AnnualReport. (Flip over for your Member Magazine)

AnnualReport 2004/2005 Welcome to HESTA s 2004-2005 Annual Report and Member Magazine (Flip over for your Member Magazine) 6144 09/05 Solid positive return for Core Pool While it was a bumpy year for some investment markets, Core Pool, where the majority of members have their super, has delivered a competitive return of 13.4%. Details about returns over previous years, and for HESTA s other investment options, can be found on page two of the Annual Report. HESTA s APRA licence The Australian Prudential Regulation Authority (APRA), the Commonwealth body responsible for regulating super funds, has granted HESTA s Trustee a Registrable Superannuation Entity (RSE) licence, effective 1 July 2005. HESTA s Trustee was the first super fund specifically for health and community services to be granted the licence. Granting of the licence is confirmation to members that HESTA will continue to meet the highest of standards in managing their money and acting in their best interest. To obtain the licence, the Trustee underwent a thorough process to verify the existence of appropriate practices and controls over key operations, including: Proper and prudent performance of Trustee duties Compliance with fitness and propriety standards Maintenance of and compliance with risk management strategies and plans The existence of proper and enforceable agreements for all outsourcing of service activities and adequate resources to service members Capital requirements HESTA s Trustee RSE number is L0000109. Under the Superannuation Safety Amendment Act 2004, only holders of a RSE licence will be allowed to operate an APRA regulated super fund after 30 June 2006. Choice of fund Choice of fund took effect on 1 July 2005 and HESTA expects that up to 40% of health and community services workers are affected by the legislation. HESTA has worked hard to provide relevant information about choice to employers and members over the past year, including holding choice seminars and posting information at www.hesta.com.au to help employers work out their obligations and to help members make an informed choice. The profile of industry funds as a value for money alternative to retail master trusts rose in the lead up to choice. An advertising campaign by a number of industry funds, including HESTA, has highlighted the differences between industry funds and retail funds, in particular the positive difference that low fees and no commissions paid to advisers can have on your final account balance. HESTA growth During 2004-2005, total funds under management increased to $7.4 billion, doubling HESTA s assets in the three years to 30 June 2005. Membership numbers grew to 508,665 and the number of employers registered with HESTA at 30 June 2005 was 34,880. HESTA staff and major partners HESTA s success over the past year is due to the dedicated work of the HESTA staff and the Fund s core partners, Superpartners (our administration service provider) and Frontier Investment Consulting (our investment consultant). We would like to acknowledge the skill, professionalism and dedication of these people and thank them for their contribution to HESTA over the past year. Industry recognition HESTA continues to rate highly within the industry. It has demonstrated this by retaining its Platinum Rating (the highest attainable rating) from SuperRatings (an independent rating agency which monitors the performance of superannuation funds), and its AAA rating from SelectingSuper, as well as winning a number of other valued industry awards. Support for your industry During 2004-2005, HESTA continued to support the health and community services industry with its involvement in a variety of conferences, research projects and events at both state and national level. You ll find more information on page 12 of the Member Magazine. Don Good - Chair Anne-Marie Corboy - CEO

