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2008 annual report

this year has been...

CONTENTSchairperson’s report 2 ceo’s report 3 highlights 6 meet our management team 8 corporate governance 10 directors’ report 11auditor’s independence declaration 14 50-year member honour roll 19 income statement 20 balance sheet 21 statement of changes in equity 22cash flow statement 22 notes to the financial statements 23 directors’ declaration 32 independent audit report 33

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It has been a year of growth for rt health fund. We’ve grown the number of members in the fund. We’ve grown our geographic reach and become a national fund. We’ve grown the services and facilities we offer to members. And we’ve grown the strength, capability and expertise of our team. But most of all, we’ve grown in our ability to serve you.

chairperson’s report

As it has in the past year, rt will continue to face major challenges in the private health insurance industry in the year ahead. In the past six months we have seen industry consolidation occur at a rate greater than at any time in recent history, and we are subject to the changing regulatory framework set down by a new government. Amidst this environment of uncertainty and change, your board and senior management team remain focused on the task of delivering exceptional value to members; to strengthening the fund through growth; to seeking to continually deliver improvements in services, facilities and processes; and to always adding value to members through every interaction.

The board has continued to demonstrate its commitment to ongoing good governance by working within a best practice framework based on the recommendations of the Australian Stock Exchange, using a set of practices that are appropriate for the size, complexity and operations of the organisation. The ongoing relevance and effectiveness of this framework is regularly reviewed to reflect changing circumstances and improvements to the board’s practices are regularly adopted. Two significant improvements in the board’s operations over the past 12 months have been the development of a new board charter, which has been adopted by all board members, and the re-establishment of a board code of conduct.

Along with all other health funds, rt was required during the year to apply for re-registration following changes to the National Health Act. This process required a significant amount of work by the management team and liaison at the most senior levels of government. I am pleased to report that rt was successful in its re-registration. The fund was also subject to a comprehensive review of operations conducted by the industry regulator, PHIAC. This is part of a program of ongoing and routine reviews conducted within all health funds. When the regulator last met with rt some three years ago, the fund was subject to very serious findings about its operations and management practices. I am delighted to report to you that following this year’s review, the regulator found no area of the business requiring improvement. This outcome represents the culmination of three years of effort to rebuild the management and governance of the fund and it is pleasing to now see rt becoming an industry-leading organisation that represents best practice in its management, governance, operations, policies and procedures.

rt was represented at all of the major private health industry forums throughout the year by various senior managers and board members and has once again achieved a position of high regard and respect within the industry for its significant input into initiatives and changes.

Importantly, rt has also continued to deliver excellent benefits to members and was recently recognised by the Australian Financial Review Smart Investor magazine as being one of the ‘nation’s best-value health funds’.

I would like to thank my fellow directors for their professionalism, commitment and support throughout the year. On behalf of the board I thank the staff for their diligence and passion in achieving this year’s outstanding results.

Finally, I would like to thank our CEO, Glenn Campbell, for his leadership and commitment. Our strong and dedicated senior management team have enabled the fund to grow nationally this year – a significant achievement, especially in an environment of constant change within the industry. Glenn and his team lead the way in ensuring that customer service, quality and honesty remain our highest priorities and that our ‘we are here to help’ pioneering spirit is embedded in all that we do.

rt health fund is an inspiring organisation and I consider it an honour and a privilege as one of its present custodians to assist in guiding its future. The outlook is positive, founded on a strong balance sheet and excellent growth prospects for the coming year, and many years to come.

VICTORIA REYNOLDS Chairperson

During the year in review rt health fund has advanced many of its major strategic initiatives, including introducing enhanced member services (in person, by phone and online), continuing to establish and rebuild significant transport industry partnerships, and achieving industry-leading levels of growth. Beyond this, rt has also played a key role in influencing regulatory outcomes to the benefit of the organisation and our members.

“ ...customer service, quality and honesty remain our highest priorities.”

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ceo’s report

‘GroWInG’ forWArDIt is a well-accepted business maxim that ‘if you are not growing you are going backwards’ and that has never been as true as it is for rt health fund and the private health insurance industry as a whole today. The industry is experiencing phenomenal change. In the past 12 months, the UK-owned BUPA has acquired Australia’s second largest health fund, MBF; Australia’s largest fund, Medibank Private, has increased its share of the market through the acquisition of Australian Health Management Group (AHM); and NIB undertook a public float on the Australian Stock Exchange, a first for an Australian health insurer.

It’s not just the larger funds that are setting the agenda for change though. Smaller insurer Druids Friendly Society health fund was acquired by Victorian-based GMHBA, and Illawarra-based PeopleCare moved away from its restricted membership status. What all this industry activity means for rt health fund is clear: if we don’t continue to grow and perform strongly we may be targeted for acquisition by a larger, more aggressive fund. And there are a number of other reasons why growth is not just desirable, but critical to the future of this organisation.

rt faces a particular challenge among health funds that exacerbates the need for membership growth. Our membership age profile is the second highest in the industry, which translates into a higher volume and higher cost of claims as older members typically have more hospital stays, at a higher cost than younger members. It is crucial that we continue to recruit younger members and move toward a membership age profile that is closer to the rest of the industry.

In addition, the cost and resources required to comply with corporations law, contemporary corporate governance practices and private health insurance legislation mean it is increasingly difficult for smaller funds to continue to meet the burden. As we grow, we are able to achieve economies of scale and become more efficient, which keeps the cost of operating the fund to an absolute minimum. As a not-for-profit fund owned by our members, our primary financial objective is to run the fund as efficiently as possible, ensuring that we maintain the highest possible benefits for members at the lowest possible price. Growth enables us to continue to achieve this outcome.

IncreAsInG our potentIAl to GroWWe have seen strong and sustainable growth in our membership over the past year, a result of the hard work and commitment of our very capable new sales and marketing team. With a net membership growth of 11.3 per cent we have significantly outstripped the industry average of 4.2 per cent, and gone from a position of long-term decline in membership to become one of the fastest-growing funds in the country. We have also grown our geographic reach and now have members in every Australian state and territory. We’ve opened a new member service centre in Railway Square in the centre of Sydney to provide services to our large concentration of transport industry members located there; launched our new member service centre in Newcastle; and opened a small office in Victoria to service our growing client base in that state.

We’ve continued to grow our relationships and involvement in community events with key transport industry groups through our alliance with Encompass Credit Union and the NSW Railways Institute and participation in ongoing activities with the State Transit Bus Institute (STBI) and State Transit Authority (STA) who we were proud to support as they celebrated 75 years of Sydney Buses last November. We’re working more closely with Queensland Rail (QR) and the Queensland Railways Institute (QRI) sharing in many of their special events and family days, including the 50th anniversary of the Redbank workshops just a couple of months ago. In addition, we’ve entered into new partnerships with the RTBU (Rail, Tram and Bus Union) nationally and the ETU (Electrical Trades Union) in Victoria. We’ve also begun to broaden our focus beyond our traditional markets to the wider ‘transport and electricity’ sector, which is the full mandate of our membership eligibility.

Our new partnership with industry comparator iSelect has proven a stunning success, with our products regularly rating among the top recommendations for iSelect shoppers. This is a partnership that has resulted in many new members joining the fund and in rt confidently standing among the largest funds in the country, often as the better alternative.

Through increased marketing activity and involvement in industry events and activities we have continued to grow awareness and recognition of the rt health fund name and brand, which is another step toward ensuring that transport and electricity industry employees around the country know and support their industry health fund.

ImproveD servIces AnD eAsIer AccessOur capability in service delivery has also continued to grow, both in response to member feedback and requests, and as part of taking a proactive approach to growing and improving the services we provide to members. We’ve increased the number of member care staff available by phone, in person and online to assist members. And we are now turning the majority of claims around within two days from receipt to payment.

Just some of the other new service initiatives we have implemented this year include: online cover checking for hospitals, allowing them to access the information they need for admissions faster; the ability for doctors to lodge claims directly with the fund electronically, reducing the cost and administrative burden; a new online member service centre through which members can access and make changes to their health cover, view correspondence, access and download documents such as tax statements, and elect to receive correspondence from us via email rather than by post, which increases the speed with which we can communicate while reducing the cost; and a new online contribution calculator making it easy for members and prospective members to make cost comparisons on our different covers. And we’re not done yet … we’ve just launched a new payment option, Post billpay, which makes it possible for members who choose to pay on account notice to make their payments at any post office in Australia. We’re also working on a new online joining process that will enable people to complete their application form online. These new online services are intended to offer members more

two years ago I presented a strategic plan on behalf of the management of the organisation that was focused on ‘laying the foundations’ for building a strong business into the future. the second stage of that plan was about leveraging these foundations for significant growth – not only in terms of new memberships, but growth in the services and facilities we provide for members, and in the capability and skills of the staff and management team. It is a privilege to report on behalf of my team that we have achieved great success and amazing growth in the past 12 months.

