Treasury Managment Guidelines

8/13/2019 Treasury Managment Guidelines

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TreasurymanagementguidelinesBorrowingandInvestmentPowersAct2007June2007


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Treasurymanagementguidelines

BorrowingandInvestmentPowersAct2007,June2007 i

Contents

ExecutiveSummary......................................................................................................1

1. Purpose.............................................................................................................3

2. AdministrativeFramework................................................................................4

2.1 BorrowingandInvestmentPowersAct........................................................................................42.2 BorrowingPowers........................................................................................................................4

2.3 InvestmentandFinancialArrangement(Derivative)Powers......................................................5

3. PublicSector

Debt

Management

Objectives

.....................................................

7

4. RolesandResponsibilities.................................................................................8

4.1 DepartmentofTreasuryandFinance(DTF)................................................................................8

4.2 TreasuryCorporationofVictoria(TCV)........................................................................................8

4.3 GovernmentBusinessEnterprises(GBEs)...................................................................................9

5. TreasuryManagementGuidelines..................................................................12

5.1 Guidelinesforthedevelopmentofbusinessspecifictreasurymanagement

policies ......................................................................................................................................13

5.2

Guidelinesfor

GBEs

without

Board

approved

treasury

management

policies

.........................16

6. ManagementofInvestments..........................................................................19

7. ComplianceMonitoringFramework...............................................................20

Schedules...................................................................................................................21

Schedule1: GBEsundertheBorrowingandInvestmentPowers(BIPAct)1987.............................21Schedule2: ProFormaAnnualBorrowingApprovalRequest.........................................................23

Schedule3: ProFormaBorrowingPowers......................................................................................25

Schedule4: ProFormaFinancialArrangement(Derivative)Powers...............................................29

Schedule5:

Pro

Forma

Investment

Powers

....................................................................................30

Schedule6: PublicSectorDebtManagementObjectives................................................................32

Schedule7: RecommendedInterestRateandRefinancingRiskLimitsforGBEs

DevelopingTheirOwnTreasuryPolicies...................................................................................34

Schedule8: ProFormaAnnualCertificationofCompliance............................................................35


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BorrowingandInvestmentPowersAct2007,June2007 1

ExecutiveSummary

ThepurposeoftheTreasuryManagementGuidelines(theGuidelines)istosetaframework

toguideGovernmentBusinessEnterprises(GBEs)inthedevelopmentandmanagementof

theirtreasuryfunction.Theframeworkisdesignedtoensureconsistencywith:

thedebtandfinancialmanagementobjectivesandrisktoleranceoftheState; theinstitutionalandadministrativestructureforpublicsectortreasurymanagement;and theaccountabilityframeworkthathasbeenestablishedundertheGBEreformprogram.Section2oftheseGuidelinesoutlinesthelegislativeframeworkthatgovernstheborrowing

andinvestmentpowersofGBEs.Statutoryauthoritiesobtaintheirpowertoborrowand

investunder

the

provisions

of

the

BorrowingandInvestmentPowersAct1987(BIPAct).

ThesepowersaregrantedbytheTreasurersubjecttotheauthorityobservingthe

Guidelines.Specialarrangementsapplytocorporationslawcompaniesestablishedaspartof

theGBEreformprogram,whichrequirethemtoobservetheseGuidelines.

Section3outlinestheGovernmentsoverallpublicsectordebtmanagementobjectives

whichare:

toensuretheStatesnetdebtismaintainedataprudentlevel; toensureaccesstofinancialmarkets; tominimiseborrowingcosts;and

to

ensure

effective

management

of

the

States

financial

risks.

TherolesandresponsibilitiesoftheDepartmentofTreasuryandFinance(DTF),Treasury

CorporationofVictoria(TCV)andGBEsinachievingtheseobjectivesareexplainedin

Section4.DTFisprimarilyresponsibleforensuringthattheGovernmentsobjectivesare

achievedbysettingguidelinesandrecommendingborrowingandinvestmentpowersto

applytoGBEs.TCVisresponsibleforensuringthattheStatesfundingandotherfinancial

marketrequirementsareachievedandtoprovidefinancialproductsandotherservices

whichmeetthefundingandriskmanagementneedsofitsclients.TheBoardsofGBEsare

responsiblefordeterminingtheirownfundingneedsandmanagingtherisksassociatedwith

theirbusiness.BydealingthroughTCV,funding,financialtransactionsandmarketrisksfaced

byGBEsarereduced,allowingGBEstofocusontheircorebusinessrisks.

InSection

5,

the

Guidelines

are

outlined.

The

objective

of

the

Guidelines

is

to

ensure

that

theBoardsofGBEsareadoptingtreasurypoliciesthatareconsistentwiththeGovernments

objectivesandwhichensurethatfinancialrisksoftheGBEsareeffectivelymanaged.Under

theGuidelines,DTFformallynotestreasurypoliciesthatareapprovedbyGBEBoards.

Section5.1providesanoutlineastowhatshouldbecontainedinatreasurypolicyforthose

GBEsthatchoosetodeveloptheirownbusinessspecificpolicydocument.Section5.2

containstherecommendedapproachforthoseGBEsthathavenotdevelopedabusiness

specifictreasurymanagementpolicyandalsotosmallerGBEsthatdonothavesufficiently

sophisticatedtreasuryoperationstowarrantthedevelopmentofabusinessspecificpolicy.

OncetreasurymanagementpoliciesareapprovedbytheGBEBoard,itisessentialthatthe

Board

is

satisfied

that

the

organisation

is

in

fact

operating

within

the

approved

limits

and

policiescontainedinthepolicydocument.Section7outlinesacompliancemonitoring


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2Treasurymanagementguidelines

BorrowingandInvestmentPowersAct2007,June2007

frameworkincludingtherequirementthatGBEscertifytoDTFonanannualbasisthatthe

organisationisoperatingwithintheapprovedtreasurypolicyparameters.


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1. Purpose

ThepurposeoftheseGuidelinesistosetaframeworktoguideGBEsinthedevelopment

andmanagementoftheirtreasuryfunction.Byworkingwithintheframework,theTreasurer

canbeassuredthatGBEtreasuryoperationsareconsistentwith:

theoveralldebtandfinancialmanagementobjectivesoftheState; theinstitutionalandadministrativestructureforthetreasurymanagementofborrowings

andinvestmentsinVictoria;

theaccountabilitiesandmanagementframeworkundertheGBEreformprogramimplementedbytheGovernment;and

theidentification,

measurement

and

prudent

management

of

the

GBEs

financial

risks.

Theissueoftreasuryriskmanagementisoneofgreatimportanceinthewiderfinancial

community.TheAustralianSocietyofCertifiedPractisingAccountantshasissueda

handbookentitledUnderstandingandManagingFinancialRiskwhichoutlinestherelevant

issuesintreasuryriskmanagement.Thishandbookisapracticalguidethatcanbeusedin

thedevelopmentofatreasurypolicydocumentandtheprinciplesandconceptscontained

inthehandbookhavebeenincorporatedintotheseGuidelines.

TheseGuidelinesapplytoPublicTradingEnterpriseswhosepowertoborroworinvestis

governedbytheBIPAct.TheseGuidelinesdonotapplytoPublicFinancialEnterprises

operatingundertheBIPActwhicharesubjecttoseparateprudentialframeworks.State

owned

corporations

law

companies

established

during

the

recent

industry

reform

are

coveredbytheseGuidelines.AlthoughtheBIPActdoesnotdirectlyapplytothese

companies,theTreasurerhasdirectedthattheyobserveaframeworksimilartotheBIPAct

includingobservanceoftheseGuidelines.Schedule1providesdetailsofthesourceof

borrowingandinvestmentpowersforindividualGBEs.

TheseGuidelinesreplacetheTreasuryManagementGuidelinesissuedbyDTFinMarch

2000.OverthepastdecadetherehavebeensignificantdevelopmentsintheGovernments

approachtotreasurymanagementissues,particularlythroughthecentralisationofthe

StatesexposuretofinancialmarketsbytheestablishmentandpromotionoftheTreasury

CorporationofVictoria(TCV)astheStatescentralisedtreasuryoperation.