Investment performance and strategic asset allocations for 2004-2005 HESTA s most popular option, Core Pool, returned 13.4% to 30 June 2005 - the 17th consecutive year of positive returns for this investment option. Returns for other investment options reflect movements in the broad investment markets. For more details on the reasons behind this year s returns, turn to page 10 of your Member Magazine. Ready-Made Investment Pools Your Choice Asset Classes Returns To 30 June (%) 2005 2004 2003 2002 2001 Average (%) Cash Plus 9.0 9.6 3.8 2.9 6.9 6.4 Core Pool 13.4 15.5 1.5 0.5 8.3 7.7 Shares Plus 13.0 18.1-1.6-1.2 6.8 6.7 Eco Pool 10.5 15.5-7.3-10.4 2.6 1.7 Overseas Share Pool 0.1 19.9-12.5-17.1 N.A -3.4 Australian Share Pool 24.2 22.4 1.0 2.0 N.A 11.9 Cash 4.6 4.0 3.8 3.9 N.A 4.1 Fixed Interest 8.0 3.6 9.8 6.1 N.A 6.9 Property 10.2 9.9 9.2 9.7 N.A 9.7 5.1 20.7-10.0-14.4 N.A -0.6 23.1 22.2-0.1 1.7 N.A 11.2 Infrastructure 17.1 7.6 4.4 4.4 N.A 8.3 Private Equity 0.0 19.9-3.3-6.9 N.A 1.9 Absolute Return Strategies 5.3 7.1 N.A N.A N.A 6.2 Commenced 1 July 2001 Commenced 1 July 2003 Return applied to your account Interest is applied to your account at 30 June each year based on your daily balance. The rate varies each month and depends on HESTA s earnings and reserving policy. The cost of protecting low member balances (0.02% for 2004-2005) against fee erosion is deducted from investment earnings before returns are declared. Ready-Made Investment Pools Earnings To 30 June (%) 2005 2004 2003 2002 2001 Average (%) Cash Plus 9.1 9.7 3.9 3.0 7.0 6.5 Core Pool 13.5 15.6 1.8 0.2 8.4 7.8 Shares Plus 13.1 18.2-1.5-1.1 6.9 6.8 Eco Pool 10.6 15.6-7.2-10.3 2.7 1.8 Overseas Share Pool 0.2 20.0-12.4-17.1 N.A -3.3 Australian Share Pool 24.3 22.5 1.1 2.1 N.A 12.0 Cash 4.7 4.1 3.9 4.0 N.A 4.2 Fixed Interest 8.1 3.7 9.9 6.2 N.A 7.0 Earnings rates The earning rate reflects how well each investment performed after deducting investment taxes and fund manager investment fees, including any performance fees. It s important to note that some other funds deduct these fees after declaring their rates. Your Choice Asset Classes Property 10.3 10.0 9.3 9.8 N.A 9.8 5.2 20.8-9.9-14.3 N.A -0.5 23.2 22.3 0.0 1.8 N.A 11.3 Infrastructure 17.2 7.7 4.5 4.5 N.A 8.4 Private Equity 0.1 20.0-3.2-6.8 N.A 2.0 Absolute Return Strategies 5.4 7.2 N.A N.A N.A 6.3 Commenced 1 July 2001 Commenced 1 July 2003 Investment objectives HESTA offers six Ready-Made Investment Pools and eight Your Choice Asset Classes for members to choose from, each with its own investment objective. You can choose individual investment options or mix and match between them. For more information, or to make an investment choice, call 1800 813 327 for a copy of HESTA s Member Investment Choice booklet, or visit www.hesta.com.au 2 AnnualReport 2004/2005

Ready-Made Investment Pools Cash Plus is the most conservative of HESTA s Ready-Made Pools. Specifically designed to offer a low-risk investment with a greater allocation to cash and fixed interest markets than other Ready-Made Pools, Cash Plus aims for the lowest variation in year-to year returns of all HESTA s Ready-Made Investment Pools, although with the expectation of lower rates of return than the Core Pool over the long term. Almost 30% of its investment is in shares, helping to enhance potential returns over the longer term. Core Pool aims to optimise returns and produce an after tax return greater than CPI + 4% over rolling five year periods, while in the short term achieving consistently better returns than the 90-day bank bill rate (adjusted for tax) and rarely having an annual interest rate less than zero. Core Pool invests in a diversified, but balanced, mix of assets to provide a consistent return. To maintain this consistency of return, the asset mix may vary during the year according to market conditions. If you have not already selected another option, your superannuation is automatically invested in Core Pool. Shares Plus has a mixed asset allocation with more exposure to shares than Core Pool and aims to provide higher returns over the long term. There are likely to be substantial yearto-year variations in returns and, even in the longer term (ten years or more), Shares Plus may not outperform other Pools. However, diversification of Shares Plus means that it has a lower risk profile than an investment in shares alone (such as Australian Share Pool or Overseas Share Pool). Eco Pool is HESTA s socially responsible investment option, aiming to optimise long term returns while investing in companies that demonstrate best practice environmental/ sustainability performance relative to their peers. The high allocation to shares means that significant year-to-year variations in returns are likely and, although HESTA expects long term returns similar to Core Pool, Eco Pool may not outperform other Pools, even in the long term. Eco Pool s strategic asset allocation may change throughout the year without prior notice to members. HESTA is seeking to diversify the underlying asset classes in which Eco Pool invests. Overseas Share Pool invests 