ING Australia s unit pricing program UPDATE as at 13 June 2006 (This webpage is regularly reviewed and updated when appropriate) Program overview...1 The process...1 What does this mean for investors?...1 Links...1 Any questions?...1 What funds are affected?...2 Program overview > ING Australia is currently conducting a comprehensive unit pricing review. > Some funds have been affected by unit pricing errors. > The errors relate to particular periods prior to September 2004. > Since last year ING Australia has been working with industry regulators on this matter and recently provided an Enforceable Undertaking to ASIC. > This formal agreement with ASIC underlines ING Australia s commitment to protect investors interests. The process > ING Australia has strengthened its processes and controls. > ING Australia is progressively reviewing each fund, making any required corrections, and then compensating investors entitled to compensation. > The review of ANZ funds is underway. > Identified compensation will commence shortly and we expect most of it to be paid over the coming months. What does this mean for investors? > If you are entitled to compensation, you will be informed in writing at the time of compensation. > The funds are being reviewed progressively. This means that some investors may receive more than one compensation letter until the program is complete. Links > Click here to read ING Australia s public statement > To read the ASIC statement visit their website www.asic.gov.au, and go to the Media and Information Releases section, September 2005 (reference 05-286) Any questions? Customers > Call 1800 782 887 weekdays 9.00am to 6.00pm AEST > Click here to read the Information Booklet Advisers > Call 1800 674 078 weekdays 8.00am to 8.00pm AEST
Guide to unit pricing program > Our review of funds is ongoing and the following table details those that have been identified with unit price errors that may require investor compensation, and whether compensation has been completed (i.e. compensation letters mailed). > Please note that not all investors in these funds will receive compensation, as the errors relate to particular periods prior to September 2004. If you are entitled to compensation, we will write to you directly. > In the following table, products are grouped by superannuation, retirement income or investment. > As the compensation program progresses, this table will be updated. Compensation status The compensation status column in the table below refers to whether the compensation is complete, pending or is not applicable. These terms are defined as follows: > - investors entitled to compensation have been compensated. A letter has been sent to the investors most recently advised address (other than investors who have lost contact with us, for whom a copy of this letter will remain on file until they resume contact with us). > Not applicable - no investor entitlement to compensation i.e. no investor transactions took place during the error period. > - our review is ongoing and investors with an entitlement to compensation will receive correspondence in due course. Guide to ANZ funds as at 13 June 2006 (This webpage is regularly reviewed and updated when appropriate) Affected Products Affected Investment Options identified with errors that may require compensation Compensation status Superannuation products ANZ OneAnswer Personal Super AXA Global Equity Value Barclays Global Investors Australian Shares BT Core Hedged Global Shares Colonial First State Imputation Credit Suisse International Shares Credit Suisse Property ING Active Growth ING Australian Shares ING Cash ING Conservative ING High Growth ING Income Plus ING Managed Growth ING Mortgages ING Tax Effective Income Investors Mutual Australian Shares OptiMix Australian Fixed Interest OptiMix Australian Property Securities OptiMix Australian Shares OptiMix Conservative OptiMix Enhanced Cash OptiMix Global Shares
Affected Products ANZ OneAnswer Personal Super cont d Affected Investment Options identified with errors that may require compensation OptiMix Global Smaller Companies Shares OptiMix Growth OptiMix High Growth OptiMix Moderate Perpetual Australian Shares Perpetual International Shares Schroder Australian Equity State Street Australian Index Plus State Street Global Index Plus (Hedged) UBS Diversified Fixed Income Compensation status ANZ Super Advantage Advance Imputation ANZ Australian Equities Index ANZ Balanced Index ANZ Diversified Stable ANZ Wholesale Balanced ANZ Wholesale Global Technology ANZ Wholesale Income BT Putnam Global Core Hedged BT Wholesale Asian Share BT Wholesale Australian Share Citigroup Diversified Colonial First State Imputation Colonial First State Wholesale Leaders Credit Suisse International Shares Gateway Aggressive Gateway Balanced Gateway Conservative ING Australian Shares ING Capital Stable ING Cash ING Diversified Fixed Interest ING High Growth ING Managed Growth ING Property Securities ING Select Leaders ING Wholesale Australian Share ING Wholesale Fixed Interest Securities Merrill Lynch Wholesale Balanced Share Merrill Lynch Wholesale Imputation MLC Income Builder Wholesale MLC Investment Trust Balanced Portfolio OptiMix Australian Fixed Interest OptiMix Australian Property Securities OptiMix Australian Shares
