ordinary meeting of council to be held on tuesday, 18 july 2006

Ordinary Meeting <strong>of</strong> Council - 18 July 2006 5 / 4
Item 5
S03537
6 July 2006
o incorporates both coupon interest payments and capital gains or losses from
marking short term investments <strong>to</strong> market. Medium and long term investments
and/or investments with capital guarantees at maturity, expected <strong>to</strong> <strong>be</strong> <strong>held</strong> <strong>to</strong>
maturity, are reported on the basis <strong>of</strong> coupon payments.
‣ Total investment earnings related <strong>to</strong> budget
‣ All performance should <strong>be</strong> related <strong>to</strong> performance <strong>be</strong>nchmarks
‣ Certification that all investments <strong>held</strong> are in accordance with Council policy and
applicable legislation.
Accounting for Investments
Section 1.6(B) <strong>of</strong> the attached policy has <strong>be</strong>en revised <strong>to</strong> incorporate recent changes in
accounting standards for investments. These changes in standards are generally due <strong>to</strong> the
introduction <strong>of</strong> International Accounting Standards in Australia. The provisions <strong>of</strong>
accounting standards AASB139 and AASB136 require generally that investments are
valued at “fair” value (market value less selling costs). The exception <strong>to</strong> this is where the
investment is intended <strong>to</strong> <strong>be</strong> <strong>held</strong> <strong>to</strong> its maturity. In this case it may <strong>be</strong> valued at original
cost, unless there have <strong>be</strong>en instances <strong>of</strong> selling significant amounts <strong>of</strong> <strong>held</strong>-<strong>to</strong>-maturity
investments or the Council <strong>be</strong>comes aware <strong>of</strong> fac<strong>to</strong>rs that have significantly depleted the
investment’s value.
Credit Rating and Issuer Constraints on Permissible Investments
Section 1.6(A) <strong>of</strong> the attached policy has <strong>be</strong>en updated <strong>to</strong> more clearly and consistently
specify constraints over permissible investments. The former policy had differing
constraints according <strong>to</strong> whether investments were with Fund Managers or made directly
with issuers. Constraints should relate <strong>to</strong> credit rating <strong>of</strong> the investment as this determines
its security.
CONSULTATION
Council’s Investment Policy has <strong>be</strong>en reviewed in consultation with Grove Research & Advisory
Pty Ltd.
FINANCIAL CONSIDERATIONS
Investment income is a significant revenue source for Council and it is important that returns are
maximised and that Council’s investments are made in accordance with the relevant legislation.
Council’s interest on investments budget in 2005/2006 is $1.8 million and is anticipated <strong>to</strong> <strong>be</strong> $2.7
million in 2006/2007.
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