100% in international shares (including small companies and emerging markets) and aims to achieve higher long term returns than Core Pool and Shares Plus while recognising that this brings a higher risk of more year-to-year variations in performance. While diversification is achieved by investing across many different markets and countries, this Pool is more aggressively managed than most other HESTA options (including the Your Choice share options) and has a slightly higher risk profile than the Your Choice International Shares asset class. Australian Share Pool aims to achieve higher long term returns than most Pools. It is not widely diversified, investing only in Australian shares (including small companies) and this, combined with an aggressive management strategy, means that Australian Share Pool has the highest risk profile of all Pools, including the Your Choice share options. Your Choice Asset Classes Your Choice Asset Classes are provided for members who want more control over their super. Members can choose their own asset allocation, the level of risk they wish to take and the sectors they wish to invest in. They can also mix and match Your Choice Asset Classes with Ready-Made Investment Pools. Please note that the share components of Your Choice are slightly more conservatively managed than the Overseas Share Pool or Australian Share Pool. Members who wish to create a portfolio of 100% shares and who are comfortable with a high level of risk may want to consider Overseas Share Pool or Australian Share Pool as an alternative to Your Choice. Your Choice Asset Classes may be excluded from having exposure to certain investments while the value of HESTA s investment is built up to a critical mass. When this occurs, only Core Pool will have exposure. Long-term probabilities of negative returns are based on capital market assumptions and actual outcomes may vary. Your Choice Cash is the most conservative of the Your Choice options and aims to produce a return equal to or higher than the overnight cash rate. Your Choice Cash is 100% invested in cash and enhanced cash products. Your Choice Fixed Interest invests 100% in Australian and international fixed income products, including those specialising in investing in corporate bonds and aims to produce a return higher than the UBS Composite Bond Index. It is less conservative than Cash in that it may produce a negative return, but is more conservative than the other Your Choice options. Your Choice Property invests 100% in unlisted Australian and international property products and aims to produce a return equal to or higher than the Mercer Direct Property Index. It is less conservative than cash or fixed interest, in that it may produce a negative return, but is more conservative than the remaining Your Choice options. Your Choice Infrastructure invests 100% in unlisted Australian and international infrastructure products and aims to produce a return significantly higher than the UBS Composite Bond Index. It is likely to produce negative returns from time to time but returns should be less volatile than other equity investments. Your Choice invests 100% in international shares and aims to produce high long term returns. However, it is very likely to produce negative returns from time to time. Your Choice invests 100% in Australian shares and aims to produce high long term returns. However, it is very likely to produce negative returns from time to time. Your Choice Private Equity invests 100% in Australian and international private equity products and aims to produce high long term returns. However, it is very likely to produce negative returns from time to time. Your Choice Absolute Return Strategies invests 100% in absolute return strategy products, primarily through international managers, although they may include Australian managers. It aims for returns considerably above cash returns, however it may produce a negative return from time to time. Note: Each Asset Class will hold a small percentage in cash for portfolio management purposes. Currency Hedging International investments are vulnerable to changes in the value of the Australian dollar. Currency hedging involves locking in the price for a future purchase or sale of currency to help even out the effect of these fluctuations. While this can decrease potential loss, it can also reduce potential profits. HESTA uses currency management specialists to manage currency hedging and all our investments with overseas currency exposure have some percentage of the exposure hedged. HESTA has two currency hedging policies. Strategic hedge: From 1 July 2005, a set percentage of the currency exposure will be hedged: 40% on overseas shares and 100% on all other overseas asset exposures. Active hedge: Currency managers can change the percentage of the hedged currency with the aim of producing additional returns for members. This policy is only used on the currency exposures in HESTA s overseas share holdings. AnnualReport 2004/2005 3