ForthepurposeoftheseGuidelines,adistinctionhasbeenmadebetweenmajorand

smallerGBEs.

Major

GBEs

are

defined

as

those

GBEs

with

gross

debt

or

investments

equal

to

orgreaterthan$20million,andsmallerGBEsaredefinedasthoseGBEshavinggrossdebtor

investmentsbelow$20million.TherequirementsinrelationtotheseGuidelineswilldiffer

dependingupontheclassificationoftheGBEandarefurtherexplainedinSection5.

MajorGBEsareexpectedtodevelopabusinessspecifictreasurypolicydocumentwhich

addressesthefinancialrisksoutlinedinSection4.3oftheseGuidelines.SmallerGBEsare

givenanoptiontoeitheradopttheirownbusinessspecifictreasurypoliciesapprovedby

theirBoard,oralternatively,tooperatewithintherecommendedlimitsspecifiedinthese

Guidelines(Section5.2).

Oncedeveloped,thepolicydocumentisrequiredtobesubmittedtoDTFforcommentprior

toobtaining

Board

approval.

Following

Board

approval,

the

treasury

policy

document

should

beforwardedtoDTFforformalnoting,togetherwithacopyoftheBoardminute

documentingtheBoardapproval.


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2. AdministrativeFramework

2.1 BorrowingandInvestmentPowersActThepurposeoftheBIPActistoprovidestatutoryauthoritieswiththepowertoborrowand

investinawiderangeoffinancialproductsandtoaccessthefinancialarrangements

requiredtoeffectivelymanagetheirdebtandinvestmentportfolios.

TherearearangeofpowersavailableundertheBIPActincluding:

Section5 OverdraftinAustralia;

Section8 FinancialaccommodationinAustralia;

Section

9

Financial

accommodation

within

or

outside

Australia;

Section10 Financialleases;

Section11 Financialarrangements(derivatives)and;

Section20 Investmentpowers.

ThespecificpowersavailabletoindividualstatutoryauthoritiesarespecifiedinSchedule1

oftheBIPAct.TheBIPActprovidesthesepowerssubjecttotheapprovaloftheTreasurer

andinthecaseofinvestmentpowers,theTreasurerandtheGovernorinCouncil.The

powersgrantedtocorporationslawcompaniesformedaspartoftheGBEreformprocess

arebasedontheBIPframework.

Thespecificfinancialarrangement(derivatives)andinvestmentpowersgrantedtoGBEsare

listedintheGovernorinCouncilandTreasurersapprovalratherthantheBIPAct.

ThepowersgrantedbytheTreasureraretailoredtotherequirementsoftheindividualGBEs

ensuringthattheyareenteringintofinancialtransactionsthatareappropriatetotheir

businesses.

AllfinancialaccommodationandfinancialarrangementssubjecttoaGovernment

guaranteearerequiredtobetransactedthroughTCV,otherthanbankoverdrafts(tocover

overnightrequirements)andspecificallyexemptedtransactions.Nogeneralapprovalsare

grantedtoenterintostructuredtransactionsincludingfinanceleasesandaccordingly

specificapprovalforindividualtransactionsmustbesoughtfromtheTreasurer.

BorrowingandinvestmentpowersaregrantedtoGBEsonthebasisthattheyobservethese

Guidelines.

2.2 BorrowingPowersTheBIPActframeworkoperatesonanannualcycle.EachyearinJune,theTreasurer

approvestheborrowingrequirementsandtheborrowingpowersforeachGBEoperating

undertheBIPActforthefollowingfinancialyear.Theborrowingrequirementsshouldbe

consistentwithbusinessandcorporateplansapprovedbytheGovernmentwhichinturn

willensurethatthelevelofborrowingsforeachGBEisconsistentwiththeState'saggregate

financialplanningandobligationstotheAustralianLoanCouncil.

InordertoobtaintheTreasurersapprovalfortheannualborrowingprogramand

borrowingpowersofGBEs,DTFwillsurveyGBEsborrowingrequirementsfortheupcoming

financialyearinaformatconsistentwithSchedule2,inApril/Mayeachyear.The

Treasurersapprovalwillbeinthefollowingform:


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NewFinancialAccommodation; RefinancingofFinancialAccommodation(maturingandnonmaturing); TemporaryPurposeBorrowings;and Overdraftrequirements.Approvalfortheoverdraftwillbegivenonanongoingbasisuptoanapprovedlimit.

Approvalfortherefinancingofdebtwillalsobeonanongoingbasisasrequired.Borrowing

approvalswillbegivenontheunderstandingthatanydebtrepaymentsspecifiedinthe

borrowingapprovalrequestwillbeachieved.ThiswillensureconsistencywiththeStates

LoanCouncilAllocation.

BorrowingpowersgrantedtoGBEsundertheBIPActareadministeredbytheCommercial&

InfrastructureRiskManagement(CIRM)GroupofDTF.Schedule3providesaproformaof

thestandardborrowingapprovalsthataregrantedtoGBEs

Queriesinrelationtoborrowingpowersandapprovalsshouldbeaddressedto:

AssistantDirector,

Commercial

&

Infrastructure

Risk

Management

Group

DepartmentofTreasuryandFinance

Level5,1TreasuryPlace

MelbourneVIC3002

Tel: 96510923

Fax: 96515211

2.3 InvestmentandFinancialArrangement(Derivative)PowersIn

order

for

GBEs

to

manage

surplus

funds

and

financial

risks,

investment

powers

and

financialarrangement(derivative)powersaregrantedbytheTreasurer.Investmentpowers

whichareapprovedbytheGovernorInCouncilandtheTreasurerprovideGBEswithalistof

instrumentsinwhichtheGBEsareauthorisedtoinvestin.Thelistofapprovedinstruments

willdependuponthenatureoftheorganisationandthelevelofinvestmentscurrentlyheld

andanticipatedinthefuture.

GBEsareencouragedtoapplysurplusfundstotherepaymentofdebtratherthanholding

surplusfundsasinvestmentstoensureGBEsachievelowerborrowingcostsandminimise

interestraterisk.SuchapolicymayalsoassistGBEsinachievingoptimalgearingandtarget

capitalstructures.

Financialarrangement(derivative)powersapprovedbytheTreasureraregrantedtoGBEsto

ensurethat

the

assets

and

liabilities

of

an

organisation

are

effectively

managed

and

protectedagainstfinancialrisks.Thefinancialarrangements(derivative)powersgrantedto

aGBEaredependantuponthenatureoftheorganisation,theexistingassetsandliabilities,

expectedassetsandliabilitiesandthetypeofexposurestobemanaged.DTFspreferenceis

forGBEstotransactusingthephysicalmarketratherthanderivativesasitallowsforgreater

transparency,lessongoingmanagementeffortandremainsconsistentwiththeconservative

riskphilosophyoftheState.Schedule4providesaproformaofthestandardfinancial

arrangement(derivative)powersthataregrantedtoGBEs.

Investmentpowersandfinancialarrangement(derivatives)powersareadministeredbythe

CIRMGroupinDTF.YourorganisationwillneedtoprovideinformationtoCIRMonthetype

of

powers

you

wish

to

be

granted

including

a

business

case

with

supporting

information

suchassizeandmaturityprofileofyourdebtandinvestmentportfolios.Schedule5provides

aproformaoftheinvestmentpowerswhichDTFwillberecommendingtotheTreasureras

thestandardinvestmentpowerstobegrantedtoallGBEs.


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Requestsforspecificpowersshouldbeaddressedto:

AssistantDirector,Commercial&InfrastructureRiskManagementGroup


Level5,1TreasuryPlace

MelbourneVIC

3002

Tel: 96510923

Fax: 96515211


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3. PublicSectorDebtManagementObjectives

TheGovernmentsoveralldebtmanagementobjectivesfortheStateareasfollows:

a) EnsuretheStatesnetdebtismaintainedataprudentlevel;b) Ensureaccesstofinancialmarkets;c) Minimiseborrowingcosts;andd) ManageeffectivelytheStatesfinancialrisks.