“ We have gone from a position of long-term decline in membership to become one of the fastest-growing funds in the country.”

The good news is spreading. rt has grown 11.3% this year

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choice and greater convenience in how they interact with us, and are designed to complement our member care team, not to replace it. By increasing the number of member care staff available, we can spend as much time with our members as they need.

more thAn A just A heAlth funD, We’re your heAlth pArtnerThe cost of doctors’ fees, medical technology and hospital stays are on an accelerating and never-ending upward spiral. While the rest of the healthcare industry actually derives a profit from people being unwell and needing care, our not-for-profit status means that the interests of rt health fund are perfectly aligned with those of our members. It’s in our best interests to help our members to stay healthier, because the healthier we can help our members to be, the less expensive it is to operate the fund, and the lower members’ contributions can stay. So we have a vested interest in helping our members to be well, get well and stay well.

As we undertook to do in last year’s annual report, we have recruited a health services manager to develop and implement a number of programs designed to assist members as they navigate their way through the healthcare system, as well as to help members improve their overall health and avoid preventable health issues through a number of preventative programs and communications.

We’ve recently launched our hospital substitution program, which is designed to help members receive professional nursing care in their own homes rather than having to go to hospital, provided that their doctor, the hospital and the member all agree that is the best treatment option. We’ve also launched a number of chronic disease management programs that are aimed at helping people manage and improve their health through assistance in making lifestyle changes. You may have read some information about different aspects of health management on our website and in recent newsletters, particularly our ‘arts and hearts’ issue and the recent ‘bloke’s issue’ focusing on men’s health. Health management is an important part of our future goals and is where we see the future of the industry heading.

leADInG InDustry chAnGe to BenefIt our memBersWe have continued to grow our influence in the industry and to take a strong industry leadership position within the HIRMAA group (the representative body for restricted membership health funds). This is important as it affords rt the opportunity to contribute to the discussion and direction of the industry at the highest levels of government. During the year rt has made submissions to the ACCC on industry consolidation, to the industry regulator (PHIAC) on prudential standards, and has continued to consult and negotiate with government on legislative and industry changes.

more optIons, Better quAlIty cAreWe understand how important it is that our members have access to high quality hospital and day hospital facilities through their private hospital cover. We have continued to participate with the Australian Health Services Alliance (AHSA) together with a number of other funds, to ensure our members receive high quality care, at an agreed contract rate, in a wide choice of hospitals. As a result of our involvement with the AHSA, we are able to offer our members access to 476 hospitals around Australia, all of which have met acceptable quality standards, representing 85 per cent of all private hospitals and day facilities in the country. This level of access is greater than that available to members of any of the four largest funds in Australia.

GovernAnce AnD mAnAGement The last 12 months has seen the culmination of much of the hard work undertaken to improve the governance and management of the fund, the details of which are reported in this year’s chairperson’s report.

our commItment to helpInG the communItyThe rt Families Foundation is a completely separate entity from the health fund which is run by staff on a voluntary basis and uses no health fund monies or resources. It exists to provide assistance to families in our industries – whether they are members of the fund or not – who need a helping hand in times of hardship. Over the past 12 months it has made four grants to families, ranging from assistance in purchasing equipment to help make life a little more comfortable for people living with chronic health problems, to providing funding for school supplies and equipment for children in families where mum or dad has become ill and unable to work.

thAnks for BeInG WIth usOn behalf of the rt team I would like to thank each one of our members for your ongoing membership of the fund. As a not-for-profit mutual fund, you are quite literally our only reason for being and our goal is to continue to be of service to you for many years to come. I would especially like to acknowledge the many members of the fund with more than 50 years of membership. On behalf of the current and all the previous management of the fund, I thank you. I would also like to thank my amazing team, many of whom you will meet later in this report, for their commitment, professionalism and relentless enthusiasm for the work we do. Finally, I would like to thank the board for their guidance and support, and our industry partners for their continued association and friendship.

GLENN CAMPBELL Chief Executive Officer

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The good news is spreading. rt has grown 11.3% this year

Our marketing strategies of the past two years are starting to pay off – we’re attracting a new generation

of younger members and keeping them happy

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FaNTaSTiC ValuE FOr MONEyrt’s benefits as a percentage of contributions are the best in the industry

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GiViNG MOrE baCk TO Our MEMbErSbenefits paid to members have grown significantly in the past year

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RESTRICTED FUNDSALL FUNDSRT HEALTH FUND

SaTiSFiEd MEMbErSrt’s member retention far outstrips the industry average

RESTRICTED FUNDSALL FUNDSRT HEALTH FUND

GrEaT HOSPiTal bENEFiTSrt’s hospital benefits are, on average, the best in the industry

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UPDATING EMAIL ADDRESS (24%)CHANGING CONTACT DETAILS (25%)

CHANGING ADDRESS (3%)UPDATING ADDRESS (5%)

UPDATING PHONE NUMBER (40%)

CHANGING CREDIT ACCOUNT DETAILS (2%)CHANGING DEBIT ACCOUNT DETAILS (1%)

MEMBERS ARE USING OUR ONLINE SERVICES FOR:

ONLINE PATIENT VERIFICATION (11%)

MEDICARE NUMBER VERIFICATION (70%)

INPATIENT MEDICAL CLAIM (7%)

HOSPITAL ELIGIBILITY CHECKING (12%)

PROVIDERS ARE USING OUR ONLINE SERVICES FOR:

dental and optical claims continue to be the largest ancillary benefits paid

new online servicesmembers and providers alike are

benefitting from the convenience of new, easy access, online facilities

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HEALTHCARE APPLIANCES (1%) $45,926PODIATRY AND CHIROPODY (3%) $239,704ARTIFICIAL AIDS (3%) $246,221PHARMACEUTICAL (3%) $278,466NATURAL THERAPIES (6%) $505,831PHYSIOTHERAPY (7%) $580,779CHIROPRACTIC (9%) $734,355OPTICAL (17%) $1,464,410DENTAL (51%) $4,292,417

ANCILLARY CLAIMS PAID BY TYPE:

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GrEaT aNCillary bENEFiTSrt members are getting more value from their ancillary cover than ever before

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NEVEr MOrE FiNaNCially SOuNdrt has the highest solvency reserves in the industry

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MANAGEMENT EXPENSESCLAIMS

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STrONG FiNaNCial MaNaGEMENTrt’s revenue growth and financial performance are sound

top 10 hospItAl clAIms 2007/8rt provides great peace of mind in a time of soaring medical costs.

# Gender Age Medical Condition Cost Benefit Paid ($)

1 M 81 Cardiac – Bypass 86,992.74 83,548.742 M 44 Endoscopy Retrograde – Cholangiopancreatography 70,363.09 70,363.093 M 70 Cranionomy 70,111.00 70,111.004 F 58 Cardiac – Defibrillator 69,248.00 69,248.005 F 75 Cardiac – Defibrillator 69,007.48 69,007.486 F 70 Cardiac – Defibrillator 68,217.77 68,217.777 M 72 Cardiac – Defibrillator 68,086.12 68,086.128 M 85 Neurosurgical – Intracerebral Haematoma 67,664.58 67,664.589 M 57 Cardiac – Defibrillator 66,518.00 66,517.0010 M 71 Spinal – Vetebral 64,228.65 64,228.65

dental and optical claims continue to be the largest ancillary benefits paid

We’d like to introduce you to some of the very capable men and women who contribute so much to improving and growing the capabilities of your health fund every day.

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meet our management team

MaTTHEw MOOrEoperations managerMatthew has lived and breathed private health insurance for more than 20 years. He spent his first decade in the industry with Medibank Private in a range of analytical, marketing and planning roles before ultimately becoming head of strategy. He then made the move to MBF where, as risk manager, he established and implemented fraud and risk analysis for the fund. Matthew went on to consult for various health industry organisations before accepting the position of CEO of an innovative organisation that provided outsourced ‘back office’ and IT services to small and medium-sized health funds both in Australia and overseas. He returned to consulting before joining the rt team as our operations manager. Matthew has a degree in administration and information systems and brings a lifetime of experience in all aspects of health fund management to his role. His vision is to create a sustainable future for rt by constantly growing and improving the fund’s operational processes and services to members.

SiMONE TrEGEaGlEsales and marketing managerStarting out in customer service management in the general insurance industry, Simone moved to Medibank Private where she was responsible for marketing, promotions and member communications in more than 300 branches across the country. She stepped out of the insurance industry to gain valuable insights from other sectors, working for a not-for-profit organisation and later lecturing in sales and marketing. From there, Simone became a communications strategist

working on the agency side of brand development before making the move back into health insurance as brand and communications manager with Grand United and GU Corporate. She met rt health fund while working in a brand development consultancy and couldn’t pass up the opportunity to take on the challenge of rebranding the fund and working with the team responsible for growing awareness and membership. Simone has degrees in communications and marketing. Her goal is to help the fund do justice to the vision of the men who first created it and to ensure that it is valued by members for another 120 years … and beyond.