Ready-Made Investment Pools Strategic Asset Allocation Cash Plus % Core Pool % Shares Plus % Eco Pool % Overseas Share Australian Share Your Choice Pool % Pool % 30/6/04 30/6/05 30/6/04 30/6/05 1/7/05 30/6/04 30/6/05 1/7/05 30/6/04 30/6/05 30/6/04 30/6/05 30/6/04 30/6/05 30/6/04 30/6/05 Absolute Return Strategies 3 3 3 3 3 3 3 0 0 0 0 0 0 0 Australian Private Equity 0 0 3 3 2 3 3 2 0 0 0 0 0 0 International Private Equity 0 0 0 2 2 0 2 2 0 0 0 0 0 0 Australian Infrastructure 0 0 6 5 5 6 5 3 0 0 0 0 0 0 International Infrastructure 0 0 0 3 4 0 3 3 0 0 0 0 0 0 15 15 31 30 30 37 36 38 50 50 0 0 100 100 13 13 26 25 23 34 33 35 40 40 100 100 0 0 Choose your own asset mix Australian Direct Property 12 9 12 9 9 15 9 9 0 0 0 0 0 0 International Direct Property 0 3 0 3 3 0 4 3 0 0 0 0 0 0 Australian Fixed Interest 15 15 11 10 4 0 0 0 0 0 0 0 0 0 International Fixed Interest 12 12 6 5 8 0 0 0 0 0 0 0 0 0 Cash 30 30 2 2 4 2 2 2 10 10 0 0 0 0 Commodities 0 0 0 0 3 0 0 3 0 0 0 0 0 0 NA Strategic Asset Allocation July 2005 - The component of Eco Pool is selected via an environmental screen while the component screen incorporates economic, environmental and social criteria. Eco Pool s strategic asset allocation may change throughout the year without prior notice to members. From 1 July 2005, the exposure will have currency hedging in accordance with both the strategic and active currency policies explained on page 3. - The Overseas Share Pool and Australian Share Pool are more aggressively managed than the share components of other Pools, including Your Choice Asset Classes, in that they provide more concentrated exposure to managers and no passive investments. From 1 July 2005, the Overseas Share Pool will have currency hedging in accordance with both the strategic and active currency policies explained on page 3. HESTA s Reserving Policy Reserves are a way of smoothing out interest rate fluctuations. A proportion of the investment is held in reserve so, when a return is lower than the Trustee wishes to apply, the Board may elect to use the reserve to top up members returns. Core Pool is HESTA s only investment that maintains reserves. Over the last three years, investment reserves were: 2005 - $47.112 million unaudited, 2004 - $41.974 million audited, 2003 - $37.700 million (includes a retrospective tax credit received in 2003-2004). HESTA s policy is to reduce the level of reserves by attrition. Super Update From 1 July 2005, people reaching their preservation age can use their super benefit to purchase a non-commutable income stream (unable to be converted to a lump sum) even if they are not permanently retired from the workforce. This proposal was first announced in the Federal Government s February 2004 policy paper, A more flexible and adaptable retirement income system, and will help older people to work part-time while using part of their super to supplement their income. Under the regulations, people who purchase an eligible allocated pension will be able to stop the income stream and return the benefits to their super fund if they choose to return to work full time. Super proposals in 2005 Budget The May 2005 Federal Budget contained a number of superannuation proposals, including those summarised below. The measures will not take effect until passed by Parliament. The superannuation surcharge on high income earners will be removed from contributions and termination payments made on or after 1 July 2005. Fund members will have the ability to split their employer and personal contributions made on or after 1 July 2006 with their spouse. However, not all super funds will offer this facility. Employer contributions made within 30 days of the super guarantee (SG) due date can be used to offset any SG charge for that quarter. The measure will apply to late payments made on or after 1 January 2006. Currently, employers who make late contributions to a super fund may end up paying the amount again, as late contributions cannot be used to offset the liability to the Tax Office. SG will be payable where salary or wages are paid in a quarter following termination of employment. This SG obligation will apply to the quarter in which the back payment is made. Currently, there is no obligation on an employer to pay SG on back payment of wages following termination. 4 AnnualReport 2004/2005