Schedule6providesamoredetaileddescriptionofthegovernmentsdebtmanagement

objectives.

ThebroadapproachtothemanagementoftheStatesfinancialrisksunderlyingthese

Guidelines

is

firstly

to

minimise

and

control

financial

risks

by

managing

funding

and

financial

marketriskscentrallyandsecondlytoensurethateffectivepoliciesandproceduresarein

placetohedgeormanagethoserisksthatremaininindividualGBEs.


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RequestsforfurtherinformationonTCVsproducts,services,rolesandresponsibilities,in

relationtotheseGuidelines,shouldbedirectedto:

TreasuryClientServices

TreasuryCorporationofVictoria

Level12,

1Collins

Street

MelbourneVIC3000

Tel: 96514800

Fax: 96514880

4.3 GovernmentBusinessEnterprises(GBEs)SubjecttotheseGuidelinesandanyotherconstraints,theresponsibilityforthe

managementoftheborrowings,investmentsandfinancialriskofGBEslieswithitsBoard.As

thebusinessofeachauthority/companyisdifferent,theBoardisinthebestpositionto

understandthenatureoftheirbusinessandtheresultingfinancialrisks.Inordertoensure

thatthese

risks

are

effectively

managed,

it

is

essential

that

the

GBE

Boards

approve

treasury

policiesandprocedureswhichensurethatfinancialrisksareprudentlymanaged.

ThenatureofthemajorfinancialrisksfacedbyGBEsareasfollows:

(a) InterestRateRisk

WhileTCVisresponsibleformanagingthefundingandfinancialmarketriskoftheState,

GBEsareresponsibleforthemanagementofinterestrateriskontheirborrowings.Interest

rateriskistherisktoearningsorcapitalarisingfrommovementsininterestrates.Interest

rateriskfacedbyGBEsarisesfrom:

Differencesbetweenthetimingofinterestratechangesandthetimingofcashflows(repricing

risk);

Changingraterelationshipamongdifferentyieldcurvesaffectingactivities(basisrisk);and

Changinginterestraterelationshipacrossmaturities(yieldcurverisk).Underthecentralisedmodel,basisriskandyieldcurveriskaremanagedbyTCV.

Accordingly,GBEsmustdeterminenotonlytheirfundingandcashflowrequirements,but

alsothetypeofborrowing,itstermtomaturityandinterestrateriskmanagement

strategies.Interestrateriskmaybemitigatedbyincludingamixoffixedandfloatingrate

debtwitharangeofmaturitiesintheliabilityportfolio,andensuringthatnewor

replacementdebtisaddedinawaythatminimisesanyconcentrationofmaturitiesor

repricingdates.

TCVisresponsibleforprovidingfinancialproductswhichmeettheGBEsinterestraterisk

managementneeds.Inaddition,TCVisavailabletoprovideadviceinrelationtointerestrate

riskmanagementandfundingissues.

(b) LiquidityRisk

GBEsareultimatelyresponsibleforthemanagementofliquidityriskoftheiroperations.

LiquidityriskistheriskthataGBEdoesnothavesufficientfundsavailabletomeetcash

outflowcommitmentsorfacesaliquiditycrisisbroughtonbyunforeseenevents.Liquidity

riskconsistsoftwomainelements:fundsriskandtransactionrisk.

FundsriskistheriskthattheGBEwillnotbeabletomeetitsobligationsastheyfalldue.Thisisacashflowriskanditismanagedbyensuringthatadequatefundsofthecorrect

currencyareavailableintherightplacesattherighttime.


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Transactionriskistheriskthatlosseswillarisefrombeingexposedtoanilliquidmarket.Thistiesverycloselytomarketrisk.Ifmarketratesbecomemorevolatile,transaction

riskincreasesfortheGBEifittriestosellorbuyinthemarket.

Underthe

Governments

centralised

treasury

model,

GBEs

are

responsible

for

managing

the

fundsrisk.TCVisresponsibleformanagingthetransactionriskandensuringthatfunding

linesarealwaysavailabletotheirparticipatingauthorities.Consequently,GBEsshouldfocus

onmanagingliquidityriskthroughcarefulcashflowforecastinganddevelopingan

appropriatematurityprofiletomanagerefinancing.

(c) ForeignExchangeRisk

Foreignexchangeriskistherisktoprofitorcapitalfromachangeinaninvestmentsvalue

duetoachangeinforeignexchangerates.Foreignexchangeexposuresfallintothreetypes:

Transactionexposures,resultingfromnormaloperationalbusinessactivities(tradepurchasesandsales,shorttermborrowings,etc);

TranslationexposuresresultingfromconversionoflongtermforeigncurrencyassetsandliabilitiesintoAustraliancurrency(capitalitems,etc);and

Competitiveexposuresthatmayresultfromadoptingadifferentapproachtomanagingforeignexchangeexposuresfromthattakenbytheorganisationscompetitors.

Underthecentralisedtreasurymodel,GBEsarenotexpectedtoexperiencetranslation

exposuresasTCVonlylendsoracceptsdepositsinAustraliandollars.Competitiveexposures

arealsolikelytoberelativelyminorbecausemostGBEsarenotsubjecttodirect

competitionwiththeprivatesector.

ThemostsignificantcurrencyexposuresfacedbyGBEsarecashflowexposures.TCVoffersa

varietyof

specific

market

instruments

to

manage

these

exposures,

including

forward

foreign

exchange,currencyswaps,currencyfuturesandoptions,whichlendthemselvesreadilyto

transactionexposures.

TheBoardsofGBEsareresponsiblefordevelopingpoliciesandproceduresinrelationto

foreignexchangeriskwhichidentifytheforeignexchangeexposureandrecognisethe

Treasurersrequirementthattheseexposuresbefullyhedged. Policiesshouldtherefore

specificallyaddresshowanyexposurearisingfromtradetransactions(payables/receivables)

istobemanagedsoastoeliminateforeignexchangerisk.

(d) CommodityPriceRisk

Commoditypriceriskistheriskthatachangeinthepriceofacommoditythatisakeyinput

oroutput

of

abusiness

will

adversely

affect

its

financial

performance.

It

should

be

noted

thatmanycommoditieshaveaforeignexchangecomponentintheir$Apriceforexample

oil,goldandsugar.

Commoditypriceriskmaybecontrolledandmanagedbyarangeoffinancialinstruments

thatincludeforwardsalesandpurchases,futures,swaps,andoptions,whichcanbe

arrangedthroughTCV.

TheBoardsofGBEsareresponsiblefordevelopingappropriatepoliciesandproceduresfor

managingexposuretospecificcommodityriskwheretheBoardconsiderstheseriskscould

haveamaterialimpactonthebusiness.

(e) CreditRisk

Creditriskistheriskthatanotherpartyinatransactionwillfailtomeetitsfinancial

obligations. Creditriskmayinclude:


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Counterpartyrisk,whichistheriskthattheotherpartytoatransactionwillnotmeetitsobligationsastotimingoramountofsettlement;

Country/political/soverignriskassociatedwithgovernmentdirectivesandpoliciesthatmayaffectthecontractualperformanceofeitherpartytothetransaction,andthatare

generallybeyond

the

direct

control

of

the

counterparty;

and

Settlementordeliveryriskthatmayexistifthereisadefaultinasinglesettlementordelivery,inwhichcaseallotherexposuresorpositionswiththatcounterpartywillbe

closedout,thusestablishingclaimsfortransactioncosts.

CreditriskarisesfromdirectfinancialmarketactivitiesandarelargelycarriedbyTCV.

PoliciesinrelationtocreditriskshouldthereforebefocusedonnonTCVinvestmentsand

nonfinancialmarkettransactions.

(f) OperationalRisk

Operationalriskistheriskoflosingmoneyasaresultoffailuresinsystems,peopleor

proceduresin

agiven

market.