Affected Products Affected Investment Options identified with errors that may require compensation Compensation status ANZ Super Advantage cont d OptiMix Conservative OptiMix Global Shares OptiMix Global Smaller Companies Shares OptiMix Growth OptiMix High Growth OptiMix Moderate Perpetual Australian Shares Perpetual Balanced Growth Perpetual Wholesale Industrial Share Perpetual Wholesale Smaller Company Share Rothschild Smaller Companies Wholesale Russell Australian Bond Russell Australian Property Securities Russell Australian Shares Russell Balanced Russell International Shares UBS Diversified Fixed Income ANZ Personal Super Bond ANZ Australian Imputation ANZ Australian Shares ANZ Balanced ANZ Conservative ANZ Diversified Fixed Interest ANZ Growth ANZ Income ANZ Property Securities Gateway Aggressive Gateway Balanced Gateway Conservative ANZ Approved Deposit Fund Growth ANZ Cash Rollover Fund Gateway Aggressive Gateway Balanced Gateway Conservative ANZ Deferred Annuity Gateway Aggressive Gateway Balanced Gateway Conservative ANZ Maxisafe Deferred Annuity Gateway Aggressive Gateway Balanced Gateway Conservative ANZ Public Retirement Fund Self-employed Retirement income products ANZ OneAnswer Allocated Pension BT Core Hedged Global Shares Credit Suisse International Shares Credit Suisse Property
Affected Products Affected Investment Options identified with errors that may require compensation Compensation status ANZ OneAnswer Allocated Pension ING Cash cont d ING Mortgages OptiMix Australian Fixed Interest OptiMix Australian Property Securities OptiMix Conservative OptiMix Enhanced Cash OptiMix Global Shares OptiMix Growth OptiMix High Growth OptiMix Moderate Perpetual Australian Shares Perpetual International Shares Schroder Australian Equity UBS Diversified Fixed Income ANZ OneAnswer Term Allocated BT Core Hedged Global Shares Pension Credit Suisse International Shares Credit Suisse Property ING Cash ING Mortgages OptiMix Australian Fixed Interest OptiMix Australian Property Securities OptiMix Conservative OptiMix Enhanced Cash OptiMix Global Shares OptiMix Growth OptiMix High Growth OptiMix Moderate Perpetual Australian Shares Perpetual International Shares Schroder Australian Equity UBS Diversified Fixed Income ANZ Allocated Pension ANZ Australian Equities Index ANZ International Equities Index ANZ Select Leaders ANZ Wholesale Australian Imputation ANZ Wholesale Diversified Fixed Interest ANZ Wholesale Global Technology ANZ Wholesale Property Securities Australian Equities BT Wholesale Asian Share BT Wholesale Australian Share BT Wholesale European Share Colonial First State Wholesale Imputation Colonial First State Wholesale Leaders Gateway Aggressive
Affected Products Affected Investment Options identified with errors that may require compensation Compensation status ANZ Allocated Pension cont d Gateway Balanced ING Wholesale Australian Share ING Wholesale Balanced ING Wholesale Capital Stable ING Wholesale Fixed Interest Securities Merrill Lynch Wholesale Balanced Share Merrill Lynch Wholesale Imputation Merrill Lynch Wholesale International Share Perpetual Wholesale Industrial Share Perpetual Wholesale International Rothschild Smaller Companies Wholesale Rothschild Balanced Wholesale Russell Australian Property Securities Russell International Shares Russell International Shares - $A Hedged Salomon Smith Barney Diversified Salomon Smith Barney Tactical Allocation ANZ Flexible Income Plan ANZ Australian Imputation Investment products ANZ Balanced ANZ Diversified Fixed Interest ANZ Growth ANZ Income ANZ Property Securities Gateway Aggressive Gateway Balanced ANZ Investment Bond Gateway Aggressive Russell Australian Shares ANZ OneAnswer Investment ANZ Australian Bond Portfolio ANZ Australian Resources ANZ Property Securities AXA Global Equity Value Barclays Global Investors Australian Share BT Core Hedged Global Share Colonial First State Imputation Credit Suisse International Share Credit Suisse Property ING Balanced ING Conservative ING Diversified Fixed Interest ING Diversified High Yield
