 2015

$'000 $'000

13.1: Categories of Financial Instruments Financial Assets Loans and receivables Cash and cash equivalents 41,113 8,845

Trade and other receivables 2,921 204

Total loans and receivables 44,034 9,049

Total financial assets 44,034 9,049

Financial Liabilities Financial liabilities measured at amortised cost Trade creditors and accruals 4,167 1,965

Other payables 276 8

Total financial liabilities measured at amortised cost 4,443 1,973

Carrying amount of financial liabilities 4,443 1,973

2016 2015

$'000 $'000

13.2: Net Gains or Losses on Financial Assets Loans and receivables Interest revenue 78 156

Net gains on loans and receivables 78 156

13.3: Net Income and Expense from Financial Liabilities

Note 13: Financial Instruments

There is no interest expense from financial liabilities not at fair value through profit or loss in the year ending 30 June 2016 (30 June 2015: Nil).

The carrying amount of the financial assets and liabilities is equivalent to their fair value.

Accounting Policy Financial assets CSC classifies its financial assets as loans and receivables. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. Financial assets are recognised and derecognised upon trade date.

Effective interest method Income is recognised on an effective interest rate basis except for financial assets that are recognised at fair value through profit or loss.

Impairment of financial assets Financial assets are assessed for impairment at the end of each reporting period.

If there is objective evidence that an impairment loss has been incurred for loans and receivables 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.

Financial liabilities Financial 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 interest basis.

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).

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13.4: Fair Value of Financial Instruments 13.5: Credit Risk CSC holds no collateral to mitigate against credit risk.

Credit quality of financial assets not past due or individually determined as impaired

Not past due nor impaired

Not past due nor impaired

Past due or impaired

Past due or impaired

2016 2015 2016 2015 $'000 $'000 $'000 $'000

Cash and cash equivalents 41,113 8,845 - -

Receivables for goods and services 2,893 204 17 -

Reimbursements 11 - - -

Total 44,017 9,049 17 -

Ageing of financial assets that were past due but not impaired for 2016 0 to 30 31 to 60 61 to 90 90+

days days days days Total

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

Loans and receivables:

Receivables for goods and services 1 - 5 5 11

Total 1 - 5 5 11

Ageing of financial assets that were past due but not impaired for 2015 0 to 30 31 to 60 61 to 90 90+

days days days days Total

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

Loans and receivables:

Receivables for goods and services - - - - -

Total

- - - - -

CSC is exposed to minimal credit risk as loans and receivables are cash and trade receivables. The maximum exposure to credit risk is the risk that arises from potential default of a debtor. This amount is equal to the balance of trade receivables and reimbursements (excluding GST receivable) 2016: $2,921,000 (2015: $204,000).

CSC has assessed the risk of the default on payment and has allocated $6,000 in 2016 (2015: nil) to an impairment allowance account. CSC also manages credit risk by following up debtors (the majority which are Commonwealth agencies) before the due date to ensure payment. In addition, policies and procedures are in place that guide employee debt recovery techniques.

Note 13: Financial Instruments (continued) The carrying amount for all financial assets and liabilities is equal to their fair value in the years ending 30 June 2016 and 30 June 2015.

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13.6: Liquidity Risk Maturities for non-derivative financial liabilities 2016 On within 1 to 2 2 to 5 > 5

demand 1 year years years years Total

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

Trade creditors and accruals - 4,167 - - - 4,167

Other - 276 - - - 276

Total - 4,443 - - - 4,443

Maturities for non-derivative financial liabilities 2015

On within 1 to 2 2 to 5 > 5

demand 1 year years years years Total

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

Trade creditors and accruals - 1,965 - - - 1,965

Other - 8 - - - 8

Total - 1,973 - - - 1,973

13.7: Market Risk

Note 13: Financial Instruments (continued) CSC's financial liabilities are suppliers and other 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 due to funding received for specific projects and internal policies and procedures put in place to ensure there are appropriate resources to meet CSC's financial obligations.

During 2015-16 the majority of CSC's activities were funded through direct charges for scheme administration services and trustee services. CSC manages its budgeted funds to ensure it has adequate funds to meet payments as they fall due. In addition, CSC has procedures in place to ensure timely payments are made when due and has no past

experience of default. CSC holds basic financial instruments that do not expose the agency to certain market risks, such as 'currency risk', 'interest rate risk' or 'other price risk'.

