rt annual report 2006

R&T Health Fund | Annual Report 2006

health fund

“ From a health point of view, joining R&T Health Fund was the best decision I ever made. I wouldn’t be without it, especially now.”ARTHuR MeAley R&T MeMbeR sInce 1956

R&T Health Fund was started in 1889 to help transport industry people, and it’s what we’re still doing today.

Just as we did almost 120 years ago, we understand the health and wellbeing issues that are especially relevant to transport industry employees and we are at the leading edge of developing products, benefits, services and initiatives that will ensure we continue to meet your needs for another 120 years and beyond.

Contents Chairperson’s Report 2CEO’s Report 6Highlights 10The Board of Directors 14Corporate Governance 1650 Year Member Honour Role 20

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It is my pleasure to present R&T Health Fund’s annual report for the year ending 30 June 2006. This has been a busy and challenging year for R&T, a year of change, vision and opportunity and it has been a privilege for me to serve as the fund’s chairperson throughout this time. I believe that the steps taken by your board and management over the past twelve months have given the fund a strong foundation for its future.

Following an Australia-wide search, in April 2006 the fund recruited Glenn Campbell to the position of Chief Executive Officer (CEO). Glenn brings to R&T a wealth of senior executive business experience and a background in the health industry.

Since his arrival Glenn has introduced substantial change to R&T’s business processes with the development of a strategic plan that directly addresses the challenges facing the organisation and the environment in which it operates.

Key to the fund’s achievements over the past six months has been a comprehensive review of its operations and member services. As a result, a number of initiatives have been implemented that will enable the fund to more efficiently serve members’ needs with an even greater focus on the quality of member interactions. These will ensure that the fund provides members with the type and level of service that they expect and that it does so with professionalism and efficiency. Part of this process has been the introduction of a new organisational structure and the launch of a new Member Care Team dedicated to providing the highest quality of service and support to our members. These, and other strategies will lead R&T into the future and assist the fund to remain competitive in an increasingly challenging market.

Following the intervention of industry regulator, the Private Health Insurance Administration Council (PHIAC), in late 2005 the fund commissioned an independent review of its board effectiveness to improve its governance practices. As a result of the recommendations arising from the review, the board has begun implementing a number of measures and procedures to strengthen its corporate governance and director effectiveness.

As part of our ongoing commitment to transparency and good corporate governance this annual report includes a number of statements on the robust governance structure and risk management framework that now prevails throughout R&T. Your board will continue to refine its practices in this area over the coming year.

Chairperson’s Report

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I would like to thank my fellow directors for their support and contribution to the fund over the past year. Each director brings different skills, experience and perspectives to the boardroom, and each has worked diligently to implement the recommendations made following the review by PHIAC and KPMG; they are to be congratulated for their efforts.

The management and staff of R&T remain its core and most valuable asset. The result of the year’s work, as set out in this report, is a testament to the energy and dedication that each person brings to his or her role within the organisation.

On behalf of the board, I congratulate CEO Glenn Campbell and his management team on their commitment and leadership throughout what has been a demanding and challenging year.VICTORIA REYNOLDS Chairperson

Private Hospital Table appears to pay the best hospital benefits of any health fund in Australia. Seldom, if ever does the hospital portion of a claim on R&T require the payment by the patient of anything extra.

R&T’s

benefitsSOURCE: INDEPENDENT ACTUARIAL REPORT, JUNE 2006

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“ R&T has been looking after our family since 1966, and it still is today. They’re always there for us, and they couldn’t make it simpler.”FiOnA AnD PHiliP wiTH JESSiCA, DAniEl, MATTHEw AnD lukE wORSlEY R&T MEMBERS SinCE 1986

BRuCE AnD CYnTHiA wORSlEY R&T MEMBERS SinCE 1966

So many passionate and dedicated people have contributed to building the fund over almost 120 years. The board, management and staff are simply the current custodians of the fund – it is our responsibility to ensure that we protect what has been created and add to it so that when it comes time to hand it to the next generation it is strong

and relevant to the transport community.

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Since accepting the position of CEO in April 2006, one of my key priorities has been to develop a strategic plan for the future of the fund. In doing this, my focus has been on gaining an understanding of the fund’s history, the members it serves and the industry it operates within. What I have discovered is an organisation with a rich and inspiring history, a strong foothold in the present and a bright and confident future. Above all, what I have learnt is that this is your health fund, and its priority must be to continue to serve the needs of its members, as it has done since it began in 1889.

In this, my first annual report to you as CEO, I overview some of the key measures of the fund’s performance during the past twelve months, and where the focus of your board, management and staff will be in the coming years. I also want to share with you why these plans are important and to give you a sense of certainty about the direction and future of your health fund.

Achievements during the 2006 financial yearThe 2006 financial year saw some very strong results for R&T, which have turned around the financial performance of recent years. The fund’s 2006 profit was $2,718,000, representing an exceptional recovery from the 2005 financial year loss of $1,140,000. During the year the fund returned benefits to members of $23,976,000 in hospital claims and $7,689,000 in ancillary claims. Management expenses have been reduced to 10.4% of revenues (from 11.3% in 2005 and 12.9% in 2004), and are now approaching the industry average of 9.6%. Total member funds have increased to $28,852,000 from $25,746,000 in 2005, exceeding the solvency requirements set down by industry regulator PHIAC.

Some of these funds are being reinvested into R&T’s operations to implement long-overdue improvements to systems and facilities. The underlying objective of all these improvements is to better meet members’ needs while improving efficiency, reducing management expenses and continuing to offer excellent value health cover with some of the highest benefits available in the industry. Key areas of investment this year have been:

• Introduction of HICAPS claiming. This facility gives members the convenience of being able to claim most ancillary health services on-the-spot with healthcare practitioners using a special R&T membership card (read more about this on page 8).

• Replacement of the fund’s outdated operating system with Paragon 21. The implementation of the system in late 2006 will see improvements in the management of member information, increased efficiencies (which will enable staff to assess claims faster and more accurately), and better access to information for members. Part of this system upgrade includes making a range of services and information available to members via a new website (read more about new online member services on page 8).

• Implementation of modern accounting and payroll systems to enable the fund to improve the management of its expenses and liabilities, and operate more efficiently.

• Appointment of a full-time internal auditor to ensure that the fund has appropriate internal controls in place to prevent the likelihood of fraud or other inappropriate behaviours.

• Investment in sales and marketing capability. In recent years awareness of the fund among transport industry employees has decreased. This, coupled with the fact that R&T has the second highest member age profile in the industry, means that strategies to reinvigorate awareness and growth are essential to the fund’s future viability.

• Purchase of a commercial investment property adjacent to the fund’s head office in Burwood NSW, which is currently returning 5.85% p.a. and provides for potential expansion of the fund’s premises.

CEO’s Report

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The fund has also introduced a number of management initiatives which are fundamental to its ability to operate professionally and prudentially. These include:• Development of a three-year strategic plan and budget. This plan addresses objectives and

budget requirements for all areas of the business’s operations. The underlying objective of the plan is to lay the foundations that will enable the fund to improve member services, grow its membership and introduce new member programs and benefits over time.

• Development of clear policies and establishment of properly defined roles and responsibilities between the board and management, which complements the work that the board has done to introduce excellent corporate governance practices over the past twelve months.

• A new organisational structure has been implemented which is enabling the fund to better serve the needs of members. The working environment has also been restructured according to occupational health and safety guidelines to ensure that we are providing staff with a safe environment.

• The fund is taking a stronger role in industry leadership through participation in key industry groups such as the Australian Health Services Alliance and the Health Insurance Restricted Membership Association of Australia. It has also been active in re-establishing ties with key transport industry organisations.

• Removal of ‘ex gratia’ payments and free cover for life members. These two practices were determined to be illegal under the National Health Act and the fund has ceased both as a result.

The futureSince 1889, R&T has been helping people in the transport industry – it was with an amazing pioneering spirit, vision and commitment to helping each other that the fund was created, and I am committed to ensuring that those values are retained within the fund today. My role as CEO is to ensure that the fund’s future is sound, that it meets the needs of its current members, that it makes itself relevant to a new generation of members, and that it remains financially able to keep helping members for another 120 years and beyond.

There are many aspects of the fund’s operations that require modernisation in order for it to not only continue serving its members, but to ensure its future through growth. I would like to assure you that we are not interested in creating change simply for the sake of change, nor do we desire or intend to discard the past. The future direction that has been set for the fund is about introducing appropriate and intelligent change, about respecting and honouring what has been created and about protecting and enhancing the legacy that exists within this organisation.

pays the best hospital and ancillary benefits of any of its competitors and it also pays very reasonable medical gap benefits.

R&T

bestSOURCE: INDEPENDENT ACTUARIAL REPORT, JUNE 2006

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our people – Celebrating our membersAs a not-for-profit health fund, members are at the centre of all our activities. Our membership is a long-standing and loyal one, which is increasingly desirable yet uncommon in today’s marketplace, but it also presents two primary challenges for the organisation. First, how do we continue to improve our products and services so that they meet the changing needs of members as they reach the age of retirement and beyond? Second, how to we continue to attract a new generation of members to ensure the continuity of the fund? Both of these requirements are equally important to the fund fulfilling its purpose of helping transport industry families.