The

focus

of

operational

risk

management

within

atreasury

policyrelatestotherolesandresponsibilitiesofstaffemployedinthetreasuryfunctionand

therelatedsystems.Financiallosscanoccurinthetreasuryfunctiondueto

mismanagement,error,fraud,omission,theft,unauthoriseduseoftechniquesand/or

financialproducts,orinadequateinformationsystems.Operationalrisksaremanagedby

havinganadequatecontrolframeworkinplacewhichlimitsauthority,establishes

supervisionandseparatessensitiveduties.Themanagementapproachtooperationalrisk

shouldbetoclearlydefinetherolesandresponsibilitiesofstaffemployedinthetreasury

section.Themanagementofoperationalriskwithinthetreasuryfunctionshouldbe

consistentwithbroaderenterprisewideriskmanagementpoliciesoftheGBE.


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5. TreasuryManagementGuidelines

TheobjectivesoftheGuidelinesaretoensurethatthefinancialrisksofGBEsarebeing

effectivelymanagedandthattheobjectivesandstrategiesadoptedbyGBEsareconsistent

withtheoverallobjectivesoftheGovernment.TheGuidelinesseektoachievethisby

providingaframeworkforGBEBoardstofollowinthedevelopmentofatreasury

managementpolicy.

Section5.1outlinesaframeworkforGBEsdevelopingbusinessspecifictreasurypolicies.

ThissectionisgenerallyforGBEswithgrossdebtorinvestmentsequaltoorgreaterthan

$20million.Section5.2outlinesaminimumstandardoftreasurymanagementpolicyand

limitsforsmallerGBEs(thosewithgrossdebtorinvestmentssmallerthan$20million)that

maynot

want

to

develop

their

own

business

specific

treasury

policy.

TheGuidelinesseektoprovideageneralframeworkforwhichGBEsaretoworkwithin.

ThereareinstanceswhereGBEsmaywishtodiscusstheirindividualcircumstancesor

particularissueswithDTF.Suchinstancesmayinclude:

DiscussionofinitialborrowingprogramwithDTFtoensurethereisastrategyinplacetoachievethedesiredspreadofmaturitiesacrossthetermstructure.

Discussionoftheimpactthatanyregulatoryregimemayhaveontheirborrowingrequirements.

DiscussiononforeseeablebreachestotheTreasuryPolicy.GBEs

are

encouraged

to

develop

treasury

management

policies

that

best

address

the

financialrisksoftheGBEsbusiness.TheStatehasaconservativeriskphilosophyforthe

managementoffinancialrisksandisthestakeholderandguarantorofGBEs.Itis

appropriatethereforeforBoardstodeveloptreasurypoliciesthatareconsistentwithboth

theunderlyingbusinessandtheconservativeriskphilosophyoftheState.Inordertoensure

thattheStatestreasuryrisksarebeingproperlymanaged,powersgrantedtoGBEsbythe

TreasurerundertheBIPACTaresubjecttotheGBEobservingtheGuidelines.

DTFisresponsibleforensuringthattheGovernmentsobjectivesinrelationtotreasury

managementarebeingachieved.InthisroleDTFreviewsGBEtreasurypoliciesandadvises

onanyareaswherethepolicymaybeinadequateorinconsistentwiththeStatesoverall

objectives.GBEsarerequiredtoforwarddraftpoliciestoDTFforcommentpriortoseeking

Boardapproval.

Following

Board

approval,

the

treasury

policy

document

should

be

forwardedtoDTFforformalnoting,togetherwithacopyoftheBoardminutedocumenting

theBoardapproval.

PolicydocumentsthathavebeenformallynotedbyDTFwillbeforwardedtoTCV.GBEsare

encouragedtoconsultTCVinthedevelopmentorreviewoftheirpolicies.Thisensuresthat

TCVisawareofGBEstreasuryobjectivesandneeds.GBEsarerequestedtoadviseDTF

whensubmittingtheirpoliciesiftheydonotwishtheirpolicydocumenttobeautomatically

forwardedtoTCV.

ItislikelythatGBEswillneedtoupdatetheirtreasurypoliciesfromtimetotime.Any

revisionofthetreasurypolicydocumentwillneedtoberesubmittedtoDTFforformal

comment

prior

to

obtaining

Board

approval.

This

ensures

that

DTF

is

provided

with

the

latesttreasurypolicydocumentandisinkeepingwiththecompliancecertification

framework.


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Draftpoliciesforcommentandpoliciesbeingsubmittedforformalnoting,includingany

queriesinrelationtotheseGuidelines,shouldbedirectedto:

AssistantDirector,FinancialAnalysisandSuperannuation


Level9,

1Macarthur

Street

MelbourneVIC3002

Tel: 96515305

Fax: 96512321

5.1 Guidelinesforthedevelopmentofbusinessspecifictreasurymanagementpolicies

InnotingGBEtreasurymanagementpolicies,DTFwillgiveconsiderationtothefollowing:

consistencywiththeGBEsfinancialaccommodation,financialarrangementandinvestmentpowersapprovedbytheTreasurerundertheBIPAct;

appropriatenessoftheGBEspolicyandrisklimitstoitsunderlyingfinancialrisks; consistencywiththeStatesoverallriskphilosophyandfinancialmanagementobjectives; consistencywiththeGBEsbusinessandcorporateplansapprovedbytheGovernment; themaximumacceptableriskexposureoftheState; and theabilityofTCVtoaccommodatethetransactionsimplicitinGBEsstrategy.TheGuidelinesprovideaframeworkforGBEstofollowwhendevelopingtheirowntreasury

managementpolicies.TheGuidelinesdrawontheAustralianSocietyofCertifiedPractising

Accountantspublication

Understanding

and

Managing

Financial

Risk.

As

the

framework

reflectsbestpracticefortreasurymanagementpolicies,DTFexpectthatalltheitems

containedintheframeworkwillbeaddressedinthepoliciesdevelopedbyGBEs.

(a) IntroductionandOverview

Treasurymanagementpoliciessetparametersfortreasuryriskmanagementandmustbe

consistentwiththebusinessoverallcorporatepolicies,objectivesandriskculture.

Thetreasurypolicyshouldincludesufficientinformationtodetailallaspectsthatare

relevanttoachievingtheprimaryobjectivesofthetreasuryoperation.Althoughthiswill

varyfromoneorganisationtoanotherinitsspecificdetail,itwillbesimilarenoughtoapply

toanyorganisationasfarasitsgeneralstructureisconcernedandshouldcover:

purposeoftreasurypolicy scopeofthetreasurypolicy referencetootherrelevantdocuments maintenanceofthetreasurypolicy,thepositionresponsibleandtheapprovalprocessfor

anychange,includingformalnotingbyDTF.

(b) FinancialObjectivesandStrategies

Thepolicyshouldincludeabriefoutlineoftheobjectivesofthetreasuryoperation,

includingstrategiesdevelopedtoachievethoseobjectives.TherisktoleranceoftheBoard

shouldbe

reflected

in

the

treasurys

objectives

and

strategies.


18/41



(c) RolesandResponsibilityStructureofTreasury

Thepolicydocumentshouldcontaininformationregardingtherolesandresponsibilitiesof

thepartiesinvolvedinthemanagement,controlandreportingoftheorganisationsfinancial

risks.Typicallytheinvolvedpartieswillbesomeorallofthefollowing:

Board; ChiefExecutiveOfficer; ChiefFinancialOfficer; TreasuryCommittee;and TreasuryManager.(d) DelegationofAuthority

ThedelegationofauthorityfromtheBoardleveldownthroughtheorganisationtothe

treasury,andalsowithinthetreasury,formsavitalpartofbothanorganisationsstructure

andthe

treasury

policy.

Alistingofdelegatedauthoritiesanddiscretionarylimits(oftenheldasanattachmenttothe

policy)shoulddetailspecificallywhattransactionsaredelegatedtowhom,whoshould

authorisethemandwhatlimitsapply.Itshouldbecomprehensiveincapturingalltypesof

transactionsthataresubjecttodelegation.

