TCV PROFILE

Established by the Treasury Corporation of Victoria Act, 1992, the Treasury Corporation of Victoria

("TCV" or "the Corporation") is the central financing authority for the State of Victoria. The Corporation

has the following objectives:

• to act as a financial institution for the benefit of the State and participating authorities;

• to enhance the financial positions of the State, the Corporation and of participating authorities; and

• to provide services in an effective, efficient and competitive manner.

Shareholder

The Treasurer of the State of Victoria is our sole shareholder whose interests are monitored by the Department of

Treasury and Finance. Our Chairman, on behalf of the Board of Directors, reports directly to the Treasurer of Victoria.

Our clients are the State of Victoria, participating authorities and other State-owned entities. A list of our clients is

provided on page 20.

Government Guarantee

Our payment obligations in relation to borrowings and derivative transactions are guaranteed by the Government of

Victoria (section 32 of the Treasury Corporation of Victoria Act, 1992). We lend only to the State and participating

authorities that are themselves guaranteed by the State of Victoria.

Our Vision, Mission and Values

Vision To be a respected financing authority maximising benefits for the State of Victoria and our clients

Mission Combining our people and technology, we are united in our commitment to deliver innovative

financial solutions. Our culture motivates our people to act with integrity and professionalism to

achieve the best results for the State and our clients

Values Teamwork, Integrity, Commitment and Professionalism

We realise our Mission by

• funding the State and its public authorities at the lowest possible cost having regard to their business needs;

• ensuring that the State's financing is undertaken using a risk-averse approach with due regard to internationally

accepted standards of prudence;

• delivering efficient services and a high standard of financing and treasury advice to assist our clients to

effectively manage their financial exposures;

• maintaining a well-defined and respected presence in domestic and international financial markets;

• advising the Government, its departments and agencies and our participating authorities on effective financial

management strategies; and

• maintaining, without conflicting with the preceding goals, the Corporation's value by achieving a return on

capital in excess of the TCV "10-Year Bond" rate. We use our expertise to work with our clients on liability management, treasury management, financial structuring, financial risk management and the execution of transactions, to deliver the best results for the State of solutions Victoria and our clients

Contents

Page

2 Chairman's Report

4 Performance Indicators

6 Financial Summary

7 Working Together to Achieve Better Solutions

11 Risk Monitoring & Compliance

14 TCV People

18 Corporate Governance

20 Appendices

27 Financial Statements

I.B.C Contact Details After five yeárs of managing the significant proceeds from throughout the year. Net income from treasury operations at privatisations, TCV's activities during 1999-00 were $8.7 million (1999 adjusted: $10.2 million) was 15 per cent concentrated on servicing the borrowing needs of the State lower than the previous year's adjusted result. Net profit was and our Participating Authorities, and providing a full range a disappointing $1 million (1999 adjusted: $8.3 million), of treasury products and financial services to our clients. reflecting not only this decline in operations revenue but, Substantially reduced cost recovery from fee income, more significantly, a reduction in administration fees from coupled with volatile markets in the second half of the year, $11.4 million in 1999 to $4.8 million. This reduction reflects contributed to a disappointing profit result for the year. the revised fee structure set by the budget sector for the management of its portfolio. Following the election of the Bracks Government in September 1999, TCV accompanied the new Premier and The 2000 accounts also include a significant adjustment of Treasurer on a financial roadshow to the United States and $13.1 million as an Abnormal Item reflecting an equivalent Europe in June 2000. This mission, co-ordinated by TCV overstatement in the 1999 reported profit. Although market and designed to promote Victoria to foreign investors, value accounting was applied for substantially all of our assets provided an opportunity for financial market participants and liabilities last year, we adopted historic cost accounting overseas to meet the Premier and the Treasurer and to be for that part of the inflation-indexed portfolio that is expected informed of the Government's vision and commitment to to be held to maturity. In calculating the historic cost values responsible financial management. we incorrectly recognised $10,098,000 as income in 1998-99. In addition, $2,967,000 of income, relating to an

Performance individual debt buy-back transaction, was treated as income TCV's ongoing provision of competitive financing to our without adequately reflecting future expenses associated with clients is underpinned by the pricing of our benchmark debt that transaction. Although no economic loss was incurred, the securities in line with other AAA/Aaa-rated Australian States. 1998-99 net income from operations was overstated by We maintained the performance of our yield curve in the $13,065,000 and has now been reversed and recorded as financial markets in line with that of equivalent credits an Abnormal Item in the 1999-00 Financial Statements.