To address these issues, a number of initiatives have been identified as part of the fund’s new three-year strategic plan. Over the coming months you will begin to see the introduction of:

• HICAPS (Health Industry Claims and Payment Services) HICAPS is a facility that is offered by many ancillary healthcare practitioners whereby health

fund members simply ‘swipe’ a plastic membership card through a special terminal (similar to a credit card or EFTPOS terminal) – and their claim is instantly processed. The benefit to members is that they then only pay the difference (if any) between the amount of their health fund benefit and the consultation fee, removing the need to pay the full fee up front and submit a claim to the fund. R&T will begin issuing new HICAPS cards to members early in 2007.

• Online Services While there won’t be any reduction in your ability to call the fund or drop into a branch to

speak with our team, we will be launching a range of online services providing convenience for those members that choose to manage their health cover online. What will be most visible to members is a new website, rich with new functions and access to tools and information, including the ability to receive and file correspondence, change your personal or cover details and see what your remaining limits are for different benefit categories.

• Improved Communications We’ll be focusing on ensuring that we’re providing you with the information you need, when

you need it. Behind the scenes our new operating system, Paragon 21, will greatly improve our processes and administration, giving our staff better access to information and vastly improving our efficiency and ability to provide you with even better service, whether in person, over the phone or online.

An important aspect of the way the fund communicates is how and what it presents to people who aren’t yet members. In order to compete with the bigger, more corporate funds and to communicate everything that is unique about R&T it is vital that we present the fund in a way that is appealing to potential new members. We have undertaken a project that has, in consultation with members, the industry, the staff and board, identified the aspects of the fund that are central to what makes R&T unique and we will be using these findings as the cornerstones of the project to review our member communications.

Your people – Caring for the people that Care for Your needs Our staff have always been central to caring for our members, and our commitment is to continue to provide genuine personal service, where you can call and speak to a real person, not a machine, or drop into a branch to speak with someone who will take as much time as you need. In order to continue providing this service, and to improve it, we are taking a number of steps to ensure that your team has access to all the information and resources they need to serve you better. We are investing in training and rewarding our people based on how well they serve you, our members.

CEO’s Report (continued)

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• Member Care We have implemented a new, dedicated Member Care Team to give you telephone access to

a small group of people specifically trained to handle all aspects of your enquiries. Our goal is that the person who answers your call will be able to address your needs, without having to pass you on to others or requiring you to wait for a response.

Your CommunitY – the new r&t families foundationHelping transport industry families has always been at the heart of what R&T exists to do. Beyond providing health cover, the fund is offering a further level of assistance through its new Families Foundation. The Foundation is a registered charity that is run by staff on a volunteer basis to raise money to assist transport industry families in times of hardship and need. The Foundation is currently finalising its administration, operations and fundraising plan for the coming year.

our fund’s future – new opportunities in the health industrY In 2007 a number of legislative changes will be introduced which will have a dramatic impact on the types of healthcare services that health funds can offer. We view these changes as being very positive and aligned with our goals as they are fundamentally about enabling funds to help members take better care of their health and wellbeing, rather than just helping them to cover the costs when they are unwell or injured. Among the coming changes are:• New provisions that will enable health funds to offer benefits for a broader range of

preventative health treatments and services aimed at reducing the need for hospitalisation, which ultimately reduces the pressure on healthcare system costs and facilities.

• Health fund members who are subject to a Lifetime Health Cover Loading will have their loading removed after ten years’ continuous health fund membership under a program called the Lifetime Health Cover Loyalty Bonus.

R&T will be working to take a leadership role in the industry and to be at the forefront of these developments.

Thank youIn many ways 2005/6 has been a challenging but positive year for the fund. Our new board of directors has worked tirelessly to introduce best practice governance to the organisation and to return the fund to usual operations. Our staff have experienced considerable challenges during this period and have enthusiastically continued to serve our members and embrace the many changes that have been introduced. I extend my most sincere thanks to the board and staff for their commitment to the fund and their extraordinary efforts over the past year. On behalf of R&T’s management and staff, I also thank you, our members, for your ongoing commitment to the fund – we look forward to continuing to be of service to you.GLENN CAMPBELL CEO

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top 10 individual hospital Claims 2005/6

No. Age Medical Condition Benefit Paid ($)

1 75 Abdominal; intestinal removal and repair 105,315.342 64 Cardiac 90,590.003 87 Cancer; amputation of lower limbs 85,499.684 88 MRSA; Soft tissue contamination; Staphylococcus 82,933.115 60 Cardiac 80,974.906 59 Cardiac 78,635.007 67 Cardiac 77,698.138 78 Total hip replacement 73,540.279 67 Psychiatric 70,018.0010 86 Fracture of limb; rehabilitation 66,525.00

R&T provides great peace of mind in a time of soaring medical costs.

highlights

Caring for our members

R&T’s member retention of 89.6% is among the highest of all funds. We care about our members.

highest hospital benefits

R&T pays the highest average hospital benefit in the industry.

inexpensive anCillarY

R&T’s ancillary cover contributions are well below the industry average.

great anCillarY benefits

R&T’s ancillary benefits are well above the industry average.

exCellent Customer serviCe

R&T sets the benchmark with 100% of ancillary claims paid within five days.

membership growth

With 15,564 contributing members R&T ranks 24th out of Australia’s 38 registered private health funds.

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top 10 individual anCillarY Claims 2005/6

No. Service Benefit Paid ($)

1 Major Dental; Chiro; Podiatry; Physio 5,255.052 Major Dental; Orthopaedic 4,830.953 Major Dental 4,460.004 Major Dental; Chiro; Acupuncture 4,204.005 Physio; Chiro; Pharmacy; Dental 3,905.706 Dental (wisdom teeth); Dental splint 3,719.007 Major Dental; Chiro 3,698.008 Major Dental; Physio; Chiro; Pharmacy 3,681.709 Major Dental; Chiro; Physio 3,624.0010 Major Dental; Physio; Chiro; Pharmacy 3,616.25

R&T’s ancillary cover provides great value to members even when you don’t need to go to hospital.

strong assets

The decline in members’ funds has been reversed.

strong profit

The fund has achieved one of its best ever profit performances.

hospital benefits Continue to grow

Since 2002, hospital benefit payments have increased by 31%.

anCillarY benefits Continue to grow

Since 2002, ancillary benefit payments have increased by 39%.

ageing membership

R&T is working to achieve a better balance of members in younger age groups for the ongoing health of the fund.

performanCe

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FILE

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0-415

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-3445

-4960

-6475

-7990

-940

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4

6

8

10

0

2

4

6

8

10

0

2

4

6

8

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ALL FUNDSR&T

R&T HEALTH FUND

ALL FUNDS

RESTRICTED FUNDS

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MEGAn AnD PAul MAnninG R&T MEMBERS SinCE 2005

“ R&T has been in our family for three generations. The benefits are great and we like knowing that it’ll be there for everything we need throughout our lives.”

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in preventative healthcare for our members.

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As Australia’s first registered health fund, we have a role to play in contributing to, leading and influencing the industry – ensuring that we continue to deliver healthcare solutions for today and the future. we are addressing the needs of an ageing population and embracing the newest

thinking

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The Board of Directors

VICTORIA REYNOLDS Chairperson

Victoria Reynolds has been in the rail industry for 22 years, and is currently General Manager Human Resources with Rail Infrastructure Corporation. Over the years she has been actively involved in community programs, working with disabled people and helping teenage mothers return to tertiary education. Victoria has been an R&T Health Fund member since 1997 and a member of the board since 2005.

Victoria’s objectives are to ensure that R&T continues to deliver the best outcomes for current and future members, while reducing management costs and improving services. Her goal is to lead the board in strengthening its corporate governance and building on the fund’s reputation and proud history to ensure that it is recognised as a leader among health funds.

JUDITH BLAKE Deputy Chairperson

Judith Blake has been involved in the transport industry since 1991 and is currently a Passenger Information Officer with the NSW State Transit Authority, where she has been employed since 1994. Judith has been involved in community work for many years and is currently a volunteer with the Justice of the Peace Association. Judith has been an R&T Health Fund member since 1996 and a board member since 2005.

Judith’s vision for R&T is to see the fund further consolidate the many improvements that have been introduced to its governance and operations, and to see it grow to become the number one fund serving the needs of all transport employees.

BARRY DREDGE

Barry Dredge began his career as a fitter and turner with Queensland Rail in 1964. He retired from his position as Maintenance Planner in Redbank in 2005. Barry has had a keen involvement with transport industry organisations throughout his career, including the Australian Metal Workers Union at Redbank where he was the convenor for four years. Barry joined R&T Health Fund in 1992 and has been a member of the board since 2005.

Barry’s goal is to ensure that R&T continues to deliver good value to members through great products and generous rebates – while remaining price competitive.

DENNIS ELLIS

Dennis Ellis has worked with Queensland Rail for 28 years, currently in the position of Pollution Operator. Throughout his career Dennis has been active in the transport industry and is Senior Vice President of the RTBU. Dennis has been with R&T Health Fund since 1997 and a member of the board since 2005.

Dennis is committed to ensuring that the board continues to operate under its new best practice standards of governance and provides support to the CEO, management and staff in helping the fund to achieve its strategic plan goals.