(e) FinancialRiskRecognitionandManagement

Thefinancialrisks(referSection4.3fordefinitions)tobecoveredinthetreasurypolicy

include:

interestraterisk(ReferSchedule7forrecommendedinterestandrefinancingrisklimits); liquidityrisk; foreignexchangerisk; commoditypricerisk; creditrisk;and operationalrisk.Foreachofthefinancialrisksitisimportanttoprovideacleardefinition,detailsofthe

recognition,measurement,timingandobjectivesofriskmanagement.

Indevelopingfinancialriskmanagementstrategies,GBEsshouldgiveconsiderationtothe

followingfactors:

projectedcashflowsofthebusinessovertheshorttomediumterm; thelifecycleofassetsandthestrategiesfortheirreplacement; thenatureandstructureofexistingliabilities; thesensitivityoftheGBEscashflowstomovementsineconomicvariables,commodity

pricesandfinancialmarketvariablese.g.interestrates,inflationratesandexchange

rates;and

therisktoleranceoftheBoard.(f) ApprovedFinancialInstruments

The

treasury

policy

should

include

only

those

instruments

which

have

been

approved

by

the

BoardandtheTreasurerofVictoria(undertheBIPAct).Foreachcategoryofapproved

financialinstrument,thepolicydocumentshouldcoverthefollowing:


19/41



maximummaturityforwhichinstrumentsmaybeenteredinto; maximumamountpertransaction;and listofapprovedcounterparties.(g)

Use

of

Derivatives

Thetreasurypolicyshouldincludeguidelinesfortheuseofderivatives,inparticular:

itemswhichexposetheorganisationtoriskandneedtobehedged; approvedinstrumentswhichareeffectiveinreducingtheexposures;and managementreportstomeasure,monitorandcontrolderivativeactivityincludingmark

tomarketinformationonallopenpositionsbyinstrumentcategory.

Thetreasurypolicyshouldalsoincludestatementsthat:

theinstrumentmustbedesignedasahedgeatthetimeofenteringintotheinstrument; theitemmustnotalreadybeeffectivelyhedgedbyanoffsettingrisk; leveragingoftransactionsisnotpermitted;and tradingactivitiesinthecontextoftransactingtocreateneworadditionalexposuresare

notpermitted.

(h) InternalControlsandSystems

Thetreasurypolicyshoulddetailproceduresregarding:

i. theroleofInternalAudit,includingwhocarriesouttheinternalaudit,frequencyofauditsandtowhomtheresultsareconveyed.

ii. adequateoperationalpoliciesthatreasonablyensurethat: treasurymanagementguidelinesarenotbreached; computersystemsareappropriateanderrorfree; risksarebeingregularlyidentified,measuredandevaluated; appropriatesegregationofduties;and managementpoliciesanddirectivesarebeingadheredto.iii.reportingofbreaches, including proceduresto ensurethat breaches are

reportedappropriatelyandinternalcontrolsamendedifrequired.Thepolicy

shouldalsorecordthatDTFmustbecontactedverbally,andinwriting,ofany

breachesofapprovedpolicy.

(i)

Reportingto

Board

and

Management

Thepolicyshoulddetailthefrequencyandcontentsofreportstomanagementandthe

Boardincludingthereportingoftreasuryactivitiesandadherencetodealinglimits.

(j) AnnualCertificationofCompliance

ThepolicyshouldprovidedetailsontheannualcertificationofcompliancerequiredbyDTF.

Thecertificate(seeSection7andSchedule8foraproforma)istobesignedbythe

ChairmanoftheBoardandChiefExecutiveOfficerandstatesthattheorganisationhasbeen

operatingwithintheparametersspecifiedinthetreasurypolicydocument.


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5.2 GuidelinesforGBEswithoutBoardapprovedtreasurymanagementpolicies

GBEsthathavenotdevelopedabusinessspecifictreasurymanagementpolicyapprovedby

the

Board

and

formally

noted

by

DTF

are

expected

to

operate

within

the

treasury

risk

limits

outlinedinthissection.Iftherearespecificbusinessneedstooperateoutsidethelimitsin

thissection,theGBEisrequiredtoliaisewithDTF.

TheserecommendedGuidelinesaremoreappropriateforsmallerGBEs(thoseGBEswith

grossdebtorinvestmentsbelow$20million),whobelievetheirtreasuryoperationsdonot

warrantacomprehensivetreasurymanagementframeworktobedeveloped.Iftheselimits

andpoliciesaredeemedappropriate,theBoardsofGBEsarerequiredtoacknowledgeand

approvetheselimitsandprovideanannualcompliancecertificatetoDTFasdetailedin

Section7.

(a) InterestRateandRefinancingRiskProfile

Volatilityin

interest

expense

will

arise

predominantly

from

floating

rate

loans

therefore

the

proportionoftotaldebtintheformoffloatingrateloansshouldbelimitedunlessthereare

offsettingsensitivitiesinrevenue.Inaddition,interestexpensevolatilitycanbefurther

reducedbyspreadingmaturitiesacrossthetermstructure.ItisrecommendedthatGBEs

maintainadebtportfoliocompositionasfollows:

Termtomaturity Target% Limits

0 1year* 20% 1030%

1 4years 35% 2050%

4

8years

35%

20

50%

8yearsandover 10% 020%

*Loansmaturingwithin12monthsandtermloanswithfloatingrateresetsshouldbeincludedinthe

0to1yearperiod.

ForGBEswithasmalltreasuryfunction,interestrateriskshouldbemanagedprimarilyin

thephysicalmarketbyobservingthetargetportfoliocomposition.Itisexpectedthatthe

useoffinancialarrangements(derivatives)forinterestrateriskmanagementwillbelimited.

Anexceptionismadeforthemanagementoflargefixedrateloansastheyapproach

maturity.Inthiscase,TCVshouldberequestedtoprovideappropriatefinancial

arrangements

(derivatives)

to

ensure

that

the

refinancing

risk

remains

within

acceptable

bounds.

Thefinancialarrangements(derivatives)thatcanbeusedbyaGBEformanaginginterest

rateriskareidentifiedinthefinancialarrangementspowersapprovedbytheTreasurerfor

eachGBE(seeSection2.3).

Financialarrangements(derivatives)usedtohedgeinterestrateexposuresmustbethose

identifiedintheTreasurersapproval.Itisexpectedthatfinancialarrangements(derivatives)

areonlyundertakenbythosepeopleauthorisedtotransactsuchinstruments.Interestrate

limitcompliancereportingtotheBoardshouldbeundertakenonaregularbasis.

(b) LiquidityRisk

GBEswill

need

to

maintain

funding

sources

or

have

access

to

credit

lines

to

be

able

to

meet

unexpectedfundingrequirements.TCVisabletoprovidethissourceofshorttermfunding.

Therecognitionofliquidityriskisbasedontheregularidentificationandmonitoringofthe


21/41



maturityprofileoftheorganisationsliquidassetsandliabilitiestogetherwithanticipated

cashflows.Regularforecastsshouldbepreparedoffuturecashflowstoeffectivelymonitor

theorganisationsfuturefundingrequirements.

(c) ForeignExchangeRisk

GBEsshouldnotmaintainanyforeigncurrencyexposure.AsTCVonlendstoparticipating

authoritiesinAustralianDollars,noforeigncurrencyexposurecanarisefromnew

borrowings.Foreigncurrencyexposurefrombusinessoperationsshouldbeidentifiedand

fullyhedgedonceexposuresareknownandquantifiable.Thefinancialarrangements

(derivatives)thatcanbeusedbyaGBEformanagingforeignexchangeriskareidentifiedin

thefinancialarrangement(derivatives)powersapprovedbytheTreasurerforeachGBE(see

Section2.3).

(d) CreditRisk

ThemajorityofinvestmentandriskmanagementtransactionsareundertakenwithTCV,

therefore

the

major

credit

risk

exposure

of

a

GBE

is

to

TCV

which

carries

a

credit

rating

equivalenttotheStateofVictoria.