2 Working together. Competitive Client Financing Directors Our major business focus is on the centralised provision of During the year the term of appointment of three Directors treasury services. This enables clients to effectively manage expired. Reginald A D Nicolson, Deputy Chairman was their debt portfolios, cash management requirements and reappointed for a two year period while Duncan G Andrews financial risks without the need to employ a specialist and David E Meiklejohn retired as Directors. In addition treasury operation or to retain external treasury advisers. Paul J Rizzo advised his intention to retire with effect from We achieve our objectives by providing services through a 30 September 2000. In August 2000 John F Astbury and team with a breadth of knowledge and experience in David T Craig were appointed to the Board, both of whom financial markets and treasury management. Our client bring extensive experience in the finance industry to the relationship is based on a comprehensive understanding of Board of TCV. client needs and tailoring financial solutions to ensure those David Carruthers elected not to renew his contract as needs are met in an effective, efficient and competitive Managing Director. The Board appointed Michael manner. We have continued our focus on maintaining a Dontschuk to the position of Managing Director, effective viable liquid debt program, which has enabled us to deliver 4 September 2000. The Board and management extend a net cost of funds after fees to our clients lower than their appreciation to those Directors who have departed comparable AAA/Aaa-rated States. In addition this is the Board for their contribution to the governance of TCV significantly below the cost at which funds could be over many years and to David Carruthers for his contribution obtained if individually raised by the client. to the development of TCV over the past five years.

Balance Sheet Management Acknowledgments During 1999-00 our gross debt was reduced by around We express our appreciation for the support provided by the $1 billion to $12.6 billion. Investments and cash respective Treasurers of Victoria. The commitment and holdings remained relatively stable at $6.4 billion professionalism of our staff is acknowledged as providing (1999: $6.6 billion). Debt maturities of $1.7 billion and the stability required to meet our objectives in a changing debt buy-backs of $0.3 billion facilitated increases in our environment. benchmark programs' outstandings - Hotstocks $6.3 billion (1999: $5.7 billion) and domestic commercial paper The Future $0.5 billion (1999: $zero). Client loans decreased from As the central financing authority for the State, TCV has an $9.7 billion to $8.9 billion. obligation to provide a constructive contribution to the management of the State's financial risks. We will continue Market Developments to deliver this through: The continued evolution of Australian capital markets has seen the growth in issuance of non-government securities, • providing competitive flexible loan financing with an unprecedented level of activity coming from arrangements to clients; corporate and offshore issuers in domestic markets during • the central management of client treasury services; 1999-00. Although the level of Government debt has not • efficiently managing the State's financing risks; and declined significantly during the year, investor demand has • providing financial advice to the State and our clients. accommodated the growth in the non-Government sector. This growth has highlighted and reinforced the role of Government paper as the primary liquidity provider in the domestic market.

Goods and Services Tax (GST) VIC. JOINT DEPT INFC CENTRE Along with other financial institutions, TCV is input taxed under the GST legislation. Accordingly, from Ian N Ferres 3 0 OCT 2G00 1 July, the GST component of costs will be substantially Chairman unrecoverable from the Australian Tax Office. LEVEL 3, 1 MACARTHUR STREET E. MELBOURNE VIC. 3002 The Corporation's expenses are expected to increase by over $0.5 million in the year to 30 June 2001 due to this impost.