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269

Note 14: Fair Value Measurements The different levels of the fair value hierarchy are defined below: Level 1: Quoted prices (unadjusted) in active markets for identical assets and liabilities that the entity can access at measurement date.

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset and liability, either directly or indirectly.

Level 3: Unobservable inputs for the asset or liability.

2016 2015 $’000 $’000

Non-financial assets

2

Leasehold improvements 6,932 - Level 3

Depreciated replacement cost

Replacement cost new Consumed economic benefit/Obsolescence of

asset

Property, plant and equipment (PP&E)

4,117 - Level 3

Depreciated replacement cost

Replacement cost new Consumed economic benefit/Obsolescence of

asset

Total non-financial assets 11,049 -

Total fair value measurements of assets in the Statement of Financial Position

11,049

-

1. There were no changes in valuation technique used from previous years. 2. CSC's assets are held for operational purposes and are not held for the purposes of deriving a profit. The current use of all-non financial assets is considered their highest and best use.

3. The remaining assets and liabilities reported by CSC are not measured at fair value in the Statement of Financial Position.

4. CSC did not measure any non-financial assets at fair value on a non-recurring basis as at 30 June 2016.

5. There have been no transfers between level 1 and level 2 of the hierarchy during the year.

Valuation Technique(s) and Inputs Used

Sensitivity Analysis

Significant movements in any of the inputs in

isolation would result in a significantly different fair value measurement. A change in the assumption used for replacement cost is accompanied by a directionally similar

change in the fair value of leasehold improvements and PP&E. A change in the assumption used for consumed economic benefit/obsolescence of asset is

accompanied by a directionally opposite change in the fair value of leasehold improvements and PP&E.

The following tables provide an analysis of assets and liabilities that are measured at fair value. The remaining assets and liabilities disclosed in the Statement of Financial Position do not apply the fair value hierarchy. Accounting Policy 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.

An independent valuer conducted revaluations of all leasehold improvements and property, plant and equipment as at 30 June 2016.

14.1: Fair Value Measurement

Category

(Level 1, 2 or 3)

3,4,5

Valuation Technique

1

Inputs used

Fair value measurements at the end of the reporting period

CSC ANNUAL REPORT 2015-16

CSC FINANCIAL STATEMENT S

270

Significant level 3 inputs utilised by CSC have been derived and evaluated as follows:

2016 2015 2016 2015 2016 2015 $’000 $’000 $’000 $’000 $’000 $’000

As at 1 July - - - - - - Total gains/(losses) recognised in net contribution by services

a

(1,222) - (1,455) - (2,677) -

Total gains/(losses) recognised in other comprehensive income

b

541 - 631 - 1,172 -

Purchases 2,167 - 1,094 - 3,261 -

Acquired through restucturing 5,446 - 3,847 - 9,293 -

Total as at 30 June 6,932 - 4,117 - 11,049 -

a. These gains/(losses) are presented in the Statement of Comprehensive income under depreciation and amortisation expense and write-down and impairment of assets. b. These gains/(losses) are presented in the Statement of Comprehensive income under changes in asset revaluation reserve.

No assets were transferred into or out of level 3 during the year.

Leasehold Improvements Property, Plant and Equipment Total

Note 14: Fair Value Measurements (continued) 14.1: Fair Value Measurement (continued) Consumed economic benefit/obsolescence of asset Assets that do not transact with enough frequency or transparency to develop objective opinions of value from observable market evidence have been measured utilising the cost (depreciated replacement cost (DRC)) approach. Under the DRC approach the estimated cost to replace the asset is calculated and then adjusted to take into account its consumed economic benefit/asset obsolescence (accumulated depreciation). Consumed economic benefit/asset obsolescence has been determined based on professional judgement regarding physical, economic and external obsolescence factors relevant to the asset under consideration.