Counterpartylimitssettingoutthemaximumexposureleveltothirdpartiesshouldbe

establishedforallcounterpartiesoftheGBE.Anycreditpolicyinrelationtoinvestments

mustbeconsistentwiththatoftheinvestmentapprovalgrantedundertheBIPAct(see

Section2.3).Theselimitsshouldstatethemaximumexposureleveltoeachcounterparty

andthemaximummaturityperiodforeachfinancialinstrument.

(e) OperationalRisk

Thelownumbersofstaffinvolvedinasmalltreasuryoperationgivesrisetoriskoferroror

fraudresultingfrominadequatesegregationofduties.Inthissituation,internalorexternal

auditorsshould

be

requested

to

report

on

this

matter

and

if

it

is

found

that

there

is

inadequatesegregationofduties,compensatingchecksshouldbeundertakenby

managementtominimisetheriskoferrororfraud.

Inordertoachieveoperationalefficienciesandeffectivesegregationofduties,DTF

encouragestheoutsourcingoftreasuryoperations,suchasriskmanagementadvice,

treasuryaccountingandsystems.TCVisDTFspreferredprovideroftheseservices.

(f) CommodityPriceRisk

Commoditypriceriskistheriskthatachangeinthepriceofacommoditythatisakeyinput

oroutputofabusinesswilladverselyaffectitsfinancialperformance.Giventhatcommodity

riskmayplayasmallifnotnegligibleroleintherisksofmanyoftheGBEs,theBoardmay

notneed

to

set

any

guidelines.

If

at

any

time,

the

GBE

becomes

exposed

to

commodity

risk

it

shouldbeimmediatelyrecognisedandamanagementstrategydeveloped.

(g) AnnualCertificationofCompliance

AnannualcertificatewillneedtobeprovidedtoDTFstatingthattheorganisationis

complyingwiththerecommendedrisklimitsoutlinedabove.SeeSection7forfurther

detailsregardingtheannualcertificationofcompliance.

(h) ReportingPolicyBreaches

ShouldGBEsfindthemselvesoperatingoutsidetheBoardapprovedtreasurypolicyorthe

recommendedlimits,itisrequiredthatDTFbenotifiedimmediatelyverballyandinwriting

ofthe

breach.

The

notification

should

outline

an

explanation

of

the

breach

including

a

strategytocorrectthebreach.NoncompliancewiththeGuidelinesmayresultinGBEs


22/41


23/41



6. ManagementofInvestments

ThemanagementofinvestmentsistheresponsibilityoftheindividualGBEs.However,GBEs

areencouragedtouseanysurplusinvestmentstoreducetheirlevelofdebt.Fromtimeto

timeaGBEmayfinditselfinapositionofhavingsurplusinvestmentswithnodebt.Whileit

isnotexpectedthataGBEwouldremaininapositionofhavingsurplusinvestmentsforany

lengthyperiodoftime,aGBEmaybeholdingsurplusinvestmentspendingfuturecapital

works.InsuchsituationsaGBEisencouragedtoinvestfundstomatchanticipatedfuture

cashflows.Thiswillensurethattheinvestedfundsareavailablewhenrequiredand

borrowingswillnothavetobemadeintheinterimbeforeinvestmentsbecomeavailable.

TCVareavailabletoprovidecompetitiveandappropriatefacilitiestoGBEsforthe

investmentofsurplusfunds.


24/41



7. ComplianceMonitoringFramework

OncetreasurymanagementpoliciesareapprovedbytheBoarditisessentialthattheBoard

issatisfiedthattheorganisationisinfactoperatingwithintheapprovedlimitsandpolicies

containedinthepolicydocument.

AstheBoardisnotexpectedtobeacrossthedetailsofthedaytodayactivitiesofthe

treasuryoperation,seniormanagementmustcertifytotheBoardwhetherornottreasury

activitiescomplywithpoliciesandproceduresasapprovedbytheBoardonaregularbasis.

Fororganisationswithsignificanttreasuryoperations,thiscompliancereportingtothe

Boardshouldbeoccurringonamonthlybasis.Itisalsoanimportantaspectindischarging

thefiduciaryandlegalobligationsofdirectors.

Thecompliance

reporting

to

the

Board

should

include:

asummaryoftreasuryactivitiesovertheperiodincludingreportingagainstapprovedlimitsanddetailsofunrealisedprofits/lossesonoutstandingderivativepositions;

certificationthatallpolicieshavebeenadheredto; detailsofareas,ifany,wherestatedpolicieshavebeenbreached;and identificationofthereasonsfortheoccurrenceofanybreachesandwhatactions,ifany,

havebeentakentorectifythebreachedsituation.

Underthetreasurymanagementframework,theChairmanandCEOofGBEsaretocertifyto

DTFonanannualbasisthattheBoardissatisfiedthattheorganisationisoperatingwithin

theBoard

approved

treasury

management

policies.

Before

this

certification

is

given

to

DTF,

theBoarditselfmustbesatisfiedthattheorganisationisoperatingwithintheBoard

approvedpolicies.TheabovecompliancereportingframeworkallowstheBoardtomake

thisjudgementbeforeitprovidesacertificationofcompliancetoDTF.

Schedule8includesproformasoftheannualcompliancecertificatesapplicabletoGBEs

operatingunderbusinessspecificpoliciesandGBEsoperatingundertherecommended

limitscontainedintheseGuidelines(Section5.2).

ShouldGBEsfindthemselvesoperatingoutsidetheBoardapprovedtreasurypolicyorthe

recommendedlimits,itisrequiredthatDTFbenotifiedimmediatelyverballyandinwriting

ofthebreach.Thenotificationshouldoutlineanexplanationofthebreachincludinga

strategy

to

correct

the

breach.

Non

compliance

with

the

Guidelines

may

result

in

the

GBEs

havingtheirborrowingandinvestmentpowersrevokedandtheGBEmaybeplacedona

moreonerousborrowingandinvestmentapprovalprocess.

TheAnnualCertificateofComplianceisdueonemonthaftertheendofthefinancialyear

andshouldbeforwardedto:

AssistantDirector,FinancialAnalysisandSuperannuation


Level9, 1MacarthurStreet

MelbourneVIC3002

Tel: 96515305

Fax:

9651

2321


25/41



Schedules

Schedule1: GBEsundertheBorrowingandInvestmentPowers(BIPAct)1987

PUBLICTRADINGENTERPRISES

Authority

MetropolitanUrbanWaterBusinessesCityWestWaterMelbourneWaterSouthEastWater

YarraValley

Water

RegionalWaterBusinesses

BarwonWaterCentralHighlandsWaterColibanWaterEastGippslandWaterGippslandWaterGoulburnValleyWaterGrampiansWimmeraMalleeWaterLowerMurrayWater

SouthGippsland

Water

WannonWaterWesternWaterWesternportWater

RuralWaterBusinesses

FirstMilduraIrrigationTrustGoulburnMurrayWaterSouthernRuralWater

PublicFinancialCorporations

RuralFinanceCorporationofVictoriaTransportAccidentCommissionTreasuryCorporationofVictoriaVictorianFundsManagementCorporationVictorianManagedInsuranceAuthorityVictorianWorkcoverAuthority

EnergyBusinesses

StateElectricity

Commission

of

Victoria

VENCorp


26/41



AlpineResortBusinesses

FallsCreekAlpineResortManagementBoardLakeMountainAlpineResortManagementBoardMtBawBawAlpineResortManagementBoardMt

Buller

Alpine

Resort

Management

Board

MtHothamAlpineReportManagementBoard

OtherBusinesses

AustralianGrandPrixCorporationCountryFireAuthorityDairyFoodSafetyVictoriaDirectorofHousingFedSquarePtyLtdMelbourneandOlympicParksTrust

MelbourneMarket

Authority

PortofMelbourneCorporationQueenVictoriaWomensCentreTrustStateSportCentresTrustV/LinePassengerCorporationVicForestsVictorianRegionalChannelsAuthorityVictorianRailTrackVictorianUrbanDevelopmentAuthority(VicUrban)ZoologicalParksandGardensBoardofVictoria