.to achieve better solutions 3 Performance Targets and Outcomes for 1999- 00 Indicators

JJ

Gross Debt Market Value at 30 June

• Illiquid Debt •y-fjfv- • Liquid Debt * li " $ billion . " ' - fi v.'f . HR 40 • - 35

30

25

20

15

10

5

0 1993 1994 1995 1996 1997 1998 1999 2000

During 1993 and 1994 the debt obligations of Victorian Public Authorities such as SECV, Melbourne Water, Gas & Fuel Corp. etc. were assumed by TCV. Hotstocks maturing within 12 months are treated as illiquid debt for the purpose of these comparisons.

Credit Ratings of TCV and the State of Victoria at 28 September 2000

\nenc\ Loni> Frinì Long Terni Sliorl Torni Domestic Forcali Curi eil« v C urrenn ( ut rem v : Standard & i- Moody's Investors Seren Aaa,

(11 On 8 hebruar\ 2000 upgraded rrom Aal with positive outlook to Aaa (2l On 11 December 19'!') upgraded from AA to (31 On 20 December 1999 \AA rating alfi

4 Working together. Area of Activity Target for 1999-00 Outcome

Delivery of services Provide financing competitive with All loans delivered to clients at levels, after fees, more than to our clients other AAA/Aaa-rated States. competitive with other AAA/Aaa rated States

TCV's Hotstocks traded between the comparable QTC and NSWTC Hotstocks throughout the year

Support clients by delivering relevant Provided all of the borrowing and liability management treasury and financial advice requirements for 21 Participating Authorities and deposit facilities for over 100 Public Authorities

Provided advice on several banking tenders and conducted reviews of client banking systems

Appointed treasury adviser to 3 clients

Developed and reviewed treasury policies for several clients

Advised on and executed portfolio restructures for 5 clients

Offer portfolio accounting and Provided outsourced treasury service for 3 clients management systems to clients

Extend the use of the Guaranteed Bil CBID, developed in 1998-99 as an enhanced cash management Index Deposit (CBID) product product, was accessed by 20 clients to a maximum utilisation level of $2.2 billion. At 30 June 2000 utilisation was $1.2 billion (1999: $0.3 billion)

Management of the Reduce State risk by providing Advised on and executed Budget Sector portfolio restructure State's financial exposures professional advice Advised on privatisation contracts and settlements

Maintain 12-month maturities at As at 30 June 2000, $1.15 billion of outstandings mature in less than 20% of outstandings less than 12 months (10% of total outstandings) \

Financial markets Maintain commitment to liquid The Hotstock program peaked at $6.6 billion outstanding debt programs Outstandings in each Hotstock line at 30 June 2000: $ billion 22 Sept 2001 1.05 15 Oct 2003 1.11 15 Nov 2006 1.66 15 Aug 2008 1.45 15 Sept 2010 1.06 Market Value 6.33

Buy-back illiquid debt at economic levels $264 million debt bought back at or better than our benchmark yield curve

Accommodate client funding needs by Maintained Hotstock, Promissory Note, Euro Commercial maintaining a flexible approach Paper and Euro Medium Term Note Programs

Capital adequacy Maintain target of around 10% with a Minimum 9% Maximum 14.2% minimum of 8%

Return on Capital Prudentially manage portfolios to Net income from operations of $8.7 million produce profit within acceptable risk parameters

.to achieve better solutions 5 Financial for the past five years Summary

Income and Expenditure Summary 1999-00 Annual 1998-99 1997-98 1996-97 1995-96 $ million thange "" j $ million $ million $ million $ million Net income from operations j 8.7 (63.0) 1 *23.3 25.8 35.7 41.8 i1 ! i Administrative expenses j (9.9) ; (3.0) j (10.4) (9.4) (8.9) (9.7)

Borrowing related expenses .«!< 1 (2.9) (3.7) (3.8) (5.9)

- ' (12 5) (6.0) 1 (13.3) (13.1) (12.7) (15.6) 11.7 11.5 12.9 Administrative fees & recoveries j f * '4.8 58.0) ( 11.4 £ " (7 7) i (1.9) (1.4) (1.2) (2.7) Ì 1 Net Surplus before Abnormal Items ! 1.0 (95) i •21.4 24.4 34.5 39.1 Abnormal Items 1 *(13 1) WmmìllBmi - - - - Net Deficit 12^1) • SREHHkSH ! - - - -

•1998-99 reported income of $23.3 million was overstated by $13j1;mi ion which has beeji ad|usted through Abnormal Items as detailed in the financial statements.