14.2: Reconciliation for Recurring Level 3 Fair Value Measurements

Non-financial assets

CSC ANNUAL REPORT 2015-16

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Note 15: Assets Held in Trust

Monetary assets

2016 2015

$'000 $'000

CSS Opening balance 3,789,241 4,071,391

Closing balance 3,343,013 3,789,241

PSS Opening balance 17,898,204 16,613,851

Closing balance 17,954,263 17,898,204

PSSap Opening balance 7,936,570 6,414,206

Closing balance 8,976,460 7,936,570

MSBS Opening balance 6,830,533 5,794,885

Closing balance 7,327,791 6,830,533

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. The assets comprise units in the AIT, for which CSC is also Trustee, plus cash and cash equivalents and sundry debtors.

CSC ANNUAL REPORT 2015-16

CSC FINANCIAL STATEMENT S

272

ComSuper closing value 30 June 2015

Adjustments1 CSC take on value 1 July 2015

$’000 $’000 $’000

FUNCTIONS ASSUMED Assets recognised Cash and cash equivalents 23,075 - 23,075

Trade and other receivables 382 - 382

Leasehold improvements 3,448 1,998 5,446

Property, plant and equipment 2,672 1,175 3,847

Intangibles 21,169 (597) 20,572

Other non-financial assets 1,429 - 1,429

Total assets recognised 52,175 2,576 54,751

Liabilities recognised Suppliers (2,165) (1,175) (3,340)

Other payables (7,979) - (7,979)

Employee provisions (9,476) - (9,476)

Other provisions (805) - (805)

Total liabilities recognised (20,425) (1,175) (21,600)

Net assets/(liabilities) assumed 31,750 1,401 33,151

Note 16: Restructuring

In respect of functions assumed, the net book values of assets and liabilities transferred to CSC for no consideration and recognised as at the date of transfer were:

Following the passage of the Governance of Australian Government Superannuation Schemes Legislation Amendment Bill 2015 on 15 June 2015, ComSuper was merged into the Commonwealth Superannuation Corporation (CSC) on 1 July 2015. As a result of the merger, the Statutory Agency of ComSuper was abolished, and as at 1 July 2015, the assets and liabilities ceased to be assets and liabilities of ComSuper, and became assets and liabilities of CSC without any conveyance, transfer or assignment. CSC was the successor in law in relation to the assets and liabilities.

1 Accounting standards require CSC to take on ComSuper’s assets and liabilities at their 1 July 2015 fair value. During the course of the 2015-16 financial year, CSC identified that adjustments were required to the 30 June 2015 carrying values of ComSuper’s assets and liabilities so that they correctly represented their fair values. As such, ComSuper's 30 June 2015 asset and liability values have been adjusted for amounts identified relating to the independent valuation of fixed assets, the carrying amount (and related impairment) of intangible assets and the timing of asset purchases finalised prior to the restructure.

CSC ANNUAL REPORT 2015-16

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273

2016 2015

$’000 $’000

Expenses Employees 54,197 833

Suppliers 29,448 12,556

Depreciation and amortisation 5,656 -

Finance costs 12 -

Write-down and impairment of assets 271 -

Total expenses 89,584 13,389

Own-source income Sale of goods and rendering of services 99,268 13,469

Interest 78 156

Other revenue - 120

Total own-source income 99,346 13,745

Assets Cash and cash equivalents 41,113 8,845

Trade and other receivables 3,442 706

Leasehold improvements 6,932 -

Property, plant and equipment 4,117 -

Intangibles 20,129 -

Other non-financial assets 2,018 157

Total Assets 77,751 9,708

Liabilities Supplier payables 4,167 1,965

Other payables 12,939 1,313

Employee provisions 11,779 -

Other provisions 1,351 -

Total liabilities 30,236 3,278

Note 17: Reporting of Outcomes

1

CSC has one outcome: Retirement and insurance benefits for scheme members and beneficiaries, including past, present and future employees of the Australian Government and other eligible employers and members of the Australian Defence Force, through investment and administration of their superannuation funds and schemes. Net costs shown included intra-government costs that were eliminated in calculating the actual Budget Outcome.

Outcome 11

12APPENDICES

CSC ANNUAL REPORT 2015-16

APPENDICES

276

Appendix 1

Changes to CSC’s governing legislation & new military super scheme legislation

Governance of Australian Government Superannuation Schemes Act 2011 (GAGSS Act) The Defence Legislation Amendment (Superannuation and ADF Cover) Act 2015 amended the GAGSS Act to incorporate the Australian Defence Force Superannuation Scheme (ADF Super) and the Australian Defence Force Cover Scheme (ADF Cover). The amendments under schedule 1 commenced on 11 September 2015.