TONy dElaHayEmember transactions manager Tony and his team are responsible for all rt member transactions: every claim, every payment received and benefit paid, and every change members make to their cover. Over the past couple of years the team has worked hard to introduce improvements that grow rt’s ability to provide services to members faster, more efficiently and in ways that suit different people by providing a range of options for how members can interact with the fund. Tony has a degree in business and worked with Suncorp and Shell Chemicals in the UK before joining MBF where he managed a team of 70 staff. He made the switch to rt after six years with MBF, and while he brings the experience gained in one of the country’s biggest health funds, he doesn’t bring the same ‘big business’ approach to the way he works with his team or our members. In fact, one of the things he loves most about rt is being part of a small, supportive team that really gets to know and care about members, and to be able

to introduce improvements in services that have a genuine impact by making members lives that little bit easier.

lEaH THOMPSONbusiness services managerThere’s not much about the operations of a health fund that Leah hasn’t been involved in over the past decade. She began her career with a restricted membership fund in Melbourne as a claims assessor and quickly worked her way into a supervisory role. Looking for new challenges, she moved to Australian Unity, where she held a variety of positions over the next four-and-a-half years, including special project officer, analysis coordinator and customer relations manager. Keen to move back into a more member-focused environment after a move to Sydney, Leah joined the rt team as our transactions team leader where she took on the challenge of streamlining systems to improve claims turnaround times. She then transitioned into the role of member services manager, where she worked tirelessly to improve member services procedures, and now as our business support manager Leah is focused on analysing and improving the efficiencies of the behind-the-scenes systems that keep rt up and running on a daily basis. Leah’s vision is to ensure that the business works smoothly every day, making improvements as required to cater for changing member needs as the fund grows.

COriNNE MCCONNEllhealth services managerCorinne joined rt in this newly-created position at the beginning of 2008 with the goal of establishing

1 Matthew Moore 2 Simone Tregeagle 3 Tony Delahaye 4 Leah Thompson 5 Corinne McConnell 6 Jorge Ferreira 7 Dwight Wood Patricia Kennedy (pictured on page 15) Samantha Ames (pictured on page 16)

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a range of services and facilities for members that assist them to take care of their health through preventative and remedial programs, and to find their way through the health industry maze when they are undergoing long or complex treatments. It’s the perfect role for someone with a passion for helping people take control of their health and fulfil their potential for leading healthy, balanced lives. Corinne has a degree in human movement and exercise science, and before joining the rt team created and implemented chronic disease screening and intervention programs for the WA Water Corporation. Corinne is thrilled to be working for a health fund that is not-for-profit as she believes this allows the fund to focus on the health, wellbeing and happiness of members and staff alike without being compromised by pressures to increase profits for shareholders. She looks forward to helping rt forge new paths in health insurance, implementing new initiatives that can grow as the fund grows, continually increasing benefits to members.

JOrGE FErrEirainternal audit, fraud and business analystJorge is responsible for reviewing the accuracy and effectiveness of rt’s systems of internal control. He appraises the relevance, reliability and integrity of management, financial and operating data, and analyses the efficiency with which resources are employed within the organisation. Jorge reports audit findings and recommendations to management and to the board’s Audit and Risk Committee. He is currently in the process of analysing our fraud prevention and protection policies and procedures. Jorge has degrees in accounting and economics, and before joining

the rt team worked with Ernst and Young, Westpac and the South Eastern Sydney and Illawarra Health Service. Jorge believes that the benefits of working with rt are clear – as a small team it offers everyone the chance to really make a difference and from his point of view, the better the fund is run, the more benefits it can offer to members.

dwiGHT wOOdtechnology services managerDwight describes himself as ‘the rt systems guy’. He makes sure that all the computer and telecommunications systems work to their full potential, 24 hours a day. Under Dwight’s leadership, rt has developed a world-class disaster recovery system – all information across the fund is updated every ten minutes, 24 hours a day, seven days a week and replicated in a disaster recovery system which is located offsite. This level of protection is virtually unprecedented (in any industry) and translates into uninterrupted services for members, no matter what happens behind the scenes. Dwight has a diploma in network engineering, certificate in advanced applications (HTML scripting), certificate III in network administration, certificate IV in network engineering and an advanced diploma in systems engineering. Before joining the rt team he worked as a systems engineer with Alcatel and then in an IT consultancy, ultimately moving into the health insurance industry. Dwight’s goal is to ensure that the IT systems we have in place today will take rt into the future, enabling all members to enjoy the benefits of a robust, tightly controlled and effective information system.

PaTriCia kENNEdymember services managerPatricia has nine years’ experience in the health insurance industry. She spent eight years at Grand United and GU Corporate where she worked her way up to become customer service manager for the corporate health division. After a stint as a member care centre team leader with MBF, it became clear to Trish that she wanted to work with a truly member-focused health fund, so she joined the team at rt as our member services manager. Trish has certificates in business management and contact centre management. Her goal is for her team to ‘knock our members socks off’ by delivering exceptional customer service every time they call, send an email or walk into one of our member care centres.

SaMaNTHa aMESmember transactions team leaderHow many health fund claims supervisors would describe their employer as a ‘fund with a very big heart’? That’s exactly how transactions team leader Samantha Ames has come to see rt after her first year with the fund. Sam has seven years’ experience in health insurance, gaining invaluable knowledge and expertise in the customer service and transactions departments of various organisations, and a certificate IV in frontline management. And, while they operate ‘behind the scenes’, Sam and her team are responsible for so many of the day-to-day interactions members have with the fund through claims and contribution payments. Her goal is to help her team constantly improve the service they provide to members, while making sure the fund keeps true to its ‘heart and soul’ as it grows into the future.

role of the BoArDThe board is responsible for the overall corporate governance of the fund, including determining its strategic direction and financial wellbeing, and guiding and monitoring its business and affairs 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:•contributingtothedevelopmentof,approving,andmonitoringthe

implementation of strategy•monitoringthefinancialstateandperformanceofthefund•approvingthefund’sfinancialreporting,includingannualreports•delegatingclearresponsibilityandauthoritytothecommitteesoftheboardand

the CEO, and monitoring and regularly reviewing the performance of those who hold delegated powers

•ensuringthatthefundhaseffectiveprocessesandsystemsinplacetoenablethe board to monitor its performance and capabilities

•promotingandmaintainingorganisationalvaluesandaculturewheretransparent and timely information is shared between management and the board

•overseeingthefund’scorporategovernanceframeworkandensuringeffectivecommunication with members and stakeholders

•settingtheoveralldirection,financialobjectivesandoperationalgoals for the fund

•reviewingandapprovingtheannualbudgetandbusinessplan•ensuringeffectivesystemsofinternalcontrolandinternalaudit•identifyingandmitigatinganyrisksthatmayharmthefund•reviewingtheperformanceofandmentoringtheCEO

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.

BoArD chArter The board has continued in 2007/08 to undertake key activities which will ensure all of its policies, practices and procedures reflect good governance and current corporate practice. In line with current best practice, the board has undertaken the significant exercise of developing a new board charter that outlines the fund’s approach to such issues as:•corporateculture•riskmanagement•audit•policesandprocedures•ethicalstandardsandvalues•boardagenda•meetingprocedures•directors’inductionandtraining•boardanddirectors’evaluationandremuneration•chiefexecutiveofficer’sevaluationandremuneration

The directors recognise that adherence to the new charter is fundamental in demonstrating that they are accountable to members and stakeholders, and that they are appropriately overseeing the future direction of the fund and managing its business risks.

The board has further undertaken a major compliance review to ensure that rt has documented its compliance with all relevant legislation and regulations, and the processes that are in place to ensure ongoing compliance.

chAnGes to constItutIonWith the introduction of new legislation on 1 April 2007 and the need for rt to undertake re-registration, a significant review of the constitution has been undertaken. A revised constitution will be presented to members for approval at the 2008 annual general meeting. The changes to the constitution will ensure that rt complies with the revised legislative requirements.

conflIcts of InterestDirectors are required to disclose, on an ongoing basis, any interest that could potentially conflict with those of the fund 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. New processes have also been implemented this year to ensure we identify any breaches of compliance, regulations or code of conduct by board members.