Dividends j j -nc (29) f (14.0) (29.0) (22.5) (25.5)

Balance Sheet Summary "200Ó Annual 1999 1998 1997 1996 30 June $ million ".. change j $ million $ million $ million $ million Loans to clients 8,903 . 9,707 16,038 18,737 24,132

Investments ' 4.6 1 3,687 2,548 2,246 2,482 > f tf Jpr* tjtv Cash and cash equivalents AV'1,740C\ (40) ll 2,924 2,826 812 756 ^ - ^. Other assets ii BHHpib i 408 173 235 601 Total Assets 15,696 16,726 21,585 22,030 27,971

I

Financed by: i Hotstocks fr •"6,334 _ 1 5,668 7,725 7,024 9,227 International : „3,250 J SÉBM^I MB 4,427 5,714 7,952 10,459

Domestic other ! I.181", 3,468 6,343 5,396 6,043 Cross debt 12,602 ! 13,563 19,782 20,372 25,729 i Deposits from Public Sector 1 2,460 i 2,448 1,269 1,093 1,423 Other liabilities 517 (10) I 576 402 429 695 1 i Total liabilities i 15,579 1 16,587 21,453 21,894 27,847

Equity 139 132 136 124

6 Working together. Working .to achieve better solutions together... JJ

Meeting Clients Needs... "to be the first choice provider of financial market products and services to the State and it's Public Authorities"

TCV provides a full range of treasury products and financial services to the State and Public Authorities to manage their debt portfolios, cash management requirements and financial risks. Our services include: • loans; • debt management advice; • cash management and deposit products; • banking arrangements; • treasury policies and strategies; • interest rate risk management; • financial advisory services; • financial analysis and modelling; and • economic intelligence.

During 1999-00, our loans to clients decreased from $9.7 billion (at 30 June 1999) to $8.9 billion. Client funds deposited with TCV were stable at around $2.5 billion. As at 30 June 2000, 19 clients held loans from the Corporation while over 100 clients placed funds on deposit with us.

.to achieve better solutions 7 Flexible Funding and Low Cost of Funds...

"to deliver to our clients the best that the financial

markets have to offer, including the lowest cost of funds

within acceptable risk parameters"

TCV provides Participating Authorities and the State with maximum flexibility in determining the characteristics of their borrowings, while encouraging them to implement tailored loan structures. While this may result in a complex balance sheet for TCV, it simplifies our clients' balance sheets, affording them benefits in terms of reduced risks and administration costs. Clients are assured of complete pricing transparency as all loans are priced off the TCV yield curve, - -.^»„..v" , .V j -v jn^Ss a readily accessible market benchmark.

TCV's standing in the financial markets enables us to access funding, and offer loans to clients, at wholesale market rates. The Corporation delivers a competitive cost of funds to our clients through the maintenance of our liquid Hotstock program. During 1999-00, TCV's Hotstock outstandings were at historically low levels due to our focus of minimising surplus investments. Nevertheless, our commitments to the financial market in relation to minimum outstandings ($1 billion per Hotstock line) were achieved and the pricing of Hotstocks was maintained relative to t other AAA/Aaa-rated Semi-Government borrowers. In this regard TCV acknowledges the strong support of our Dealer 1MË8 Panel.

Top Six Dealer Panel Members Based on 1999-2000 performance - \ v - - 1 Salomon Smith Barney Australia . I SUBS Warburg Australia Limited • 3 ID Securi ^wsH 4 ''iWestpac Banking Corporatioi

5 " ABN AmroiBahk'N.V. (Australian Branch) ,6 , Macquarie Bank Limited

- s'viilWÊfe.;.- ' JÉT

8 Working together. Cash Management and Deposit Products... Balance Sheet Management... "to provide solutions that are tailor-made to "to apply best practice and innovative management to clients' requirements" the TCV balance sheet"

