Addendum Agenda of Ordinary Meeting

Ordinary Meeting 12 December 2018

City Corporate Report

CORP 02

Investment Report November 2018

Strategic Direction	Leading through Collaboration Seek efficient and innovative methods to manage our resources
File Ref	328255.2018
Report By	John Singh - Revenue Accountant
Approved By	Vishwa Nadan - Chief Financial Officer

Executive Summary

This report details Council’s Investment portfolio.

At 30 November 2018, Council held investments with a market value of $288 million.

The portfolio yield to the end of November 2018 is 70 basis points above the AusBond Bank Bill index.

	AusBond Bank Bill Index (BBI)
Benchmark	1.91%
Portfolio yield	2.61%
Performance above benchmarks	0.70%

Return on investment to November 2018 was $738k higher than budget. This favorable year-to-date variance however is expected to reduce by year-end as cash outlay on capital works in the remaining months will be significantly higher.

Council’s investments and reporting obligations fully complies with the requirements of Section 625 of the Local Government Act 1993, Clause 212 of the Local Government (General) Regulation.

Council’s portfolio also fully complies with limits set out in its investment policy. NSW TCorp however has recommended that Council progressively reduce its exposure to lower rated financial institutions to below 25% of its investment portfolio by 2021.

RECOMMENDATION

That Council receives and notes this report.

REPORT

Clause 212 of the Local Government (General) Regulation 2005 requires that the Responsible Accounting Officer must provide Council with a written report setting out details of all money that Council has invested under section 625 of the Local Government Act 1993.

Council’s Portfolio

At 30 November 2018, Council held investments with a market value of $288 million. Council’s investment register detailing all its investments is provided as an attachment to this report. In summary, Council’s portfolio consisted of investments in:

The ratio of market value compared to face value of various debt securities is shown in the table below.

Asset Class	Nov-18	Jun-18
Senior Debts (FRN's ,TCD's & FRB)*	100.00%	100.22%
MBS (Reverse Mortgage Backed Securities)	59.61%	59.26%
T-Corp Unit Trusts	102.22%	101.26%

*Definition of terms

· Transferrable Certificate of Deposit (TCD) t - security issued with the same characteristics as a Term Deposit however it can be sold back (transferred) in to the market prior to maturity. A floating TCD pays a coupon linked to a variable benchmark (90 days BBSW).

· Fixed Rate Bond (FRB) – returns Fixed Coupon (interest) Rate and is tradeable before maturity.

Council is fully compliant with the requirements of the Ministerial Investment Order including the grandfathering provisions. The grandfathering provision states that Council continues to hold to maturity, redeem or sell investments that comply with previous Ministerial Investment Orders. Any new investments must comply with the most recent Order. Council continues to closely monitor the investments in its portfolio to ensure continued compliance and minimal exposure to risk.

NSW TCorp has recommended that Council progressively reduce its exposure to lower rated financial institutions to below 25% by 2021. Council’s current portfolio investments in BBB and below rated ADI’s is 24.26% and the position will be maintained going forward.

Portfolio Maturity Profile

The table below shows the percentage of funds invested at different durations to maturity.

Market Value by Issuer and Institution Policy limit as per Investment Policy

Overall Portfolio Credit Framework compliance to Investment Policy

Portfolio Performance against relevant market benchmark.

Council’s Investment Policy prescribes AusBond Bank Bill Index (ABBI) as a benchmark to measure return on cash and fixed interest securities. The ABBI represents average daily yield of a parcel of bank bills. Historically there has been a positive correlation between changes in the cash rate and the resulting impact on the ABBI benchmark.

The portfolio yield to 30 November 2018 exceeded the AusBond Bank Bill index by 70 basis points (2.61% against 1.91%).

Council continues to achieve a solid outcome despite ongoing margin contraction and significantly lower market term deposit yields. Comparative yields for the previous months are charted below:

Performance of Portfolio Returns against Budget

Council’s investment income for November 2018 exceeded budget by $738k mainly due to higher actual monthly average portfolio holdings compared to budgeted monthly average portfolio holdings for the period. This favorable year-to-date variance however is expected to reduce by year-end (as illustrated in graph below) as cash outlay on capital works in the remaining months will be significantly higher.