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 riSkThe Audit and Risk Committee is responsible for:•facilitatingtheindependenceoftheexternalauditprocessandaddressing

issues arising from the external audit process•ensuringthefundmeetsitsobligationstoregulatoryagencies•directingtheinternalauditfunction,ensuringmaximumvaluetothefund•ensuringthequalityandaccuracyofpublishedfinancialreportssothey

present a true and fair view of the fund’s financial position and comply with relevant statutory and regulatory requirements

•ensuringthefundadopts,maintainsandappliesappropriateaccounting and business policies and procedures

•ensuringthefundmaintainseffectiveinternalcontrolandriskmanagementsystems in order to safeguard its financial, physical and intellectual resources

In line with the accepted good practice of rotating long-serving external auditors, the fund’s current auditors, BDO, will resign at the annual general meeting. An evaluation of alternative auditors with expertise in private health insurance has been undertaken and new auditors are to be put to members at the 2008 annual general meeting.

rEMuNEraTiON aNd NOMiNaTiONSThe Remuneration and Nominations Committee is responsible for:•assistingtheboardtoachieveitsobjectivesofensuringthatrthasaboard

of effective composition, size and commitment to adequately discharge its responsibilities and duties

•establishingpoliciesandproceduresfortheannualperformanceevaluationof the board, each director and management, and recommending performance and salary reviews for the CEO

•reviewingandplanningprofessionaldevelopmentandsuccessionwith the board and senior management

•annualeducationprogramsforboardmembers

BoArD performAnceA performance evaluation process has been established for the board, individual directors and key executives. A comprehensive board performance appraisal was again conducted by independent external consultant Jane Walton, of the Walton Group, after the end of the last reporting period. This focused on board and individual director effectiveness and included a top-to-bottom review of board reporting and processes. As a result of the review a number of recommendations were made to ensure that board performance continued to build on capability and improvement. One of the major recommendations was that directors undertake formal training through the Australian Institute of Company Directors (AICD) and Chartered Secretaries Australia (CSA). All directors have attended training during the year and participated in PHIAC (Private Health Insurance Administration Council) and HIRMAA (Health Insurance Restricted Membership Association of Australia) director education forums. A further review of the board will take place in late September 2008.

corporate governance

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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 First Appointed Date Re-elected

V Reynolds Chair 21/09/2005 R Ledger Vice Chair * 21/09/2005 24/10/2007R Glover Director 22/09/2004 22/11/2006J Blake Director ** 21/09/2005 B Dredge Director 21/09/2005 24/10/2007D Ellis Director 21/09/2005 M Prior Director 25/05/2006 R Scheuber Director 24/10/2007

* Appointed Vice Chair 21 November 2007. ** Concluded term as Vice Chair 21 November 2007.

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.

results Year 2008 Year 2007

The operating profit amounted to $1,427,000 $275,000

revIeW of operAtIonsThe financial year ending 30 June 2008 resulted in a profit for the Fund of $1,427,000.

The Fund has continued to pay 100% for accommodation, theatre fee and approved pharmaceutical items used. Hospital benefits paid went from $27,435,000 to $29,024,000, an increase of benefits by $1,589,000 or 5.8%.

Ancillary claims have increased from $7,651,000 to $8,417,000 an increase of $766,000 or 10%.

A total of $719,000 was paid to the State Government during the year for ambulance levy.

memBershIpThe Fund’s hospital membership has increased from 15,390 to 16,728 an increase of 1,338 or 8.7%. Ancillary membership has increased from 10,371 to 11,820 an increase of 1,449 or 14.0%. Total number of persons covered in 2008 were 37,834 an increase of 2,911 or 8.3% from 2007.

memBershIp stAtIstIcs

2008 2007 Gain / (Loss)

NSW: Hospital 11,342 10,675 667 Ancillary 7,198 6,379 819

QLD: Hospital 5,386 4,715 671 Ancillary 4,622 3,992 630

fInAncesTotal income for the year was $45,655,000 (an increase of $3,491,000 or 8.3% from 2007) including $1,977,000 from invested funds. Expenditure for the year totalled $44,228,000 resulting in a net profit of $1,427,000.

Management expenses for the year were $6,169,000 (net of Ambulance Levy) or 14.1% 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 $29,383,000 to $30,810,000.

the Directors present their report together with the financial statements of the railway & transport health fund limited for the year ended 30 june 2008 and the Auditors report thereon.

directors’ report

1 Victoria Reynolds 2 Robert Ledger 3 Michael Prior 4 Bob Scheuber AM 5 Barry Dredge 6 Judith Blake 7 Dennis Ellis 8 Robert Glover

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quAlIfIcAtIons of the current BoArD of DIrectors As At 30 june 2008ViCTOria rEyNOldSChairpersondip Hr Mgt, GaiCd, MaHri, MwObChair, remuneration and Nominations CommitteeSince joining the rt board in 2005, Victoria Reynolds has worked tirelessly to develop and implement initiatives that continue to improve the governance of the fund. As chair of the board’s Remuneration and Nominations Committee she developed the ‘fit and proper’ process for board member selection. She has skillfully guided the team in the development of a new board charter and a new charter for the Remuneration and Nominations Committee. She was also involved in the redevelopment of rt’s constitution and has developed an induction program for new board members.

Victoria’s objectives are to ensure that rt continues to deliver the best outcomes for members, while continually improving its services. Her goal is to lead the board in strengthening its corporate governance and building on the fund’s proud history to ensure that it is recognised as a leader among private health funds.

rObErT lEdGErdeputy Chairpersonb Elec, Grad dip Eng Sys, GaiCdaudit and risk CommitteeRobert Ledger began his career as an electrical fitter with the NSW Government Railways in 1965. Following 40 years’ experience in engineering and engineering management, Robert retired in 2006 as the fleet engineer in the passenger fleet maintenance section of State Rail.

Robert has been a member of rt health fund since 1965 and a member of the board since 2005. He is a member of the board’s Audit and Risk Committee and was instrumental in redrafting the constitution in 2007, and has played a key role in the current review of the constitution and board charter.

Robert’s vision for rt is to see it become the health fund of choice for all transport and electricity industry employees, and to continue to expand to become the premier industry health fund in Australia. Robert’s expectation is for rt to maintain its high standard of corporate governance while continuing to serve the needs of its members.

MiCHaEl PriOrM Com, Grad dip applied Finance (Sia), CPa, FTia, FiNSia, MaiCdChair, audit and risk Committee Michael Prior was appointed to the board as an independent director in 2006 and is the current chair of the Audit and Risk Committee. Michael has drawn on his wealth of risk and financial management experience within the financial services sector to ensure the fund’s corporate governance and risk management frameworks allow it to mange its business risks effectively.

Michael has over 30 years’ experience within the financial services industry and has held senior executive positions including two years as chief financial officer at CMC Markets Asia Pacific Pty Ltd, two years as general manager operational risk and compliance with the Commonwealth Bank, and 23 years as a senior finance executive with Westpac. He was self-employed as a risk management consultant for four years, providing consulting services to major Australian companies and was a project director for two years with Accenture Singapore.

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

bOb SCHEubEr aMFCPa, FaiM, MaiCd, b Ec, b busBefore retiring in mid-2007, Bob held the position of chief executive officer with Queensland Rail for six years. Since then, he has gone on to establish his own consulting business and to serve as a director on two other boards. In January 2008, he was awarded a Member of the Order of Australia (AM) for his ‘service to the rail sector in Queensland, particularly through contributions to regulatory and operational reforms’.

Bob holds degrees in business from the now Central Queensland University and economics from the University of Queensland. He is a FCPA and is a Fellow of the Australian Institute of Management. He has been a member of rt health fund since it established operations in Queensland in 1991.

Bob’s objective is to contribute his skills and experience in the rail industry and as a senior executive manager to help the fund grow through delivering products and services that help members manage their health.

barry drEdGE MaiCdremuneration and Nominations CommitteeBarry Dredge began his career with Queensland Rail in 1964 and retired from his position as maintenance planner in Redbank in 2005. He became a member of rt health fund in 1992, shortly after it began operating in Queensland. He has been a member of the board since 2005 and is a member of the board’s Remuneration and Nominations Committee.

Barry has been involved with amendments to the fund’s constitution, the ongoing review of the board charter, and the development of ‘fit and proper’ policies and procedures, all of which contribute to ensuring that the operations, management and governance of the fund represent best practice in the industry. Barry’s goal is to ensure that rt continues to grow, delivering value to members through excellent products and generous rebates, while maintaining competitive contributions.

JudiTH blakEJP, MaiCdaudit and risk CommitteeJudith Blake is currently a passenger information officer with the NSW State Transit Authority, where she has been employed since 1994. She has been an rt health fund member since 1996 and a board member since 2005. Judith is a member of the board’s Audit and Risk Committee.

As a member of the Audit and Risk Committee Judith has contributed to the introduction of procedures to ensure compliance with the requirements of the Private Health Industry Administration Council (PHIAC) as well as disaster recovery procedures for the fund. She has also been involved with the continued development and implementation of strong corporate governance policies. Judith’s vision for rt is to see it continue to grow, becoming the premier industry health fund in Australia, while maintaining compliance with the relevant health and government regulations and remaining at the forefront of the industry.

dENNiS ElliSMaiCdremuneration and Nominations CommitteeDennis Ellis has worked with Queensland Rail for 31 years, currently in the position of pollution operator. Throughout his career Dennis has been active in the transport industry and was senior vice president of the RTBU. Dennis has been with rt health fund since 1997 and a member of the board since 2005. He is a member of the board’s Remuneration and Nominations Committee.

