Financial Report for the year ended 30 June 2019 · Receivables Investment debtors 44,915 135,673...

Financial Report for the year ended 30 June 2019Fund:Commonwealth Bank Group Super ABN 24 248 426 878Registrable Superannuation Entity Registration No. R1056877

Trustee:Commonwealth Bank Officers Superannuation Corporation Pty LimitedABN 76 074 519 798Australian Financial Services Licence No. 246418Registrable Superannuation Entity Licence No. L0003087

COMMONWEALTH BANK GROUP SUPER

INCOME STATEMENTFOR THE YEAR ENDED 30 JUNE 2019

2019 2018

Notes $'000 $'000

Superannuation activities

Interest 136,996 134,841

Dividends 132,310 127,501

Distributions from unit trusts 48,428 61,236

Property income 38,722 42,266

Changes in fair value of investments 3 656,989 515,404

Total revenue 1,013,445 881,248

Investment expenses (69,056) (66,782)

Administration expenses (12,019) (11,806)

Other operating expenses 6 (5,375) (5,153)

Total expenses (86,450) (83,741)

Operating result before income tax 926,995 797,507

Income tax expense/(benefit) 7 87,279 51,812

Operating result after income tax 839,716 745,695

Net benefits allocated to defined contribution (DC) (613,773) (529,288)

member accounts

Net change in defined benefit (DB) member benefits (327,288) (289,594)

Net operating result after income tax (101,345) (73,187)

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STATEMENT OF FINANCIAL POSITIONAS AT 30 JUNE 2019

Notes $'000 $'000 $'000 $'000

Assets

Cash and cash equivalents 14 512,711 367,363

Receivables

Investment debtors 44,915 135,673

Interest accrued 22,216 22,574

Dividends outstanding 11,036 12,731

Sundry debtors 6,056 84,223 9,756 180,734

Investments 4

Equities - Listed 4,355,895 4,211,006

Fixed income securities - Government 3,364,516 3,168,648

Fixed income securities - Corporate 1,604,365 1,620,546

Unit trusts 1,584,915 1,347,786

Derivative assets 15 (c) 223,317 218,272

Equities - Unlisted 549,548 384,704

Property 8 452,594 457,707

Pledged investments 15 (c) 16,599 12,151,749 16,508 11,425,177

Total assets 12,748,683 11,973,274

Liabilities

Payables

Benefits outstanding (10,762) (15,209)

Investment creditors (174,750) (196,938)

Sundry creditors (16,546) (202,058) (14,156) (226,303)

Derivative liabilities 15 (c) (242,435) (207,015)

Tax liabilities

Current tax liabilities (3,411) (16,019)

Deferred tax liabilities 7 (177,008) (180,419) (136,781) (152,800)

Total liabilities excluding (624,912) (586,118)

member benefits

Net assets available for member benefits 12,123,771 11,387,156

Member benefits

Defined contribution member liabilities 13 (b) (8,772,240) (8,082,934)

Defined benefit member liabilities 13 (c) (3,000,575) (2,847,298)

Total net assets 350,956 456,924

Equity

Operational risk financial reserve 17 29,993 28,535

Unallocated surplus/(deficiency) 13 (d) 320,963 428,389

Total equity 350,956 456,924

2018 2019

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STATEMENT OF CHANGES IN MEMBER BENEFITSFOR THE YEAR ENDED 30 JUNE 2019

DC member DB member

benefits benefits Total

Notes $'000 $'000 $'000

Opening balance as at 1 July 2018 8,082,934 2,847,298 10,930,232

Employer contributions 384,139 - 384,139

Member contributions 45,719 5,810 51,529

Transfers from other superannuation entities 183,525 64 183,589

Transfers to other superannuation entities (361,123) (7,212) (368,335)

Income tax on contributions (58,116) - (58,116)

Net after tax contributions 194,144 (1,338) 192,806

Benefits to members (133,242) (152,400) (285,642)

Insurance premiums charged to members' accounts (32,522) - (32,522)

Death and disability benefits credited to members' accounts 22,257 - 22,257

Transfer of funds from DB to DC member benefits 20,581 (20,581) -

Equity transfers to/(from) members:

Unallocated surplus 5,410 - 5,410

Reserve transfers to/(from) members:

Operational risk financial reserve (1,095) 308 (787)

Net benefits allocated to DC members, comprising:

Net investment income 659,038 - 659,038

Investment fees (26,224) - (26,224)

Administration fees (18,720) - (18,720)

Adviser service fees (321) - (321)

Net change in DB member benefits - 327,288 327,288

Closing balance as at 30 June 2019 13 8,772,240 3,000,575 11,772,815

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STATEMENT OF CHANGES IN MEMBER BENEFITSFOR THE YEAR ENDED 30 JUNE 2018

DC member DB member

benefits benefits Total

Notes $'000 $'000 $'000

Opening balance as at 1 July 2017 7,370,576 2,760,850 10,131,426

Employer contributions 369,634 106 369,740

Member contributions 43,195 6,133 49,328

Transfers from other superannuation entities 181,929 132 182,061

Transfers to other superannuation entities (259,903) (29,099) (289,002)

Income tax on contributions (56,135) (16) (56,151)

Net after tax contributions 278,720 (22,744) 255,976

Benefits to members (123,118) (151,286) (274,404)

Insurance premiums charged to members' accounts (30,790) - (30,790)

Death and disability benefits credited to members' accounts 23,480 - 23,480

Transfer of funds from DB to DC member benefits 28,217 (28,217) -

Equity transfers to/(from) members:

Unallocated surplus 6,602 - 6,602

Reserve transfers to/(from) members:

Operational risk financial reserve (41) (899) (940)

Net benefits allocated to DC members, comprising:

Net investment income 572,776 - 572,776

Investment fees (24,246) - (24,246)

Administration fees (18,809) - (18,809)

Adviser service fees (433) - (433)

Net change in DB member benefits - 289,594 289,594

Closing balance as at 30 June 2018 13 8,082,934 2,847,298 10,930,232

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STATEMENT OF CHANGES IN RESERVESFOR THE YEAR ENDED 30 JUNE 2019

Operational Unallocated

risk financial surplus/ Total

reserve (deficiency) equity

$'000 $'000 $'000

Opening balance as at 1 July 2018 28,535 428,389 456,924

Transfer (to)/from DC member accounts 1,095 (5,410) (4,315)

Transfer (to)/from DB member accounts (308) - (308)

Operating result 671 (102,016) (101,345)

Closing balance as at 30 June 2019 29,993 320,963 350,956

Operational Unallocated

risk financial surplus/ Total

reserve (deficiency) equity

$'000 $'000 $'000

Opening balance as at 1 July 2017 26,996 508,777 535,773

Transfer (to)/from DC member accounts 41 (6,602) (6,561)

Transfer (to)/from DB member accounts 899 - 899

Operating result 599 (73,786) (73,187)

Closing balance as at 30 June 2018 28,535 428,389 456,924

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STATEMENT OF CASH FLOWSFOR THE YEAR ENDED 30 JUNE 2019

2019 2018

Notes $'000 $'000

Cash flows from operating activities

Interest received 137,460 139,706

Dividends and distributions from unit trusts 182,782 188,055

Property income 44,988 47,843

Investment expenses (69,223) (69,067)

Administration expenses (12,178) (10,382)

Other operating expenses (3,163) (3,629)

Death and disability insurance benefits 22,257 23,480

Insurance premiums (32,522) (30,790)

Income tax paid (59,365) (49,110)

Net cash inflows/(outflows) from 14 211,036 236,106

operating activities

Cash flows from investing activities

Proceeds from the sale of investments 18,497,731 17,322,288

Purchases of investments (18,465,778) (17,488,456)

Net cash inflows/(outflows) from 31,953 (166,168)

investing activities

Cash flows from financing activities

Employer contributions 383,544 370,009

Member contributions 51,733 49,830

Transfers from other superannuation entities 184,159 182,147

Transfers to other superannuation entities (374,180) (283,816)

Benefits paid to members (284,288) (274,372)

Tax on contributions paid (58,413) (56,170)

Net cash inflows/(outflows) from (97,445) (12,372)

financing activities

Net increase/(decrease) in cash 145,544 57,566

Effects of exchange rate changes on cash (196) 209

Cash at the beginning of the year 367,363 309,588

Cash at the end of the year 512,711 367,363

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NOTES TO THE FINANCIAL REPORTFOR THE YEAR ENDED 30 JUNE 2019

1. GENERAL INFORMATION

Commonwealth Bank Group Super ("the Fund") is a statutory superannuation fund established under the Commonwealth BanksAct 1959. With effect on and from 19 July 1996, the Fund became governed by a Trust Deed made on 11 July 1996, with all therights and liabilities of members and beneficiaries of the Fund that existed immediately before 19 July 1996 continuing, subject tothe Trust Deed.

The trustee of the Fund is Commonwealth Bank Officers Superannuation Corporation Pty Limited (ABN 76 074 519 798) ("theTrustee"). It is an Australian Financial Services Licensee, holding licence number 246418 and a Registrable SuperannuationEntity, holding licence number L0003087.

The Fund is a regulated superannuation fund under the Superannuation Industry (Supervision) Act 1993 ("SIS Act").

The purpose of the Fund is to provide superannuation benefits to its members. The Fund provides both defined benefits andaccumulation benefits in accordance with its Trust Deed and Rules.