As at 30 June 2000, client deposits were $2.46 billion While the size of TCV's balance sheet has decreased from (1999: $2.45 billion). Our focus on client deposit $36 billion as at 30 June 1995 to $15.7 billion, the risk management reflects the changing nature of our clients' inherent in our balance sheet and the complexities in treasury requirements. As Victorian Public Authorities look managing that risk have been maintained owing to: to enhance their returns on short-term surpluses, TCV • the simplification of loans to Participating continues to develop deposit products to meet the specific Authorities. Significant asset/liability mismatches requirements of clients. All Participating Authorities or have been created on our balance sheet because Public Authorities are free to choose their deposit our loan assets are not back-to-back with our liabilities counterparties. As a result, we compete with the financial (market borrowings). market at large, and deliver tailored products that might not • the termination of Participating Authorities' otherwise be available or which provide enhanced returns /Budget Sector loans from privatisation proceeds. to clients. All loans extended by TCV to the privatised entities were extinguished immediately upon receipt of the Advisory... settlement proceeds, even though there was little "to deliver effective and creative financial solutions in likelihood of immediately retiring corresponding response to client needs" market liabilities. The loans were terminated without the application of any penalties thereby TCV provides a wide range of advisory services to clients in maximising the receipt of proceeds to the State. relation to financial management, especially treasury policy Although the privatisation proceeds have been and strategies, interest rate management, financial analysis, progressively applied to debt reduction, the market modelling and banking arrangements. We also provide liabilities redeemed have not necessarily treasury accounting services to some clients. In this regard, corresponded to those client loans, thereby our MIDAS back office system provides a platform for the creating further asset/liability mismatches. provision of accounting services to our clients. Similarly, the balance of privatisation proceeds

During 1999-00, TCV's combined knowledge and expertise were applied to reduce Budget Sector indebtedness in financial management and treasury management assisted to TCV. TCV assumed responsibility for those asset the State and our clients in managing their balance sheet and liability mismatches that otherwise would have risks and exposures on a range of assignments. resided within the Budget Sector Portfolio. These included: • assisting the Transport Reform Unit on transport Debt Mix at 30 )une 2000 privatisation; EJ Illiquid Debt M Liquid Debt • banking tenders; • treasury adviser to 3 Participating Authorities; • development of treasury management policies for a number of Participating Authorities; • debt portfolio restructuring for the Budget Sector, Country Fire Authority, Melbourne Ports, Western Water and Barwon Water; and • development of financial evaluation models for various Participating Authorities.

Promissory Notes & Cash 4%

(1) Includes $216 million maturing July 2000 which were previously Hotstocks. (2) $A amounts of hedged International borrowings.

<

.to achieve better solutions 9 • the huge reduction in Participating Authorities' loans, coupled with diminished opportunities to buy-back debt at an economic cost. This has resulted in the accumulation of creditworthy financial assets such as Commonwealth bonds, Semi-Government securities, bank paper and bonds issued by foreign governments and supranational organisations. However, these assets each have their own characteristics, which may be different from the characteristics of TCV's market liabilities. The resultant maturity mismatches, coupon mismatches mm and trading disparities (spread risk) require ongoing and active management.

*— Management of balance sheet risks in 1999-00 generated ¡»S $58 billion of financial market transactions in nominal face value items (1999: $64 billion). This excludes exchange traded futures and options.

Value for money By providing clients with access to expert financial advice, the low-cost funding flowing from our economies of scale provides efficient and effective financial services to the State and its businesses. Operating in a highly transparent manner, we provide for the prudent management of State risk on TCV's balance sheet, rather than retaining that risk on our clients' balance sheet.

