2014-06-26 Budget Meeting Attachment H

STRATEGIC POLICY – 2014/15 INVESTMENT POLICY


Delegation of authority
Authority for implementation of the Investment Policy is delegated by Council to the Chief
Executive Officer in accordance with the Local Government Act 2009, Section 257 (1) (b) –
delegation of local government powers.

Authority for the day-to-day management of Council’s Investment Portfolio is to be delegated by
the Chief Executive Officer to the Director Corporate Services and to the Manager Financial
Services in accordance with section 259 of the Local Government Act 2009, and subject to regular
reviews with the Director Corporate Services and Chief Executive Officer.

Preservation of Capital
Preservation of capital shall be the principal objective of the investment portfolio. Investments are
to be performed in a manner that seeks to ensure security of principal of the overall portfolio. This
would include managing credit and interest rate risk with given risk management parameters and
avoiding any transactions that would prejudice confidence in Council or its associated entities.

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.

Return on Investments
The portfolio is expected to achieve a market average rate of return and take into account
Council’s risk tolerance and 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 Investment Policy.

The following table shows the credit ratings and counterparty limits for Council:

Short Term Rating (Standard & Poor’s) or equivalent             Individual          Total Limit
                                                                Counterparty
                                                                Limit
A1+ - Financial Institutions                                    35%                 100%
A1+ - Bond Mutual Funds                                         30%                 50%
A1 – Financial Institutions                                     30%                 30%
A2 – Financial Institutions                                     10%                 30%
A3 – Financial Institutions                                     5%                  10%
Unrated                                                         Nil                 Nil
QIC / QTC Pooled Cash Management Fund                           100%                100%

It is noted that for the purposes of this investment portfolio, the percentage limits apply effective
from the date of purchase as a percentage of the market value of the portfolio. No more than 20
per cent of the portfolio is to be invested in Floating Rate Notes.

Comparison of Performance
For performance purposes, the portfolio will be compared to the UBS Australia Bank Bill Index
and/or the Bank Bill Swap Reference Rate over a rolling one-year period. The UBS Australia Bank
Bill Index has a modified duration of 45 days and comprises thirteen 90 Day Bank Bills. 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.




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