Changes to Public Governance, Performance and Accountability Act 2013

Following the merger of ComSuper with CSC on 1 July 2015, the Public Governance, Performance and Accountability Amendment (CSC) Rule 2016 (Amendment Rule) was made to amend the rule instrument made under the PGPA Act, the Public Governance, Performance and Accountability Rule 2014 (PGPA Rule). The Amendment Rule makes CSC subject to certain arrangements that applied to ComSuper when it performed the administrative services function in relation to the superannuation schemes administered by CSC. The Amendment Rule:

> provides that, in relation to amounts received by CSC on behalf of the Commonwealth and certain other amounts, CSC must comply with directions relating to bank accounts opened and maintained in Australia given by the Finance Minister in delegating his or her power in subsection 53(1) of the PGPA

Act to non-corporate Commonwealth entities. The amounts covered by the requirement include administration fees and amounts that CSC collects from agencies, on behalf of the Commonwealth, in line with government policy. In practice, this will mean that Commonwealth money and certain other money held in CSC bank accounts will continue to be consolidated at the end of each day and banking arrangements for this money will need to comply with the directions. CSC will not be required to apply the directions in managing money that the organisation holds in its own right;

> provides that the function of providing administrative services in relation to the superannuation schemes administered by CSC, formerly performed by ComSuper, will continue to be subject to, and need to comply with, the Commonwealth Procurement Rules - July 2014 (CPRs), now that this function is performed by CSC. The CPRs will not apply to CSC in respect of any of its other functions, such as fund management and investment management; and

> allows the Board of CSC, which is a corporate Commonwealth entity, or an official of CSC to be delegated and the Board of CSC to sub-delegate certain powers, functions or duties relating to recovery of debts owing to the Commonwealth under the PGPA Act and the PGPA Rule. This is necessary given CSC’s function to provide administrative services in relation to the superannuation schemes administered by the organisation. The relevant powers, functions or duties

CSC ANNUAL REPORT 2015-16

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277

were performed by ComSuper when it previously undertook this administrative services function. Debts owed to CSC in its own right are not affected by the Amendment Rule and will be managed in the same manner as has been CSC’s practice to date.

The Amendment Rule commenced on 13 April 2016.

Establishment of new superannuation scheme - ADF Super

The Australian Defence Force Superannuation Act 2015 gave effect to a new modern superannuation arrangement for people joining the Australian Defence Force from 1 July 2016. The Act established a new superannuation scheme known as ADF Super. ADF Super is a fully-funded accumulation scheme.

The Australian Defence Force Superannuation Trust Deed 2015 established the Trust Deed for ADF Super and sets out the functions and powers of CSC in relation to the scheme and the fund.

Establishment of new statutory death and invalidity scheme - ADF Cover

The Australian Defence Force Cover Act 2015 established a new statutory death and invalidity scheme, to be known as ADF Cover. ADF Cover provides all members of the Australian Defence Force who join after 1 July 2016 with death and invalidity cover.

CSC ANNUAL REPORT 2015-16

APPENDICES

278

Financial Reporting Risk & Security Accounting Services

Tax

Finance & Risk

Risk & Strategy Public Markets Private Markets Investments

Scheme Operations

Technology Operations

Quality, Knowledge & Change

Applications Development

Scheme Determinations

Portfolio Management Enterprise Architecture

Project Management Office Information

Management Technology Customer Service Infrastructure

Legal & Regulatory Compliance Corporate Governance Board Services General Counsel

Business Partnering Organisational Capability & Learning

People & Culture

Scheme Administration

Technology

Treasury & Investment Accounting

Performance Compliance & Due Diligence

Investment Operations

Customer Management Employer Services Corporate Affairs Product & Distribution Member &

Employer Services

Financial Planning (Industry Fund Services)

CSC Board Executive

> General Manager, Finance & Risk

> General Counsel

> Chief Investment Officer

> General Manager, Member & Employer Services

> General Manager, Investment Operations

> General Manager, Scheme Administration

> General Manager, Technology

> Chief Executive Officer

CSC

organisational chart

CSC is structured as a fully integrated provider of superannuation services:

CSC ANNUAL REPORT 2015-16

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279

Glossary ABN Australian Business Number

ADF Cover Act Australian Defence Force Cover Act 2015

ADF Super Act Australian Defence Force Superannuation Act 2015

ACTU Australian Council of Trade Unions

ADF Australian Defence Force

AFS licence Australian Financial Services licence

APRA Australian Prudential Regulation Authority

APS Australian Public Sector

ARIA Australian Reward Investment Alliance

ASFA Association of Superannuation Funds of Australia

CEO Chief Executive Officer

CIO Chief Investment Officer

CPI Consumer Price Index

CPSU Community and Public Sector Union

CSC Commonwealth Superannuation Corporation

CSCri Commonwealth Superannuation Corporation retirement income

CSS Commonwealth Superannuation Scheme

CSS Act Superannuation Act 1976

DFRB Defence Forces Retirement Benefits Scheme

DFRB Act Defence Forces Retirement Benefits Act 1948

DFRDB Defence Force Retirement and Death Benefits

DFRDB Act Defence Force Retirement and Death Benefits Act 1973

DFSPB Defence Force (Superannuation) (Productivity Benefit) Determination 1988

ESG Environmental, social and governance

GAGSS Act Governance of Australian Government Superannuation Scheme Act 2011

IFS Industry Fund Services

IP Income Protection

MilitarySuper Military Superannuation and Benefits Scheme

MilitarySuper Act Military Superannuation and Benefits Scheme Act 1991

CSC ANNUAL REPORT 2015-16

APPENDICES

280

PDS Product Disclosure Statement

PGPA Act Public Governance, Performance and Accountability Act 2013

PNG Act Papua New Guinea (Staffing Assistance) Act 1973

PNG Scheme Papua New Guinea Scheme

PRI Principles for Responsible Investment

PSS Public Sector Superannuation Scheme

PSS Act Superannuation Act 1990

PSSap Public Sector Superannuation accumulation plan

PSSap Act Superannuation Act 2005

RSE Registrable Superannuation Entity

RSEL Registered Superannuation Entity licence

SIS Act Superannuation Industry (Supervision) Act 1993

TPD Total and permanent disability

1922 Act Superannuation Act 1922

13REPORT REQUIREMENTS

CSC ANNUAL REPORT 2015-16

REPORT REQUIREMENT S

282

Table 29: Index of CSC’s annual reporting requirements

Requirements under Governance of Australian Government Superannuation Schemes Act 2011

Information on the performance of CSC’s functions in relation to each superannuation scheme and each superannuation Fund administered by CSC (other than the 1922 scheme, DFRB, DFRDB, DFSPB, ADF Cover and PNG) during 2015-16 as set out in GAGSS Act.

Available on pages 37-63.

Information on the performance of CSC functions in relation to the DFSPB during 2015-16. Available on pages 60-62.

Financial statements in respect of the management of each superannuation Fund administered by CSC in a form agreed between the Minister and the CSC Board.

Available on pages 65-227.

Requirements under Public Governance Accountability Amendment Act 2013

Details of the legislation establishing CSC. Available on page 3.

A summary of the objectives and functions of CSC as set out in the establishing legislation. Available on page 10.

The purposes of CSC as included in CSC’s corporate plan for the period. Available on page 18.

The names and titles of persons holding the position of responsible Minister or Ministers during 2015-16. Responsible Ministers during 2015-16 were: > Senator the Hon Mathias Cormann,

Minister for Finance

> Senator the Hon Marise Payne, Minister for Defence

> The Hon Kevin Andrews MP, Minister for Defence

> The Hon Michael McCormack MP, Assistant Minister for Defence

> The Hon Stuart Robert MP, Assistant Minister for Defence.

Any directions given to CSC by a Minister under an Act/ instrument during 2015-16. N/A - no directions were given during the year.

Any Government policy orders that applied in relation to CSC under section 22 of the PGPA Act. N/A - no Government policy orders applied during the year.

Explanation of non-compliance with a direction or Government policy order (this requirement is intended to assist readers understand why a corporate Commonwealth entity has acted in a particular way.

N/A - no Government policy orders applied during the year.