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BOB GLOVER

Bob Glover joined the NSW Government Railways in 1971 as a fitter and turner at Wagon Centre, Clyde. Over the next 29 years he worked in the Chullora and Eveleigh workshops before retiring in 2000 having achieved the position of Production Manager. Over the years Bob has been active in local junior sports, including coaching junior cricket and soccer. Bob has been a member of R&T Health Fund since 1976 (including ten years as a workshop representative for the fund) and has been a member of the board since 2004.

Bob’s objective is to see R&T develop innovative and valuable benefits that not only help members to stay well but reward them for their years of support for the fund.

ROBERT LEDGER

With over 40 years’ experience in engineering, Robert Ledger began his career as an electrical apprentice with the NSW Government Railways in 1965. When he retired in 2006, Robert was Fleet Engineer in the Passenger Fleet Maintenance Section of the organisation, which by then had become State Rail. Robert has been a member of R&T Health Fund since 1965 and a member of the board since 2005.

Robert’s vision for R&T is to see it expand to become the premier transport industry health fund serving the needs of all transport industry employees, all around Australia.

MICHAEL PRIOR

Michael Prior is a self-employed risk management consultant, appointed to the board as an independent director in 2006. He has a wealth of risk management experience in the financial services sector, having been General Manager Operational Risk and Compliance with the Commonwealth Bank, an international consultant contracted to Accenture Singapore, and a senior finance executive with Westpac.

Michael’s objectives are to ensure that the fund’s standards of corporate governance are maintained, that its business risks are managed effectively and that it realises the maximum return on its investments.

JEFF WALTON

For the past 13 years Jeff Walton has been the Operations Manager of R&T Health Fund and is currently also Deputy CEO. Prior to joining R&T Jeff spent 24 years with the State Rail Authority working in personnel management, audit and industrial relations. Jeff has had a long involvement as the president of the local junior cricket club and continues to play cricket himself. Jeff has been an R&T Health Fund member since 1968 and was appointed a casual director of the board in November 2005.

Jeff’s goal is to see R&T continue to do what it does best, deliver great value health cover at excellent contribution rates to members, while ensuring that the future of the fund remains viable through membership retention and growth.

The board of R&T is committed to ensuring that all of its policies, practices and procedures reflect good governance. The directors recognise that adherence to the fund’s governance framework is fundamental in demonstrating that they are accountable to its members and stakeholders, and that they are appropriately overseeing the future direction of the fund and managing its business risks.

Role of the board The board is responsible for the overall corporate governance of the fund including determining its strategic direction and financial wellbeing, and guiding and monitoring the business and affairs of R&T on behalf of the members by whom it is elected, and to whom it is accountable.

In summary, the board’s accountabilities and responsibilities include:• contributing to the development of and approving strategy, and monitoring the implementation

of that strategy;• monitoring the financial state and performance of the fund;• approving the fund’s financial reporting, including annual reports;• delegating clear responsibility and authority to the committees of the board and the CEO,

and monitoring and regularly reviewing the performance of those who hold delegated powers;• ensuring that R&T has effective processes and systems in place to enable the board to

monitor its performance and capabilities;• promoting and maintaining organisational values and a culture where transparent and timely

information is shared between management and the board;• overseeing R&T’s corporate governance framework and ensuring effective communication

with members and stakeholders;• setting the overall direction, financial objectives and operational goals for the fund;• reviewing and approving the annual budget and business plan;• ensuring effective systems of internal control and internal audit;• identifying and mitigating any risks that may harm the fund;• reviewing the performance of the CEO.

The board delegates responsibility for the day-to-day management of the fund to the CEO and senior managers, but remains responsible for overseeing the performance of the management team. To ensure that responsibility is clearly defined, the board has delegated a range of authorities to management through formal delegations. These include limited expenditure authority, and the authority to enter into certain contracts and to engage staff.

Corporate Governance

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Board performanceA performance evaluation process has been established for the board, individual directors and key executives. A comprehensive board performance appraisal conducted by an independent external consultant was completed after the end of the reporting period. This focused on board and individual director effectiveness and is the first such review of the board in R&T’s history.

Conflicts of interestDirectors are required to disclose, on an ongoing basis, any interest that could potentially conflict with those of R&T or its members. In accordance with the Corporations Act 2001, your board ensures that any director with a material personal interest in a matter being considered by the board must not be present when the matter is under discussion and may not vote on the matter.

Board committeesIn line with best practice corporate governance, the board has established standing committees as an efficient mechanism for considering detailed issues and making recommendations for consideration by the entire board. These committees adopt charters setting out the matters relevant to the composition, responsibilities and administration of each committee. Current committees of the board are:

audit and risk• Provides a forum for regular communication between the board and R&T’s external and

internal auditors.• Focuses on key issues such as financial controls and systems, risk identification and

management, and R&T’s annual financial statements.

Risk identification, measurement and mitigation strategies are key elements of all proposals considered by the board.

remuneration and nomination • Assists the board to achieve its objectives of ensuring that R&T has a board of effective

composition, size and commitment to adequately discharge its responsibilities and duties.• Establishes policies and procedures for the annual performance evaluation of the board, each

director and management, and recommends performance and salary reviews for the CEO.• Reviews and discusses with the board and senior management plans for professional

development and succession, and annual education programs for board members.

provides relatively better benefits for all of the major categories of ancillary services than each of the major funds and provides better benefits overall.

R&T

betterSOURCE: INDEPENDENT ACTUARIAL REPORT, JUNE 2006

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SARA AnGElOni R&T MEMBER SinCE 2005

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“ My R&T cover gives me the security of knowing that i can make choices about when and where i’m treated if i ever do have to go into hospital.”

to operate in an increasingly regulated environment, to serve the long-standing members that have invested so much of their lives in the fund and to remain relevant to a new generation.

we never lose sight of why we’re here – to help our members. we recognise that the world is constantly changing and that we need to make intelligent changes in order to continue to meet members’

needs,

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Adrienne SmithAlan CrookAlan ScottAlbert FryAlbert KempAlbert LevertonAlfred MounseyAllan ByronAllan GrahamAllan WhitbyAllen FishAllen HarbidgeAllen RisbyAnnie McNamaraArnold GrimaArthur HilderArthur JacksonArthur MealeyArthur SteadmanBarbara PainterBarry FieldBarry McDonaldBarry WalshBasil NolanBernard McCuddenBernard McGrathBessie BirkettBoris DaszkiewiczBrian CalvertBrian ChannellsBrian HayneBrian WadeBrian WoodBruce MurphyBruce RobinsonCaterina SgroCecil NichollCharles BeckerChristianus MuschterClaire BrownClare BrownClifford CroweClifford SimmonsClive CheshamColin BrightColin FogartyColin HolmesCoral NashDaphne CummingsDarryl DunneDennis ColemanDerrel GoldspinkDonald BritnellDonald BurnsDonald ChapmanDonald NashDonald Simpson

Donald StewartDonald WaughDoris HealeyDorothy HollisDorothy LawrenceDorothy SwardDouglas BarryDragutin EibergerEdward CrickEdward PurssellEdward StantonEileen FeeneyElaine RichElwyn HumbleyEndel BuschEric SillsErnest SmithErrol CuttingEvelyn MorrisFerenc KovacsFrancis CowanFrancis HallinanFrancis HurstFrank BattenFrederick ChewFrederick DihmGarry HarnishGeoffrey KellyGeoffrey TreacyGeorge ArchibaldGeorge BurrowsGeorge StocktonGerard ByrneGertrude MacKenzieGiovanni ScopellitiGiuseppe VartuliGordon HarperGrahame BrindellGregory McAleerGunter HermsHazel De AudneyHenry BarrHenry RosserHerbert JohnsonHerbert RobertsHuburt FreemanHughie RobertsonIan GriffithIrene PriceIvan GaleIvan HardwickJack McDonaldJames AmosJames IvinsJames QuigleyJanice WeldonJeanette KelkertJeffrey Manser

Joan DunnJoan ElkinsJoan FisherJohn AdamsJohn AlfordJohn BarnettJohn BennettJohn BroganJohn BrownJohn ChisholmJohn CroweJohn GardnerJohn HallidayJohn MoffittJohn SavilleJohn ShortJohn SquireJohn SullivanJohn WaterhouseJoseph JuransJudith BowdenJudith WilsonJudith JohnstonJudith SpillardJune PeacockJune ReedKathleen BushKeith DoggettKeith HardinghamKeith HargravesKeith JonesKeith WalkerKeith WhinfieldKenneth BeckerKenneth DoyleKenneth FrostKenneth RoeKerry BourkeKevin BlackKevin CaffreyKevin KellyKevin PenfoldLammert DevriesLaurel BalcombeLaurence ParkerLeigh CoskerieLeo KeoughLeonard WicksLeslie CookLeslie McDonaldLeslie MitchellLeslie NichelsenLina DuncanLois YagerLorenzina FavottoLorraine Stanley