Investment Portfolio at a Glance

Portfolio Performance

The portfolio yield to 30 November 2018 exceeded the AusBond Bank Bill index by 70 basis points (2.61% against 1.91%).

Annual Income vs. Budget

Council’s investment interest income exceeded budget by $738k as at 30 November 2018 mainly due to higher actual monthly average portfolio holdings compared to budgeted monthly average portfolio holdings.

Investment Policy Compliance

Legislative Requirements		Fully Compliant.
Portfolio Credit Rating Limit		Fully Compliant.
Institutional Exposure Limits		Fully Compliant
Overall Portfolio Credit Limits		Fully Compliant.
Term to Maturity Limits		Fully Compliant.

Economic Outlook – Reserve Bank of Australia

The Reserve Bank has left the official cash rate on hold at 1.5 per cent in its 4 December 2018 meeting. The current 1.5 per cent cash rate is at a historically low level and impacts returns on investment.

Certificate of Responsible Accounting Officer

The Chief Financial Officer, as Responsible Accounting Officer certifies that the investments listed in the attached report have been made in accordance with Section 625 of the Local Government Act 1993, Clause 212 of the Local Government (General) Regulation 2005 and Councils Investment Policies at the time of their placement. The previous investments are covered by the “grandfather” clauses of the current investment guidelines issued by the Minister for Local Government.

Independent verification by Head of Audit, Risk and Improvement (HARI)

Council requested on-going independent review of its investment portfolio by Audit Risk and Improvement Committee (ARIC) or its representative under delegated authority. The ARIC has agreed for its Chairperson to provide a certificate on a quarterly basis – next certificate will be presented to Council on 28 February 2019.

CONSIDERATIONS

Economic	Council’s investment interest income exceeded budget by $738k as at 30 November 2018 mainly due to higher actual monthly average portfolio holdings compared to budgeted monthly average portfolio holdings.
Environment	There are no environmental and sustainability considerations.
Social	There are no social and cultural considerations.
Civic Leadership	There are no civic leadership and governance considerations.
Legislative	Council is fully compliant with the requirements of the Local Government Act 1993 – Investment Order (authorized investments) and with reporting requirements under Clause 212 of the Local Government (General) Regulation 2005.

ATTACHMENTS

1. Investment Portfolio - November 2018 ⇩

Ordinary Meeting 12 December 2018

City Corporate Report

CORP 03

Annual Financial Reports 2017/18

Strategic Direction	Leading Proactive Council Provide business excellence and financial sustainability to deliver services that meet community expectations
Key Policy	Long-Term Financial Plan
File Ref	328268.2018
Report By	Earl Paradeza - Senior Management Accountant
Approved By	Vishwa Nadan - Chief Financial Officer

Executive Summary

The Council at its meeting on 29 October 2018 authorised the issue of 2017/18 audited financial statements.

The financial statements together with the audit certificate was lodged with the Office of Local Government (in accordance with Section 417 of the Local Government Act 1993), and placed on public exhibition inviting public submissions.

Submissions closed on 29^th November 2018 and Council did not receive any public submissions on the matter.

RECOMMENDATION

That Council receives and adopts this report.

REPORT

The Council at its meeting on 29 October 2018 authorised the issue of 2017-18 audited financial statements.

The financial statements together with the audit certificate were lodged with the Office of Local Government in accordance with Section 417 of the Local Government Act 1993.

The audited financial statements were placed on public exhibition. Section 420 of the Act permits members of the public to make submissions. The Act further requires Council to refer all submissions to its Auditor and take action as may be appropriate which includes notice to the Office of Local Government to amend the financial statements.

Submissions closed on 29^th November 2018 and Council did not receive any submissions on the matter.

CONSIDERATIONS

Economic	The audited financial results for the year ended 30 June 2018 are contained and presented within the report.
Environment	There are no environmental and sustainability considerations.
Social	There are no social and cultural considerations.
Civic Leadership	There are no civic leadership and governance considerations.
Legislative	Section 417 and Section 420 of the Local Government Act 1993.

ATTACHMENTS

1. 2017-18 Financial Statements

15
CORP 03	Annual Financial Reports 2017/18
Attachment 1	2017-18 Financial Statements

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