Annual performance statements for CSC for the period in accordance with section 39(1)(b) of the PGPA Act and section 16F of the PGPA Rule 2016.

Available on pages 18-20.

A statement of any significant issue reported to the responsible Minister under section 19(1)(e) of the PGPA Act that relates to non-compliance with the finance law in relation to CSC (an outline of the action taken to remedy the non-compliance is also required).

N/A - no significant issue was reported to the responsible Minister during the year.

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283

Requirements under Public Governance Accountability Amendment Act 2013

Information on the accountable authority, or each member of the accountable authority, of CSC in 2015-16; must include the accountable authority/member’s name/s, qualifications, experience, the number of meetings attended and if a non-executive or executive member.

Available on pages 22-31.

An outline of CSC’s organisational structure (including any subsidiaries of CSC). Available on page 278.

An outline of the location (whether or not in Australia) of major activities or facilities of CSC. CSC has three office locations; two in Canberra (Civic and Belconnen) and

one in Sydney.

Information in relation to the main corporate governance practices used by CSC during the period. Available on pages 33-35.

CSC’s decision-making if:

> the decision is to approve CSC paying for a good/service from another Commonwealth entity/company; or providing a grant to another commonwealth entity/ company; and

> CSC and the other Commonwealth entity/company are related entities; and

> the value of transaction (or if there is more than more transaction, the aggregate value of transactions) is more than $10,000 (inclusive of GST).

The value of the transaction or aggregate value of transactions is also required.

(Two Commonwealth entities are related if an individual is a member/director of the board of both entities.)

N/A - none of the circumstances outlined in the left-hand column did not apply to CSC during the year.

Any significant activities and changes that affected the operations or structure of CSC during the period; significant activities or changes may include:

> Significant events such as forming or participating in the formation of a company

> Operational and financial results of the entity

> Key changes to the entity’s state of affairs or principal activities; and

> Amendments to the entity’s enabling legislation and to any other legislation directly relevant to its operation.

Significant activities and changes that affected the operations or structure of CSC during 2015-16 are detailed in the Chair’s report on pages 14-17; significant activities and changes during the year include the:

> integration of ComSuper into CSC; and

> development of the new military super schemes, ADF Super and ADF Cover.

Particulars of judicial decisions/administrative tribunals made during the period that have had, or may have a significant impact on the operations of CSC.

No judicial or administrative tribunal decisions had a significant effect on CSC operations; CSC has a reconsideration process and a process for dealing with legal claims made by members.

CSC ANNUAL REPORT 2015-16

REPORT REQUIREMENT S

284

Requirements under Public Governance Accountability Amendment Act 2013

Particulars of any report on CSC given in 2015-16 by the Auditor General (other than a report under section 43 of the PGPA Act which deals with the Auditor General’s audit of annual financial statements); or a Committee of either House of Parliament; or the Commonwealth Ombudsman; or the Office of the Australian Information Commissioner.

N/A

If the accountable authority has been unable to obtain information from a subsidiary of the entity required to be included in the annual report - an explanation of the information that was not obtained and the effect of not having this information on the report.

N/A - CSC has no subsidiaries.

Details of any indemnity that applied in 2015-16 to the accountable authority, any member of the accountable authority or officer of CSC against a liability (including premiums paid, or agreed to be paid, for insurance against the authority, member or officer’s liability for legal costs).

Available on page 23.

Details of any significant non-compliance with finance law as per section 19 of the PGPA Act. N/A - there was no reportable non-compliance.

An index of CSC’s mandatory annual reporting requirements. This report requirements table.

Details of how CSC’s Annual Report (ie this report) was approved and when approval was given (this report must be approved by the CSC Board or a member of the Board and must be signed by a member of the Board); a statement that the CSC Board is responsible for preparing and giving the annual report to the responsible Minister in accordance with section 46 of the PGPA Act is also required.

CSC Chair’s approved the report on 7 October 2016. Other details are shown on page 3.

CSC’s Annual Report must comply with the presentation and printing standards required for documents which are to be presented to Parliament.

This requirement is met throughout the report.