The Fund has fifteen divisions. Fourteen divisions provide predominantly defined benefits and are closed to new members. Accumulate Plus and Retirement Access are issued by the Trustee as an interest under Division F of the Fund’s Trust Deed.Accumulate Plus provides accumulation benefits and Retirement Access provides account-based pension benefits and transitionto retirement benefits. Both are open to new members.

These financial statements cover the Fund as an individual entity. The financial statements of the Fund were authorised for issueby the directors of the Trustee on 24 September 2019. The directors of the Trustee have the power to amend and re-issue thesefinancial statements.

(a) Guaranteed benefits

The Fund's Trust Deed and Rules require that the Commonwealth Bank of Australia ("the Bank"), as Principal Employer of theFund, contribute amounts to the Fund. The amounts payable are determined by the Bank, on the advice of the actuary, as theamounts necessary to fund pensions and other benefits payable under the Trust Deed.

On and from 19 July 1996, Clause 117(3) of the Commonwealth Banks Act 1959 provides that the Commonwealth of Australiaguarantees the due payment of any amount that is payable to or from the Fund, by CBOSC or by the Bank, in respect of aperson who was a member, retired member or beneficiary of the Fund immediately before 19 July 1996.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Unless covered in other notes to the financial statements, the principal accounting policies applied in the preparation of thesefinancial statements are set out below. These policies have been consistently applied to all years presented, unless otherwisestated in the following text.

(a) Basis of preparation

These general purpose financial statements have been prepared in accordance with Australian Accounting Standards andInterpretations issued by the Australian Accounting Standards Board, the SIS Act and Regulations, and the provisions of theTrust Deed.

The Statement of Financial Position is presented on a liquidity basis. Assets and liabilities are presented in decreasing order ofliquidity, and do not distinguish between current and non-current. All balances are expected to be recovered or settled withintwelve months, except for financial investments, derivative liabilities, and net assets available for member benefits.

The financial statements are presented in Australian Dollars, and are prepared on the basis of fair value measurement of assetsand liabilities, except where otherwise stated.

Where necessary, comparative figures have been restated, reclassified and/or re-positioned for consistency with current yeardisclosures.

The Fund is a not-for-profit entity for the purpose of preparing the financial statements.

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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(b) Financial investments

(i) Classification

The Fund's investments and derivative liabilities are classified as at fair value through profit or loss.

(ii) Recognition/derecognition

Financial assets and financial liabilities are recognised on the date the Fund becomes party to the contractual agreement (tradedate) and changes in the fair value of the financial assets or financial liabilities are recognised from this date.

Investments are derecognised when the right to receive cash flows from the investments have expired or the Fund has transferredsubstantially all of the risks and rewards of ownership.

(iii) Measurement

At initial recognition, the Fund measures a financial asset or liability at fair value. Transaction costs are expensed in the IncomeStatement.

Subsequent to initial recognition, all financial assets and financial liabilities are measured at fair value. Gains and losses arepresented in the Income Statement in the period in which they arise as changes in fair value of investments.

For further details on how the fair values of financial instruments are determined, refer to Note 4.

(iv) Offsetting financial instruments

Financial assets and liabilities are offset and the net amount reported in the Statement of Financial Position when there is alegally enforceable right to offset the amounts, and there is an intention to settle on a net basis, or realise the asset and settle theliability at the same time.

(c) Cash and cash equivalents

Cash and cash equivalents include cash on hand, and short term deposits held with an original maturity of three months or less,which are subject to an insignificant risk of changes in value.

Pledged cash at bank represents cash held as collateral for derivative transactions. The cash is held by the clearer orcounterparty and is only available to meet margin calls or the collateral requirements for unrealised derivative positions.

(d) Revenue recognition

Interest revenue from financial instruments that are held at fair value is determined based on the contractual coupon interest rateand includes interest from cash and cash equivalents.

Dividend and trust distribution income is recognised gross of withholding tax during the period in which the Fund’s right to receivepayment is established.

Rental income from investment properties is accounted for on a straight-line basis over the lease term on an accruals basis.Contingent rental income is recognised as income in the periods in which it is earned. Lease incentives granted are recognisedas an integral part of total rental income, over the term of the lease.

Changes in the fair value of investments (including derivatives) are calculated as the differences between the fair value on sale, orat the reporting date, and the fair value at the previous valuation point. These are recognised on the Income Statement.

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(e) Foreign currency transactions and balances

Foreign currency transactions are translated into the functional currency (Australian dollars) using the exchange rates on thedates of the transactions. Foreign exchange gains and losses arise from the settlement of such transactions, and from theconversions at year end exchange rates of monetary items denominated in foreign currencies.

Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at balance date (i.e. 30June). Conversion differences on assets and liabilities carried at fair value are reported on the Income Statement on a net basiswithin "Changes in fair value of investments".

(f) Receivables and payables

Receivables are carried at the nominal amounts due, which approximate their fair value. Receivables are normally settled within30 days. Collectability of trade receivables is reviewed regularly. Debts which are known to be uncollectable are written off byreducing the carrying amount.

Payables are recognised for amounts to be paid in the future for goods and services received, whether or not billed to the Fundand are carried at the nominal amounts which approximate their fair value. They are normally settled within 30 day terms.

Investment debtors and creditors represent receivables for securities sold and payables for securities purchased that have beencontracted for but not yet delivered at the reporting date. Trades are recorded on trade date. These amounts are recognisedinitially at fair value and subsequently measured at fair value.

(g) Benefits outstanding

Benefits outstanding are valued at the amounts due to members at the reporting date. This comprises pensions accrued atreporting date and lump sum benefits of members who are due a benefit but had not been paid at reporting date.

(h) Contributions received and transfers from other funds

Contributions received and transfers from other funds are recognised in the Statement of Changes in Member Benefits when thecontrol of the contribution or transfer has transferred to the Fund. They are recognised gross of any taxes.

(i) Significant accounting judgements, estimates and assumptions

The Fund makes estimates and assumptions that affect the reported amounts of assets and liabilities. Estimates are evaluatedand based on historical experience and other factors, including expectations of future events that are believed to be reasonableunder the circumstances.

For the majority of the Fund’s financial instruments, quoted market prices are readily available. However, certain financialinstruments (for example, over-the-counter derivatives or unquoted securities), are valued using valuation techniques to determinetheir fair value. Where valuation techniques (for example, pricing models) are used to determine fair values, they are validated andperiodically reviewed by experienced personnel. Refer to Note 4 for details.

The Fund also makes estimates and assumptions in relation to the valuation of defined benefit member liabilities, details of whichare set out in Note 13 (c).

The Fund has entered into commercial property leases on its directly held investment properties. It has been determined thatsince all the significant risks and rewards of ownership are retained, the leases are to be classified as operating leases.

The Fund holds certain investments which are controlled by it. However, the Fund has determined that it is an investment entityunder the definition in AASB 10 Consolidated Financial Statements as it meets the following criteria:

• the Fund has obtained funds on behalf of members for the purpose of providing them with investment management services;• the Fund's business purpose, which it communicated directly to members, is investing solely for returns from capital

appreciation and investment income; and• the performance of investments made by the Fund are measured and evaluated on a fair value basis.

The Fund also meets all of the typical characteristics of an investment entity. As a consequence, the Fund does not consolidatethese investments, but accounts for them at fair value through the Income Statement.

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(j) New and amended standards adopted by the Fund

AASB 9 Financial Instruments replaces the multiple classification and measurement models in AASB 139 FinancialInstruments: Recognition and Measurement and is mandatory for periods commencing on or after 1 January 2018. Itaddresses the classification, measurement and derecognition of financial assets and liabilities and replaces the multipleclassification and measurement models in AASB 139.

The adoption of AASB 9 did not result in a change to the classification or measurement of financial instruments in either thecurrent or comparative period as all financial assets and liabilities with the exception of member liabilities and tax assets andliabilities remain at fair value through profit or loss in accordance with AASB 1056 Superannuation Entities.

AASB 15 Revenue from Contracts with Customers makes significant changes to revenue recognition and adds someadditional disclosures, replacing AASB 111 Construction Contracts and AASB 118 Revenue . It is mandatory for periodscommencing on or after 1 January 2018. The new standard provides a five-step model to be applied to all contracts withcustomers when determining when to recognise revenue, and at what amount.

The adoption of AASB 15 does not have a material impact on the Fund's financial position or performance, or the presentationand disclosures in the Financial Report.

There are no other standards, interpretations or amendments to existing standards that are effective for the first time for thefinancial year beginning 1 July 2018 that have a material impact on the amounts recognised in the prior or current periods orthat will affect future periods.

(k) New accounting standards and interpretations

Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2019 reportingperiods and have not been early adopted by the Fund. These standards are not expected to have a material impact on theFund in the current or future reporting periods and on foreseeable future transactions.

(l) Rounding of amounts

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

3. CHANGES IN FAIR VALUE OF INVESTMENTS

2019 2018 $'000 $'000

Equities - Listed 381,395 440,204 Fixed income securities - Government 438,633 221,381 Fixed income securities - Corporate 9,970 1,687 Unit trusts 69,147 23,474 Derivatives (277,078) (221,554) Equities - Unlisted 35,962 20,221 Property (25,002) 20,986 Changes due to currency fluctuations 23,962 9,005

Total 656,989 515,404

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4. FAIR VALUE MEASUREMENT

(a) Fair value hierarchy

The Fund measures and recognises financial assets and liabilities at fair value on a recurring basis. The Fund has no assetsor liabilities measured at fair value on a non-recurring basis in the current reporting period.

