2015-06-29 Special Meeting Agenda

INVESTMENT OF COUNCIL FUNDS POLICY


Credit Risk

Council will evaluate and assess credit risk prior to investment. The investment officer will minimise
credit risk in the investment portfolio by prequalifying all transactions including the brokers / securities
dealers with which they do business, diversify the portfolio and limit transactions to secure
investments.

Interest Rate Risk

The investment officer shall seek to minimise the risk of a change in the market value of the portfolio
because of a change in interest rates. This would be achieved by measuring the investment term
against the cash flow requirements of Council and structuring the portfolio accordingly. This will avoid
having to sell securities prior to maturity in the open market. Secondly, interest rate risk can be limited
by investing in shorter term securities.

Maintenance of liquidity

The investment portfolio will maintain sufficient liquidity to meet all reasonably anticipated operating
cash flow requirements of Council, as and when they fall due, without incurring significant transaction
costs due to being required to sell an investment. For these purposes, illiquid investments are
defined as investments that are not publicly traded in sufficient volume to facilitate, under most
market conditions, prompt sale without severe market price effect.

Examples include:
   Investment in private placements;
   A security that is not supported or priced by at least two approved brokers/securities dealers;
   Sub investment grade (i.e., a lower than rating BBB- (Standard and Poor’s) or equivalent), and
    in most cases, BBB rated investments; and
   Unrated securities.

Return on investments

The portfolio is expected to achieve a market average rate of return and take into account Council’s
risk tolerance, current interest rates, budget considerations, and the economic cycle. Any additional
return target set by Council will also consider the risk limitations, prudent investment principles and
cash flow characteristics identified within this policy.

Comparison of performance

For performance purposes, the portfolio will be compared to the Bloomberg AusBond Bank Bill Index
and/or the Bank Bill Swap Reference Rate over a rolling one-year period. The benchmark target is
to be set equal to or above the benchmark yield and consider the expected types of securities held
in each portfolio.

In comparing performance, the portfolio will be market valued and take into account all coupons,
deposits and withdrawals to/from the portfolio.




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