MSB Board Annual Report to Parliament 2008-09

appendices

Appendix 1: MilitarySuper in brief

Investment
Asset Class	$m	%	$m	%
Fund asset allocation	30 June 2008		30 June 2009
Cash	413	14	174	6
Debt	346	12	484	18
Alternative Debt	194	7	191	7
Property	213	7	141	5
Australian Shares	588	20	535	19
Private Equity	479	17	516	19
International Shares	392	13	309	11
Uncorrelated Alpha	173	6	74	3
Infrastructure	303	10	267	10
Currency	16	1	52	2
Investment performance	30 June 2008		30 June 2009
Asset Class	Fund % (1)	Benchmark % (2)	Fund % (1)	Benchmark % (2)
Cash	7.0	7.3	5.09	5.48
Debt	3.9	4.4	3.90	5.48
Alternative Debt	-11.36	12.5	2.02	12.50
Property	4.7	12.0	-43.84	12.50
Australian Shares	-10.2	-13.7	-9.01	-20.34
Private Equity 3	5.3	15.0	-15.39	15.00
International Shares 4	-4.0	-13.7	-24.98	-28.39
Uncorrelated Alpha	-7.7	-0.2	-39.17	12.50
Infrastructure	12.6	12.5	-6.83	12.50

1. Figures shown are gross of management fees and tax.
2. Benchmark is the most commonly used index or other market measurement which is used as a yardstick to assess the risk and performance of a portfolio. The benchmark usually represents the minimum performance objective. Absolute return benchmarks established by the Board in the absence of any commonly accepted benchmark.
3. Private Equity is a long term investment and does not generally show a return in the early years of the investment because of set-up and management costs. The investment gains usually come in the later years as the underlying companies mature and increase in value. The effect of this timing is known as the J-curve Effect.
4. All international share exposures are fully hedged back to the Australian dollar.

Membership
Contributors at 30 June	2008	2009	Increase (decrease)
Males Females Total	42 513* 6842* 49 355	44 262 7393 51 655	1749 551 2300
Total Member contributions	$167.5m	$186.5m	$19m
Contributor Exits
Age retirement Resignation Redundancy Invalidity Death Unclaimed Other	143 3523 6 718 55 2803 -	262 1081 9 633 108 4008 44	119 (2442) 3 (85) 53 1205 44
Total	7248	6145	(1103)
Pensions in force
Retirement Redundancy Invalidity Reversionary Total Pensions paid	1106 1910 3531 163 6710 $128m	1220 1914 3913 180 7227 $146m	114 4 382 17 517 $18m
Average pension	$19 196	$19 690	$494
Preserved benefit Members at 30 June	72 812	75 929	3117

* The split between male and female Membership at 30 June 2008 does not accord with those in the 2007–08 report. Data quality fixes to the scheme Administrator’s system have amended the status of females incorrectly recorded as males.

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Appendix 2: glossary

Glossary of terms
active management	an approach to investment where the manager varies its strategy depending on current market conditions. Active managers regularly review their investments with a view to benefiting from changes in the market or from growth in specific assets.
ADF	Australian Defence Force
AD(JR) Act	Administrative Decisions (Judicial Review) Act 1977
APRA	Australian Prudential Regulation Authority
ASIC	Australian Securities and Investment Commission
Board	Military Superannuation and Benefits Board of Trustees No 1
CDF	Chief of the Defence Force
ComSuper	Commonwealth Superannuation Administration
core manager	a manager whose portfolio is constructed so as to provide a high probability of capturing the market return for a particular asset class. Core managers are used to control liabilities
CPI	Consumer Price Index
defensive assets	assets (such as cash and bonds) that are not very susceptible to market fluctuations
derivatives	investment products (such as an option on a share) that are derived from other securities or assets. Their value is linked to the value of the underlying security
DFRDB	Defence Force Retirement and Death Benefits
direct property	property that is purchased by an investor to be held by that investor (see also indirect property)
FSA	Financial Services Australia
FSG	Financial Services Guide
FSR	Financial Services Reform
growth assets	assets (such as shares and property) which provide investment returns (comprising both capital growth and income) which outperform inflation
ICC	Incapacity Classification Committee
indirect property	an investment in property made by purchasing units in a property trust, or shares in a property company
IVR	Interactive Voice Response telephone system
LWOP	leave without pay
MilitarySuper	Military Superannuation and Benefits Scheme
MSB	Military Superannuation and Benefits
MSBS	Military Superannuation and Benefits Scheme
MSCC	Military Superannuation Communication Committee
passive	a style of investment management that seeks to achieve performance equal to the market or index without making any active investment decisions
PDS	Product Disclosure Statement
RC	Reconsideration Committee
SCT	Superannuation Complaints Tribunal
SIS Act	Superannuation Industry (Supervision) Act 1993
SRC Act	Superannuation (Resolution of Complaints) Act 1993
surcharge	Superannuation Contributions Tax (Assessment and Collection) Act 1997, a tax on employer-financed superannuation contributions
unitisation	the conversion of Member interest-bearing accounts to unit-based accounts within the MSB Fund

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Appendix 3: publications

The Board publishes booklets and a series of factsheets for the benefit of Members. The following two documents together form the Product Disclosure Statement for MilitarySuper:

These are general information books that are intended as a reference for Members and pay officers.