The Fund classifies fair value measurements using a fair value hierarchy that reflects the subjectivity of the inputs used inmaking the measurements. The fair value hierarchy has the following levels:

• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.• Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability,

either directly or indirectly.• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

(i) Fair value in an active market (Level 1)

The fair value of financial assets and liabilities traded in active markets is based on their quoted market prices at the end ofthe reporting period, without any deduction for estimated future selling costs.

The Fund values its investments in accordance with the accounting policies set out in Note 2 to the financial statements. Forthe majority of its investments, the Fund relies on information provided by independent pricing services for the valuation of itsinvestments.

The quoted market price used for financial assets and liabilities held by the Fund is the last traded price.

A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from anexchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual andregularly occurring market transactions on an arm’s length basis.

(ii) Fair value in an inactive or unquoted market (Level 2 and Level 3)

The fair value of financial assets and liabilities that are not traded in an active market is determined using valuationtechniques. These include the use of recent arm’s length market transactions, reference to the current fair value of asubstantially similar other instrument, discounted cash flow techniques, option pricing models, or any other valuationtechnique that provides a reliable estimate of prices obtained in actual market transactions.

Fixed interest securities are valued at the mean of representative quoted bid and ask prices for the securities or, if such pricesare not available, at prices for securities of comparable maturity, quality and type.

Investments in unlisted unit trusts are recorded at the redemption value per unit, as reported by the investment managers ofsuch funds.

The fair value of derivatives that are not exchange traded is estimated as the amount that the Fund would receive or pay toterminate the contract at the end of the reporting period, taking into account current market conditions (volatility andappropriate yield curve), and the current creditworthiness of the counterparties. The fair value of a forward contract isdetermined as the net present value of estimated future cash flows, discounted at appropriate market rates as at the valuationdate.

Investments classified within Level 3 have significant unobservable inputs, as they are infrequently traded. These includecertain unlisted unit trusts, unlisted equities, and direct property.

Unlisted equities are valued by independent third parties on either a quarterly or semi-annual basis. The adopted valuation forthese investments represents the mid-point of the valuations, determined using the discounted cash flow methodology. Underthe discounted cash flow methodology, a discount rate is used to present projected future cash flows in present value terms.

The Trustee generally values units in unit trusts classified as Level 3 instruments using the implied unit price provided by theunderlying investment manager unless there is a specific verifiable reason to vary from the unit price provided. The Level 3 unittrusts held by the Fund hold direct property assets.

The fair value of direct property is determined primarily by reference to independent valuations undertaken by registeredvaluers, at intervals of not more than one year. Fair value is equal to the most recent independent valuation, adjusted for capitalworks in progress. Each property valuation typically utilises the discounted cash flow, capitalisation of net income, directcomparison, and residual value methodologies. These are based on unobservable inputs in relation to appropriate discountrates, the rate at which income is capitalised (captialisation rate), the anticipated value of the property at the end of theholding period (terminal yield), expected vacancy periods, and rental growth rates.

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4. FAIR VALUE MEASUREMENT (CONTINUED)

(a) Fair value hierarchy (continued)

The table below sets out the level of the fair value hierarchy within which the fair value measurements of the Fund are categorised:

Level 1 Level 2 Level 3 Total 30 June 2019 $'000 $'000 $'000 $'000

Financial assets

Cash and cash equivalents 512,711 - - 512,711

Receivables 84,223 - - 84,223

InvestmentsEquities - Listed 4,345,607 10,288 - 4,355,895 Fixed income securities - Government - 3,364,516 - 3,364,516 Fixed income securities - Corporate - 1,604,365 - 1,604,365 Unit trusts - 1,280,427 304,488 1,584,915 Equities - Unlisted - - 549,548 549,548 Property - - 452,594 452,594 Pledged investments - 16,599 - 16,599

DerivativesFutures 26,993 1,627 - 28,620 Options - 55,901 - 55,901 Foreign exchange contracts - 26,406 - 26,406 Swaps - 112,390 - 112,390

Total financial assets 4,969,534 6,472,519 1,306,630 12,748,683

Financial liabilities

Payables (202,058) - - (202,058)

DerivativesFutures (30,005) (1,405) - (31,410) Options - (11,160) - (11,160) Foreign exchange contracts - (61,468) - (61,468) Swaps - (138,397) - (138,397)

Total financial liabilities (232,063) (212,430) - (444,493)

4,737,471 6,260,089 1,306,630 12,304,190

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(a) Fair value hierarchy (continued)

Level 1 Level 2 Level 3 Total 30 June 2018 $'000 $'000 $'000 $'000

Financial assets

Cash and cash equivalents 367,363 - - 367,363

Receivables 180,734 - - 180,734

InvestmentsEquities - Listed 4,173,736 37,270 - 4,211,006 Fixed income securities - Government - 3,168,648 - 3,168,648 Fixed income securities - Corporate - 1,620,546 - 1,620,546 Unit trusts - 1,134,216 213,570 1,347,786 Equities - Unlisted - - 384,704 384,704 Property - - 457,707 457,707 Pledged investments - 16,508 - 16,508

DerivativesFutures 22,359 859 - 23,218 Options - 64,569 - 64,569 Foreign exchange contracts - 66,814 - 66,814 Swaps - 63,671 - 63,671

Total financial assets 4,744,192 6,173,101 1,055,981 11,973,274

Financial liabilities

Payables (226,303) - - (226,303)

DerivativesFutures (29,925) (1,042) - (30,967) Options - (19,174) - (19,174) Foreign exchange contracts - (86,059) - (86,059) Swaps - (70,815) - (70,815)

Total financial liabilities (256,228) (177,090) - (433,318)

4,487,964 5,996,011 1,055,981 11,539,956

(b) Transfers between Levels

The Fund’s policy is to recognise transfers into and transfers out of fair value hierarchy levels as at the end of the reporting period.

There were no transfers between levels for the Fund during the current and previous reporting periods.

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(c) Fair value measurements using significant unobservable inputs (Level 3)

The following table presents the movement in the fair value of Level 3 instruments by class of financial instrument:

Fixed income Equities

Corporate Unlisted Unit trusts Property Total 2019 $'000 $'000 $'000 $'000 $'000

Opening balance as at 1 July 2018 - 384,704 213,570 457,707 1,055,981 Transfers into or out of Level 3 - - - - - Gains and losses recognised in

profit or loss 88 51,579 14,011 (24,598) 41,080 Purchases - 116,368 111,146 19,485 246,999 Sales (88) (3,103) (34,239) - (37,430)

Closing balance as at 30 June 2019 - 549,548 304,488 452,594 1,306,630

Fixed income Equities

Corporate Unlisted Unit trusts Property Total 2018 $'000 $'000 $'000 $'000 $'000

Opening balance as at 1 July 2017 - 322,032 65,584 576,912 964,528 Transfers into or out of Level 3 - - - - - Gains and losses recognised in

profit or loss - 25,088 3,614 20,986 49,688 Purchases - 38,751 150,000 29,961 218,712 Sales - (1,167) (5,628) (170,152) (176,947)

Closing balance as at 30 June 2018 - 384,704 213,570 457,707 1,055,981

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(d) Valuation inputs and relationships to fair value

The following table summarises the quantitative information about the significant unobservable inputs used in Level 3 fair valuemeasurements. See 4 (a) (ii) for the valuation techniques adopted.

Fair value at Range of Relationship of unobservable30 June 2019 Unobservable unobservable inputs inputs to fair value and sensitivity

Description $'000 inputs (midpoint) analysis

Airport operator 286,117 Discount rate 10%-11% (10.5%) The higher the discount rate, thelower the fair value.

Franking credit 80%utilisation rate The higher the franking credit

utilisation rate and terminal valueTerminal value 3.0% growth rate, the higher the fair value.growth rate

Freeway 82,332 Discount rate 6.9%-7.9% (7.4%)

Franking credit 80%utilisation rate

Terminal value Nilgrowth rate

Electricity 10,946 Discount rate 8.5%-9.5% (9.0%)TransmissionFacility Franking credit 80%

utilisation rate


Storage Facility 45,603 Discount rate 6.25%-11.5%

Franking credit Nilutilisation rate

Terminal value 2.0%growth rate

Waste to Energy/ 54,339 Discount rate 9.9%-10.4% (10.15%)District Heating



Energy 70,211 Discount rate 8.75%-9.5% (9.13%)Generation



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(d) Valuation inputs and relationships to fair value (continued)



Property 452,594 Discount rate 7%-7.75% The higher the discount rate,terminal yield, capitalisation rate

Terminal yield 6%-7% and expected vacancy period, thelower the fair value.

Capitalisation rate 5.75%-6.75%

Expected vacancy 6 monthsperiod range

Rental growth rate 3%-3.22% The higher the rental growth rate,range the higher the fair value.

Unlisted property 304,488 Unit price The higher the redemption price, theunit trusts higher the fair value.

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(d) Valuation inputs and relationships to fair value (continued)



Airport operator 250,391 Discount rate 10.25%-11.25% (10.75%) The higher the discount rate, thelower the fair value.