27/41



Schedule2: ProFormaAnnualBorrowingApprovalRequest

ANNUALBORROWINGPROGRAM20XXXX

OF: (participatingauthorityname)

ASAT: (preparationdate)

CONTACTNAME: (nameofpersonnel)

CONTACTNUMBER: (phonenumberofpersonnel)

TABLEA ANNUALBORROWINGAPPROVALREQUEST

TypeofFinancialAccommodation CapitalProceed

($million)s

(a) NewFinancialAccommodation

(b) RefinancingofMaturingFinancialAccommodation

(d) TemporaryPurposeFinancialAccommodation

(e) BankOverdraft

TOTAL

TABLEB INVESTMENTS

Investments Estimated30June2007 Estimated30June2008

($million)

TCV

Other

TOTAL

TABLEC DEBTMATURITYPROFILE

TermtoMaturity(years) Estimated30June2007

($million)

Estimated30June2008

($million)

0to1

1to2

2to3

3to4

4to5

5to6

6to7

7to8

8to9

9to10

Beyond10

TOTAL


28/41



ANNUALBORROWINGPROGRAM20XXX

OF: (participatingauthorityname)

TABLED MONTHLYCASHFLOWESTIMATE

PLUS LESS LESS

NetCashflowexcept

Financeflows

InflowfromBorrowings InterestExpense Outflowfr

Repay

($million)

Jul07

Aug07

Sep07

Oct07

Nov07

Dec07

Jan08

Feb08

Mar08

Apr08

May08

Jun08

TOTAL


29/41



Schedule3: ProFormaBorrowingPowers

BorrowingandInvestmentPowersAct1987APPROVALOFTHETREASUREROFTHESTATEOFVICTORIA

FORAUTHORITY

NEWFINANCIALACCOMMODATIONANDTEMPORARY

PURPOSEFINANCIALACCOMMODATION

I,JOHNBRUMBYMP,TreasurerofVictoria,

(1) approvetheAuthority,obtainingfinancialaccommodationpursuanttosection8of

theBorrowingandInvestmentPowersAct1987(theAct)bywayoffinancialaccommodationfromtheTreasuryCorporationofVictoriasubjecttothetermsand

conditionssetoutintheSchedulewhichisattachedtothisapproval.

(2) confirmthatthefinancialaccommodationobtainedbytheAuthorityunderthis

approvalhasthebenefitoftheguaranteecontainedinsection13(2)oftheAct.

Dated:

JOHNBRUMBYMP

Treasurer


30/41



SCHEDULETOAPPROVALFORAUTHORITY

FOR

NEWFINANCIALACCOMMODATIONANDTEMPORARY

PURPOSEFINANCIALACCOMMODATION

TermsandConditions

Application

1. Thisapprovalappliesto:

newfinancialaccommodationwhichisobtainedbytheAuthority; temporarypurposefinancialaccommodationtoberepaidpriorto30June20XX.

Effect

2. Thisapprovalhaseffectfortheperiodfrom1July20XXto30June20XX(inclusive).

ApprovalLimit

3. TheAuthoritymustnotobtainfinancialaccommodationunderthisapprovalifatthat

timethetotalliabilityoftheAuthorityinrespectoffinancialaccommodationobtained

underthisapproval,wouldthenexceed(inamountsequivalenttoAustraliandollars):

a) withrespecttonewfinancialaccommodation,$Xmillion;b) withrespecttotemporarypurposefinancialaccommodation$Xmillion.

4.

The

Authority,

in

determining

its

liability

in

respect

of

financial

accommodation

obtained

underthisapproval,mustincludethefollowingamounts:

a) thediscountedprincipalproceedsofeachbillofexchangedrawnandeachpromissorynoteandsecurityissuedbyitunderthisapprovalwhichhasnotmatured;and

b) thediscountedprincipalproceeds(capitalproceeds)*fromanydiscountorpremiumloanwhichhasnotmaturedunderthisapprovalandtheprincipalamount

outstandingoneachotherloan.

EvidenceofCompliance

5. ItwillbesufficientforTreasuryCorporationofVictoriatobesatisfiedastocompliance

withthis

approval

ifthe

Treasurer

of

the

Authority

provides

acertificate

confirming

that

alltermsandconditionsofthisapprovalhavebeencompliedwith.

*Capitalproceedsisequivalenttomarketvaluelessaccruedinterest.


31/41



BorrowingandInvestmentPowersAct1987APPROVALOFTHETREASUREROFTHESTATEOFVICTORIA

FORAUTHORITY

OVERDRAFTANDREFINANCINGFINANCIALACCOMMODATION

I,JOHNBRUMBYMP,TreasurerofVictoria,

1. approvetheAuthority,obtainingfinancialaccommodation: pursuanttosection5oftheBorrowingandInvestmentPowersAct1987(the

Act)byobtainingafinancialbenefitorassistancetoobtainafinancialbenefit

bywayofoverdraftofaccountatanybankoranyotherfinancialinstitutionin

Australia;

pursuanttosection8oftheActbywayoffinancialaccommodationfromtheTreasuryCorporationofVictoriaforthepurposesofrefinancingmaturing

financialaccommodationpreviouslyobtainedbytheAuthority;

subjecttothetermsandconditionsintheScheduletothisapproval.2. confirmthatthefinancialaccommodationobtainedbytheAuthorityunderthisapproval

hasthebenefitoftheguaranteecontainedinsection13(2)oftheAct.

Dated:

JOHNBRUMBYMP

Treasurer


32/41



SCHEDULETOAPPROVALFORAUTHORITY

FOR

OVERDRAFTANDREFINANCINGFINANCIALACCOMMODATION

TermsandConditions

Effect

1. ThisApprovalhaseffectandappliesfromandincluding1July20XXuntilwithdrawnby

writtennoticegivenbytheTreasurertotheAuthority.

ApprovalLimits

2. TheAuthoritymustnotobtainfinancialaccommodationunderthisapprovalifatthat

timethe

total

liability

of

the

Authority

in

respect

of

financial

accommodation

obtained

underthisapproval,wouldthenexceed(inamountsequivalenttoAustraliandollars):

a) withrespecttofinancialaccommodationobtainedbywayofoverdraftondomesticbankswithinoroutsideAustralia,$X;

b) withrespecttofinancialaccommodationobtainedtorefinancefinancialaccommodation,withoutlimitation.

3. TheAuthority,indeterminingitsliabilityinrespectoffinancialaccommodationobtained

underthisapproval,mustincludethefollowingamounts:

a) theamountdrawndownundereachoverdraftfacility.b) thediscountedprincipalproceedsofeachbillofexchangedrawnandeachpromissory

noteandsecurityissuedbyitunderthisapprovalwhichhasnotmatured;andc) thediscountedprincipalproceeds(capitalproceeds)*fromanydiscountorpremium

loanwhichhasnotmaturedunderthisapprovalandtheprincipalamount

outstandingoneachotherloan.

EvidenceofCompliance

4. Itwillbesufficientforalendertobesatisfiedastocompliancewiththisconditionifthe

TreasureroftheAuthorityprovidesacertificateconfirmingthatalltermsandconditions

ofthisapprovalhavebeencompliedwith.

*Capitalproceedsisequivalenttomarketvaluelessaccruedinterest.


33/41



Schedule4: ProFormaFinancialArrangement(Derivative)Powers

BorrowingAndInvestmentPowersAct1987APPROVALOFTHETREASUREROFVICTORIA

FINANCIALARRANGEMENTS

Pursuanttosection11(a)oftheBorrowingandInvestmentPowersAct1987(theAct),I,JOHNBRUMBYMP,TreasureroftheStateofVictoria,herebyapprovetheAuthority

enteringintoandperforming:

1. ThefollowingfinancialarrangementswiththeTreasuryCorporationofVictoria: VicHotStockForwardcontracts; VicInterestRateForwardcontracts; VicSwitchAgreements; VicSwapAgreements; optionsontheabovearrangements; anycombinationoftheabove; optionsforthepurchaseorsaleofsecuritiesissuedbytheTreasuryCorporation

ofVictoria;and

forwardrateagreements.tohedgeorprotectthevalueoftheAuthoritysliabilitiesinrespectoffinancial

accommodationagainstmovementsininterestratesinaccordancewiththeAuthoritys

TreasuryPolicyStatement.