The Your Guide to Investment Choice Booklet is an overview of the general objectives that underpin the Board’s investment policy and the specific strategy through which these objectives will be realised.

Also available is the Family Law and Splitting Super – How it’s done and what happens next? Booklet.

The Board also publishes a series of factsheets that deal with specific topics in more depth.

The fact sheets are entitled:

About to Leave the ADF?
Additional Personal Contributions
Appeal Rights
Death and Dependants’ Benefits
Dependants’ Benefits
Early Access to your Superannuation Benefit
Government (Super) Co-Contributions
Invalidity Benefits
Invalidity Benefits - The Classification Process
Leave Provisions
Maximum Benefit Limits
Relationship definitions
Rejoining the ADF
Salary Sacrifice Contributions
Spouse Contributions
Summary of the Scheme - for new starters
Superannuation Contributions Surcharge
Taxation Concessions for pensions
Taxation of Contributions
Taxation of Lump Sums
The Productivity Benefit
Transfer Amounts
Unitisation

All of these publications can be obtained from Members’ Pay Offices, or ordered online.

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Appendix 4: legislation

MilitarySuper Legislation

MilitarySuper is established under:

the Military Superannuation and Benefits Act 1991
the Military Superannuation and Benefits Trust Deed issued under section 4 of the Act
the Military Superannuation and Benefits Rules. (The Rules are a Schedule to the Trust Deed.)

Amendments to the Act

There were no amendments to the Military Superannuation and Benefits Act 1991 during the 2008–09 financial year.

Amending Trust Deeds

Two amending Trust Deeds were issued during the 2008–09 financial year.

Military Superannuation and Benefits Trust Deed Amendment 2008 (No. 1)

[ComLaw ref: F2008L04766] – the Rules were amended to remove discrimination against same-sex couples within the Scheme

Military Superannuation and Benefits Trust Deed Amendment 2008 (No. 2)

[ComLaw ref: F2008L04787] – the Rules were amended to allow superannuation guarantee top-up contributions made by the Department of Defence to be accepted as ancillary contributions.

Family Law

The Family Law Act 1975 was amended by:

Statute Law Revision Act 2008 (No. 73, 2008) [ComLaw ref: C2008A00073] – to make various amendments of the statute law of the Commonwealth, to repeal certain obsolete Acts, and for related purposes.
Family Law Amendment (De Facto Financial Matters and Other Measures) Act 2008
(No. 115, 2008) [ComLaw ref: C2008A00115] – to bring de facto relationships within the scope of the Act, and for related purposes.
Same-Sex Relationships (Equal Treatment in Commonwealth Laws—General Law Reform) Act 2008 (No. 144, 2008) [ComLaw ref: C2008A00144] – to address discrimination against same-sex couples and their children in Commonwealth laws, and for other purposes.

The Family Law (Superannuation) Regulations 2001 were amended by the Family Law (Superannuation) Amendment Regulations 2009 (No. 1) [ComLaw Ref: F2009L00263] (Select Legislative Instrument 2009 No. 19) – to provide for the new financial settlement regime for de facto couples included in the Family Law Act 1975 by the Family Law Amendment (De Facto Financial Matters and Other Measures) Act 2008.

ComLaw

The consolidated Military Superannuation and Benefits Act 1991, Trust Deed and Rules, each Amending Trust Deed and other Commonwealth legislation are available from the ComLaw website www.comlaw.gov.au

Appendix 5: compliance

While this report is not a Departmental annual report, the Board has endeavoured to comply with the ‘Requirements for Departmental Annual Reports’, where applicable. Details of ComSuper’s operations are provided in the Commissioner for Superannuation Annual Report 2008–09.

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Appendix 6: freedom of information

Freedom of Information Act statement

This statement is provided in accordance with section 8 of the Freedom of Information Act 1982 (the FOI Act).

Functions of ComSuper

The general functions of ComSuper are described in the main body of this report and in the Commissioner for Superannuation Annual Report 2008–09.

Decision-making powers

The power of the DFRDB Authority to administer the provisions of the Defence Forces Retirement Benefits Act 1948 and the Defence Force Retirement and Death Benefits Act 1973 is set out in section 8 of the DFRDB Act. The power of the Authority to delegate its powers and functions is set out in section 15.