Louise RowstonMalcolm AsplundMargaret AshfordMargaret RyanMargaret SmithMarie JagersMarie LyndonMarilyn SonterMarjorie BrownMarjorie MaloneyMartin CallaghanMary ForresterMaureen KerwickMaxwell FrenchMaxwell HannonMaxwell McVeanMervyn ThomasMichael DuffyMichael FarrellMona ChateNeta AurischNeville FletcherNicola SpinelliNina JohnsonNoel AdamsNoel BallNoel JohnstoneNorma McTaggartNorma HooperNorman BuckleyNorris MorphettPamela BrownePamela McCormackPamela RadleyPatricia BrownPatricia EganPatricia MillerPatricia RowePatrick DoughtyPaul BrownPauline BossPeggy AdamsPeter HolmesPeter SawtellRae MaddenRalph MatthewsRaymond PlattRaymond RamsayRaymond SwansonRichard ButcherRichard StephensonRichard StubisRita YoungRobert BellRobert ByattRobert DaveyRobert Dicks

Robert KellyRobert LancasterRobert McDonaldRobert RyanRobert SharpRobert WoolstonRonald AbsolomRonald DempseyRonald DennisRonald SherringRosaria FioreRoss JenkinsRoss TigheRowland PengillyRoy ColefaxRudolphus AllenSandra SwadlingSheila PlaterShirley PiddingtonSidney WattSilas BanksStanislaw WieczorskiStanley SteedTerence ClareTerence SmithThelma WilliamsonThomas LilleyThomas SheatherTrevor JamesValda ChristieValda StrongeValerie BestVera CobleVictor BonhamVictor PaskVonda OwersWalter BrennanWalter DoddWarwick AstonWilliam CassidyWilliam ChambersWilliam FlynnWilliam McelligottWilliam McGrillenWilliam WatersWilliam WheatleyYvonne Martin

50 Year Member Honour RoleWe gratefully acknowledge and celebrate the contribution our long-standing members have made to R&T Health Fund, and the role that each and every one has played in helping this organisation to grow and continue far beyond what its forefathers surely could have ever imagined. We value all of our members, and in particular, we honour those members who in 2005 and 2006 celebrate an extraordinary 50 years of membership.

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Head OfficeSydney46 Burwood Road BURWOOD NSW 2134

branchesSydney46 Burwood Road BURWOOD NSW 2134

BRISBAne 59A Melbourne Street SOUTH BRISBANE QLD 4101

WOLLOnGOnG200 Crown Street WOLLONGONG NSW 2500

neWCASTLeShop 2, 28 Donald Street HAMILTON NSW 2303

contact usTeL 1300 886 123 FAX 1300 887 [email protected] www.rthealthfund.com.au

R&T Health Fund

R&T Health Fund | Financial Report 2006

health fund

R&T Health Fund


BranchesSydney46 Burwood Road BURWOOD NSW 2134


WOLLOnGOnG200 Crown Street WOLLONGONG 2500


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RAILWAY & TRANSPORT HEALTH FUND LIMITED ABN 93 087 648 74429

COnTenTS Directors’ Report 1Auditors’ Independence Declaration 6Directors’ Declaration 7Income Statement 8Balance Sheet 9Statement of Changes in Equity 10Cash Flow Statement 11Notes to the Financial Statements 12Independent Audit Report 28


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The Directors present their report together with the Financial Statements of the Railway & Transport Health Fund Limited for the year ended 30 June 2006 and the Auditors Report thereon.

DirectorsThe following persons were directors during the whole of the financial year and up to the date of this report, unless otherwise stated:

Name Position Held Date Appointed Date Resigned

V Reynolds Chair 21/09/2005 J Blake Vice Chair 21/09/2005 R Glover Director 22/09/2004 R Ledger Director 21/09/2005 B Dredge Director 21/09/2005 D Ellis Director 21/09/2005 M Prior Director 25/05/2006 J Walton Director 7/12/2005 V Wulf President 17/11/2005J Whyte Director 13/02/2006C Haigh Director 17/11/2005F Fontana Director 26/10/2005V Russo Director 21/09/2005A Wilson Director 21/09/2005H Lewocki Director 21/09/2005R Le-Andrews Director 20/07/2005

Principal ActivitiesThe principal activity of the Fund during the course of the financial year was the provision of Private Health Insurance. There were no significant changes in the activities of the Fund during the year.

Result 2006 2005

The operating profit/(loss) amounted to $2,718,000 ($1,140,000)

Review of OperationsThe financial year ending 30 June 2006 resulted in a profit for the Fund. The 2006 profit was $2,718,000.

The Fund has continued to pay 100% for accommodation, theatre fee, prosthesis and pharmaceutical items used. Hospital benefits paid went from $24,650,000 to $23,976,000. This is a decrease in payments of benefits by $674,000 or (3%).

Ancillary claims have increased from $6,412,000 to $7,689,000. This is an increase in payment of benefits of $1,277,000 or 20%.

MembershipThe Fund’s hospital membership now totals 14,931, which is an increase on last year’s count of 14,762. Ancillary membership now totals 9,675 which is an increase on last year’s count of 9,311. Total number of persons covered in 2006 amounted to 34,259.

Membership Statistics 2006 2005 Gain / (Loss)

NSW: Hospital 10,522 10,600 (78) Ancillary 5,974 5,813 161

QLD: Hospital 4,409 4,162 247 Ancillary 3,701 3,498 203

FinancesTotal income for the year was $39,095,000 including $1,493,000 from invested funds. Expenditure for the year totalled $36,377,000 resulting in a net profit of $2,718,000.

Management expenses for the year were $3,987,000 (net of Ambulance Levy) or 10.4% of the total operating revenue.

As the Fund is a not for profit organisation, we continually monitor members funds. This year, total equity increased from $25,746,000 to $28,852,000. The present level of equity more than meets the statutory requirements.

Directors’ Report


�RAILWAY & TRANSPORT HEALTH FUND LIMITED ABN 93 087 648 744

Ambulance LevyA total of $724,000 was paid to the State Government during the year. This levy, represents an amount of $1.10 per week single unit or $2.20 per family.

AncillaryTotal benefits of $7,689,000 were paid for 133,087 services, representing an average benefit return of 67% per service up from 60.18% in 2005.

Qualifications of the Current Board of Directors as at 30 June 2006V Reynolds Dip. HR Mgt, GAICD, MAHRI, MWOB Chair

experience and expertise– Senior Executive, Rail Infrastructure Corporation

for seven years– General Manager, Human Resources, Rail

Infrastructure Corporation for three years– Regional Manager Projects and Support, RIC for

three years– Manager, Resources Group NORTH for four years

special Responsibilities– Chair of the Board– Chair of the Remuneration and

Nominations Committee

J Blake Vice Chair

experience and expertise– Passenger Information Officer, State Transit Sydney

Buses for eleven years

R ledgeR B Elec Director

experience and expertise– Engineering Manager with Passenger Fleet

Maintenance in NSW State Rail Authority for forty one years

special Responsibilities– Chair of the Audit and Risk Management

Committee

R gloVeR Director

experience and expertise– Production Unit Manager with Air Brakes in NSW

State Rail Authority for thirty years

special Responsibilities– Member of the Audit and Risk Management

Committee

d ellis Director

experience and expertise– Pollution Operator in QLD Railway for

twenty eight years

special Responsibilities– Member of the Remuneration and Nominations

Committee

Directors’ Report (continued)

3 RAILWAY & TRANSPORT HEALTH FUND LIMITED ABN 93 087 648 744

B dRedge Director

experience and expertise– Maintenance Planner with Queensland Rail for

forty three years

special Responsibilities– Member of the Remuneration and Nominations

Committee

J Walton Director

experience and expertise– Operations Manager with Railway & Transport

Health Fund Limited for fourteen years– Audit Manager with NSW State Rail Authority

for six years


Committee

M PRioR M Com, Grad Dip (Applied Finance), CPA, FTIA

Director

experience and expertise– Self Employed Risk Management Consultant for

two years– General Manager Operational Risk and

Compliance, CBA for two years– Project Director, Accenture Singapore for two years– Senior Finance Executive, Westpac for twenty

three years


Committee

s saffo B Comm CA Acting Company Secretary

experience and expertise– Currently the Finance Manager and Acting

Company Secretary of the Fund– Senior Auditor at BDO for three years

special Responsibilities– Acting Company Secretary of the Board– Acting Company Secretary of the Audit and Risk

Committee– Acting Company Secretary of the Remuneration

and Nominations Committee


Executive MeetingsDuring the year a total of 24 Executive Board meetings were convened. The number of meetings attended by each Director and Company Secretary is listed below. Non-attendance was due to illness, annual leave or departmental duties.

No. Eligible to Attend No. Attended

V Reynolds (Chair) (appointed 21.9.05) 12 12J Blake (Vice Chair) (appointed 21.9.05) 12 12R Glover (Director) (appointed 22.9.04) 19 18C Haigh (Director) (resigned 17.11.05) 9 8R Ledger (Director) (appointed 21.9.05) 12 12B Dredge (Director) (appointed 21.9.05) 12 12D Ellis (Director) (appointed 21.9.05) 12 12M Prior (Director) (appointed 25.5.06) 2 1V Russo (Director) (term concluded 21.9.05) 7 7F Fontana (Director) (resigned 26.10.05) 9 9R LeAndrews (Director) (resigned 20.7.05) 1 1J Walton (Executive Director) (appointed 7.12.05) 10 10H Lewocki (Director) (term concluded 21.9.05) 7 3A Wilson (Director) (term concluded 21.9.05) 7 7V Wulf (President) (resigned 17.11.05) 10 10J Whyte (Director) (resigned 13.2.06) 14 8G Campbell (CEO) (appointed 24.4.06) 3 3S Tizzone (Company Secretary) Voluntary Redundant 20.12.05) 13 10S Saffo (Acting Company Secretary appointed 20.12.05) 8 8

During the year a total of two Remuneration and Nominations Committee meetings were convened. The number of meetings attended by each Director is listed below.