10 Working together. Risk Our business exposes the Corporation to financial risks. Monitoring Management of these risks is therefore central to our policies. & Compliance

Prudential Supervision Market Risk - Interest Rates

Mr Patrick Burroughs was appointed by the Treasurer of the We have adopted a Value-at-Risk (VaR) methodology for the State of Victoria as TCV's Prudential Supervisor, effective overall measurement of interest rate risk. Our approach to 1 July 1994. In this capacity he reports to the Treasurer VaR incorporates historical simulation based upon archived of Victoria. data of rates relating to money market activities, futures, swaps, Commonwealth bonds and Semi-Government The prudential framework established by the Treasurer is securities. Our VaR model calculates outright interest rate complemented by the prudential standards, policies and risk and spread risk between the TCV yield curve and procedures set by our Board of Directors and management, relevant swap, Commonwealth bond and Semi-Government who report regularly to the Prudential Supervisor. curves. Risk due to shifts in yield volatility, especially in Capital Adequacy relation to option positions, is also measured.

The Treasurer has determined that the Reserve Bank of The daily reporting of market risk incorporates a suite of Australia's prudential statements (CI and C3) in relation to stress tests designed to indicate the potential impact on capital adequacy apply to the Corporation. The objective is profit based upon worst case historical movements in to ensure that we maintain an adequate level of capital to interest rates and disaster scenarios. We also maintain a withstand any potential losses resulting from credit contingent loss risk framework, reflecting extreme volatility, exposures and market risk. TCV is required to maintain a as a component of our stress testing program. minimum capital adequacy ratio of 8 per cent of risk- weighted assets. However, we aim to maintain a capital We manage interest rate risk within a risk limit structure. ratio of around 10 per cent of risk-weighted assets. The Board has delegated risk limits to the Managing Director with further delegations as appropriate. Physical Capital Ratios instruments and derivative instruments, such as interest rate swaps, forward and futures contracts and interest rate Actual 1999-00 options, are used to manage these exposures. The use of Minimum Required derivative products is restricted to risk management Target activities. Policies for the monitoring and measurement of risk are reviewed regularly.

V /

6% Jul 99 Aug 99 Sep 99 Oct 99 Nov 99 Dec 99 Jan 00 Feb 00 Mar 00 Apr 00 May 00 Jun 00

.to achieve better solutions 11 Market Risk - Currency Credit Risk

The Corporation does not maintain any material net foreign Exposure to credit risk arises through investments in currency exposure. financial assets and derivative financial instrument transactions associated with our risk management activities. Liquidity Risk Generally, TCV will not enter into derivative transactions Typically liquidity risk results from the need to raise funds having a maturity exceeding twelve months unless the when markets are unable to offer the required volume or counterparty has a Standard & Poor's/Moody's rating of price. Our liquidity policy ensures we maintain holdings in A+/A1 or better and we will not enter into a transaction with liquid assets and immediately accessible standby lines a maturity exceeding five years unless the counterparty is equivalent to 100 per cent of liabilities maturing within one rated AA-/Aa3 or better. month and a declining proportion of liabilities maturing out to six months. In addition, there is a requirement to hold a minimum amount of these assets in Commonwealth Government securities or cash.

Concentration of Credit Risk

T T I I - I 14.169

B Cash and Cash Equivalents B Derivatives S Securities

Based on Standard & Poor's credit rating scale. Amounts expressed in current market value terms. Derivatives based on credit equivalent amounts. The credit equivalent amounts (current replacement value and an allowance for potential future exposure) are calculated in accordance with the capital adequacy guidelines for the banking sector produced by the Australian Prudential Regulation Authority. We do not net exposures for credit purposes.

Working together. Operational Risk We manage operational risk by ensuring that appropriate policies and procedures are in place. Compliance with these policies and procedures is tested regularly.

... Credit Exposures by Counterparty Rating S' v^laHlt - • • Standard & Derivatives Investments Moody's Derivatives;! Investment Poor's Rating% of Portfolio "., of Portfolio Ratini; % of Portfolio % of Portfolio iRMliiMMII iPîâriSSâËËw^ AAA jjjjS® ' • * 40^; " AA + S 18** Aa1 17. 1

AA 12 . 16 Aa2 J u 3 - 4 . - 'AA -, À? 1 20 » 32 „. WÊÊÊQ* -„„VH^;-* A+t MM ,,, 1 'f,: " A 5É1É:.; V A2 ' 4 T** A - -sffir .'iffltf&'i. A3 3 1 : »V BBB Jfe'."' Z^ËÊS&l WâÈÊSÎSÊi 100 ^fi 100 100 100 fmÊSmmmmi «•»Si • ' ^m&m The proportion of TCV's derivative & investment portfolio by counterparty credit rating.at 30 June 2000 measured by credit exposure amounts.. 4 ;