2. ThefollowingfinancialarrangementswithTreasuryCorporationofVictoria: forwardforeignexchangetransactions;and spotforeignexchangetransactions.

tohedge

or

protect

the

value

of

the

Authoritys

assets

or

liabilities,

or

prospective

assets

or

liabilitiesinrespectofanunderlyingexposuretomovementsincurrencyratesinaccordance

withtheAuthoritysTreasuryPolicyStatement.

Thisapprovalhaseffectandappliestoallfinancialarrangementsenteredintobythe

Authorityasfromthedateofthisapproval.

Dated:

JOHNBRUMBYMP

Treasurer


34/41



Schedule5: ProFormaInvestmentPowers

BorrowingAndInvestmentPowersAct1987INVESTMENTPOWERS

ORDERINCOUNCIL

TheGovernorinCouncilundersection20oftheBorrowingandInvestmentPowersAct1987,ontherecommendationoftheTreasurer,herebyapprovestheAuthorityinvestingits

moniesinthefollowingmanner:

1. Ondepositwith:a) abank;b) amoneymarketcorporation,inAustralia,whichdepositissecuredbyamortgageof

approvedsecuritiesofamarketvalueatthetimeofthedepositofnotlessthanthe

amountofthedeposit;

c) theTreasuryCorporationofVictoria.2. Inthepurchaseof,orsubscriptionfor:

a) anysecuritiesof,orguaranteedby:(i) theCommonwealth;

(ii) aStateorTerritoryoftheCommonwealth;

b) anysecuritiesofapublicbodyconstitutedbyorunderalawoftheCommonwealth,or

of

aState

or

Territory

of

the

Commonwealth;

c) anycertificateofdepositissuedbyabankwhethernegotiable,convertibleorotherwise;

d) anybillofexchangethathasbeenacceptedorendorsedbyabank;Unlessacontraryintentionappears:

Approvedsecuritiesmeans:

a) securitiesof,orguaranteesby,theCommonwealthofaStateorTerritoryoftheCommonwealth;

b) securitiesofapublicbody,constitutedbyorunderalawoftheCommonwealth,orofaStateorTerritoryoftheCommonwealth;c) billsofexchangethathavebeenacceptedorendorsedbyabank;d) certificatesofdepositissuedbyabankwhethernegotiable,convertibleornot.

Bankmeans:

a) abankwithinthemeaningoftheBankingAct1959oftheCommonwealth;b) abankestablishedbyorunderalawofaStateorTerritoryoftheCommonwealth.

CommonwealthmeanstheCommonwealthofAustralia.

MoneyMarketCorporationmeansacorporationregisteredasamoneymarket

corporationundertheFinancialCorporationsAct1974oftheCommonwealth.Securitiesincludesstocks,debentures,bonds,notes,promissorynotesandothersecurities

whetherconstitutingachargeonpropertyornot,butdoesnotincludebillsofexchange.


35/41



Referencestoastatuteincludereferencestoanyamendmentorconsiderationofor

substitutionforthestatute.

Dated:

ResponsibleMinister

JOHNBRUMBYMP

Treasurer

Clerkof

the

Executive

Council


36/41


37/41



potentialforlossresultingfromthestructureandtimingoftheStatesborrowing

requirements.Themajorrisksinthiscategoryareliquidityandrefinancingrisk.Financial

marketrisksariseprimarilyfromtheprocessoftransactingdirectlywithfinancialmarkets.

Theserisksincludeforeigncurrencyriskassociatedwithborrowings,creditriskand

operationalrisk.

Business

related

risks

arise

from

the

operations

of

the

business

and

are

uniquetothatbusiness.Businessrelatedrisksincludeinterestraterisk,foreigncurrencyrisk

arisingfromcontractsandcommoditypricerisk.


38/41



Schedule7: RecommendedInterestRateandRefinancingRiskLimitsforGBEsDevelopingTheirOwnTreasuryPolicies

DTFhasdevelopedasetofrecommendedinterestratelimitswhicharebasedonthelimits

usedfortheBudgetSectorDebtPortfolioandincorporatetheconservativeriskphilosophy

oftheTreasurer.

Theselimitsincludeanevenspreadofmaturities,providingrelativecertaintyinborrowing

costsandensuringthatasmallproportionofdebtissubjecttorepricinginanyoneperiod.

Thelimits(shownbelow)maybeausefulguidetomajorGBEsinthedevelopmentoftheir

treasurypolicies.

Section5.2outlinesbroaderlimitsapplicableforsmallerGBEs,giventheirlowerlevelsof

debt.

Interestraterisklimits

Termtomaturity Target% Limits

0to1year* 10% 020%

1to3years 16% 721%

3to5years 16% 721%

5to7years 16% 721%

7to9years 16% 721%

9to

11

years

16%

721%

11yearsandover 10% 020%

*Loansmaturingwithin12monthsandtermloanswithfloatingrateresetsshouldbeincludedinthe

0to1yearperiod.


39/41



Schedule8: ProFormaAnnualCertificationofCompliance

ForGBEswithbusinessspecificpolicies

TREASURYMANAGEMENTGUIDELINES

ANNUALCERTIFICATIONOFCOMPLIANCE

(NameofGBE)

Forthefinancialyearended

I,(NameofChairperson),theChairpersononbehalfoftheBoardandI,(NameofChief

ExecutiveOfficer),

the

Chief

Executive

Officer

of

(Name

of

GBE)

(the

organisation)

certify

as

follows:

(a) theorganisationhasinplaceaBoardapprovedTreasuryManagementPolicythathas

beenformallynotedbytheDepartmentofTreasuryandFinance;

(b) theorganisationhasinplaceacomplianceprocedurewhichincludes,asaminimum,

anannualauditofthetreasuryoperationsthatreportstoeithertheAuditCommittee

ortheBoardoftheorganisation.ThisreportatteststhattheBoardapprovedTreasury

ManagementPolicyisbeingadheredtoandthattheinternalcontrolsofthe

organisationareappropriateandhavenotbeenbreached;and

(c) theBoardandtheChiefExecutiveOfficeroftheorganisationaresatisfiedtothebest

oftheir

knowledge

that

the

organisation

has

complied

with

the

Treasury

Management

PolicyasapprovedbytheBoardandformallynotedbytheDepartmentofTreasury

andFinance.

DATED:__________________________

Chairperson

(NameofGBE) ChiefExecutiveOfficer

(NameofGBE)


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ForGBEsoperatingunderrecommendedGuidelines

TREASURYMANAGEMENTGUIDELINES

ANNUALCERTIFICATION

OF

COMPLIANCE

(NameofGBE)

Forthefinancialyearended

I,(NameofChairperson),theChairpersononbehalfoftheBoardandI,(NameofChief

ExecutiveOfficer),theChiefExecutiveOfficerof(NameofGBE)(theorganisation)certifyas

follows:

(a) theorganisationhasinplaceacomplianceprocedurewhichincludes,asaminimum,

anannualauditofthetreasuryoperationsthatreportstoeithertheAuditCommittee

ortheBoardoftheorganisation.Thisreportatteststhattheorganisationisoperating

withintheparametersoftheTreasuryManagementGuidelinesissuedbythe

DepartmentofTreasuryandFinanceandthattheinternalcontrolsofthe

organisationareappropriateandhavenotbeenbreached;and

(b) theBoardandChiefExecutiveOfficeroftheorganisationaresatisfiedtothebestof

theirknowledgethattheorganisationhascompliedwiththeTreasuryManagement

GuidelinesissuedbytheDepartmentofTreasuryandFinance.

DATED:__________________________

Chairperson

(NameofGBE) ChiefExecutiveOfficer

(NameofGBE)


41/41

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Treasury Managment Guidelines

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Transcript of Treasury Managment Guidelines