V Reynolds Chair 2 2D Ellis Director 2 2B Dredge Director 2 2S Saffo Acting Company Secretary 2 1

During the year a total of four Audit and Risk Management Committee meetings were convened. The number of meetings attended by each Director and Manager is listed below. Non-attendance was due to illness, annual leave or departmental duties.


R Ledger Chair 3 3R Glover Director 4 4M Prior Director 2 1J Blake Director 1 1J Walton Director 4 4S Tizzone General Manager 1 1C Haigh Director 1 1J Whyte Director 1 1S Saffo Acting Company Secretary 3 2

Directors’ Report (continued)

� RAILWAY & TRANSPORT HEALTH FUND LIMITED ABN 93 087 648 744

State of AffairsIn the opinion of the Directors, there were no significant changes in the affairs of the Fund that occurred during the financial year under review not otherwise disclosed in this report or the financial statement.

Events Subsequent to Balance DateThere has not arisen in the interval between the end of the financial year and date of this report any item, transaction or event of a material unusual nature likely in the opinion of the Directors, to affect significantly the operations of the Fund, the results of those operations, or the state of affairs of the Fund in subsequent financial years.

Likely Developments There are no likely developments that will significantly affect the operations of the Fund.

Environmental RegulationsThere are no environmental regulations that impact on the Fund.

Directors’ BenefitsSince the end of the previous financial year, no Director of the Fund has received or become entitled to receive any benefit (other than a benefit included in the aggregate amount of remuneration received or due and receivable by Directors shown in Note 22 of the financial statements) by reason of a contract made by the Fund with a Director or with a firm of which a Director is a member, or with an entity in which a Director has a substantial interest.

Indemnifying Officers and AuditorThe Fund has not during or since the end of the financial year in respect of any person who is or has been an officer or auditor of the Fund:i) indemnified or made any relevant agreement

for indemnifying against a liability incurred as an officer, including costs and expenses in successfully defending legal proceedings; or

ii) paid or agreed to pay a premium in respect of a contract insuring against a liability incurred as an officer for the costs or expenses to defend legal proceedings.

with the exception of the following matter:

during or since the end of the financial year, the Fund has paid or agreed to pay a premium insuring it’s directors and officers against liability, for which cover includes the current financial year. In accordance with normal commercial practice, disclosure of the amount of premium payable under, and the nature of liabilities covered by, the insurance contract is prohibited by a confidentiality clause in the contract.

Auditors’ Independence DeclarationA copy of the auditor’s independence declaration as required under section 307c of the Corporation Act 2001 is set on page 6.

This statement is made in accordance with a resolution of the Board of Directors and is signed for and on behalf of the Directors.

V Reynolds Chair

J Blake Vice ChairDated at Sydney 20th day of September, 2006

6RAILWAY & TRANSPORT HEALTH FUND LIMITED ABN 93 087 648 744

Auditors’ Independence Declaration


Directors’ DeclarationThe directors of the Fund declare that:

1. The financial statements, comprising the Income Statement, Balance Sheet, Cashflow Statement and the Statement of Changes in Equity, and accompanying notes are in accordance with the Corporations Act 2001 and:

a) comply with Accounting Standards and the Corporations Regulations 2001 and b) give a true and fair view of the financial position of the Fund as at 30 June 2006 and performance for

the year ended on that date of the Fund.

2. In the directors’ opinion, there are reasonable grounds to believe that the Fund will be able to pay its debts as and when they become due and payable.

This declaration is made in accordance with a resolution of the Board of Directors and is signed for and on behalf of the directors by:

V Reynolds Chair

J Blake Vice ChairDated at Sydney 20th day of September, 2006


2006 2005 Note $’000 $’000

Revenue from continuing operations 5 39,011 34,248

Other Income 6 84 –

Employee benefits expense (1,916) (1,859)

Depreciation and amortisation expense 7 (156) (125)

Commission expenses (212) (218)

Membership expenses (177) (163)

Computer expenses (77) (86)

Postage and telephone expenses (243) (172)

Printing and stationery expenses (129) (96)

Property expenses (252) (311)

Audit and accounting expenses (424) (225)

Financial charges and taxes (105) (88)

Hospital benefit expenses (23,976) (24,650)

Ancillary benefit expenses (7,689) (6,412)

State levies (724) (639)

Other expenses (297) (344)

Profit / (loss) before income tax 2,718 (1,140)

Income tax expense – –

Profit / (loss) attributable to members of the fund 19 2,718 (1,140)

The above income statements should be read in conjunction with the accompanying notes.

Income StatementFor the Year Ending 30 June 2006


2006 2005 Note $’000 $’000

assetsCurrent assetsCash and cash equivalents 9 11,531 9,685

Trade and other receivables 10 2,596 3,170

Held-to-maturity investments 11 5,032 –

Other Financial assets 12 – 9,634

total current assets 19,159 22,489

non-current assets

Held-to-maturity investments 11 9,098 –

Other financial assets 12 – 4,067

Property, plant and equipment 13 5,192 4,595

Investment Property 14 1,400 1,316

total non-current assets 15,690 9,978

total assets 34,849 32,467

liaBilities

Current liabilitiesTrade and other payables 15 190 175

Interest-bearing liabilities 16 – 778

Provisions 17 3,002 2,645

Other liabilities 18 2,727 2,960

total current liabilities 5,919 6,558

non-current liabilities

Provisions 17 78 163

total non-current liabilities 78 163

total liabilities 5,997 6,721

net assets 28,852 25,746

eQUityReserves 19 1,213 609

Retained earnings 19 27,639 25,137

total equity 28,852 25,746

The above balance sheets should be read in conjunction with the accompanying notes.

Balance SheetAs at 30 June 2006


Statement of Changes in EquityFor the Year Ending 30 June 2006

Retained Total Note earnings Reserves equity

at 1 July 2004 26,277 609 26,886

Total income and expense for the year recognised directly in equity 26,277 609 26,886

Loss for the year (1,140) – (1,140)

Total income and expense for the year 25,137 609 25,746

at 30 June 2005 25,137 609 25,746

Adjustment on adoption of AASB 1023 17, 19 (216) – (216)

Restated total equity at beginning of the financial year 24,921 609 25,530

Increase in fair value of land and buildings – 604 604

Total income and expense for the year recognised directly in equity 24,921 1,213 26,134

Profit for the year 2,718 – 2,718

Total income and expense for the year 27,639 1,213 28,852

at 30 June 2006 27,639 1,213 28,852

The above statements of changes in equity should be read in conjunction with the accompanying notes.

�� RAILWAY & TRANSPORT HEALTH FUND LIMITED ABN 93 087 648 744

Cash Flow StatementFor the Year Ending 30 June 2006

2006 2005 Note $’000 $’000

Cash flows from operating activitiesCash receipts from customers 37,583 33,495

Cash paid to suppliers and employees (36,125) (33,682)

Interest received 1,636 1,341

Rent received 108 135

net cash inflow from operating activities 21 3,202 1,289

Cash flows from investing activities

Purchase of property, plant and equipment (148) (92)

Purchase of investment property – (1,316)

Purchase of held to maturity investments (10,138) (1,626)

Proceeds from held to maturity investments 9,708 1,541

net cash outflow from investing activities (578) (1,493)

Cash flows from financing activities

net cash inflow/(outflow) from financing activities – –

Net increase / (decrease) in cash and cash equivalents 2,624 (204)

Cash and cash equivalents at beginning of year 8,907 9,111

Cash and cash equivalents at end of year 9 11,531 8,907

The above cash flow statements should be read in conjunction with the accompanying notes.

��RAILWAY & TRANSPORT HEALTH FUND LIMITED ABN 93 087 648 744

Notes to the Financial StatementsNote 1 Corporate InformationThe financial report of Railway & Transport Health Fund Limited for the year ended 30 June 2006 was authorised for issue in accordance with a resolution of the directors on 20 September 2006 and covers Railway & Transport Health Fund Limited as an individual entity.

The financial report is presented in the Australian currency.

Railway & Transport Health Fund Limited is a company limited by guarantee incorporated and domiciled in Australia. The address of the registered office and principal place of business is 46 Burwood Road, Burwood 2134.

Note 2 Summary of Significant Accounting Policies(a) Basis of PRePaRationThe financial report is a general purpose financial report which has been prepared in accordance with Australian equivalents to International Financial Reporting Standards (AIFRS), other authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Interpretations and the Corporations Act 2001.

The financial report has also been prepared on a historical cost basis, except for investment properties, land and buildings, that have been measured at fair value.

Compliance with Australian equivalents to International Financial Reporting Standards (AIFRS) ensures that the financial report, comprising the financial statements and notes thereto, complies with International Financial Reporting Standards (IFRS).