Dennis has played an active role in the revision of the organisation’s constitution and has also been involved in the development of the ‘fit and proper’ policies and procedures. He has contributed to the development of the board charter and other corporate governance improvements. In 2007, Dennis was integral in brokering a major business initiative with the RTBU, leading to the introduction of the RTBU health plan nationally.

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

rObErT GlOVErMaiCdaudit and risk CommitteeRobert Glover worked with State Rail for 30 years, starting as fitter/machinist and progressing through the ranks to become a production unit manager with the State Rail Authority.

Robert has been a member of rt health fund since 1976, including ten years as a workshop representative for the fund, and has been a member of the board since 2004. He is a member of the board’s Audit and Risk Committee. He has been involved in a number of projects dedicated to pursuing further improvements in the fund’s governance and operations, including the review of the fund’s constitution.

Robert’s objective is to see rt continue to develop innovative and value-filled benefits that not only help members to stay well, but also rewards them for their years of membership.

chIef executIve offIcerGlENN CaMPbEllb bus, Mba, aSa, GaiCdGlenn is a highly qualified and experienced chief executive officer who brings more than 25 years’ experience in the financial services, health, defence, construction and transport sectors. Glenn has a degree in accounting and an MBA from the Macquarie Graduate School of Management, and is a member of the Australian Society of CPAs and the Australian Institute of Company Directors. With a range of management and executive positions under his belt, including CEO and director of Hopewell Hospice Services; national transactions manager and state senior manager with MBF; general manager of business services with Mayne Nickless; and project management roles with British Aerospace, Glenn’s experience in business development, corporate governance and strategy is second to none.

His vision for rt is to continue to drive the growth of the fund into the future, while protecting the organisation’s valuable history and legacy and without compromising on the quality of benefits and services provided to members. His goal is to guide rt to the position of premier industry health fund in Australia by establishing a solid foundation for sustainability and future growth.

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compAny secretAryM MaCFarlaNE b Com, CaExperience and expertise•CurrentlytheFinancialControllerandSecretaryoftheFund•Twentyyearscommercialaccountingexperience,thelasteightInPrivate

Hospital Health Care

Special responsibilities•CompanySecretaryoftheBoard•SecretaryoftheAuditandRiskCommittee•SecretaryoftheRemunerationandNominationsCommittee

S SaFFO b Com Ca aCiS Experience and expertise•FinanceManagercurrentlyonmaternityleave•SeniorAuditoratBDOforthreeyears

Special responsibilities•CompanySecretaryoftheBoard•SecretaryoftheAuditandRiskCommittee•SecretaryoftheRemunerationandNominationsCommittee

BoArD meetInGsDuring the year a total of 10 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 employment responsibilities.

No. Eligible to Attend No. Attended

V Reynolds Chair 10 10R Ledger Director/Vice Chair 10 10J Blake Vice Chair/Director 10 9R Glover Director 10 10B Dredge Director 10 9D Ellis Director 10 9M Prior Director 10 9R Scheuber Director * 7 7G Campbell CEO 10 9S Saffo Company Secretary 6 6M Macfarlane Company Secretary 2 2

* Elected 24 October 2007.

During the year a total of 2 Remuneration and Nominations Committee meetings was convened. The number of meetings attended by each Director is listed below.

No. Eligible to Attend No. Attended

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

During the year a total of 4 Audit & 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 employment responsibilities.

No. Eligible to Attend No. Attended

M Prior Chair 4 4J Blake Director 4 3R Ledger Director 4 3R Glover Director 4 4S Saffo Company Secretary 2 2M Macfarlane Company Secretary 1 1

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 20 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 Company 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 Company: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 company 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 included on page 14.

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

R LEDGER Vice Chair

Dated at Sydney 20th day of August, 2008

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auditor’s independence declaration

“ In some ways, we’re a little old-fashioned. We still like our members to speak to a real person, not to a machine, when they call us. And we like to give our staff all the time they need to help. After all, that’s what we’re here to do – to help.”

Patricia Kennedy, member services manager

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“ my team and I spend our days dealing with pieces of paper, but we never lose sight of the fact that every claim that comes across our desk is important to the member who made it. our goal is to get the money back into our members’ pockets as fast as we can.”

Samantha Ames, member transactions team leader

“ We’re part of the team that’s out there spreading the word about rt heath fund. And the biggest complaint we get from people is ‘why didn’t I know about you sooner?’ We’re working on changing that.”

from left, Rebecca Delahaye and Karen Kelly, relationship managers

50-year member honour rollFew organisations today would have the honour of acknowledging so many people who have contributed for so long. We celebrate the contribution that each one of our long-standing members has made to rt health fund. The role that each and every one of you has played in helping this organisation to grow and continue far beyond what its forefathers surely could have ever imagined is invaluable. Our heartfelt thanks to those of you who in 2008 celebrate an extraordinary 50 years of membership.

Alan and Rosemary Sinclair Hislop

Alexander and Marie Dougall

Alfred and Heather Erickson

Anne Lynch

Anthony and Maureen Boland

Arthur Small

Barbara Ann Angel

Barrie and Elsie Kingsford

Barry and Rae Clarke

Barry and Elaine Johnson

Barry and Adele Smith

Barry and Marilyn Turton

Brian and Valma Bush

Brian and Joan McMahon

Bruce Meller

Catherine Noud

Clarice Kable

Cornelia Noort

Daisy Doyle

Desmond and Rhonda Smith

Doreen Hogden

Douglas and Gwendolene Hope

Douglas and Elaine Keyte

Douglas and Arlette Sole

Dulcie and Lawrence Lill

Duncan and Cynthia McCowan

Dusan and Phyllis Vujkovic

Edward and Helen Ritchie

Eileen Davis

Elaine Wigger

Elizabeth McPhee

Elma Woolfe

Eric Knox

Eric Rook

Evelyn Northcott

Francesco and Silvia Mercia

Francis and Beatrice Doughty

Gary Marsh

Gary and Barbara Stevens

Giuseppe and Ivana Delcarlo

Giuseppe and Janis Palamara

Gordon and Margaret Halls

Gregory Grieve

Harry Austin

Hedvika Porvaznik

Herbert Simpson

Ian Campbell

Ian and Melva Hay

Ian and Jill McLellan

Irena Gregier

James and Evelyn Cooper

James Daryl (deceased) and Margaret Richardson

Jean Macpherson

Jill O’Keefe

John Donoghue

John and Ivy Ference

John and Betty Garrett

John and Josephine Lee

John and Dell Mehaffy

John Mitchell

John and Joan Thomas

John and Lynette Weston

John and Kathleen Wright

Joseph and Kathleen Williams

Joy Armstrong

Joyce Absolom

June Tilden

Kay Batger

Keith and Noeline Wheatley

Kelvin and Judith Hyde

Kenneth and Joan Compagnoni

Kerrie and Margaret Le Cerf

Kevin David and Beverley Ann Tracey

Kevin and Valda Rossington

Lawrence Kay

Lyall Burtenshaw and Judith Edwards

Margaret Hardy

Margaret Hobday

Marjorie Burns

Maxwell Mundy

Mervyn and Marjorie Kingsley

Michael and Robyn Forster

Michael and Edna Green

Michael Neal

Michele and Maria Iannantuoni

Mona Schwede

Nell Player

Nelson and Nellie Rochefort

Nico and Carol Berserik

Nita Cachia

Nola and Don Crompton

Nola Unterrheiner

Norman and Elaine Prestwidge

Pat Lynch

Patricia Benoit

Patricia Gibbons

Paul and Susan Treble

Peter Walton

Raymond Glossop

Raymond and Dianne Hancock

Raymond and Ruby Ormsby

Reginald and Beverly Lloyd

Reinhold Nawer

Rex and Valerie Hewison

Rex and Dawn Sorby

Richard Craig Withers

Richard and Vickie Wilson

Robert and Dorothy Aldred

Robert and Lynette Booth

Robert and Janelle Gaylard

Robert and Christina Lowe

Robert Matthew and Jeanette Tait

Robert and Fay McMah

Robert and Lynette Pankhurst

Robert and Denise Parkinson

Ronald Aubrey Clee

Ronald and Jeanette Griffith

Ronald and Betty Heathcote

Ronald and Beverley Logan

Roy and Venese Adams

Roy and Corina Gatto

Roy and Epifania Lawler

Shirley Mills

Terry Hanks

Thomas and Imelda Bensley

Thomas and Lilia Fox

Thomas and Shirley Harris

Thomas and Mary O’Donnell

Thomas and Yvonne Toohey

Veronica Mitchell

Vincent and Ailsa O’Rourke

William and Sylvia Holmes

William and Patricia Hucker

William and Patricia Nolan

Winifred Myles

Should your name be on thiS liSt? While we do our best to ensure that all of our 50-year members are celebrated as part of our honour roll, records of membership held for over half a century can sometimes be wrong. We’d love to hear from you if you believe that you should have been included in this list so that we can set the record straight. Call us on 1300 886 123 or email help@rthealthfund.com.au.