HESTA s Accounts These are HESTA s unaudited accounts for 2004-2005. If you would like a copy of HESTA s audited accounts and auditor s report, please call us on 1800 813 327. These will be available from the end of October 2005. (Draft) Statement of Financial Position for the period ended 30 June 2005 ASSETS 2005 ($) 2004 ($) Investments Absolute Return Funds 240,659,866 151,432,910 Cash & Short Term Deposits 473,425,107 208,120,198 Other Interest Bearing Securities 1,007,569,093 658,989,042 Listed Australian Equities 2,664,697,167 1,661,643,988 Listed Foreign Equities 1,650,418,817 1,956,508,333 Infrastructure & Private Equity 745,518,850 438,794,449 Property 627,426,195 522,265,638 7,409,715,095 5,597,754,558 Other Assets Cash at Bank 29,330,723 23,628,423 GST Receivable - 424 29,330,723 23,628,847 Fixed Assets 487,502 573,266 TOTAL ASSETS 7,439,533,320 5,621,956,671 LIABILITIES Payables Benefits Payable - (143,104) Accounts Payable 9,046,281 10,271,796 Provision for Employee Benefits 607,835 478,839 Tax Liabilities Income Tax Payable 60,098,714 40,470,913 Deferred Tax Liabilities 81,633,836 46,789,501 TOTAL LIABILITIES 151,386,666 97,867,945 - NET ASSETS AVAILABLE TO PAY BENEFITS 7,288,146,654 5,524,088,726 Represented by: LIABILITY FOR ACCRUED BENEFITS Vested Benefits - Allocated to Member Accounts 7,229,441,706 5,466,133,047 - Not Yet Allocated to Member Accounts 1,903,117 5,863,708 Reserves 56,801,831 52,091,971 7,288,146,654 5,524,088,726 (Draft) Operating Statement for the period ended 30 June 2005 TOTAL REVENUE FROM ORDINARY ACTIVITIES 2005 ($) 2004 ($) Investment Revenue Dividends 99,954,573 56,973,423 Trust Income 207,048,097 151,255,551 Interest 38,778,574 25,641,828 Other Investment Income 690,165 358,666 Change in Net Market Value of Investments 504,391,809 529,382,917 Direct Investment Expenses (12,193,515) (9,545,827) Net Investment Revenue 838,669,703 754,066,558 Contribution Revenue Employer 941,449,449 788,792,836 Member 143,468,734 66,282,604 Transfers from Superannuation Funds 390,107,707 302,904,914 1,475,025,890 1,157,980,354 Other Revenue Group Life Insurance Proceeds 11,076,700 14,895,422 Other Income 60,202 40,983 11,136,902 14,936,405 TOTAL REVENUE FROM ORDINARY ACTIVITIES 2,324,832,495 1,926,983,317 TOTAL EXPENSES FROM ORDINARY ACTIVITIES Group Life Insurance Expenses 49,798,933 44,832,013 General Administration Expenses Administration Expenses 16,548,506 12,148,752 Operating Expenses 10,075,134 13,144,299 Superannuation Contributions Surcharge 6,720,872 4,309,321 33,344,512 29,602,372 TOTAL EXPENSES FROM ORDINARY ACTIVITIES 83,143,445 74,434,385 Benefits Accrued as a Result of Operations Before Income Tax 2,241,689,050 1,852,548,932 Income Tax Expense 171,133,893 164,318,382 Benefits Accrued as a Result of Operations After Income Tax 2,070,555,157 1,688,230,550 Other things you need to know about your HESTA account Three ways your super account grows 1. Your employer usually contributes at least 9% of your eligible ordinary time earnings to your HESTA account 2. You may make your own contributions to your account and, if you qualify for a Government cocontribution, this will be deposited after the Australian Tax Office (ATO) has assessed your tax return 3. Other payments, such as transfers from another fund, can be made at any time How investment returns are distributed - HESTA declares interest rates each month that reflect net investment results, applying interest to accounts at 30 June based on your investment choice and daily balance. This year s returns are shown on page two of your Annual Report. Investment and protection - Investment management fees (averaging 0.56% in 2003-2004), any applicable performance fees and provision (0.02% in 2004-2005) for protecting account balances below $1,000 against fee erosion are deducted from the assets of the Fund before interest rates are declared. If you leave HESTA - If you close your HESTA account during the financial year your account will be updated with interim interest rates, adjusted from time to time by the HESTA Trustee Board to reflect investment performance. Administration fee - From 1 July 2005, HESTA s administration