Franking credit 80%utilisation rate The higher the franking credit

utilisation rate and terminal valueTerminal value 3.5% growth rate, the higher the fair value.growth rate

Freeway 80,752 Discount rate 7.25%-8.25% (7.75%)



Electricity 10,665 Discount rate 8.5%-9.5% (9.0%)TransmissionFacility Franking credit 80%

utilisation rate


Storage Facility 42,896 Discount rate 6.5%-11.5%


Terminal value 2.0%growth rate

Property 457,707 Discount rate 7%-7.75% The higher the discount rate,terminal yield, capitalisation rate

Terminal yield 5.75%-7% and expected vacancy period, thelower the fair value.

Capitalisation rate 5.5%-6.75%

Expected vacancy 6 monthsperiod range

Rental growth rate 3.11%-3.25% The higher the rental growth rate,range the higher the fair value.

Unlisted property 213,570 Unit price The higher the redemption price, theunit trusts higher the fair value.

(e) Valuation Processes

Portfolio reviews are undertaken regularly by the Fund's investment administrator to identify securities that may not be activelytraded or have stale security pricing. This process identifies securities which could be regarded as being Level 3 securities. Further analysis, if required, is undertaken to determine the accounting significance of the identification. In the event that thesecurity is not actively traded, and there are no or few other broker quotes to substantiate the quoted market price, anassessment is performed to determine the appropriate valuation to use that is most representative of fair value.

For Level 3 valuations, the relevant investment managers have defined valuation policies in place and the valuation process isregularly reviewed by the Trustee.

As at the reporting date, the Fund did not hold any financial instruments which were not measured at fair value on the Statementof Financial Position.

Page 17



5. FUNDING ARRANGEMENTS

The Fund's Trust Deed and Rules require that the Bank, as Principal Employer of the Fund, contribute amounts to theFund. The amounts payable are determined by the Bank, on the advice of the actuary, as the amounts necessary to fundpensions and other benefits payable under the Trust Deed.

An actuarial investigation of the Fund as at 30 June 2018 was completed in December 2018. In line with the FundActuary's advice contained in the actuarial investigation report, the Bank contributes to the Fund on a monthly basis toensure that the Fund remains in an appropriate financial position. The next actuarial investigation is due with an effectivedate of 30 June 2021, with the report to be completed by 31 December 2021.

6. OTHER OPERATING EXPENSES

2019 2018 $'000 $'000

Auditor's remuneration 341 319 Advertising and sponsorship - - Consultants fees 1,093 958 Other administration expenses 3,941 3,876

5,375 5,153

7. INCOME TAX

This note provides an analysis of the Fund’s income tax expense and how the tax expense is affected by non-assessableand non-deductible items.

(a) Accounting policy

Under the Income Tax Assessment Act 1997, the Fund is a complying superannuation fund. As such, a concessional taxrate of 15% is applied on net investment earnings, with deductions allowable for administrative and operational expenses.Financial assets held for less than 12 months are taxed at the Fund’s rate of 15%. For financial assets held for more than12 months, the Fund is entitled to a further discount on the tax rate, leading to an effective tax rate of 10% on anygains/(losses) arising from the disposal of these investments.

Current tax is the expected tax payable on the estimated taxable income for the current year, based on the applicable taxrate adjusted for instalment payments made to the ATO during the year, and by changes in deferred tax assets andliabilities attributable to temporary differences.

Deferred tax is recognised in respect of temporary differences between the carrying amount of assets and liabilities in thefinancial statements and the amounts used for taxation purposes. Deferred tax assets are recognised only if it is probablethat future taxable amounts will be available to utilise temporary differences and losses.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets andliabilities, and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilitiesare offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realisethe asset and settle the liability simultaneously.

(b) Income tax expense

2019 2018 $'000 $'000

Income StatementCurrent income tax

Current income tax expense 37,387 36,000 Adjustments for current tax of prior periods 9,664 3,544

Deferred income tax Relating to origination and reversal of temporary differences 40,228 12,268 Adjustments for deferred tax of prior periods - -

Income tax expense 87,279 51,812

Page 18



7. INCOME TAX (CONTINUED)

(c) Numerical reconciliation of income tax expense to prima facie tax payable

2019 2018 $'000 $'000

Operating result before income tax 926,995 797,507 Tax at the rate of 15% 139,049 119,626

Adjustments for current tax of prior periods 9,664 3,544 Adjustments for deferred tax of prior periods - - Net imputation and foreign tax credits (25,436) (18,725) Discount on capital gains (1,205) (26,832) Insurance premium deductions (5,007) (4,752) Exempt pension income (33,104) (22,412) Other assessable/(non-assessable) income 3,318 1,363

Income tax expense 87,279 51,812

In addition to the above, $58,116,000 (2018: $56,151,000) is recognised in the Statement of Changes in Member Benefitsrelating to tax on contributions deducted from member accounts.

(d) Deferred tax balances

The balance comprises temporary differences attributable to:

2019 2018 $'000 $'000

Investment income receivable 1,783 1,727Unrealised gains/(losses) in investments 174,901 134,734Property depreciation and building allowance 324 320

Deferred tax (assets)/liabilities 177,008 136,781

8. PROPERTY

The purpose of the Fund's property investments is to derive rental income and capital growth. The fair value of propertyinvestments, by sector, at the reporting date were:

2019 2018 $'000 $'000

Freehold PropertyRetail 452,594 457,707

Total 452,594 457,707

Reconciliation of the fair value of property investments:

Opening balance as at 1 July 457,707 576,912Additions by acquisition - - Additions by capital expenditure 19,485 29,961Disposals - (170,152) Changes in fair value (24,598) 20,986

Closing balance as at 30 June 452,594 457,707

The majority of the above amounts have expected useful lives of longer than twelve months from the reporting date.

Page 19



9. RELATED PARTIES

(a) Trustee and key management personnel

The trustee of the Fund is Commonwealth Bank Officers Superannuation Corporation Pty Limited ("CBOSC"). All the issuedshares in CBOSC are held by the Bank. The Board of Directors of CBOSC is made up of nine non-executive directors, threeof whom are Independent Directors, with the remaining comprised of an equal number of representatives of the Bank andmembers of the Fund. The names of the people who held the position of director at any time during the year are:

J Atkin Independent DirectorR Vilgan Independent DirectorI Ward-Ambler Independent DirectorJ Linklater Employer DirectorK Macfarlane Employer DirectorJ White Employer Director (Ceased 17 August 2018)C Williams Employer Director (Commenced 15 November 2018)P Fletcher Member Director (Commenced 1 December 2018)S Halmarick Member DirectorC Loong Member DirectorE U Member Director (Ceased 30 November 2018)

In addition to the non-executive directors listed above, the following are also considered to be key managementpersonnel:

D Carmichael Chief Executive Officer, Commonwealth Bank Group Super(Ceased 9 August 2019)

R Dias Chief Investment Officer, Commonwealth Bank Group SuperA Carey Board Committee MemberK Davis Board Committee Member (Ceased 28 November 2018)S Durbin Board Committee Member (Ceased 5 August 2019)

Chief Executive Officer, Commonwealth Bank Group Super(Commenced 6 August 2019)

B Webber Board Committee Member (Ceased 28 November 2018)

Rule A8.2 of the Trust Deed and Rules provides that:

All costs and expenses of, and incidental to, the operation, management, administration and investment of the Fundmust, to the extent that full liability therefore is not assumed by the Principal Employer, be paid from the Fund.

CBOSC’s sole role is to act as trustee of the Fund. Accordingly, any expenses incurred during the year by CBOSC havebeen met by the Fund in terms of the rule outlined above.

Directors' interests in the fund

Certain directors are members of the Fund. Their membership terms and conditions are the same as those available to othermembers of the Fund.

Compensation of key management personnel


Except as otherwise agreed between the Trustee and the Principal Employer (Commonwealth Bank of Australia), adirector (including any alternate director) of the Trustee is not entitled to remuneration from the Fund for acting in thatcapacity, but the Trustee may pay from the Fund all reasonable expenses properly incurred by a director (including anyalternate director) in the exercise of that person’s Powers as a director (or alternate director). Those expenses must bepaid by the Principal Employer where the Fund is insufficient.

During the year, the following key management personnel have received remuneration from the Fund or the Principal Employer(Commonwealth Bank of Australia), in relation to work performed for the Trustee as a Registrable Superannuation Entity:

J Atkin Independent DirectorR Vilgan Independent DirectorI Ward-Ambler Independent DirectorJ Linklater Employer Director (appointed, but not employed by the Bank)D Carmichael Chief Executive Officer, Commonwealth Bank Group Super

(Ceased 9 August 2019)R Dias Chief Investment Officer, Commonwealth Bank Group Super

Page 20



9. RELATED PARTIES (CONTINUED)

(a) Trustee and key management personnel (continued)

During the year, the following compensation was paid by the Principal Employer or the Fund to key management personnelfor services in connection with the management of the Fund:

2019 2018 $ $

Short-term benefits (salaries, director fees) 975,440 954,346 Post-employment benefits (superannuation) 66,586 64,148 Other long-term benefits 26,385 11,229 Share-based payments 54,639 75,506

Total compensation 1,123,050 1,105,229

Remuneration has not been paid to or disclosed for any other key management personnel by the Trustee, Fund, the Bank, orfor any other related entities in relation to work performed for the Trustee as a Registrable Superannuation Entity.