Affected Products Affected Investment Options identified with errors that may require compensation Compensation status ANZ OneAnswer Investment ING Global Emerging Markets Share Portfolio cont d ING Global Sector ING High Growth ING Income ING Income Plus ING Managed Growth ING Property Securities ING Select Leaders ING Sustainable Investments Australian Share ING Tax Effective Income Investors Mutual Australian Share OptiMix Australian Fixed Interest OptiMix Australian Property Securities OptiMix Australian Share OptiMix Balanced OptiMix Conservative OptiMix Enhanced Cash OptiMix Global Shares OptiMix Global Smaller Companies Share OptiMix Growth OptiMix High Growth Perpetual Australian Share Perpetual International Shares Schroder Australian Equity State Street Global Index Plus (Hedged) UBS Diversified Fixed Income ANZ Portfolio Manager Gateway Aggressive Growth Gateway Income Gateway Income and Growth ANZ Global Technology Fund ANZ Global Technology ANZ Wholesale Global Technology ANZ Wholesale Investment Trusts ANZ Wholesale Australian Imputation ANZ Wholesale Australian Shares ANZ Wholesale Balanced ANZ Wholesale Conservative ING Wholesale Diversified Fixed Interest ANZ Wholesale Global Technology Fund ANZ Wholesale Growth ANZ Wholesale Income ANZ Wholesale Property Securities ING Wholesale Select Leaders ANZ Direct Managed Investments ING Balanced ING Managed Growth
Affected Products ANZ Gateway Unit Trusts Affected Investment Options identified with errors that may require compensation Gateway Australian Property Securities Sector Gateway Diversified Aggressive Growth Gateway International Bond Sector Trust - $A Hedged Gateway International Share Sector Compensation status ANZ Master Trusts ANZ Equity Imputation Trust ANZ Equity Trust No 1 ANZ Fixed Interest Trust ANZ Index Funds ANZ Australian Equities Index ANZ Balanced Index ANZ International Equities Index Notes The list of funds which could result in investor compensation will change as the review progresses. This list will be regularly updated.
Sydney, Australia 20 September 2005 ING Australia provides Enforceable Undertaking to ASIC ING Australia and some of its major subsidiaries have voluntarily provided an Enforceable Undertaking to industry regulator ASIC to compensate investors affected by past unit price errors. ING Australia, a joint venture between ING Group and ANZ, identified the potential for errors in May last year and immediately commissioned independent consultant PricewaterhouseCoopers (PwC) to conduct a review. The industry regulators were informed and a dedicated project team, working closely with the regulators, was established to strengthen processes and controls, and review all funds that were potentially affected. Chief Executive Officer of ING Australia, Paul Bedbrook, said: This voluntary, formal undertaking underlines our commitment to protect investors interests. We have strengthened our unit pricing processes and controls, incorporating the recommendations of PwC. Our detailed review will ensure that identified errors are corrected, and that investors entitled to compensation are identified and paid. The review of funds is well underway. Identified compensation will commence shortly and most of it is expected to be paid over the coming months. An External Unit Pricing Expert will monitor the compensation program as detailed in the Enforceable Undertaking. Further information is provided on ING s website www.ing.com.au or by calling the dedicated call centre on Ph. 1800 782 887 for customers and 1800 674 078 for advisers. Ends. ING Australia Limited (ING Australia) is one of Australia s leading fund managers and life insurers with over $30 billion in assets under management and 2,400 staff. ING Australia is a joint venture between the global ING Group, which owns 51%, and one of Australia s major banks, ANZ, which owns 49%. Following the formation of the joint venture between ING and ANZ in 2002, ING Australia and its subsidiaries became the responsible entities for unit trusts, superannuation and life funds that were previously managed by ANZ subsidiaries. ING Group is one of the world s largest wealth managers with more than 60 million customers in 50 countries and 114,000 staff. ING Group s global head office is in Amsterdam, The Netherlands, with operational headquarters around the world including Sydney, Australia. Page 1 of 1
ING Australia s Unit Pricing Program Information Booklet February 2006 This Information Booklet contains important information about your compensation payment which you should read.