Derivatives Portfolio by Currency Derivatives Portfolio by Maturity

65% •aud H 0-6 months •cad • 6-12 months • CHF l~1 1-2 years • GBP I 2-5 years 11% •jpv • 5-10 years 37%

I USD 39%

TCV had derivatives positions denominated in six currencies at balance date to hedge our The maturity profile of derivatives counterparty exposures by credit equivalent amounts borrowings. The Corporation does not maintain any material net foreign currency as at 30 June 2000. exposure. The chart is based on notional principal amounts.

.to achieve better solutions TCV employees bring a wide variety of experience to their roles, including skills derived from working in the banking TCV People and finance sector, academia and the public sector.

i •

Employee turnover for 1999-00 was steady at 16 per cent, - ì which is lower than the average for financial institutions. Although the labour market was tight during the year, a É 1«-i number of skilled and experienced people were attracted to TCV over the past 12 months.

The continued tight labour market is expected to place increased emphasis on the development of internal succession plans, particularly for key roles. In this regard, we have maintained a consistent policy of providing cross-functional development opportunities, with around 20 per cent of our staff having worked in more than one area of the organisation during their careers with TCV.

In common with the banking and finance sector generally, the average age of TCV employees is just over 30 years and the average length of service with TCV is over four years.

Employee benefits are provided on a total employer cost basis and working conditions are tailored to individual needs where possible. We are aware that we must be able to attract and retain those people best equipped to meet the Corporation's future needs. ife;,.,. In January 2000, TCV implemented an expanded health and fitness program that provides a professionally constructed mix of individual and group activities embracing physical fitness, physical and mental health, individual health and fitness assessments and advice on ergonomics in the workplace. In the first six months of operation, more than 95 per cent of employees participated in some aspect of the program.

14 Working together. Board of Directors Client & Advisory Services Chairman Co-ordinates TCV's client relationships by delivering financial Ian Ferres products,providing effective advice on all-aspects of client Deputy Chairman Reginald Nicolson »fina'ncirig'andirisk maniement needs^andaclvising clients on tWÊÊfl Managing Director economic and market developments. ' IP Michael Dontschuk

Carolyn Kay Treasury & Portfolio Services Paul Rizzo Implements our funding strategies, provides balance sheet John Astbury iplanning and risk management of the overalliState debt portfolio David Craig and/ on^ day to day basis, executes the financial transactions to meet our client requirements.

3E - Managing Director Middle Office * ^ v " Michael Dontschuk Provides-the control andipolicy environrrientan'relation to market

Internal Audit risk and product risk. It services management and treasury in

relation to risk, profit and loss attribution and management i

reporting- • . .,.. j,iS,. ...

Deputy Managing Director Banking & Settlements • • John Davies Responsible for recording and processing transactions, I the timeJy.settlement of,payment of transactions and the ' js.m • «•<»'•* s > v «- ' - ïi V > 1 « •Corporation's domestic.and ¡international shanking arrangements;*. i tV V'v ' f -, 4 » This untealso provides banking advisory services to clients , -

Corporate Services íílÉí Provides ¡lega I services/iplanning, marketing-credit mainagemen t „ „ ' 'êiSIÈm 1 and -human i resourcesvc -services. " MMHSS « •

MM* Accounting >n •sit&SBR

Maintains;all financiahrecords and produces the annual financial statements and provides accounting services to a number of clients.*; " r

si«» : lit; — zzsac ' 7 ISET , amp... Systems Responsible for business and information systems in accordance with the"Corporation's information technology^strategy. Facilitates r electroni' c- servic* e delivery and other systems support to our dientsJif^'' M* »1« «KPT- effective 28 Sepîemfaëf 2000

Comparative staffing figures

•0 June 2000 30 June 1999 Female Male Tol.il I cmale Male Total Executive officers 3 0 5 5 Middle Management "* 4*| 10 6' 5 11 Other taff U 14 28 14 17 31 Total S, ; 18» 27 20 27 47 Equivalent full-time 25.6 4; 1 17 2 26.5 43.7 -1! left Salary and.s,** relate d employee expensesp$5.3 million IP»-». $5.6 million ' " —» , . - - Tflfcft'r,,.,«' ,

.to achieve better solutions There have been several changes to our Board of Directors during the financial year Directors and subsequently. Shown below are the Directors of TCV as at 28 September 2000.