Protection and indemnification of CBOSC


The Trustee and each director of the Trustee is exempted from liability, and is to be indemnified out of the Fund, inrespect of any cost, loss, damage, claim or liability caused or incurred in any manner (including without limitationnegligence), in connection with the Powers of the Trustee or a director, as the case may be, to the maximum extent (butonly to the maximum extent) permissible under the Relevant Law and, without limiting the preceding words, the Trusteemay:

(a) effect insurance in respect of a potential cost or liability of the Trustee or a director including without limitation aliability under an indemnity granted by the Trustee to such director; and

(b) pay from the Fund premiums and other outgoings in respect of insurance effected by the Trustee or a director ofthe Trustee in respect of a potential cost or liability of the Trustee or that director.

To the extent that the assets of the Fund are insufficient to indemnify the directors of the Trustee under this Rule A5.1,the directors must be indemnified by the Principal Employer. For the purposes of Rule A5.1, "director" includes analternate director.

(b) Related party transactions

As the principal employer sponsor of the Fund, the Bank has certain powers in relation to the operation of the Fund providedto it under the Fund's Trust Deed and Rules. The main power being that the Principal Employer may from time to time,amend, add to, revoke or replace all or any of the provisions of the Fund's Trust Deed as the Principal Employer sees fit. Theexercise of this provision is subject to restrictions under relevant legislation (primarily the SIS Act). The SIS Act imposesconditions concerning the amendment of the governing rules of superannuation schemes, which must be observed whenmaking amendments. In addition, certain prescribed amendments may only be made with the consent of the Trustee. TheSIS Act also prevents the making of a Rule change that would have the effect of reducing benefits accrued or payable tomembers.

The Bank provides services to the Trustee to assist it to carry out the operation, management, administration and investmentfunctions of the Fund under material outsourcing arrangements. Agreements entered into between the Trustee and the Bankand/or related entities providing services are in writing, and are subject to terms and conditions negotiated at arm'slength.

When entering into material outsourcing arrangements with related parties, the Trustee ensures that related party serviceproviders are subject to the same rigour and conditions as those imposed on outsourcing arrangements with external serviceproviders.

The Bank and Associated Employers are required to make contributions to the Fund and to fund member benefits inaccordance with Part A9 of the Fund’s Rules (refer to Note 5 for further information).

Other related entities are appointed as investment managers to manage a portion of the Fund's investments, provide memberadministration services, provide group life and salary continuance insurance to members of the Fund, and pay insurancebenefits to members of the Fund. The Fund pays fees and premiums for the services provided.

Page 21




(b) Related party transactions (continued)

Investments in and transactions with those related entities were:

2019 2018 $'000 $'000

Investments:Fair value of cash and investments 1,269,531 1,156,417 Notional principal amount of derivatives held with 198 170,000 related counterpartiesFair value amount of derivatives held with related (198) (1,535) counterparties

Income, (expenses) and other transactions:Investment income received 14,256 52,251 Changes in fair value of investments 61,660 (6,417) Property income received 647 638 Insurance benefits received 22,257 23,480 Insurance premiums expense (32,522) (30,790) Investment management and investment administration expense (6,211) (7,609) Member administration fees expense (10,562) (10,461) Legal fees, project expenses and other charges (1,433) (1,353) Paid on behalf of related parties - (1) Owing to the Fund at year end 355 467 Owing by the Fund at year end (4,661) (4,497)

On 2 August 2019, the Commonwealth Bank of Australia Group completed the sale of Colonial First State Global AssetManagement (CFSGAM) and Realindex Investments Pty Ltd (Realindex). CFSGAM and Realindex are investment managersof the Fund and were related parties during the reporting period. From the date of the sale, CFSGAM and Realindex are nolonger related parties of the Fund.

(c) Terms and conditions of transactions with related parties

Outstanding balances at year end are unsecured and settlement occurs in cash. There have been no guarantees provided orreceived for any related party payables or receivables.

Page 22




(d) Interests in associates and controlled entities

The Fund holds multiple investments of which it has significant influence or control. As a result, these investments are classifiedas associates or controlled entities respectively.

The nature of the activities of the associates and controlled entities is to invest in direct infrastructure assets within Australia andoverseas. The purpose of these investments is to generate capital appreciation and/or investment income for the Fund.

The Fund's maximum exposure to loss from its interests in associates and controlled entities is equal to their fair value plus anycapital commitments.

The table below lists details of the Fund's interests in associates and controlled entities held during the year:

Place of 2019 2018 2019 2018 2019 2018 Name of entity business % % $'000 $'000 $'000 $'000

Rowville Transmission Facility Pty Ltd Australia 45 45 10,946 10,665 1,308 676

Nest Cooperatief U.A. Netherlands 50 50 45,603 42,896 5,720 4,867 - Vopak Terminal Eemshaven BV Netherlands 45 45

OSF Southern Way Unit Trust* Australia 100 100 82,332 80,752 8,005 8,002 - Southern Way Holdings Trust Australia 31.3 31.3- Southern Way Holdings Pty Ltd Australia 31.3 31.3

Sustainable Energy Infrastructure Australia 50 - 70,211 - 1,785 - Holdings Trust*

Amarok Holding AS Norway 75 - 54,339 - 9,897 - - Nanook Invest AS Norway 75 -

- Kvitebjørn Varme AS Norway 36.8 -

* The Fund also controlled the entity which acted as the trustee of this Trust which had a carrying value of $2 or less (2018: $2 or less).

As at the reporting date, the Fund had outstanding capital commitments in respect of Kvitebjørn Varme AS valued at $5.077million (2018: $0) which is due within the next twelve months. Kvitebjørn Varme AS is bound by covenant restrictions in theform of interest coverage and leverage ratios before it can distribute cash to the Fund.

There were no other outstanding capital commitments in respect of the associates and controlled entities above (2018: $0).

Investment incomeFair valueOwnership interest

Page 23



10. COMMITMENTS AND CONTINGENT LIABILITIES

(a) Investments

The following expenditure commitments had been contracted for as at the reporting date but are not recognised as liabilities inthe accounts.

2019 2018 $'000 $'000

Period to expected date of settlement:Within 12 months 9,280 182,847 After 12 months and before 5 years - 5,044 After 5 years - -

Total 9,280 187,891

(b) Contingent liabilities

The Trustee is not engaged in any litigation or claim which is likely to have a materially adverse effect on the Fund's financialposition.

11. INSURANCE

The Fund provides death and disability benefits to its members. These benefits are generally greater than the members' vestedbenefits.

Defined benefit membersThe death and permanent disability benefits for defined benefit members are self-insured, as part of the overall funding ofdefined benefits. Salary continuance insurance is provided for defined benefit members of Divisions CH, CK, CM and CO (PartA) under an insurance policy with The Colonial Mutual Life Assurance Society Ltd ("CMLA"), a related party of the Fund.

Defined contribution membersThe death and disability benefits for the members of Division F are covered by an insurance policy with CMLA, a related partyof the Fund. Salary continuance insurance is provided to members of Division F on a voluntary take up basis. The benefits ofthis insurance is covered under an insurance policy with CMLA, a related party of the Fund.

Other insuranceThe Trustee purchases catastrophe insurance cover, from an external insurer, to reduce the risk of the financial position of theFund being materially affected should a catastrophic event occur that affects certain members in a defined benefit division.

Payment of premiumsSee Note 9 (b) for the premiums paid or payable to and the benefits received from CMLA during the periods.

12. REMUNERATION OF AUDITOR

During the year the following fees were paid or payable for services provided by the auditor of the Fund:

Amounts paid or payable to PricewaterhouseCoopers (Australia) for:

2019 2018 $'000 $'000

Audit and other assurance services:Audit of the Financial Report of the Fund 274 270 Other assurance services 67 49

341 319

Page 24



13. MEMBER LIABILITIES

(a) Recognition and measurement of member liabilities

The entitlements of members to benefit payments are recognised as liabilities. They are measured as the amount of the accruedbenefits as at the reporting date, being the benefits that the Fund is presently obliged to transfer to members or their beneficiariesin the future as a result of their membership, up to the end of the reporting period.

(i) Defined contribution (Division F) member liabilities

Defined contribution member account balances (liabilities) are measured using unit prices based on the value of the underlyinginvestment option(s) selected by members.

(ii) Defined benefit member liabilities

Defined benefit member liabilities are measured as the estimated present value at the reporting date to meet accrued memberbenefits on the date they are expected to fall due.

(b) Defined contribution member liabilities

Members in Division F (defined contribution members) bear the investment risk relating to the underlying investment options.Unit prices used to measure defined contribution member liabilities are updated each business day for movements ininvestment values. Refer to Note 15 for the Fund’s management of the investment risks.

As at 30 June 2019, all net assets attributable to defined contribution members have been allocated to those members (2018:nil unallocated).

(c) Defined benefit member liabilities

Measurement of defined benefits member liabilities are undertaken by a qualified actuary appointed by the Trustee (the FundActuary). The valuation of defined benefit member liabilities reflects the actuarial assessment of accrued benefits as at thereporting date, and payable to members on retirement, resignation, death or disability.

The Fund manages its obligation to pay defined benefit member liabilities on an expected maturity basis, which is based onestimates of when such funds will be drawn down by members.