FOI internal procedures

All requests for documents are referred to ComSuper’s Freedom of Information Officer. Compliance with the application fee provisions of the FOI Act are verified and the request is registered and acknowledged. The documents are then obtained and the request is considered by the Officer.

Decisions to grant access, levy charges, or refuse access are made by an officer in the Legal and Compliance Unit.

Requests for internal review of FOI decisions are also referred to the unit. They are then forwarded to the Military Reconsideration Section within ComSuper where they are investigated by a more senior officer prior to submission to the Authority for decision under section 54 of the FOI Act.

Facilities for access

Facilities for viewing documents are provided only at the ComSuper office in Canberra, as ComSuper has no regional offices. Copies of publications (for which there may be a charge) can be obtained by writing to ComSuper.

Information about facilities for access by people with disabilities can be obtained by contacting the FOI Officer at the address and telephone numbers shown below.

Consultative arrangements

Informal and ad hoc arrangements exist whereby the national, state and territory branches of the Regular Defence Force Welfare Association may make representations relating to the general administration of the scheme. Representations are also received which relate to the determination of individual benefit entitlements.

Requests for consultation and/or representations relating to policy aspects of the schemes and their underlying legislation are referred to the Military Superannuation Branch of the Department of Defence which has responsibility for advising the Minister for Defence Science and Personnel and the Minister for Veterans’ Affairs on such matters.

Categories of documents

The Authority maintains no categories of documents that are open to public access as part of a public register or otherwise, in accordance with an enactment other than the FOI Act, where that access is subject to a fee or other charge.

A booklet and fact sheets that describe various aspects of the DFRDB Scheme, and annual reports, are made available to Members of Parliament, Senators and the public free of charge upon request. They are also available free of charge online.

In the interests of timeliness and conciseness, this report has been designed to provide only fundamental information. Requests for more detailed information should be directed to:

Freedom of Information Officer
ComSuper
Postal address: PO Box 22
Belconnen ACT 2616
Street address: Unit 4
Cameron Offices
Chandler Street
Belconnen ACT 2617
Telephone: 1300 033 732
Facsimile: (02) 6272 9804
TTY: (02) 6272 9827

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Appendix 7: Executive

Staff resources

During 2008–09 the staff resources of the Executive comprised staff employed directly by the Board on fixed term contracts.

Professional development

Ongoing staff training and development is an important component of the Board’s human resource management as well as a specific requirement for the Board in maintaining its Australian Financial Services (AFS) Licence. During 2008–09 all Trustees and Board staff had access to a range of continuing professional development activities including attendance at major industry conference and education forums as part of the Board’s education and training policy.

Occupational health and safety

Under the Occupational Health and Safety (Commonwealth Employment) Act 1991 and the Safety, Rehabilitation and Compensation Act 1988, the Board has a general duty of care which must be met by taking all reasonably practicable steps to protect the health and safety of its employees and third parties at work. Staff employed by the Board are covered by Workers’ Compensation which is managed by Comcare. During the year:

there were no dangerous occurrences under section 68 of the Occupational Health and Safety (Commonwealth Employment) Act 1991
there were no workplace inspections carried out by Comcare
there were no remedial Provisional Improvement Notices issued.

Financial resources

Board administration costs

The Board is responsible for the administration of the Scheme and the management and investment of the Fund. Costs of the Board which are related to its responsibilities for the management of the Fund and the investment of its monies are a charge against the Fund. Fees paid to the Chairman of the Board and a proportion of those paid to Board Members and Members of the Executive are also a charge against the Fund.

All other costs incurred by the Board are met from moneys appropriated to the Department of Defence and paid to ComSuper in relation to the administration of MilitarySuper.

Funding arrangements

The MSB legislation only allows the Board to hold monies belonging to the Fund. The legislation does not provide any capacity for the Board to hold ‘public’ monies in respect of an administration activity.

The Board has sought legislative change to enable it to be financially accountable and responsible for its own administration expenses. Until such time as separate funding arrangements can be made, administration expenses related to the Board’s non-investment activities are drawn by ComSuper from the administration fees paid by Defence and maintained separately from ComSuper’s own operating budget. These funds may only be used to meet Board administrative expenditure as determined by the Board.

The Executive processes all Board accounts, maintains accounting records and produces the Board’s financial statements.

Ecologically sustainable developments and environmental performance

In conducting its operations, the Board makes every effort to minimise the environmental impact of its activities by ensuring that:

all waste paper and cardboard are recycled
lighting and energy use are minimised
the Board’s offices, where practicable, use recycled paper and other products in its activities.

Fraud control

The Board’s Fraud Control and Fraud Risk Assessment Plan is reviewed and updated at least annually and forms an integral part of the Board’s overall risk management strategy.

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Appendix 8: staffing statistics of the Executive

Staffing statistics of the MSB Board Executive Unit
Employment category	Male	Female	Total
Full-time	2	4	6
Part-time	1	1	2
Total	3	5	8

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