This is the first financial report prepared under AIFRS and AASB 1 First-Time Adoption of Australian Equivalents to International Financial Reporting Standards has been applied in preparing these financial statements. Comparatives for the year ended 30 June 2005 have been restated accordingly.

Reconciliation of AIFRS equity and loss for the year ended 30 June 2005 to the balances reported in the 30 June 2006 financial report are detailed in Note 27 below.

(B) inCoMe ReCognition

Contribution incomeContributions have been calculated on an accruals basis, bringing to account contributions in arrears and in advance at year end. For those amounts in arrears, collectibility has been assessed.

Rental incomeRental income is accounted for on a straight-line basis over the lease term. Contingent rentals are recognised as income in the periods when they are earned.

(C) iMPaiRMent of assetsAt each reporting date the Fund assesses the amount of impairment of assets by determining the recoverable amount as the depreciable replacement cost.

(d) Cash and Cash eQUiValentsFor the purposes of the Cash Flow Statement, cash and cash equivalents includes cash on hand and at bank, deposits held at call with financial institutions, other short term, highly liquid investments with maturities of three months or less, that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value and bank overdrafts.

(e) inVestMents and otheR finanCial assetsAll investments and other financial assets are initially stated at cost, being the fair value of consideration given plus acquisition costs. Purchases and sales of investments are recognised on trade date which is the date on which the Fund commits to purchase or sell the asset. Accounting policies for each category of investments and other financial assets subsequent to initial recognition are set out below.

held-to-maturity investmentsHeld-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Fund has the positive intention and ability to hold-to-maturity and are measured at amortised cost subsequent to initial recognition using the effective interest method.


(f) faiR ValUesFair values may be used for financial asset and liability measurement as well as for sundry disclosures.

Fair values for financial instruments traded in active markets are based on quoted market prices at balance sheet date. The quoted market price for financial assets is the current bid price and the quoted market price for financial liabilities is the current ask price.

The fair value of financial instruments that are not traded in an active market are determined using valuation techniques. Assumptions used are based on observable market prices and rates at balance date. The fair value of long-term debt instruments is determined using quoted market prices for similar instruments. Estimated discounted cash flows are used to determine fair value of the remaining financial instruments.

The fair value of trade receivables and payables is their nominal value less estimated credit adjustments.

(g) PRoPeRty, Plant and eQUiPMentLand and buildings are measured at fair value less accumulated depreciation. Any accumulated depreciation at revaluation date is eliminated against the gross carrying amount of the asset and the net amount is restated as the revalued amount of the asset. A revaluation surplus is credited to the asset revaluation reserve included within members’s equity unless it reverses a revaluation decrease on the same asset previously recognised in the income statement. A revaluation deficit is recognised in the income statement unless it directly offsets a previous revaluation surplus on the same asset in the asset revaluation reserve. On disposal, any revaluation reserve relating to sold assets is transferred to retained earnings. Independent valuations are performed regularly to ensure that the carrying amounts of land and buildings does not differ materially from the fair value at the balance sheet date.

All other plant and equipment is stated at historical cost, including costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management, less depreciation and any impairments.

Land is not depreciated. Depreciation on other assets is calculated on a diminishing value basis over the estimated useful life of the asset as follows:

Class of Fixed Asset Depreciation Rate %

Buildings 4Computer Equipment 20Vehicles 20Plant and equipment 10Leasehold Improvements 20

The assets’ residual values and useful lives are reviewed and adjusted, if appropriate, at each balance sheet date.

Gains and losses on disposals are calculated as the difference between the net disposal proceeds and the asset’s carrying amount and are included in the income statement in the year that the item is derecognised.

(h) inVestMent PRoPeRtiesInvestment properties are initially measured at cost including transaction costs. Subsequent to initial recognition, investment properties are carried at fair value, representing market conditions at balance sheet date. Gains or losses arising from changes in fair values of investment properties are included in the income statement as part of other income in the year in which they arise.

(i) tRade and otheR PayaBlesTrade and other payables represent liabilities for goods and services provided to the Fund prior to the year end and which are unpaid. These amounts are unsecured and have 30-60 day payment terms.

(J) otheR liaBilitiesOther liabilities comprises of contributions in advance and employee benefits provisions in respect of annual leave.

Contributions in advance represent receipt in advance of contributions for the ensuing year. This therefore represents the balance of contribution income received which have been calculated on an accrual basis.


Notes to the Financial Statements (continued)(k) oUtstanding ClaiMs PRoVisionsThe Fund currently assesses the amount of the outstanding claim provision on a statistical model utilising previous claims history. The statistical model used by the Fund is a chain ladder model as prescribed by PHIAC. Under Australian equivalents to IFRSs, AASB 1023 General Insurance Contracts, from 1 July 2005 the Fund is required to show that amount of the outstanding claims provision including a risk margin. The margin is to be based on some statistical level of confidence. The margin of $157,000 as calculated by the funds actuary, assumes a confidence level of 75%. 75% is the standard adopted by the general insurance industry in Australia.

(l) eMPloyee Benefit PRoVisions

Wages and salaries, annual leave and sick leaveLiabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave expected to be settled within 12 months of balance sheet date are recognised in respect of employees’ services rendered up to balance sheet date and measured at amounts expected to be paid when the liabilities are settled. Liabilities for non-accumulating sick leave are recognised when leave is taken and measured at the actual rates paid or payable. Liabilities for wages and salaries and annual leave are included as part of Other Liabilities.

long service leaveLiabilities for long service leave are recognised as part of the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees to the balance sheet date using the projected unit credit method. Consideration is given to expected future salaries and wages levels, experience of employee departures and periods of service. Expected future payments are discounted using national government bond rates at balance sheet date with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.

(M) RoUnding of aMoUntsThe company is of a kind referred to in Class Order 98/0100 issued by the Australian Securities and Investments Commission relating to rounding of amounts in the financial report. Amounts have been rounded to the nearest thousand dollars ($’000) unless otherwise stated.

(n) CoMPaRatiVesWhere required by Accounting Standards, comparative figures have been adjusted to conform with changes in presentation for the current financial year.

Note 3 Critical Accounting Estimates And Judgements(a) aCtUaRial assUMPtions and MethodsThe actuarial valuation model used to calculate the outstanding claims is a modified chain ladder model.

This model, and variants of it, is used by health insurers and general insurers to calculate outstanding claims liabilities by using the relationships between the claims paid at each time interval in the past, for each past period incurred, to predict the extent of incurred claims for each recent period for which claim payments have not yet been completed.

The model produces claims incurred for each month of the previous 2 years, and outstanding claims provisions (by class of claim) for the latest month and for each of the twelve previous months.

As the run-off of health insurance claims is relatively rapid, the claims to be paid in the future were not discounted. That is, a discount rate of zero was assumed.

The reinsurance component is calculated as 19% of the total hospital and medical claims outstanding. The percentage was estimated from past experience.


The risk margin was determined from the assumption that there is a normal distribution of the differences between the calculated provisions required for past periods of time greater than 1 year ago, and the finally determined actual requirements for those periods.

The standard deviation of these differences lead to a risk margin of 5.52% providing for a 75% likelihood that the outstanding claims provision set at any particular date, and based on the reported claim payments made to that date, will be adequate.

Note 4 Risk Management Policies and ObjectivesActivities undertaken by Railway & Transport Health Fund Limited may expose the Fund to market risk, credit risk, liquidity risk and fair value and cash flow interest rate risk. The Funds’ risk management policies and objectives are therefore designed to minimise the potential impacts of these risks on the results of the Fund where such impacts may be material.

The Fund has a central treasury function which implements the risk management policies approved by the board of directors.

(a) CRedit Risk exPosUReCredit risk is the risk that counter parties to a financial asset will fail to discharge their obligations, causing the Fund to incur a financial loss.

The Fund does not expect any counter parties to fail to meet their obligations given their high credit ratings and therefore does not require collateral or other security to support credit risk exposures.

(B) faiR ValUe and inteRest Rate RiskThe Fund’s interest rate risk arisies from financial assets held with fixed interest rates.

To manage their fair value interest rate risk, the Fund keeps a certain portion of financial assets at fixed rates to counteract a fall in interest rates, and a certain portion of financial assets at floating rates to allow for increases in interest rates.

(C) MaRket RiskThis comprises foreign exchange risk and price risk.

The Fund only invests in Australian cash funds and is therefore not significantly exposed to market risk.

(d) liQUidity RiskLiquidity risk is the risk that the Fund may encounter difficulties raising funds to meet commitments. It is the policy of the Board of Directors to maintain adequate available funds at call.