The key assumptions used to determine the value of accrued benefits for the Fund as at 30 June 2019 are set out below and havebeen determined by the Fund Actuary.

(i) Discount rate

The assumed discount rate has been determined by reference to the investment returns expected of the defined benefit assetswhich are based on the Fund Actuary’s actuarial model and the Fund’s asset allocation. In order to reduce the mismatchbetween defined benefit assets and liabilities, the Trustee separately manages growth and defensive portfolios, with the pensionliabilities substantially covered by the defensive portfolio. As a result of this investment approach, the Fund Actuary believes it isappropriate to use the long term expected investment returns on the growth assets to value the liabilities of members in thepre-retirement phase, and the long-term expected investment return on the assets of the partially matched portfolio to value thepensioner liabilities. A combination of the two rates is used for active members in respect of benefits expected to be paid to themin post-retirement in the form of a pension.

The discount rates used to determine the value of accrued benefits are set out below.

Assumption Applies to 30 June 2019 30 June 2018

Discount rate (after tax) Active members (pre-retirement) 5.20% 5.80%

Discount rate (before tax) Active members (post-retirement) 4.05% 4.90%

Discount rate (before tax) Pensioners (active) 2.30% 3.40%

Page 25



13. MEMBER LIABILITIES (CONTINUED)

(c) Defined benefit member liabilities (continued)

(ii) Salary increases

The Fund Actuary's salary increase assumption is the best estimate rate of general inflationary increases, plus a combinedproductivity and promotional salary increase assumption. The assumed combined productivity and promotional salary increase is0.8% p.a. across all ages (0.8% p.a. in 2018).

The salary increase assumptions used to determine the value of accrued benefits are set out below.

Assumption Applies to 30 June 2019 30 June 2018

Salary increases Active members (pre-retirement) 2.40% 2.90%(incl. promotional scale)

(iii) Pension increases

This is the best estimate rate of inflationary pension increases, developed with reference to the market implied price inflation overa duration matching that of the Fund's defined benefit liabilities.

The pension increase rates used to determine the value of accrued benefits are set out below.

Assumption 30 June 2019 30 June 2018

CPI indexation 1.60% 2.10%

(iv) Pensioner mortality rates

Assumed pensioner mortality rates were developed as part of the actuarial investigation as at 30 June 2018 and uses a variableproportion of the Australian Life Tables 2010-12 (ALT 2010-12) issued by the Australian Government Actuary for both male andfemale pensioners. The table is 50% of ALT 2010-12, with this scaling increasing by 1.5% per annum from age 65 for both malesand females (subject to a maximum of 100% of ALT 2010-12).

In addition, an allowance for mortality improvement has been made as follows: a 2.0% pa reduction to these rates for each yearfrom 30 June 2011, with these improvements reducing by 0.05% p.a. for each year over age 65 (no change from 2018).

Sensitivity

The Trustee uses sensitivity analysis to monitor the potential impact of changes to key variables about which assumptions needto be made. The following are sensitivity calculations for the key assumptions for which reasonably possible changes would beexpected to have a material effect on the Fund:

Reasonable Possible

Key assumption Change 30 June 2019 30 June 2018

Discount rate +0.25% -3.00% -2.80% -0.25% 3.10% 3.00%

Salary increases +0.25% 0.30% 0.30% -0.25% -0.20% -0.30%

Pension increases +0.25% 2.60% 2.50% -0.25% -2.50% -2.40%

Pensioner mortality rates +1 year 4.40% 4.20% longevity

As at 30 June 2019, 100% of defined benefit member liabilities have vested (2018: 100%).

member liabilitiesIncrease/(decrease) in

Page 26



13. MEMBER LIABILITIES (CONTINUED)

(d) Unallocated surplus/(deficiency)

2019 2018 $'000 $'000

Commonwealth Bank Group Super 320,963 428,389

As at 30 June 2019, the Fund remains in surplus. The Principal Employer continues to contribute to the Fund on a monthlybasis, in line with the Fund Actuary's recommendation, following the last full actuarial investigation conducted as at 30 June2018. Some contributions to member accounts are funded through the Fund's surplus account, which based on current actuarialassessment, and will result in a gradual reduction of the surplus. This is subject to review as part of each actuarial investigation. The next actuarial investigation is due with an effective date of 30 June 2021, with the report finalised by 31 December 2021.

14. STATEMENT OF CASH FLOW RECONCILIATION

Cash and cash equivalents as shown in the Statement of Cash Flows is reconciled to the related items in the Statement ofFinancial Position as follows:

2019 2018 $'000 $'000

Cash at bank 300,425 169,090 Short term deposits 78,470 70,493 Pledged cash at bank 133,816 127,780

512,711 367,363

2019 2018 $'000 $'000

Reconciliation of net cash from operating activitiesto net operating result after income tax

Net operating result after income tax (101,345) (73,187) Adjustments for:

Net changes in fair value of investments (656,989) (515,404) Net benefits allocated to defined contribution members 613,773 529,288 Net change in defined benefit member benefits 327,288 289,594 Net change in current tax liabilities (12,608) (9,586) Net change in contribution tax payable 2,919 2,101 Net change in deferred tax liabilities 40,227 12,268 Change in operating assets and liabilities:

(Increase)/decrease in receivables 5,753 7,521 Increase/(decrease) in payables 2,283 821

Death and disability proceeds received from insurer 22,257 23,480 Insurance premiums paid (32,522) (30,790)

Net cash inflows/(outflows) from operatingactivities 211,036 236,106

Page 27



15. FINANCIAL RISK MANAGEMENT

The Fund’s activities expose it to a variety of financial risks, including market risk (including price risk, currency risk, and interestrate risk), credit risk, and liquidity risk.

The Fund has an Investment Governance Framework ("IGF") established by the Trustee. The IGF sets out the Trustee's policiesand procedures for the selection, management and monitoring of investments for the Fund. For each investment option offered bythe Fund, the Trustee seeks to maximise the returns derived for the level of risk to which the Fund is exposed.

(a) Market risk

(i) Price risk

Market price risk represents the risk that the values of financial instruments will fluctuate as a result of changes in market prices,whether those changes are caused by factors specific to individual instruments or their issuers, or factors affecting allinstruments in the market.

Market risk is primarily managed through diversification across and within asset classes. The Trustee has appointed specialistinvestment managers within each asset class. There are controls in place to ensure that all investment activities are undertakenin accordance with agreed investment strategies.

Where non-monetary financial instruments are denominated in currencies other than the Australian dollar, the price in the futurewill also fluctuate because of changes in foreign exchange rates. Note 15 (a) (ii) sets out how this component of price risk ismeasured and managed. All securities investments present a risk of loss of capital. The maximum risk resulting from financialinstruments is determined by the fair value of the financial instruments.

The table in Note 15 (b) summarises the impact of an increase/decrease in market prices on the Fund’s net assets as at 30 June2019. The analysis is based on the assumption that the relevant index increased/decreased by the percentages specified with allother variables held constant and that the fair value of the relevant asset classes moved according to the historical correlation withthe index.

Page 28



15. FINANCIAL RISK MANAGEMENT (CONTINUED)

(a) Market risk (continued)

(ii) Foreign exchange risk

The Fund holds both monetary and non-monetary assets denominated in currencies other than the Australian dollar. The foreignexchange risk relating to non-monetary assets and liabilities is a component of price risk. Foreign exchange risk arises as thevalue of monetary securities denominated in other currencies fluctuate due to changes in exchange rates. However, theTrustee actively monitors the overall exposure of all foreign currency denominated assets and liabilities.

The Fund has exposure to overseas investments. All listed and direct overseas investments, other than the international equitiesportfolio and multi asset portfolio, are managed against a (100%) currency-hedged benchmark. The Trustee engages a specialistcurrency manager to monitor and manage the foreign currency exposure of the Trustee’s international equities portfolio inaccordance with the Trustee’s hedging policy to passively hedge 25% of the international equities developed market currencyexposure, leaving the emerging market currency exposure unhedged. The specialist currency manager also manages the foreigncurrency exposure of the Fund's real asset portfolio. The currency hedging for the multi asset portfolio is at the discretion of theoutsourced investment manager of the portfolio.

The table below summarises the Fund’s financial assets and liabilities which are denominated in foreign currencies:

USA UK Japan Europe Other Total 2019 A$'000 A$'000 A$'000 A$'000 A$'000 A$'000

Cash and cash equivalents 48,804 20,671 141 15,383 13,844 98,843 Due from brokers - receivable for 12,838 1,467 9,384 1,805 3,130 28,624 securities soldInvestments 2,150,049 423,044 255,006 818,462 582,561 4,229,122

Due to brokers - payable for (28,900) (45) (9,983) (3,225) (994) (43,147) securities purchasedDerivative liabilities (35,176) (2,495) (1,481) (11,900) (1,018) (52,070)

2,147,615 442,642 253,067 820,525 597,523 4,261,372

Net increase/(decrease) in exposure (909,283) (269,869) (168,094) (650,288) (246,693) (2,244,227) from foreign currency contracts

Foreign currency risk exposure 1,238,332 172,773 84,973 170,237 350,830 2,017,145

USA UK Japan Europe Other Total 2018 A$'000 A$'000 A$'000 A$'000 A$'000 A$'000

Cash and cash equivalents 53,124 47,656 1,417 17,484 15,411 135,092 Due from brokers - receivable for 19,187 1,701 7,582 457 860 29,787 securities soldInvestments 1,942,696 385,986 302,078 750,638 507,801 3,889,199

Due to brokers - payable for (22,386) (2,643) - (2,863) (977) (28,869) securities purchasedDerivative liabilities (33,651) (2,669) (3,573) (8,601) (1,748) (50,242)

1,958,970 430,031 307,504 757,115 521,347 3,974,967

Net increase/(decrease) in exposure (822,539) (321,562) (200,808) (604,769) (227,486) (2,177,164) from foreign currency contracts

Foreign currency risk exposure 1,136,431 108,469 106,696 152,346 293,861 1,797,803

The table in Note 15 (b) summarises the sensitivities of the Fund’s monetary assets and liabilities to foreign exchange risk. Theanalysis is based on the assumption that the Australian dollar strengthened/weakened by 10% (10% in 2018) against each ofthe other currencies to which the Fund is exposed.