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income statementfor the year ended 30 june 2008

2008 2007 Note $’000 $’000

Revenue from continuing operations 4 45,655 42,164

Hospital benefit expenses (29,024) (27,435)

Ancillary benefit expenses (8,417) (7,651)

State levies (719) (690)

Movement in unexpired risk liability 14 101 (1,222)

Audit and accounting expenses (199) (182)

Commission expenses (803) (213)

Computer expenses (389) (416)

Depreciation and amortisation expense 5 (142) (70)

Employee benefits expense 5 (2,830) (2,301)

Financial charges and taxes (121) (116)

Fixed Assets writedown – (274)

Legal and professional expenses (210) (51)

Marketing (521) (499)

Membership expenses (182) (198)

Postage and telephone expenses (213) (159)

Printing and stationery expenses (295) (160)

Property expenses (181) (172)

Other expenses (83) (80)

Profit before income tax 1,427 275

Income tax expense – –

Profit attributable to members of the Fund 17 1,427 275

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

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balance sheetas at 30 june 2008

2008 2007 Note $’000 $’000

ASSETS Current assets Cash and cash equivalents 7, 18 10,581 21,264

Trade and other receivables 8, 18 4,400 3,181

Held-to-maturity investments 9, 18 11,283 4,995

Total current assets 26,264 29,440

Non-current assets Held-to-maturity investments 9, 18 7,994 4,068

Property, plant and equipment 10 5,298 5,198

Investment property 11 1,371 1,386

Total non-current assets 14,663 10,652

Total assets 40,927 40,092

LIABILITIES Current liabilitiesTrade and other payables 12, 18 270 290

Outstanding claims liability 13 4,251 5,352

Unexpired risk liabilities 14 1,121 1,222

Other liabilities 15, 18 3,855 3,769

Provisions 16 536 –

Total current liabilities 10,033 10,633

Non-current liabilitiesProvisions 16 84 76

Total non-current liabilities 84 76

Total liabilities 10,117 10,709

Net assets 30,810 29,383

EQUITY Reserves 17 1,469 1,469

Retained earnings 17 29,341 27,914

Total equity 30,810 29,383

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

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Retained Other Total earnings reserves equity Note $’000 $’000 $’000

At 30 June 2007 17 27,914 1,469 29,383

Profit for the year 1,427 – 1,427

Total income and expense for the year 1,427 – 1,427

At 30 June 2008 17 29,341 1,469 30,810

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

statement of changes in equityfor the year ended 30 june 2008

cash flow statementfor the year ended 30 june 2008

2008 2007 Note $’000 $’000

Cash flows from operating activities Cash receipts from members 43,883 40,707

Cash paid to members, suppliers and employees (46,020) (37,928)

Interest received 1,818 1,772

Rent received 146 212

Net cash (outflow)/inflow from operating activities 19 (173) 4,763

Cash flows from investing activities Purchase of property, plant and equipment (242) (97)

Purchase of held to maturity investments (16,263) (2,000)

Proceeds from held to maturity investments 5,995 7,067

Net cash (outflow)/inflow from investing activities (10,510) 4,970

Net (decrease)/increase in cash and cash equivalents (10,683) 9,733

Cash and cash equivalents at beginning of period 21,264 11,531

Cash and cash equivalents at end of period 7 10,581 21,264

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

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notes to the financial statementsfor the year ended 30 june 2008

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NOTe 1 COrpOraTe INFOrmaTIONThe financial report of Railway & Transport Health Fund Limited for the year ended 30 June 2008 was authorised for issue in accordance with a resolution of the directors on 20 August 2008 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 NSW 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), except for:•AASB114‘SegmentReporting’doesnotapplytonotfor-profitorganisations.•AASB116‘Property,PlantandEquipment’accountingfornetrevaluationincrements

and decrements on a class of assets basis rather than on individual assets basis as required for For-Profit entities.

•AASB136‘ImpairmentofAssets’valueinusebeingdeterminedasbeingthedepreciated replacement cost of an asset instead of the present value of the future cash flows expected to be derived from the asset as required for For-Profit entities.

(b) income recognitionPremium incomePremiums have been calculated on an accruals basis, bringing to account premiums in arrears and in advance at year end. For those amounts in arrears, collectability 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 member’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 amount of land and buildings does not differ materially from that 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 impairment.

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

Class of Fixed Asset Depreciation Rate %

Buildings 2

Computer Equipment 25

Vehicles 12.5

Plant and equipment 5-20

Leasehold 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) Prior year change in accounting eStimateThe depreciation method has changed in 2007 from diminishing value to straight line as a result of a re-assessment of the useful economic lives of the assets.

The financial impact of this change on the basis of the depreciation method has not resulted in a material change to the depreciation charge / expense for the year.

(i) 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.

(j) 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.

(k) other liabilitieSOther liabilities comprise of the unearned premium and employee benefits provisions in respect of annual leave.

The unearned premium represents the receipt in advance of premiums for the ensuing year. This therefore represents the balance of premium income received which has been calculated on an accrual basis.

The not earned component of premiums received in the income statement at the reporting date is recognised in the balance sheet as an unearned premium liability.

(l) 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 $390,000 as calculated by the Fund’s actuary, assumes a confidence level of 85%. 75% is the minimum standard adopted by the general insurance industry in Australia.

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(m) unexPired riSk liabilitieSAt each reporting date the fund assesses whether the unearned premium liability is sufficient to cover all expected future cash flows relating to future claims arising from rights and obligations under:•Currentcontracts(unearnedpremiums)•Contractsexpectedtoberenewedfortheperiodtothenextexpectedpricing/

premium review date or change in contractual benefits (contractual obligations).

This assessment is referred to the liability adequacy test and is performed separately for each group of contracts subject to broadly similar risks but managed as a single entity.

If the present value of the expected cash flows relating to future claims plus an additional margin to reflect the inherent uncertainty in the central estimate exceeds the unearned premiums then the unearned premiums are deemed to be deficient. The deficiency at the reporting date was $131,900 (2007: $179,000).

If the present value of the expected cash flows relating to future claims plus an additional margin to reflect the inherent uncertainty in the central estimate exceeds the premiums expected to be paid then the entire deficiency is recognised in the income statement. The test at the reporting date indicated that there was a deficiency of $989,200 (2007: $1,043,000).

The entire gain from 2007 of $101,000 is recognised immediately in the income statement. The deficiency of $1,121,100 is recorded in the balance sheet as an unexpired risk liability.

(n) emPloyee benefit ProviSionSWages 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 is 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 Payables.

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.

(o) 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.

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

(q) income taxThe Fund is a health benefit organisation registered under the Private Health Insurance Act 2007 and is exempt from income tax under section 50-30 of The Australian Income Tax Assessment Act 1997.

NOTe 3 CrITICal aCCOuNTINg eSTImaTeS aND JuDgemeNTSactuarial 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 risk equalisation component is calculated as 18.7% 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 10.1% providing for a 85% 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.

2008 2007 $’000 $’000

NOTe 4 reVeNue FrOm CONTINuINg OperaTIONSRendering of services 43,678 40,109

Rental income 146 212

Interest 1,831 1,843

45,655 42,164

NOTe 5 eXpeNSeSProfit before income tax includes the following specific expenses:

Depreciation expenseBuildings 54 24

Plant and equipment 86 44

Motor vehicles 2 2

142 70

Rental expenses in operating leasesWollongong office rental expense 13 19

Newcastle office rental expense 24 22

37 41

Employee benefits expense 2,830 2,301

Defined contribution superannuation 206 203

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25

2008 2007 $’000 $’000

NOTe 6 auDITOrS’ remuNeraTIONASSURANCE SERvICESAudit servicesAmounts paid/payable to BDO for audit or review of the financial report for the Fund 103 93

NOTe 7 CaSH aND CaSH eQuIValeNTSCash at bank and on hand 2 2

Deposits with banks and credit unions 10,579 21,262

10,581 21,264

(a) caSh on hand Cash on hand is non-interest bearing. Cash at bank bear floating interest rates between 1.25% and 4.7% (2007 – Nil). Deposits at call bear floating interest rates between 6.60% and 8.04% (2007 3.00% and 6.04%). These deposits have an average maturity of 3 months.