CSC’s Annual Report must be presented in plain English and clear design to accommodate the needs and interests of both Parliament and other persons potentially interested in CSC’s report (which in specific terms means this report must be constructed in an accessible manner, with the information presented in relevant, reliable, concise, understandable and balanced way, using appropriate headings and adequate spacing, a glossary to define acronyms and technical terms, and tables, graphs, charts and diagrams instead of text wherever possible.

This requirement is met throughout the report (a HTML report version will also be available on the CSC website in late 2016 so the report content is accessible to people with a disability who are interested in CSC’s report).

14INDEX

CSC ANNUAL REPORT 2015-16

INDEX

286

Index Symbols

1922 scheme

Administration 59

Members and benefits 59

A

ADF Cover 4, 11 , 16-17, 19, 34, 46 276-277, 279, 282-283

ADF Super 4, 11 , 16-17, 19, 38, 46, 53, 55, 276-277, 279, 283

Andrews MP, the Hon Kevin 282

Annual Performance Statement 4-5, 18, 42, 46

Association of Superannuation Funds of Australia (ASFA) 47

Australian Council of Trade Unions (ACTU) 47

Australian Government 3, 10-11 , 18, 26, 38, 46, 49-54, 59, 63, 276, 279, 282

B

Barker, Ariane 17, 28

Benefits 10, 18, 38, 46, 48-289, 49-54, 57, 60-61, 63

Invalidity 54, 61

Retirement benefits 18

C

Cole, AO, Anthony (Tony) 31

Commonwealth Fraud Control Guidelines 35

Commonwealth Superannuation Corporation (CSC) 2-8, 10-11 , 14 -23, 27, 30-31, 34-35, 38-42, 46-48, 55, 229, 276-279, 282-284

About CSC’s schemes 5, 10

Board 3-6, 10, 17-18, 21-31, 34-35, 39-40, 54, 276, 282, 284

Board committees 5-6, 22, 30

Breach and Compliance Policy 35

Chair 4-5, 14 , 17, 19, 22-24, 26-29, 31, 42, 283-284

Chief Executive Officer 27, 279

Chief Investment Officer 39, 279

About CSC 5, 10-11

Directors 4, 22-23, 25-29

Licenses

Australian Financial Services

18, 34, 279

Registrable Superannuation Entity 18, 34, 280

Major achievements 4-5, 17

Organisational chart 6, 278

Policies 18-19, 22, 30-31, 34, 39-40

Remuneration 4, 22-23, 31

Values 15-17

Community and Public Sector Union 25, 30, 279

Complaints 6, 26, 50, 52, 55, 58, 62

ComSuper 15, 276-277, 283

Consumer Price Index (CPI) 10

Cormann 3, 282

Cross, Patricia 3, 17, 23, 27, 31

CSCri 6, 11 , 38, 41-42, 44, 46, 56-57, 279

CSS 2, 5-7, 10, 15, 25-26, 34, 38, 41-43, 46, 49-50, 56, 59, 279

Cash 41-44

CSS Financial statements 65-105

Default Fund 42-43

Fund 4, 19, 24, 26, 28-30, 38-39, 42-43, 47, 49-54, 56-57, 63, 279, 282

Investment performance 4, 6, 14 -15, 17-19, 38-39, 42-44

Members and benefits 7, 49

CSC ANNUAL REPORT 2015-16

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287

D

Defence 10-11 , 18, 22, 26-27, 29, 31, 53, 60, 62, 276-77, 279, 282

Australian Defence Force (ADF) 10

Chief of Defence Force 27

Department of Defence 11 , 29, 53, 60

DFRB 2, 5, 7, 11 , 34, 38, 60, 62, 279, 282

DFRDB 2, 5-7, 11 , 34, 38, 46, 53, 60-62, 279, 282

Contributors 7, 11 , 38, 46, 52, 54, 56-57, 60

DFRDB members 7, 53, 60-61

DFSPB 5, 11 , 60, 62, 279, 282

E

Ellison, the Hon. Chris 24, 31

F

Feltham, Peter 17, 25, 30-31

Financial advice 10, 14 , 19-20, 47

Flood, Nadine 25, 30-31

G

Gearing, Lyn 17, 25, 30-31

Glossary 4, 284

H

Hounsell, Garry 17, 29-30

I

Industry Fund Services (IFS) 19, 47

Investment 5-6, 14 , 16, 19, 23-25, 28, 38-43, 279-280

Asset allocation 15, 38-39, 41

Asset class 40

Investment managers 38-40

Investment options 5-6, 38, 41-42

Montreal Carbon Pledge 41

Principles for Responsible Investment 40, 280

J

K

Kemppi, Sunil 17, 30

L

Legislation 4, 6, 10, 14 , 17, 22-23, 31, 34, 40, 46, 48, 50, 52, 55-56, 58-59, 62-63, 276, 282-283