fee is $1.25 per week. This fee is used to administer your account and the overall management of the Fund, including providing communications and educational material to members. Splitting super on divorce - Fees apply to the provision of account information ($79.00) and the splitting of accounts ($55.35). These amounts alter to $81.00 and $56.75 from 1 November 2005. Accounts of less than $5,000 cannot be split. Insurance cover - You can apply for the level of cover you want, or none at all. Basic cover - one unit of death cover and two units of income protection insurance (to age 60 with a 90-day qualifying period) - costs $2.50 per week and premiums are deducted from your account balance. Unless you have notified HESTA otherwise in writing, eligible members automatically receive basic cover. Terms and conditions apply. Contributions tax - The Federal Government taxes your employer superannuation guarantee and salary sacrifice contributions at 15%. Tax is also payable on personal contributions for which eligible self-employed persons claim a tax deduction. Tax is calculated on net contributions after insurance premiums and administration fees have been deducted. Superannuation surcharge - If your adjusted taxable income (including employer and other deductible contributions and reportable fringe benefits) exceeds $99,710 for 2004-2005, or if you have not supplied your Tax File Number to HESTA, the ATO may charge your account a surcharge of up to 12.5% on top of your contributions tax. The Government has abolished this tax from 1 July 2005. For further information, please call HESTA on 1800 813 327. AnnualReport 2004/2005 5

Who takes care of your Fund? HESTA is run by H.E.S.T. Australia Limited, an APRA licensed trustee company with guarantors (who don t receive dividends). Guarantors represent employee and employer organisations and are eligible to nominate Directors to the Board. There are 14 Trustee Directors on HESTA s Board, with equal representation from employee and employer organisations in the health, community services and allied fields. This ensures that the voices of both employers and members are heard and that their views are taken into account when decisions are made. The Board meets ten times a year, managing every aspect of the Fund s responsibilities and overseeing the administration, investments and future direction of HESTA. the Superannuation Industry (Supervision) Act 1993, which covers the regulation, responsibilities and activities of super funds. If you would like to know more about the governing rules of the Fund, you can obtain a full copy of HESTA s Trust Deed or the rules governing the appointment of Trustee Directors by calling 1800 813 327. Further information on individual Directors is available at www.hesta.com.au as are copies of HESTA s Board Charter and Code of Conduct. Key advisers and service providers HESTA uses a number of external service providers to help us administer your account and invest your money. Frontier Investment Consulting Pty Ltd (Frontier) provides the Board with advice on investing members money and is paid a fee for this service. HESTA is a shareholder of Frontier. Superpartners provides administrative services for HESTA, including operating the Fund s service centre, insurance administration, contribution and benefit processing and other general fund administration. HESTA is a shareholder of Superpartners. Other key advisers as at 30 June 2005 are: JP Morgan - Fund Custodian ING Life Limited - Insurer Peter Carroll Pty Limited - Actuary Dwyer & Co - Solicitors Ernst & Young - Auditors PricewaterhouseCoopers - Tax Accountants Although the Trustee Company is required to hold professional indemnity insurance to protect both itself and the Directors from claims against them, there has never been a claim under the insurance policy and no penalties have been imposed under s.38a of HESTA s Board (as at 30 June 2005) Employee Representatives (nominated by their organisations) Ged Cowin Australian Nursing Federation (ANF) Appointed 1 April 2004 Rob Elliott Health Services Union Appointed 21 November 1997 Brett Holmes ANF/NSW Nurses Association Appointed 28 September 2000 Kathy Jackson Health Services Union Appointed 20 August 1999 Beth Mohle (Deputy Chair) ANF/QLD Nurses Union Appointed 28 June 2001 Neil Saxton Liquor Hospitality and Miscellaneous Union Appointed 4 December 2002 David Whiteley Australian Council of Trade Unions Appointed 27 September 2001 Employer Representatives (elected through nomination by their organisations) Angela Emslie Victorian Employers Chamber of Commerce and Industry Elected 15 December 1994 Don Good (Chair) Catholic Health Australia and Chamber of Commerce and Industry of WA Elected 16 November 1989 John Griffiths Aged and Community Services Association of NSW/ACT Elected 23 September 1988 Nancy Hogan Victorian Association of Health and Extended Care Elected 1 December 2003 Viv Padman Aged Care Association Australia and ACAA (SA) Elected 15 December 1994 Geoff Sam Australian Private Hospitals Association Elected 1 December 2000 Tony Smith Aged Care Association Australia (TAS) Elected 10 April 1993 6 AnnualReport 2004/2005

HESTA s Investment managers HESTA s investment managers as at 30 June 2005 were: HESTA uses around 30 professional fund managers to invest members money according to specific objectives and strategies (including offering strategies to guard against excessive risk) set out by the HESTA Trustee Board with advice from our investment consultant, Frontier Investment Consulting. By using investment managers, HESTA can make use of their expertise in the investment of your retirement savings, while at the same time using our size to achieve economies of scale that keep costs low. AEW Capital Investment Ausbil Dexia Asset Management Bank of New York Barclays Global Investors Australia Bridgewater Associates BT Financial Group Confluence Asset Management FRM Australia Hastings Funds Management Industry Funds Management Industry Superannuation Property Trust JP Morgan Chase Lazard Asset Management Pacific Co Lee Overlay Partners Maple-Brown Abbot Investment Managers Marathon Asset Management Members Equity Morgan Stanley & Co National Australia Bank Oppenheimer Capital Pacific Investment Management Company Paradice Cooper Investors Pareto Investment Management Perpetual Funds Portfolio Partners Funds Management Quay Australia Queensland Investment Corporation Quellos Capital Management Renaissance Asset Management Warakirri Asset Management Wellington Investment Management Western Asset Management Property Currency Fixed Interest,, Currency, Core Pool Absolute Return Strategies Infrastructure Fixed Interest, Private Equity, Infrastructure Property Cash Currency Currency, Fixed Interest Property Cash Fixed Interest Currency, Cash Private Equity Property Absolute Returns Strategies Fixed Interest Do you have concerns? Please call HESTA first on 1800 813 327 to discuss your enquiry or complaint. If you require further assistance you can: Step One: Write to the Complaints Officer at HESTA Super Fund, PO Box 600, Carlton South, VIC 3053, outlining all the relevant details. HESTA will make every effort to deal with your concerns quickly. Step Two (superannuation): If the matter is not resolved within 90 days or you are not satisfied with the outcome, you may contact the Superannuation Complaints Tribunal (SCT), an independent body established by the Federal Government to assist super fund members or their beneficiaries in resolving superannuation related complaints. You can contact the SCT on 1300 780 808 or at www.sct.gov.au Step Two (non-superannuation): If you have a complaint about a nonsuperannuation related product (for example, advice provided by HESTA staff about banking or managed investment products) that is not resolved within the prescribed time (generally 45 days), you may contact the Financial Industry Complaints Service (FICS). You can contact FICS on 1300 780 808 or at www.fics.asn.au Please note that the SCT and FICS can only assist you after you have been through HESTA s complaints procedure (Step One). AnnualReport 2004/2005 7

Important Information It s your Annual Report Write and let us know what you think. Anne-Marie Corboy Chief Executive Officer, HESTA PO Box 615, Carlton South, VIC 3053 If you would like a copy of HESTA s 2003-2004 Annual Report, you can download or order it at www.hesta.com.au or call 1800 813 327 to have a copy mailed to you. What happens to your super if HESTA loses touch with you? If HESTA has been unsuccessful in delivering two pieces of mail to your address, or your account balance is less than $500 and no contributions have been made for more than one year, or less than $800 and no contributions have been made for more than two years, we may transfer your account to Australia s Unclaimed Super Fund (AUSfund), an eligible rollover fund (ERF). When your money is transferred to AUSfund (ABN 17 006 883 227, AFSL 229881), any insurance