CEO Online

Welcome to 2002.

At the CSS Board, we are all looking forward to a very exciting year working with our new investment advisory team.

On 1 February 2002, we announced that the CSS/PSS schemes have invested a total of $100 million in fund of hedge funds pooled vehicles offered by London based Financial Risk Management and Chicago based Harris Associates. This is a first foray into hedge funds for the CSS/PSS schemes and was made as a result of a search for absolute returns in a low return environment.

In the current investment climate, the Boards decided that the investment returns of the Fund could benefit from investments that tend not to follow the trends of conventional investment markets. The targeted returns for hedge fund of funds that the Boards have selected are in the range of about 8% to 12% per annum. More importantly, the investments are expected to deliver a steady positive return each month, and not to fluctuate in accordance with movements in the equity or bond markets.

WHERE DO WE GO FROM HERE

Shortly, the Board will kick off its triennial investment strategy review. During the review process, the Board will consider issues such as the nature of the external environment within which the Board operates. What is the economic environment likely to look like over the next couple of years? What is the outlook for some of our close economic partners, e.g. Japan and other Asian economies? What is the outlook for global financial markets for the next three years? What developments are likely to occur within the superannuation industry in the foreseeable future? Taking a good look at these questions will enable us to decide on the best strategic asset allocation of the growing pool of funds that make up the CSS and PSS schemes.

Stay tuned to CEO ONLINE and you will find more information about the Board's strategic investment review, so that you get a better understanding of how your money is being invested.

ARE THERE ANY LEGISLATIVE OR OTHER CHANGES UNDERWAY

As you know, the CSS Board operates within the framework of the law. The laws that have an impact on who can become a member of the CSS, or the way your money is invested, or how your retirement benefit is calculated may change from time to time. We therefore monitor very closely any changes or amendments that are made to superannuation legislation. If there are any changes that may impact on your retirement savings or benefits, we will let you know about them.

INVESTMENT RETURNS AND DEFERRED BENEFITS

In the last couple of months, we have received quite a number of queries from members who want to know how the current lower returns impact on their deferred benefits.

When you cease to be a CSS contributor (before retirement), and defer your CSS benefit, the two components of your deferred benefit continue to accumulate interest at the crediting rate of the Fund. Those components are your member component and your productivity component (if applicable).

The two components, and the interest that each of them has earned, are shown separately on your Deferred Benefit Member Statement.

Generally speaking, the investment performance of the Fund has a direct bearing on the interest earned by your total deferred benefit. This may occasionally be modified by the Board's reserving policy, as it was in the last financial year, when the Fund's investment return was 1.7%, and the crediting rate was set at 5.0%.

Crediting rates are usually determined around August of each year once the actual Fund performance is known, and apply for the whole of the previous financial year. The Fund's crediting rates have averaged 11% per annum over the past five financial years (1997-2001), being 8.5% per annum in excess of inflation (2.5% per annum).

The Exit rate is usually determined monthly to reflect changes in the Fund's earnings during a financial year. It applies to members' funds held in the CSS Fund for the period between the date of effect of the last Crediting rate and the date of payment of the benefit.

The i-Estimator is a handy online tool, which allows you to estimate your projected benefit, based on status in the Scheme at 30 June 2001. You can alter the factors that affect the growth of your benefit - like the Scheme earning rate, based on your own prediction of future financial indicators. You will need to have your Access Number handy to use the i-Estimator. If you have lost or not activated your Access Number the form can be downloaded from this site.

If you are planning on claiming your benefit within the next 12 months, you should contact our CSS Information Officers on 1300 000 277 for a more detailed benefit estimate.