Australian Defence Force Cover Act 2015 11 , 277, 279

Australian Defence Force Superannuation Act 2015 11 , 277, 279

Corporations Act 2001 23, 34

Governance of Australian Government Superannuation Schemes Act 2011 3, 276, 282

Military Superannuation and Benefits Act 1991 11 , 55

Papua New Guinea (Staffing Assistance) Act 1973 11 , 63, 280

Public Governance, Performance and Accountability Act 2013 3, 280

Superannuation Act 1922 (the 1922 Act) 11

Superannuation Act 1976 (the CSS Act) 10

Superannuation Act 1990 (the PSS Act) 11

Superannuation Act 2005 (the PSSap Act) 11

Letter of Transmittal 3, 5

M

McCullagh, John 17, 26, 30-31

Members 4-7, 10-11 , 14 -20, 23, 30-31, 38, 46-57, 59-63, 277, 283

Associates 11

Contributors 7, 11 , 38, 46, 52, 54, 56-57, 60

Deferred benefit members 11 , 38

Eligible children 11

Pensioners 7, 11 , 17, 20, 46, 49-53, 59-60, 62-63

Preservers 11 , 38, 46

Spouses 11 , 53, 60

CSC ANNUAL REPORT 2015-16

INDEX

288

MilitarySuper 2, 5-7, 11 , 15-16, 26-27, 29, 31, 34, 38, 41-43, 53-55, 60-61, 279

Aggressive 14 , 42-44

Balanced (default) 14 , 43-44

Cash 19, 41, 43-44

Fund 4, 19, 24, 26, 28-30, 38-39, 42-43, 47, 49-54, 56-57, 63, 279, 282

Income Focused 41, 43-44

Investment performance 14 , 42

Militarysuper Financial statements 5

Minister for Finance 3, 10, 22, 282

MySuper 42, 44

N

Needham, Air Vice Marshal Tony 17, 29

O

O’Neal, Peggy 27, 31

P

Pillar Administration 2, 46

PNG Scheme 2, 280

Administration 10, 16-20, 22, 46, 61-63, 276

Fund 4, 19, 24, 26, 28-30, 38-39, 42-43, 47, 49-54, 56-57, 63, 279, 282

PSS 2, 5-7, 11 , 15, 25-26, 34, 38, 41-43, 46, 51 -52, 56, 107, 280

Cash 19, 41, 43-44

Default Fund 42-43

Fund 4, 19, 24, 26, 28-30, 38-39, 42-43, 47, 49-54, 56-57, 63, 279, 282

Investment performance 14 , 42

PSS Financial statements 5, 107

PSSap 2, 5-7, 11 , 15-17, 34, 38, 41-42, 44, 46, 49, 51, 56-58, 189, 280

Administration 10, 16-20, 22, 46, 61-63, 276

Aggressive 14 , 42-44

Balanced 6, 14 -15, 42-44

Cash 19, 41, 43-44

Fund 4, 19, 24, 26, 28-30, 38-39, 42-43, 47, 49-54, 56-57, 63, 279, 282

Income Focused 41, 43-44

Investment options 4, 10, 14 -16, 38, 48

Investment performance 14 , 42

MySuper Balanced 42

Pension (CSCr)i 6, 11 , 38, 41-42, 44, 46, 56-57, 279

PSSap Financial statements 5, 189

Q

R

Regnan 40

Report requirements 281, 284

Robert, the Hon. Stuart MP 282

S

Staib, AM, CSC , Air Vice Marshal Margaret 27, 30-31

T

U

V

Vertigan AC, Dr Michael John 17, 28, 30-31

W

X

Y

Z

2015-16 A N N UA L R E P O R T

C S C A N N UA L R E P O R T

2 015 - 16

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