(b) reconciliation of caShThe above figures are reconciled to the cash at the end of the financial year as shown in the statement of cash flows as follows:

Balances as above 10,581 21,264

Balances per statement of cash flows 10,581 21,264

NOTe 8 TraDe aND OTHer reCeIVaBleS (CurreNT)Trade receivables 1,934 2,092

Other receivables 2,466 1,089

4,400 3,181

(a) effective intereSt rate and credit riSkInformation concerning the effective interest rate and credit risk of both current and non-current receivables is set out in note 18.

NOTe 9 HelD-TO-maTurITy INVeSTmeNTSCURRENTTerm Deposits 7,769 2,000

Fixed Interest Securities/Bonds 2,514 1,995

Floating Rate Notes 1,000 1,000

11,283 4,995

NON CURRENTTerm Deposits 2,000 –

Fixed Interest Securities/Bonds 1,000 2,056

Floating Rate Notes 4,994 2,012

7,994 4,068

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 between 5.00% and 7.00%. The carrying value of the bonds and floating rate notes approximate to their fair value.

NOTe 10 prOperTy, plaNT aND eQuIpmeNTLandAt fair value 2,340 2,340

Total land 2,340 2,340

BuildingsAt fair value 2,700 2,700

Accumulated depreciation (78) (24)

2,622 2,676

Total land and buildings 4,962 5,016

Plant and equipmentAt cost 465 223

Accumulated depreciation (141) (55)

324 168

Motor vehicles At cost 20 20

Accumulated depreciation (8) (6)

12 14

Total non-current property, plant and equipment 5,298 5,198

revaluationSThe 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. The 2008 valuations were made by the Directors and the 2007 revaluations were based on independent assessments made by a member of the Australian Property Institute as at 30 June 2007.

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2008 2007 $’000 $’000

NOTe 10 prOperTy, plaNT aND eQuIpmeNT (CONTINueD)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:

Total LandCarrying amount at beginning of financial year 2,340 2,126

Net revaluation – 214

Carrying amount at end of financial year 2,340 2,340

Total BuildingsCarrying amount at beginning of financial year 2,676 2,658

Net revaluation – 42

Depreciation (54) (24)

Carrying amount at end of financial year 2,622 2,676

Total Leasehold ImprovementsCarrying amount at beginning of financial year – 55

Disposals – (55)

Carrying amount at end of financial year – –

Total Plant and EquipmentCarrying amount at beginning of financial year 168 336

Additions 242 97

Disposals – (219)

Depreciation (86) (46)

Carrying amount at end of financial year 324 168

Total Motor vehiclesCarrying amount at beginning of financial year 14 16

Depreciation (2) (2)

Carrying amount at end of financial year 12 14

NOTe 11 INVeSTmeNT prOperTyAt Fair valueBalance at beginning of year 1,386 1,400

Fair value adjustments (15) (14)

Balance at end of year 1,371 1,386

Land and Buildings are disclosed at fair values determined by independent valuations as at 30 June 2008. 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:Rental income – 67

Direct operating expenses arising from investment property that generated rental income during the period – 16

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

NOTe 12 TraDe aND OTHer payaBleSOther payables 270 290

270 290

(a) intereSt rate riSkDetails of Fund’s exposure to interest rates change are set out in note 18.

NOTe 13 ClaIm lIaBIlITIeSOUTSTANDING CLAIMS LIABILITYOutstanding claims-central estimate of the expected present value of future payments for claim liabilities 3,861 5,045

Risk Margin 390 307

Gross outstanding claims liability 4,251 5,352

(a) riSk margin

Process for determining the risk margin for outstanding claims liability The overall risk margin was determined allowing for the relative uncertainty of the outstanding claims central estimates for the three main classes of benefits; hospital, medical and general (ancillary) benefits. The benefit component of the outstanding claims central estimate for any month is the sum of the differences between the central estimate of incurred claims for each class and each month for the prior 12 months to the date of calculation and the paid claims for each of those classes and months.

Uncertainty was analysed by comparing 6 most recent central estimate provisions made with revised provision based on benefits data paid to June 2008.

The relative differences between the reported central estimate of the provision and the revised central estimate of the provision are assumed to be log-normally distributed.

The risk margin for outstanding claims is 10.1% (6.09% in 2007) for an 85% (2007:75%) probability of adequacy.

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NOTe 13 ClaIm lIaBIlITIeS (CONTINueD)(b) movement in ProviSionS

Outstanding ClaimsBalance at Beginning of Year 5,352 3,002

Additional provision – 2,200

Amount utilised during the year (1,184) –

Increase in risk margin 83 150

Balance at end of year 4,251 5,352

NOTe 14 uNeXpIreD rISK lIaBIlITIeSUNEXPIRED RISK LIABILITYUnearned Premiums 132 179

Contractual Obligations 989 1,043

1,121 1,222

(a) movement in unexPired riSk liability

Unearned PremiumsBalance at Beginning of Year: 179 –

Recognition of additional unexpired risk liability in the period in relation to unearned premiums – 179

Release of unexpired risk liability recorded in previous periods in relation to unearned premiums (47) –

Balance at end of year 132 179

Contractual ObligationsBalance at Beginning of Year 1,043 –

Recognition of additional unexpired risk liability in the period in relation to contractual obligations – 1,043

Release of unexpired risk liability recorded in previous periods in relation to contractual obligations (54) –

Balance at end of year 989 1,043

(b) deficiency recogniSed in the income StatementGross movement in unexpired risk liability (101) 1,222

Total deficiency recognised in the income statement (101) 1,222

(c) calculation of deficiency

Unearned Premium LiabilityEarned unclosed business contributions 2,987

Unearned unclosed business contributions 301

Future premiums receivable for contractual obligations 24,226

Central estimate of present value of expected future cash flows arising from future claimsEarned unclosed business contributions 2,917

Unearned unclosed business contributions 303

Contractual obligations 23,743

Risk margin (IFRS 85% sufficiency margin at 6.2%)Earned unclosed business contributions 181

Unearned unclosed business contributions 19

Contractual obligations 1,472

Present value of expected future cash flows arising from future claimsEarned unclosed business contributions 3,098

Unearned unclosed business contributions 322

Contractual obligations 25,215

DeficiencyEarned unclosed business contributions 111

Unearned unclosed business contributions 21

Contractual obligations 989

Total 1,121

Process for determining the risk margin for liability adequacy testThe method for determining the risk margin for the liability adequacy test is based on an analysis of the historical variance of projected 9-month loss ratios compared with actual loss ratios.

Uncertainty was analysed by comparing the 9 recent projected central estimate loss ratios with actual loss ratios.

The relative differences between the central estimate of the model and the actual unit utilisations are assumed to be log normally distributed.

The risk margin for unexpired risks is 6.2% (3.83% in 2007) for a 85% (75% 2007) probability of adequacy, and is imposed on the unexpired risks component of the provision.

The risk margin for contractual obligations is imposed on the total expected claims costs and the expenses in paying those claims for the contract assessment period and is 6.2%.

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2008 2007 $’000 $’000

NOTe 15 OTHer lIaBIlITIeSCURRENTUnearned premium liability 3,704 3,657

Employee benefits 151 112

3,855 3,769

(a) unearned Premium liabilityBalance at the beginning of the year 3,657 2,594

Deferral of premiums on contracts written on the year 3,704 3,657

Earning of premiums deferred in the prior year (3,657) (2,594)

Balance as at the end of the year 3,704 3,657

NOTe 16 prOVISIONS CURRENTCommissions 536 –

NON CURRENT Employee benefits 84 76

(a) commiSSionSProvision is made for the estimated commission payable in respect of referred members under the iSelect Marketing Agreement. These commissions are expected to be settled in the next financial year. Management estimates the provision based on the number of referred members in each month adjusted for the probability of the referred members remaining in membership for 4 months and 6 months.

(b) movement in ProviSionSMovements in each class of provision during the financial year, other than employee benefits, are set out below:

Carrying amount at the start of the year – –

Charged to the income statement

– additional provision recognised 536 –

Carrying amount at the end of the year 536 –

NOTe 17 reSerVeS aND reTaINeD earNINgSMOvEMENTS IN RESERvESAsset Revaluation ReserveBalance at start of period 1,469 1,213

Revaluation – 256

Balance at the end of period 1,469 1,469

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

MOvEMENTS IN RETAINED EARNINGSRetained earningsBalance at start of period 27,914 27,639

Net profit for the year 1,427 275

Balance at the end of period 29,341 27,914

NOTe 18 FINaNCIal INSTrumeNTS FINANCIAL ASSETSCash and Cash Equivalents 10,581 21,264

Loans and receivables 1,197 1,152

Held-to-maturity investments 19,277 9,063

31,055 31,479

FINANCIAL LIABILITIES Trade and other payables

– accrued expenses 161 248

Unearned premium liabilities 3,704 3,657

Financial liabilities at amortised cost 3,865 3,905

notes to the financial statements

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NOTe 18 FINaNCIal INSTrumeNTS (CONTINueD)(a) general objectiveS, PolicieS and ProceSSeSIn common with all other businesses, the Fund is exposed to risks that arise from its use of financial instruments. This note describes the Fund’s objectives, policies and processes for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks is presented throughout these financial instruments.