Note 5 Revenue from Continuing Operations 2006 2005 $’000 $’000

Rendering of services 37,518 32,720 Rental income 108 135 Interest 1,385 1,393 39,011 34,248

Note 6 Other IncomeFair value gains on investment properties 84 –

84 –

Note 7 ExpensesProfit/(loss) before income tax includes the following specific expenses:

amortisation expense

Leasehold improvements 14 9

depreciation expense

Buildings 67 51 Plant and equipment 71 65 Motor vehicles 4 – 142 116

Rental expenses in operating leases

Wollongong office rental expense 18 38 Newcastle office rental expense 23 12 41 50

Employee benefits expense 1,916 1,859

Defined contribution superannuation 241 187

Notes to the Financial Statements (continued)


Note 8 Auditors’ Remuneration 2006 2005 $’000 $’000

assurance services

Audit servicesAmounts paid/payable to BDO for audit or review of the financial report for the Fund. 76 51 Amounts paid/payable to non-BDO audit firms for audit or review of the financial report for the Fund. 56 – 132 51

Note 9 Cash and Cash EquivalentsCash at bank and in hand 1 1 Deposits with banks and credit unions 11,530 9,684 11,531 9,685

(a) Cash at Bank Cash at bank and in hand is non-interest bearing. Deposits at call bear floating interest rates between 3.00% and 6.00% (2005 3.00% and 6.10%). These deposits have an average maturity of 30 days.

(B) ReConCiliation of Cash The above figures are reconciled to the cash at the end of the financial year as shown in the statement of cash flows as follows:

2006 2005 $’000 $’000

Balances as above 11,531 9,685 Bank overdrafts (note 16) – (778) Balances per statement of cash flows 11,531 8,907

Note 10 Trade and Other Receivables (Current)Trade receivables 1,070 1,135 Other receivables 1,526 2,035 2,596 3,170

(a) effeCtiVe inteRest Rate and CRedit Risk Information concerning the effective interest rate and credit risk of both current and non current receivables is set out in note 20.


Note 11 Held-to-Maturity Investments 2006 2005 $’000 $’000

CURRentBonds 2,022 – Floating rate notes 3,010 – 5,032 –

non CURRentBonds 6,080 – Floating rate notes 3,018 – 9,098 –

The bonds and floating rate notes are carried at amortised cost. They are to be held until their maturity between one and three years and carry fixed interest rates of 5% and 8%. The carrying value of the bonds and floating rate notes approximate to their fair value.

(a) tRansition to aasB 132 and aasB 139The Fund has taken the exemption available in AASB 1 to apply AASB 132 Financial Instruments: Disclosure and Presentation and AASB 139 Financial Instruments: Recognition and Measurement from 1 July 2005. As these instruments were carried at amortised cost under AGAAP there has been no adjustment at the transition date.

Note 12 Other Financial Assets 2006 2005 $’000 $’000

CURRentInvestments comprise:Other short term investments, at cost – 9,634

non-CURRentInvestments comprise:Other long term investments, at cost – 4,067

These investments represent fixed interest rates securities and bonds (with interest rates between 5.5% and 8%) and terms of up to 3 years.

(a) tRansition to aasB 132 and aasB 139The Fund has taken the exemption available in AASB 1 to apply AASB 132 Financial Instruments: Disclosure and Presentation and AASB 139 Financial Instruments: Recognition and Measurement from 1 July 2005. At the date of transition to these standards on 1 July 2005 for the Fund: – other investments, with a carrying value of $13,701,000 under previous AGAAP, were designated and reclassified as

held-to-maturity investments (refer to note 11).

Note 13 Property, Plant and Equipment 2006 2005 $’000 $’000

landAt cost 876 876 876 876

land

At fair value 1,250 1,800 1,250 1,800



2006 2005 $’000 $’000

Buildings

At fair value 2,658 1,546 Accumulated depreciation – – 2,658 1,546

leasehold improvements

At cost 102 141 Accumulated amortisation (46) (72) 56 69 Total buildings 2,714 1,615 Total land and buildings 4,840 4,291

Plant and equipment

At cost 949 854 Accumulated depreciation (612) (551) 336 304

Motor Vehicles

At cost 20 – Accumulated amortisation (4) – 16 – Total non-current property, plant and equipment 5,192 4,595

(a) ReValUationsLand and Buildings at fair values were determined by independent valuations as at 30 June 2006. The valuation basis of land and buildings at fair value is the amount for which the assets could be exchanged between willing parties in an arms length transaction, based on current prices in an active market for similar properties in the same location and condition.

(B) ReConCiliationsReconciliations of the carrying amounts of each class of property, plant and equipment at the beginning and end of the current and previous financial year are set out below:

2006 2005 $’000 $’000

total landCarrying amount at beginning of financial year 2,676 2,676 Net revaluation increases/(decreases) (550) – Carrying amount at end of financial year 2,126 2,676

total BuildingsCarrying amount at beginning of financial year 1,546 1,597 Additions 25 – Net revaluation increases/(decreases) 1,155 – Depreciation (67) (51) Carrying amount at end of financial year 2,659 1,546

total leasehold improvements

Carrying amount at beginning of financial year 68 52 Additions 1 25 Depreciation (14) (9) Carrying amount at end of financial year 55 68


Note 13 Property, Plant and Equipment (continued) 2006 2005 $’000 $’000

total Plant and equipment

Carrying amount at beginning of financial year 305 330 Additions 102 67 Disposals – (27) Depreciation (71) (65) Carrying amount at end of financial year 336 305

total Motor Vehicles

Carrying amount at beginning of financial year – – Additions 20 – Depreciation (4) –Carrying amount at end of financial year 16 –

Note 14 Investment Propertyat fair valueBalance at beginning of year 1,316 – Acquisitions – 1,316 Fair value adjustments 84 – Balance at end of year 1,400 1,316

Land and Buildings are disclosed at fair values determined by independent valuations as at 30 June 2006. The valuation basis of land and buildings at fair value is the amount for which the assets could be exchanged between willing parties in an arms length transaction, based on current prices in an active market for similar properties in the same location and condition, and subject to similar leases. No impairment losses have incurred during the year.

The following amounts have been recognised in the income statement:

2006 2005 $’000 $’000

Rental income 9 – Direct operating expenses arising from investment property that generated rental income during the year 57 –

There are no restrictions on the realisability of investment property or the remittance of income and proceeds of disposal.

Note 15 Trade and Other PayablesOther payables 190 175 190 175

(a) inteRest Rate RiskDetails of funds exposure to interest rates change are set out in note 20.

Note 16 Interest-bearing LiabilitiesCURRent

UnsecuredBank overdrafts – 778

(a) inteRest Rate RiskDetails of funds exposure to interest rates change are set out in note 20.



Note 17 Provisions 2006 2005 $’000 $’000

CURRentOutstanding claims provision 2,845 2,645 Risk margin 157 – 3,002 2,645

non-CURRentEmployee benefits 78 163

(a) MoVeMent in PRoVisions Outstanding claims provision Risk margin Total $’000 $’000 $’000

Balance at beginning of the year 2,645 – 2,645

Adjustment on adoption of AASB 1023 – 216 216 Movement in outstanding claims provision 200 – 200

Movement in risk margin – (59) (59)

Balance at end of the year 2,845 157 3,002

(B) inteRest Rate RiskDetails of funds exposure to interest rates change are set out in note 20.

Note 18 Other Liabilities 2006 2005 $’000 $’000

CURRentDeferred income 2,594 2,809 Employee benefits 133 151 2,727 2,960

Note 19 Reserves and Retained EarningsAsset revaluation reserve 1,213 609 1,213 609

Movements in reserves

Asset Revaluation ReserveBalance at start of year 609 609 Revaluation 604 – Balance at the end of year 1,213 609

The asset revaluation reserve records increments and decrements on the revaluation of individual parcels of land and buildings.

Movements in retained earnings

Retained Earnings Balance at start of year 25,137 26,277 Adjustment on adoption of AASB 1023 (216) – Net profit / (loss) for the year 2,718 (1,140) Balance at end of year 27,639 25,137


Note 20 Financial InstrumentsRisk ManageMent PoliCies

interest Rate RiskThe Fund’s exposure to interest rate risk, which is the risk that the financial instruments value will fluctuate as a result of changes in market interest rates and the effective weighted average interest rate for each class of financial assets and financial liabilities is set out below:

Fixed interest rate maturing

None Floating Interest 1 year or Over 1 to 2 Over 2 to 5 Interest Rate less years years Bearing Total $ ‘000 $ ‘000 $ ‘000 $ ‘000 $ ‘000 $ ‘000

year ended 2006

financial assetsCash and cash equivalents 11,530 – – – 1 11,531Receivables – – – – 1,070 1,070 Held to maturity investments 2,006 3,026 3,996 5,102 – 14,130 13,536 3,026 3,996 5,102 1,071 26,731

Effective weighted average interest rate 5.1% 6.5% 7.0%

financial liabilities

Overdraft – – – – – – Trade and other payables – – – – 190 190 – – – – 190 190

13,536 3,026 3,996 5,102 881 26,541

Fixed interest rate maturing

None Floating Interest 1 year or Over 1 to 5 More than 5 Interest Rate less years years Bearing Total $ ‘000 $ ‘000 $ ‘000 $ ‘000 $ ‘000 $ ‘000

year ended 2005

financial assetsCash and cash deposits 164 7,688 – – 1,833 9,685 Receivables – – – – 1,135 1,135 Other financial assets – 9,634 4,067 – – 13,701 164 17,322 4,067 – 2,968 24,521

Effective weighted average interest rate 5.1% 6.5% 7.0%

financial liabilities

Overdraft 778 – – – – 778 Trade and other creditors – – – – 175 175 778 – – – 175 953 (614) 17,322 4,067 – 2,793 23,568

fair Values The carrying amounts of financial assets and liabilities approximate to their net fair value.