Page 29




(a) Market risk (continued)

(iii) Interest rate risk

Interest rate risk represents the risk that the values of financial instruments will fluctuate because of changes in market interestrates. The Fund's exposure to such risk relates primarily to its fixed interest securities. The Fund's policy is to manage the riskby appointing skilled investment managers who have clear mandates to manage risk.

The table below summarises the Fund’s exposure to interest rate risk:

Floating Fixed Non-interest interest rate interest rate bearing Total

2019 $'000 $'000 $'000 $'000

Assets

Cash and cash equivalents 512,711 - - 512,711 Receivables - - 39,372 39,372 Due from brokers - receivable for securities sold - - 44,851 44,851 Investments 283,844 4,824,461 7,043,444 12,151,749

Liabilities

Payables - - (31,066) (31,066) Due to brokers - payable for securities purchased - - (170,992) (170,992) Derivative liabilities (2,124) (156,676) (83,635) (242,435)

794,431 4,667,785 6,841,974 12,304,190

Net increase/(decrease) in exposure from 234,932 (234,932) interest rate swaps (notional principal)

Net exposure 1,029,363 4,432,853 6,841,974 12,304,190

Floating Fixed Non-interest interest rate interest rate bearing Total

2018 $'000 $'000 $'000 $'000

Assets

Cash and cash equivalents 367,363 - - 367,363 Receivables - - 45,230 45,230 Due from brokers - receivable for securities sold - - 135,504 135,504 Investments 333,954 4,537,749 6,553,474 11,425,177

Liabilities

Payables - - (37,527) (37,527) Due to brokers - payable for securities purchased - - (188,776) (188,776) Derivative liabilities (4,629) (90,110) (112,276) (207,015)

696,688 4,447,639 6,395,629 11,539,956

Net increase/(decrease) in exposure from (1,092,836) 1,092,836 interest rate swaps (notional principal)

Net exposure (396,148) 5,540,475 6,395,629 11,539,956

The table in Note 15 (b) summarises the impact of an increase/decrease of interest rates on the Fund’s operating profit and netassets through changes in fair value or changes in future cash flows. The analysis is based on the assumption that interest ratesincreased/decreased by 110 basis points (120 basis points in 2018) from the year end rates, with all other variables heldconstant.

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(b) Summarised sensitivity analysis

The following table summarises the sensitivity of the Fund’s operating profit and net assets to interest rate risk, foreign exchangerisk and other price risk. The reasonably possible movements in the risk variables have been determined based on the Trustee'sbest estimate and comprise of annualised numbers, having regard to a number of factors, including historical levels of changes ininterest rates and foreign exchange rates, historical correlation of the Fund’s investments with the relevant benchmark and marketvolatility. However, actual movements in the risk variables may be greater or less than anticipated due to a number of factors,including unusually large market shocks resulting from changes in the performance of the economies, markets and securities inwhich the Fund invests. As a result, historic variations in risk variables are not a definitive indicator of future variations in the riskvariables.

2019 - % $'000 + % $'000

Price riskAustralian equities -20 (405,539) 20 405,539 International equities (unhedged) -17 (255,070) 17 255,070 International equities (hedged) -17 (256,579) 17 256,579 Australian direct property -12 (45,011) 12 45,011 Australian property trusts -17 (75,822) 17 75,822

Foreign exchange risk -10 (7,837) 10 7,837

Interest rate risk -1.1 219,697 1.1 (219,697)

2018 - % $'000 + % $'000

Price riskAustralian equities -20 (381,636) 20 381,636 International equities (unhedged) -17 (230,665) 17 230,665 International equities (hedged) -17 (234,785) 17 234,785 Australian direct property -12 (45,519) 12 45,519 Australian property trusts -17 (66,016) 17 66,016

Foreign exchange risk -10 (12,104) 10 12,104

Interest rate risk -1.2 214,429 1.2 (214,429)

Impact on operating profit/Net assets of the Fund

Impact on operating profit/Net assets of the Fund(after tax)

(after tax)

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(c) Credit risk

Credit risk represents the risk that the issuers of financial instruments will fail to discharge obligations and cause the Fund toincur financial losses. With respect to the financial assets of the Fund, other than derivatives, the Fund’s maximum exposure tocredit risk is equal to the fair value of the investments as reported in the Statement of Financial Position.

In relation to derivative financial instruments, credit risk arises from the potential failure of counterparties to meet their obligationsunder the contracts or arrangements. Derivatives may be traded on an exchange (exchange traded) or they may be privatelynegotiated contracts, which are referred to as Over The Counter (OTC) derivatives. The Fund’s OTC derivatives are cleared andsettled either through central clearing counterparties (OTC-cleared), or bilateral contracts between two counterparties.

Where possible the Fund uses exchange traded and OTC-cleared derivative contracts to manage/minimise the Fund's exposureto bilateral counterparty risk as the Fund’s counterparty is a clearing house. The clearing house is responsible for managing therisk associated with the process on behalf of its members and ensuring it has adequate resources to fulfil its obligations whenthey become due. Members are required to provide initial margins in accordance with the exchange rules in the form of cash orsecurities, and provide daily variation margins in cash to cover changes in market values. Further, all members are generallyrequired to contribute to (and guarantee) the compensation or reserve fund which may be used in the event of default and shortfallof a member.

For OTC derivatives that are settled through bilateral contracts, the Fund restricts its exposure to credit losses by entering intomaster netting arrangements with counterparties with whom it undertakes a significant volume of transactions. The credit riskassociated with favourable contracts is reduced by master netting arrangement to the extent that if an event of default occurs, allamounts with the counterparty are closed and settled on a net basis. The Fund’s overall exposure to credit risk on derivativeinstruments subject to a master netting arrangement can change substantially within a short period, as it is affected by eachtransaction subject to the arrangements. Refer to Note 16 for further analysis of the Fund’s master netting arrangements.

There are additional risk management processes in place to manage credit risk relating to OTC derivatives. Examples of theseprocesses include minimum credit ratings for counterparties, and diversification of exposure across a number of counterparties.

The Fund has entered into a credit support agreement with various counterparties which allow the Fund to pledge cash andsecurities as collateral to cover unrealised exposures on certain derivatives. Under this agreement, the Fund can providesecurities in the form of Commonwealth Government bonds or United States Treasury bills to a counterparty as collateral onterms which permit the counterparty to repledge or resell these securities to others. The counterparties have an obligation toreturn the securities or equivalent credit support (i.e. securities of the same type, nominal value, description and amount) to theFund. The risks and benefits of ownership of the securities remain with the Fund, therefore the securities have not beenderecognised (i.e. treated as having been sold), although they have been separately classified in the Statement of FinancialPosition as Pledged Investments. Cash pledged as collateral has also been separately classified in Note 14 as Pledged Cash atBank.

As at 30 June 2019, the Fund pledged $133.816 million of cash (2018: $127.780 million), and $16.599 million of fixed incomegovernment securities (2018: $16.508 million) as collateral.

Under the same agreement, the Fund may also receive cash and securities as collateral from the counterparties which are notrecorded in the Statement of Financial Position. The Fund is permitted to repledge or resell the securities to others however therisks and benefits of ownership remain with the counterparty. The Fund has an obligation to return the securities or equivalentcredit support to the counterparty.

As at 30 June 2019, the Fund held $37.416 million of cash (2018: $80.066 million) as collateral on such terms.

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(c) Credit risk (continued)

The notional principal amounts and fair value of the derivatives held by the Fund (on an individual transaction basis) were:

2019 2018 2019 2018 $'000 $'000 $'000 $'000

FuturesAssets 1,479,532 1,686,607 28,620 23,218 Liabilities (1,641,704) (2,845,296) (31,410) (30,967)

(162,172) (1,158,689) (2,790) (7,749) Options

Assets 56,002 64,526 55,901 64,569 Liabilities (11,157) (19,171) (11,160) (19,174)

44,845 45,355 44,741 45,395 Foreign Exchange Contracts

Assets 4,227,092 4,134,732 26,406 66,814 Liabilities (4,261,764) (4,151,647) (61,468) (86,059)

(34,672) (16,915) (35,062) (19,245) Swaps

Assets 6,297,500 7,154,212 112,390 63,671 Liabilities (6,297,500) (7,154,212) (138,397) (70,815)

- - (26,007) (7,144)

SummaryAssets 12,060,126 13,040,077 223,317 218,272 Liabilities (12,212,125) (14,170,326) (242,435) (207,015)

(151,999) (1,130,249) (19,118) 11,257

The maximum exposure to credit risk before any credit enhancements at the end of the reporting period is the carrying amount ofeach class of derivative financial instruments disclosed above.