There have been no substantive changes in the Fund’s exposure to financial instrument risks, its objectives, policies and processes for managing those risks or the methods used to measure them from previous periods unless otherwise stated in this note.

The principle financial instruments from which financial risks arise are:– Cash and cash equivalents– Trade and other receivables– Held-to-maturity investments– Trade and other payables– Unearned premium liabilities

The Board has overall responsibility for the determination of the Fund’s risk management objectives and polices and, whilst retaining ultimate responsibility for them, it has delegated the authority for designing and operating processes that ensure the effective implementation of the objectives and policies to the Fund’s finance function. 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 Board receives monthly reports from the Fund’s Financial Controller through which it reviews the effectiveness of the processes put in place and the appropriateness of the objectives and policies it sets. The Fund’s internal auditors also review the risk management policies and processes and report their findings to the Audit and Risk Committee.

The overall objective of the Board is to set polices that seek to reduce risk as far as possible without unduly affecting the Fund’s competitiveness and flexibility. Further details regarding these policies are set out below:

(b) credit riSkCredit risk is the risk that the other party to a financial instrument will fail to discharge their obligation resulting in the Fund incurring a financial loss. This usually occurs when debtors fail to settle their obligations owing to the Fund.

The maximum exposure to credit risk is the carrying amount stated in the above table.

Deposits of cash and investments are held in high quality Australian financial institution. The Funds investment policy also assists in minimising risks. No more than 20% of investments can be held in any one institution.

There has been no history of default and all receivables are likely to be repaid within their expected terms.

Contributions in arrears are members contributions due and account for 19.6% of trade and other receivables. The account is reviewed regularly for recoverability.

PAST DUE NOT IMPAIRED

2008 2007 $’000 $’000

Not past due – –

Past due 30 days 478 672

Past due 30 – 60 days 156 110

Past due > 60 days 227 48

Balance at the end of period 861 830

No receivables are impaired.

(c) intereSt rate riSkThe Funds exposed to interest rate risk, which is the risk that a financial instrument’s value will fluctuate as a result of changes in market interest rates and the effective weighted average interest rates on those financial assets and liabilities are summarised below:

Fixed interest rate maturing

Floating Interest 1 year Over 1 to Over 2 to Non-interest Rate or less 2 years 5 years Bearing Total $’000 $’000 $’000 $’000 $’000 $’000

Year ended 2008Financial AssetsCash and cash equivalents 10,579 – – – 2 10,581

Receivables – – – – 1,197 1,197

Held-to-maturity-investments 5,994 10,283 3,000 – – 19,277

16,573 10,283 3,000 – 1,199 31,055

Effective weighted average interest rate 6.6% 7.5% 5.7%

Financial Liabilities Unearned premium liability – – – – 3,704 3,704

Trade and other creditors – – – – 161 161

– – – – 3,865 3,865

16,573 10,283 3,000 – (2,666) 27,190

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NOTe 18 FINaNCIal INSTrumeNTS (CONTINueD) Fixed interest rate maturing

Floating Interest 1 year Over 1 to Over 2 to Non-interest Rate or less 2 years 5 years Bearing Total $’000 $’000 $’000 $’000 $’000 $’000

Year ended 2007Financial AssetsCash and cash equivalents 21,262 – – – 2 21,264

Receivables – – – – 1,152 1,152

Held-to-maturity-investments 3,012 3,995 1,017 1,039 – 9,063

24,274 3,995 1,017 1,039 1,154 31,479

Effective weighted average interest rate 5.6% 6.1% 6.4%

Financial LiabilitiesUnearned premium liability – – – – 3,657 3,657

Trade and other creditors – – – – 248 248

– – – – 3,905 3,905

24,274 3,995 1,017 1,039 (2,751) 27,574

The Fund’s interest rate risk arises 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.

Sensitivity Analysis

+0.25% -0.25% Carrying Interest rate Interest rate Amount increase decrease Profit Profit $’000 $’000 $’000

2008Cash and Cash equivalents 10,581 26 (26)

Held-to-maturity investments 18,277 46 (46)

Total 28,858 72 (72)

+1% -0.25% Carrying Interest rate Interest rate Amount increase decrease Profit Profit $’000 $’000 $’000

2007Cash and Cash equivalents 21,264 213 (53)

Held-to-maturity investments 7,007 70 (18)

Total 28,271 283 (71)

The above analysis assumes all other variables remain constant.

(d) liquidity riSkLiquidity Risk is the risk that the Fund may encounter difficulties raising funds to meet commitments associated with financial instruments.

The Fund is not significantly exposed to this risk as it has $10,581 of cash and cash equivalents to meet these obligations as they fall due. Liabilities as at 30 June 2008 totalled $10,117 (2007: $10,709) including financial liabilities.

NOTe 19 CaSH FlOW INFOrmaTION 2008 2007 $’000 $’000

Reconciliation of profit after income tax to net cash flow from operating activitiesProfit for the year 1,427 275

Depreciation 142 70

Fixed asset write down – 276

Amortisation 54 34

Fair value adjustment to investment property 15 14

Change in operating assets:

– (Increase) in trade and other receivables (1,206) (546)

– (Increase) in interest receivables (13) (72)

– (Decrease)/increase in other payables (20) 100

– Increase/(decrease) in employee provisions 47 (23)

– (Decrease)/increase in provisions for outstanding claims, unexpired liability and risk margin (666) 3,572

– Increase in deferred income 47 1,063

Net cash flow from operating activities (173) 4,763

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NOTe 20 Key maNagemeNT perSONNel DISClOSureS(a) key management PerSonnelThe following persons were key management personnel of the Fund during the financial year:

Name Position Held Date Appointed

V Reynolds Chair 21/09/2005

R Ledger Vice Chair 21/09/2005

R Glover Director 22/09/2004

J Blake Director 21/09/2005

B Dredge Director 21/09/2005

D Ellis Director 21/09/2005

M Prior Director 25/05/2006

B Scheuber Director 24/10/2007

G Campbell CEO 24/04/2006

(b) comPenSationDetails of compensation key management personnel of Fund are set out below:

2008 2007

The key management personnel includes:

Non Executive Directors and CEO 9 9

2008 2007 $’000 $’000

Short-term benefits Cash salary and fees 379,575 439,335

Other short-term employee benefits 7,423 18,217

Post-Employee BenefitsPension and Superannuation 34,266 41,287

Other long-term employee benefitsLong service leave – 19,436

Total 421,264 518,276

NOTe 21 CONTINgeNCIeSContingent LiabilitiesAt 30 June 2008, Railway and Transport Health Fund Ltd had no contingent liabilities.

NOTe 22 COmmITmeNTSLEASE COMMITMENTSNon-cancellable operating leases future minimum lease paymentsWithin one year 34 35

Later than one year but not later than 5 years – 10

34 45

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 23 pHIaC SOlVeNCy aND CapITal aDeQuaCy reQuIremeNTSIn accordance with Clause 5 of Schedule 2 of the Private Health Insurance (Health Benefit Fund Administration) Rules 2008, the Railway & Transport Health Fund Limited solvency requirement for the year ended 30 June 2008 is $4,987,000 (2007: $4,669,000). The Capital Adequacy requirement for the year ended 30 June 2008 is $8,533,000 (2007: $9,025,000).

NOTe 24 SuBSeQueNT eVeNTSNo material events subsequent to the reporting date.

31

RA

ILW

AY &

TR

AN

SP

OR

T H

EA

LTH

FU

ND

LTD

AB

N 9

3 08

7 64

8 74

4

DIreCTOrS’ DeClaraTIONThe directors of the company 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 2008 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

R LEDGER Vice Chair

Dated at Sydney 20th day of August, 2008

directors’ declaration

32

RA

ILW

AY &

TR

AN

SP

OR

T H

EA

LTH

FU

ND

LTD

AB

N 9

3 08

7 64

8 74

4

independent audit report

33

HeaD OFFICeSYDNEY46 Burwood Road Burwood NSW 2134

memBer Care CeNTreSSYDNEY46 Burwood Road Burwood NSW 2134

14-18 Lee Street Chippendale NSW 2008 (railway square, co-located with Encompass Credit Union)

WOLLONGONG 139 Keira Street Wollongong NSW 2500

NEWCASTLEShop 2, 28 Donald Street Hamilton NSW 2303

BRISBANE59A Melbourne Street South Brisbane Qld 4101

CONTaCT uSTel 1300 886 123 Fax 1300 887 123

help@rthealthfund.com.au www.rthealthfund.com.au

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