Note 21 Cash Flow Information 2006 2005 $’000 $’000

Reconciliation of profit / (loss) after income tax to net cash flow from operating activitiesProfit / (Loss) for the year 2,718 (1,140) Depreciation 156 125 Amortisation 130 227 Net gain on sale of property, plant and equipment – 27 Fair value adjustment to investment property (84) –

Change in operating assets:

decrease / (increase) in other receivables 199 (52) decrease / (increase) in interest receivables 121 (52) decrease in other assets 65 619 increase in other payables 15 20 (decrease) / increase in employee provisions (103) 62 decrease / (increase) in provisions for outstanding claims 200 626 (decrease) / increase in deferred income (215) 827 Net cash flow from operating activities 3,202 1,289

Note 22 Key Management Personnel Disclosures(a) key ManageMent PeRsonnel

The following persons were key management personnel of the Fund during the financial year:

Name Position Held Date Appointed Date Resigned

V Reynolds Chair 21/9/05

J Blake Vice Chair 21/9/05

R Glover Director 22/9/04 R Ledger Director 21/9/05

B Dredge Director 21/9/05

D Ellis Director 21/9/05

M Prior Director 25/5/06

J Walton Director 7/12/05

G Campbell CEO 24/4/06

V Wulf President 17/11/05

J Whyte Director 13/2/06

C Haigh Director 17/11/05

F Fontana Director 26/10/05

V Russo Director 21/9/05

A Wilson Director 21/9/05

H Lewocki Director 21/9/05

R Le-Andrews Director 20/7/05

S Tizzone General Manager 20/12/05


Note 22 Key Management Personnel Disclosures (continued)(B) CoMPensationDetails of compensation key management personnel of Fund are set out below:

V Reynolds J Blake R Glover R Ledger B Dredge D Ellis M Prior $ $ $ $ $ $ $

2006

short-term benefitsCash salary and fees 22,916 15,666 9,549 14,999 11,833 11,333 1,750

Other short-term employee benefits – – – – – – –

Post-employment Benefits

Pension and Superannuation 2,100 1,485 2,543 1,387 1,103 2,603 158

other long-term employee benefits

Long service leave – – – – – – – termination Benefits – – – – – – –

total 25,016 17,151 12,092 16,386 12,936 13,936 1,908

G Campbell J Whyte C Haigh V Wulf A Wilson¹ S Tizzone² J Walton Total(continued) $ $ $ $ $ $ $ $

short-term benefitsCash salary and fees 28,306 5,000 1,041 8,336 – 38,640 100,801 270,170 Other short-term employee benefits 2,072 – – – – – 6,691 8,763


Pension and Superannuation 2,333 450 – 321 7,222 5,555 10,391 37,651


Long service leave – – – – – 1,739 3,345 5,084 termination Benefits – – – – – 145,951 – 145,951

total 32,711 5,450 1,041 8,657 7,222 191,885 121,228 467,619

¹ A Wilson was paid final salary sacrifice of $7,222 further to his resignation during the period on 21 September 2005.² S Tizzone was paid an eligible termination payment of $145,951, and unused annual leave and long service leave entitlements

of $21,115 and $67,500 respectively.



A Wilson C Haigh R Glover F Fontana H Lewocki J Whyte $ $ $ $ $ $

2005

short-term benefitsCash salary and fees 5,800 41,486 6,201 20,744 40,580 25,022Other short-term employee benefits – – – – – –


Pension and Superannuation – 3,733 559 1,867 3,639 2,252


Long service leave – – – – – – termination Benefits – – – – – –

total 5,800 45,219 6,760 22,611 44,219 27,274

R Arnold³ R Leandrews V Russo V Wulf S Tizzone Total(continued) $ $ $ $ $ $

short-term benefitsCash salary and fees 17,571 19,338 29,490 73,659 116,551 396,442Other short-term employee benefits – – – – 10,300 10,300


Pension and Superannuation 1,581 1,784 2,655 6,632 36,538 61,240


Long service leave – – – – 3,668 3,668termination Benefits – – – – – –

total 19,152 21,122 32,145 80,291 167,057 471,650

³ R Arnold repaid $4,384 of his honoraria on his retirement on 17 May 2005.


Note 23 ContingenciesContingent liaBilitiesAt 30 June 2006, Railway & Transport Health Fund Limited had no contingent liabilities.

Note 24 CommitmentsCapital commitments

2006 2005 $’000 $’000

Property, plant and equipmentPayable:Within one year 129 – Later than one year but not later than 5 years – – 129 –

lease commitments

Non-cancellable operating leases – future minimum lease paymentsWithin one year 37 18 Later than one year but not later than 5 years – 8 37 26

The Fund leases various premises under non-cancellable operating leases expiring within one year. All leases have annual CPI escalation clauses. The above commitments do not include any turnover rentals which are contingent upon the Fund achieving defined sales levels. Nor do they include commitments for any renewal options on leases. Lease terms usually run for 5 years with a 5 year renewal option.


Note 25 Phiac Solvency RequirementUnder the requirements of the Health Benefits Organisations – Solvency Standard, 2003 the Railway & Transport Health Fund Limited solvency requirement for the year ended 30 June 2006 is $8,649,000 (2005: $8,080,000).

Note 26 Subsequent EventsNo material events subsequent to the reporting date.

Note 27 Explanation of Transition to Australian Equivalents to IFRSAs stated in Note 2, this is the first time that the financial statements of the Fund have been prepared using Australian equivalents to IFRS. The following information summarises the impact of the transition from previous GAAP at the end of the previous financial year:

(a) aasB 1 tRansitional exeMPtionsThe Fund has elected to use the following transitional exemptions allowed by AASB 1 First-Time Adoption of Australian Equivalents to International Financial Reporting Standards:


exemption from requirements to restate financial instrument comparatives under aasB 132 and aasB 139The Fund has elected to apply the exemption available in AASB 1 to restate comparatives for financial instruments. This means that the transition date for financial instruments becomes 1 July 2005 instead of 1 July 2004. Under previous GAAP, non-current investments were previously recognised at their cost, being $9,634,000 and $4,067,000 respectively until 30 June 2005.

(B) note on CoMPaRatiVes UndeR agaaP and those PResented UndeR aifRsAs the Fund has applied the above exemptions, there has been no restatements to the 2005 comparatives.

(C) otheR notes

i) Property plant and equipmentThe Fund offsets revaluation increments and decrements within each class of non-current asset. The Fund is a not for profit organisation. Under Australian equivalents to IFRSs, not for profit organisations can continue to offset revaluation increments and decrements against one another within a class of non current assets.

On review of the Asset Revaluation Reserve, it was noted that the balance of $609,000 at 30 June 2005 in entirely made up of increments to Land and buildings, relating to 46 Burwood Road.

The balance of the asset revaluation surplus was not required to be recalculated on transition to an asset-by-asset basis. As a result there was no increase / decrease to the asset revaluation surplus or to the opening balances of retained earning at 1 July 2004.

ii) impairment of assetsThe Fund previously assessed the amount of impairment of assets by determining the recoverable amount on the basis of undiscounted cash flows. Under Australian equivalents to IFRSs, AASB 116 Impairment of Assets, the Fund was required to determine the recoverable amount as the depreciable replacement cost.

The review of all assets had been undertaken by management and no impairments had been identified. In particular, properties owned by the Fund, and held as Land and Buildings or as Investment property have all had recent independent valuations, which support recoverable amounts greater than the carrying values.

iii) financial assetsThe Fund has financial assets in the form of fixed interest deposits and fixed interest bonds, which are held to maturity. The premium on such bonds was amortised on a straight line basis over the life of the bond. Under Australian equivalents to IFRSs, the Fund’s bonds are classified as held to maturity investments and their value is calculated using the amortised cost method utilising the effective interest rate.

iv) outstanding Claims ProvisionThe Fund assesses the amount of the outstanding claims provision on a statistical model utilising previous claims history. The statistical model used by the Fund is a chain ladder model as prescribed by PHIAC. Under Australian equivalents to IFRSs, AASB 1023 General Insurance Contracts, from 1 July 2005 the Fund is required to show that amount of the outstanding claims provision including a risk margin. The margin is to be based on some statistical level of confidence. The margin of $216,000 was calculated by the funds actuary, assuming a confidence level of 75%. 75% is the standard adopted by the general insurance industry in Australia. This amount was provided as an adjustment to opening reserves at 1 July 2005, and disclosed under the adoption of AASB 1023 in the statement of changes in equity, and Note 19.


Independent Audit Report


COnTenTS Directors’ Report 1Auditors’ Independence Declaration 6Directors’ Declaration 7Income Statement 8Balance Sheet 9Statement of Changes in Equity 10Cash Flow Statement 11Notes to the Financial Statements 12Independent Audit Report 28


R&T Health Fund | Financial Report 2006

health fund

R&T Health Fund


BranchesSydney46 Burwood Road BURWOOD NSW 2134


WOLLOnGOnG200 Crown Street WOLLONGONG 2500


Contact UsTeL 1300 886 123 FAX 1300 887 [email protected] www.rthealthfund.com.au

Documents

rt annual report 2006