cover you have with HESTA will cease and your HESTA account will be closed. You will become a member of AUSfund and subject to its governing rules. If HESTA can provide your current contact details, AUSfund will send you a copy of its Product Disclosure Statement (PDS). You can also contact AUSfund to request a copy. What you need to know: AUSfund accounts of $50 or more attract an administration levy of $10 per year or part-year. Lower balances are not subject to the levy and do not earn interest. However, all accounts are protected from erosion by the levy so that the levy cannot exceed the interest credited to each account AUSfund may have a different investment strategy to HESTA. Details can be found in AUSfund s PDS AUSfund does not offer death or disability insurance AUSfund conducts cross-fund matching services (where your information is used to search for an active account in your name in another superannuation fund) and will transfer your AUSfund benefits to that fund if an active account in your name is found. AUSfund also attempts to locate superannuation contributions paid to the Tax Office on a member s behalf If your account is transferred to AUSfund, your personal information will be used or disclosed by AUSfund to administer your benefits, including establishing your account and managing your super, processing contributions, paying benefits, providing you with membership benefits and services and contacting you. AUSfund uses external service providers such as Superpartners Pty Ltd and Baycorp Advantage Limited to provide services and other benefits to its members under the strictest confidence. AUSfund will not use or disclose your personal information for any other purpose without your consent, except where required or authorised by law. You may request access to, or correction of, any personal information held by AUSfund by writing to AUSfund s Privacy Officer at AUSfund Administration Contact AUSfund: AUSfund Administration PO Box 2468, Kent Town, SA 5071 Phone: 1300 361 798 Fax: 1300 366 233 Email: admin@ausfund.net.au Web: www.unclaimedsuper.com.au Australian Financial Services Licence H.E.S.T. Australia Limited, the Trustee of HESTA Super Fund, holds an Australian Financial Services Licence (AFSL). HESTA s AFSL Number is 235249. HESTA issues a Product Disclosure Statement (PDS) containing information potential or current members need to make an informed decision about the fund, including risks, fees, features, benefits and tax information. The PDS should be considered when making a decision about HESTA. You can order a copy by calling 1800 813 327, or download the booklet at www.hesta.com.au Fee disclosure HESTA s Trustee has revised the way fees and other costs are disclosed in accordance with ASIC requirements so as to make clearer reference to weekly administration fees and costs such as investment management fees and benefit protection costs that are deducted from fund earnings before returns are declared to members. Further information about HESTA s fees and costs is available in our Product Disclosure Statement (PDS) at www.hesta.com.au or by calling 1800 813 327. Previous information given about HESTA s fees should be disregarded. HESTA s derivatives policy Derivatives, such as futures and options, are financial instruments whose price is derived from the price of another instrument or security, such as shares, bonds, etc. Derivatives are not an asset class, they are contracts in which two or more parties agree to arrangements in relation to an asset or set of assets that will be settled at some time in the future. For example, traders might agree to buy or sell an asset or currency in three months time but the price is set at the start of the contract. Although applications of derivatives can be high risk, the majority of derivatives contracts are aimed at reducing risk in an investment portfolio. Derivatives have a role to play as part of HESTA s overall investment strategy and aim to minimise investment risk in the portfolio while maximising investment return. HESTA s policy on derivative use allows investment managers to use derivatives to achieve their investment objectives, particularly in regard to controlling risk. Managers are not allowed to exceed specific asset sector investment guidelines limiting the circumstances under which they may use derivatives. Derivatives may be used in the management of the portfolio but not used to gear the portfolio or create net short positions. 8 AnnualReport 2004/2005