Contents 1. Introduction 2. Overview 3. Types of unit pricing errors > Financial data errors > Tax accrual errors > Fee errors 4. Compensation entitlements > How we are working out the compensation > The compensation calculation financial data errors > The compensation calculation tax accrual errors > The compensation calculation fee errors > How will compensation be paid? 5. Tax information 6. Investors receiving a Centrelink or Department of Veterans Affairs benefit 7. How to contact us and other information 1. Introduction ING Australia Limited (ING Australia) has been reviewing its unit pricing processes. Some of our funds have been affected by unit pricing errors which occurred up to September 2004. We are therefore undertaking a Unit Pricing Program to identify, correct and compensate for material unit pricing errors affecting those funds prior to September 2004. The errors relate to particular periods before that date and relate to products issued by: > ING Life Limited ABN 33 009 657 176, AFSL 238341 > ING Funds Management Limited ABN 21 003 002 800, AFSL 238342 > ING Custodians Pty Limited ABN 12 008 508 496, AFSL 238346 > Optimix Investment Management Limited ABN 45 006 790 629, AFSL 238343 > ANZ Managed Investments Limited ABN 61 004 392 269, AFSL 238344 > ANZ Life Assurance Company Limited ABN 63 008 425 652, AFSL 238345. We have been working with industry regulators on this matter and in September 2005 we provided an Enforceable Undertaking to the Australian Securities & Investments Commission (ASIC). This formal agreement with ASIC underlines our commitment to protect investors interests. This Information Booklet provides information about the Unit Pricing Program. You have received it because you are entitled to compensation under our unit pricing error compensation policy. As we are progressively compensating each investment fund, you may be entitled to more than one compensation payment. We will write to you separately for each compensation payment that is made to you. What is the Enforceable Undertaking? The Enforceable Undertaking is an undertaking to the industry regulator ASIC to take agreed action that is enforceable by law. You can view a copy of the Enforceable Undertaking, as well as the public announcements from ASIC and ING Australia, by going to ING Australia s website www.ing.com.au, then to the Unit Pricing Program link in the grey footer located at the bottom of every page of the ING Australia website. You can also access this information by visiting the ASIC website www.asic.gov.au, then going to the Media and Information Releases Section, September 2005 (reference 05-286).
2. Overview In May 2002, the ING Australia joint venture was formed. This combined the Australian and New Zealand insurance and funds management businesses of the ANZ and ING Groups. The joint venture required complex integration of entities, and numerous products and systems. As this integration progressed, we identified issues that had led to unit pricing errors. These included errors in financial data and tax estimates, and are explained further in Section 3. To help ensure the integration was addressing all relevant unit pricing issues, ING Australia engaged independent consultants PricewaterhouseCoopers to report on the status of our unit pricing process. PricewaterhouseCoopers reported in July 2004 with a number of recommendations. Since that time, processes and controls have been strengthened, and we are undertaking a thorough program to identify any errors and to pay compensation to materially affected investors. In February 2006, an External Unit Pricing Expert (Ernst & Young) was appointed to review and report to ASIC and ING Australia about ING Australia s processes in relation to the payment of compensation under the Enforceable Undertaking. 3. Types of unit pricing errors There were three main types of errors: a. financial data errors; b. tax accrual errors; and c. fee errors For financial data errors and tax accrual errors, where a material error led to an understated unit price: > investors who redeemed units when the price was too low are entitled to compensation under our unit pricing error compensation policy > where investors benefited from purchasing units when the price was too low, the fund will be compensated by the amount by which the transacting investors benefited. For financial data errors and tax accrual errors, where a material error led to an overstated unit price: > investors who purchased units when the price was too high are entitled to compensation under our unit pricing error compensation policy > where investors benefited from redeeming units when the price was too high, the fund will be compensated by the amount by which the transacting investors benefited. A material error is explained in Section 4. Investors will not bear the cost of compensation. a. Financial data errors These errors are due to information mismatches, incorrect processing or differences in recording of transactions over time between various information sources. Some resulted from incorrect assumptions and adjustments in determining the published unit price. Where they occurred, most of these errors have affected investors in specific unit trusts, superannuation and life funds who transacted on particular days or during particular periods. b. Tax accrual errors Tax is progressively estimated and set aside in a fund throughout each financial year. These estimates are reconciled with the actual tax paid each year. Some of these reconciliations were not completed on time, resulting in over/under estimation of tax in some funds. Tax-related unit price errors also resulted from incorrect tax estimates made for some life and superannuation investment funds, for items such as capital gains tax and imputation/franking credits. (These tax estimates do not relate to tax attributable to individual investors they only relate to the investment taxes attributable to the funds.) c. Fee errors These errors occurred when an incorrect fee was applied in the calculation of the unit price for the affected fund. This means the investors in those funds were charged a higher fee than was disclosed in the offer document. 2 3