The majority of derivative assets and liabilities are expected to be recovered or settled within twelve months of the reporting date.

There are no significant concentrations of credit risk within the Fund. The Fund's assets are invested directly by the Trustee orby selected investment managers and are held by the Trustee directly or by the Fund's custodians, Citigroup Pty Limited (fordomestic custody arrangements) and Citibank N.A. (for global custody arrangements). The Fund also has bank accounts held bythe Trustee which are used for administration purposes.

The Fund invests in fixed income securities most of which have an investment grade as rated by credit rating agencies. Ananalysis of debt securities by rating is set out in the table below:

2019 2018 $'000 $'000

RatingInvestment Grade

AAA 3,695,605 3,262,664 AA+ to BBB- 1,136,254 1,450,509

Non-Investment GradeBB+ to D 53,451 53,439

Not Rated 100,170 39,090

Total 4,985,480 4,805,702

Notional Principal Amounts Fair Value

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(d) Liquidity risk

Liquidity risk is the risk that the Fund will encounter difficulty in realising assets or otherwise raising funds to meet commitmentsassociated with financial instruments. Cash flow interest rate risk is the risk that future cash flows on financial instruments willfluctuate because of changes in market interest rates.

To control liquidity and cash flow interest rate risk, the Fund maintains significant cash balances and invests mainly in financialinstruments, which under normal market conditions, are readily convertible to cash.

Liquidity risk is generally managed by regular monitoring of the liquidity position, annual stress testing of the liquidity profile ofthe Fund, and incorporating liquidity considerations into the investment mandate with managers.

The Fund’s significant financial liabilities are benefits payable to members. In relation to vested superannuation benefits, thesewould be considered on demand, which comprise the entire accumulation benefit component and vested portion of the definedbenefit component. These vested benefits amount to $9,591 million (2018: $8,913 million), and could be considered to have amaturity of less than 1 month. The Fund manages its obligations to pay benefits on expected maturity, based on management'sestimates and actuarial assumptions of when such funds will be drawn down by members. The Fund considers it highly unlikelythat all members will request to withdraw or roll over their superannuation fund account at the same time.

The value of vested benefits relating to non-commutable pensions amounts to $2,149 million (2018: $2,009 million) with anaverage estimated annual payment of $142 million and an average duration of around 12 years.

The Fund considers all non-derivative financial liabilities to be due in 1 month or less.

The table below analyses the Fund’s derivative financial instruments into relevant maturity groupings based on the remainingperiod to the contractual maturity date at the year end date. The amounts disclosed in the table are the contractualundiscounted cash flows (on an individual transaction basis).

1 month 1 to 3 3 to 12 1 to 3 Over 3 or Less Months Months Years Years Total

2019 $'000 $'000 $'000 $'000 $'000 $'000

Net settled derivativesFutures (1,269) (3,170) 2,164 (515) - (2,790) Swaps (2,198) 1,968 3,411 11,000 33,252 47,433

Gross settled derivativesForeign exchange contracts

Inflows 3,243,054 555,419 428,253 - - 4,226,726 (Outflows) (3,271,568) (556,925) (432,905) - - (4,261,398)

SwapsInflows - 1,464 4,393 11,716 11,726 29,299 (Outflows) - (146) (438) (998) (973) (2,555)

1 month 1 to 3 3 to 12 1 to 3 Over 3 or Less Months Months Years Years Total

2018 $'000 $'000 $'000 $'000 $'000 $'000

Net settled derivativesFutures (778) 2,352 (9,600) 431 (154) (7,749) Swaps (994) 4,264 2,242 6,341 26,758 38,611

Gross settled derivativesForeign Exchange Contracts

Inflows 2,878,383 900,835 390,995 - - 4,170,213 (Outflows) (2,889,395) (904,934) (392,799) - - (4,187,128)

SwapsInflows - 2,711 8,132 21,686 21,687 54,216 (Outflows) - (181) (542) (1,375) (1,259) (3,357)

(e) Fair value estimation

The methods adopted in determining the fair value of the Fund's assets are explained in Note 4. The Fund's investments arelisted in the Statement of Financial Position on page 2.

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16. OFFSETTING FINANCIAL ASSETS AND FINANCIAL LIABILITIES

Financial assets and liabilities are offset and the net amount is reported in the Statement of Financial Position when there is alegally enforceable right to offset the recognised amounts, and there is an intention to settle on a net basis or realise the assetand settle the liability simultaneously. The gross and net positions of financial assets and liabilities that have been offset in theStatement of Financial Position are disclosed in the first three columns of the tables below.

Financial Assets

Amounts Gross Net amount subject to

amounts Gross of financial master Financial of financial amounts assets netting arr- instrument Cash Net

assets set off presented angements collateral collateral amount $'000 $'000 $'000 $'000 $'000 $'000 $'000

2019 Derivatives (a) 223,317 - 223,317 (87,609) - (20,559) 115,149

Total 223,317 - 223,317 (87,609) - (20,559) 115,149

2018 Derivatives (a) 218,272 - 218,272 (65,927) - (18,410) 133,935

Total 218,272 - 218,272 (65,927) - (18,410) 133,935

Financial Liabilities

Amounts Gross Net amount subject to

amounts Gross of financial master Financial of financial amounts liabilities netting arr- instrument Cash Net

liabilities set off presented angements collateral collateral amount $'000 $'000 $'000 $'000 $'000 $'000 $'000

2019 Derivatives (a) 242,435 - 242,435 (87,609) (16,599) (51,724) 86,503

Total 242,435 - 242,435 (87,609) (16,599) (51,724) 86,503

2018 Derivatives (a) 207,015 - 207,015 (65,927) (16,508) (18,684) 105,896

Total 207,015 - 207,015 (65,927) (16,508) (18,684) 105,896

(a) Master netting arrangement - not currently enforceable

The Fund presents the fair value of its derivative financial assets and liabilities on a gross basis. Certain derivative financialinstruments are subject to enforceable master netting arrangements, such as an International Swaps and Derivatives Association("ISDA") master netting agreement. In certain circumstances, for example, when a credit event (such as a default) occurs, alloutstanding transactions under the ISDA agreement are terminated, the termination value is assessed and only a single netamount is payable in settlement of all transactions. As the Fund does not presently have a legally enforceable right of set-off,these amounts have not been offset in the Statement of Financial Position, but have been presented separately in the above table.

Statement of Financial Position

Effects of offsetting on the

Effects of offsetting on the

Statement of Financial PositionRelated amounts not offset

Related amounts not offset

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17. OPERATIONAL RISK FINANCIAL RESERVE

2019 2018 $'000 $'000

Opening balance 28,535 26,996 Transfers to reserve 787 940 Earnings on reserve 671 599 Transfers from reserve - - Losses on reserve - -

Closing balance 29,993 28,535

Superannuation Prudential Standard 114 "Operational Risk Financial Requirement" ("SPS 114") which became effective 1 July2013, requires Registered Superannuation Entity ("RSE") licensees to maintain adequate financial resources to address lossesarising from operational risks that may affect such entities within their business operations. The Fund’s Operational RiskFinancial Reserve ("ORFR") has been established for this purpose.

As a minimum, the Fund aims to hold an ORFR Target Amount equal to 25 basis points of funds under management (at aspecified point in time), subject to a predetermined tolerance limit. The tolerance limit is set by the Trustee to reduce the needfor small transfers to or from the ORFR for immaterial fluctuations in the ORFR’s value.

The ORFR may only be used to make a payment to address an operational risk event as defined by SPS 114.

If the balance of the ORFR were to fall below the tolerance limit, additional funds would be transferred into the ORFR. Anytransfers to the ORFR must be approved by the Trustee.

18. STRUCTURED ENTITIES

A structured entity is an entity in which voting or similar rights are not the dominant factor in deciding control. Structuredentities are generally created to achieve a narrow and well defined objective with restrictions around their ongoing activities.Depending on the Fund's power over the activities of the entity and its exposure to and ability to influence its own returns, itmay control the entity. However, the Fund applies the Investment Entity Exception available under AASB 10 and therefore doesnot consolidate its controlled entities. In other cases it may have exposure to such an entity but not control it.

An interest in a structured entity is any form of contractual or non-contractual involvement which creates variability in returnsarising from the performance of the entity for the Fund. Such interests include holdings of units in unlisted trusts. The natureand extent of the Fund's interests in structured entities are titled "Unit trusts" and are outlined in Note 4. The total size of thestructured entities that the Fund has exposure to is $136,141.470 million (2018: $117,788.370 million), which is determinedbased on the combined net asset value of all unlisted trusts in which the Fund held units.

The Fund has exposures to unconsolidated structured entities through its investments. The Fund typically has no otherinvolvement with the structured entity other than the securities it holds as part of its investments and its maximum exposure toloss is restricted to the carrying value of the investment.

19. EVENTS AFTER BALANCE SHEET DATE

No significant events have occurred since the end of the reporting period which would impact on the financial position of theFund disclosed in the Statement of Financial Position as at 30 June 2019 or on the results of the Fund for the year ended onthat date.

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Financial Report for the year ended 30 June 2019 · Receivables Investment debtors 44,915 135,673...

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