4. Compensation entitlements How we are working out compensation payments We are paying compensation to investors affected by a material error which is a unit price variance of 0.3% or more from what would have been the true price in an investment portfolio on a given day. Investors affected by a material error are being paid compensation where: > the sum of an investor s entitlement is $0.01 or more per investment option as a result of the investor transacting on one or more incorrect unit prices; or > an investor has been adversely affected by inaccurate tax estimates by $0.01 or more per investment option. The industry standard recommends that we use an appropriately determined tolerance level. ING Australia considers that a 0.3% tolerance is appropriate. The tolerance is used because unit pricing occurs regularly (usually daily) and at times relies on estimates. An example is the estimates for tax on investment income. If we had to wait for the exact data, we would be unable to process investor transactions in a timely manner. We are applying the 0.3% tolerance to financial data errors, and then separately to tax accrual errors. Where multiple errors impact a unit price on any one day, the industry standard requires the combined effect of those errors to be measured to verify whether the tolerance level has been reached. Where the tolerance of 0.3% is reached, the total error is assessed for compensation. However, where it was not reached, there is no entitlement to compensation under our unit pricing error compensation policy. Any fee errors are being fully compensated (the 0.3% tolerance does not apply to fee errors). The compensation calculation financial data errors To calculate your compensation amount, an individual calculation was made as follows: (a) We identified whether a material unit pricing error occurred in your investment fund. (b) We identified your transactions which were in the affected period including the number of units or proceeds you received. (c) We calculated the corrected unit price which should have applied when you transacted. (d) We calculated the number of units or proceeds you should have received when you transacted. (e) We calculated the difference between the number of units or proceeds on which you actually transacted and (d). (f) We calculated an additional allowance on the amount determined under (e) for investment performance, and either distributions (for continuing investors) or interest (for exited investors), as appropriate. The compensation calculation tax accrual errors To calculate your compensation amount, an individual calculation was made as follows: (a) We identified whether a material unit pricing error occurred in your investment fund. (b) We identified the investors disadvantaged by the unit price error. (c) We apportioned the dollar value of the error across all disadvantaged investors in proportion to their holdings. (d) We then calculated an additional allowance on the amount determined under (c) for investment performance, and either distributions (for continuing investors) or interest (for exited investors), as appropriate. The compensation calculation fee errors Where fees have been overcharged the difference is paid in compensation. All fee errors are compensated in full, no tolerance is applied with respect to the identification and compensation of fee errors. How will compensation be paid? This depends on a number of factors including product type and whether you are a current or exited investor. The letter accompanying this booklet advises your method of payment. 4 5
5. Taxation information Whether or not you will have a tax liability in respect of the amount received will depend on a number of factors, including your personal situation and product type. We cannot provide you with taxation advice that takes into account your personal circumstances. If you have further questions about the tax treatment of your compensation payment we recommend you seek your own tax advice. 6. Investors receiving a Centrelink or Department of Veterans Affairs benefit This information is relevant if you are receiving a pension or other income support payment from Centrelink or the Department of Veterans Affairs. If your compensation is paid by cheque and is $1000 or more, you will need to contact Centrelink or the Department of Veterans Affairs within 14 days of receiving the compensation and inform them you have received this payment. (Centrelink has advised it is not necessary to inform them about compensation payments made by cheque which are less than $1000.) If you have been compensated by an adjustment to your investment, you do not need to take any immediate action. The adjustment will be incorporated in the DSS Summary you can request when required for your next Centrelink review. If you are concerned or unsure what to do, we recommend you seek your own advice from your financial or tax adviser regarding any tax or social security impacts of your compensation payment. 6 7
7. How to contact us and other information What to do if you have a complaint? We have established procedures to ensure all enquiries and complaints are properly considered and dealt with. If you have an enquiry or complaint about the unit pricing program, please phone our dedicated Call Centre on 1800 782 887, weekdays from 9am to 6pm (Sydney time), or write to us at: Complaints Resolution Officer ING Customer Service Group GPO Box 5306 Sydney NSW 2001 If you are not satisfied with our response, you may lodge a written complaint with the relevant organisation listed below: Non Superannuation / Insurance / Investment products Financial Industry Complaints Service (FICS) PO Box 579 Collins Street West Melbourne VIC 8007 Fax: 03 9621 2291 Phone: 1800 335 405 Email: fics@fics.asn.au Internet: www.fics.asn.au Superannuation products Superannuation Complaints Tribunal Locked Bag 3060 Melbourne VIC 3001 Fax: 03 8663 5588 Phone: 1300 884 114 Email: info@sct.gov.au Internet: www.sct.gov.au Need more information? For more information, you can refer to our website www.ing.com.au and click on Unit Pricing Program update. We regularly update this page to report on our progress on resolving and compensating the unit pricing errors. You can also phone our dedicated Call Centre on 1800 782 887, weekdays from 9am to 6pm (Sydney time), for more information about your entitlement and the Unit Pricing Program. Fund / Investment Option names Please note that fund names do occasionally change. It is possible that the name of the fund in which you were invested at the time of a unit price error may have since changed. If the name of a fund has changed, it will be referred to by its new name in your compensation letter. These external, independent bodies have been established to help clients who have tried to resolve their complaint with the relevant financial institution but have been unable to do so. We are bound by their decisions. It is important that you contact us in the first instance so we can endeavour to resolve your complaint. 8 9
www.anz.com A2285_0206