M

Ian N Ferres FFA (Edinburgh), FIAA (Aust) Chairman

Age 61. First appointed: 1 January 1993. Current appointment expires: 31 December 2000.

A specialist in the finance, investment and financial services sector, Mr Ferres spent more than 34 years with the National Mutual Group and was an Executive Director from 1983 to 1990. He is Chairman of CH China Investments, Infosentials Limited and the MAB Corporation Croup. He is a Director of Amrad Corporation Limited, Swiss Re Australia Ltd, Victorian Funds Management Corporation and Australian Unity Limited.

Reginald A D Nicolson AAIB, FAIM Deputy Chairman

Age 68. First appointed: 1 January 1993. Current appointment expires 31 December 2001.

Mr Nicolson was Deputy Managing Director of the ANZ Banking Croup from 1984 to 1988 and Group Managing Director from 1988 until 1991. He is Chairman of Telstra Super Pty Ltd and Chairman of The Bank of Tokyo - Mitsubishi (Australia) Ltd.

Michael Dontschuk BSc(Hons) Managing Director

Age 43. First appointed: 4 September 2000.

Mr Dontschuk was appointed Managing Director on 4 September 2000 having been

with the Corporation for seven years. Prior to that, he had 13 years experience in

financial markets and actuarial positions. He worked at Bankers Trust for 7 years where

he headed their Australian and New Zealand interest rate business in London for 3

years.

16 Working together. S Carolyn H Kay BA (Melb), LLB (Melb) Age 39. First appointed: 15 April 1998. Current appointment expires 14 April 2001.

Ms Kay is a Director of Victorian Funds Management Corporation, Pacific Dunlop Ltd, Deputy Chairman, the Arts Foundation of Victoria and Advisory Director, Morgan Stanley Dean Witter. Until February 1999, Ms Kay was an Executive Director of Morgan Stanley Dean Witter, having joined the firm in London in 1989, returning to Australia in 1992 to head Debt Capital Markets for Australasia. Prior to joining Morgan Stanley Dean Witter she worked for J.P. Morgan in Melbourne and New York, Linklaters & Paines in London and Gillots (now Minter Ellison) in Melbourne.

John F Astbury FAICD Age 56. First appointed: 22 August 2000. Current appointment expires 21 August 2003.

Mr Astbury is a Director of MIM Holdings and NRMA Insurance Croup. After a long career in banking in the United Kingdom with the Barclays, Chemical and Charterhouse banks and in Australia with the National Australia Bank, Mr Astbury was Finance Director of Lend Lease Corporation until his retirement from executive life in 1998.

David T Craig FCPA, AAIBF \ Age 60. First appointed: 22 August 2000. Current appointment expires: 21 August 2003.

Mr Craig was Chief Financial Officer of the ANZ Banking Group from 1992 to 1997. He had previously held other senior executive positions within the ANZ Group in Australia and London. He is a Director of ANZ Staff Superannuation (Australia) Ltd and Stokes (Australasia) Ltd. He is also a member of the Compliance Committee of Merrill Lynch Mercury Asset Management and a member of the Industry Advisory Committee of Lazard Asset Management Pacific Co.

Paul J Rizzo Bcom (Melb), FAIB, MBA (Melb), AMP (Harvard) Age 55. First appointed: 16 January 1996. Appointment expires: 30 September 2000.

Mr Rizzo has been Group Mananging Director, Finance and Administration and Chief Finance Officer of Telstra Corporation Limited since joining that company in 1993. His previous appointments were in the banking industry. From 1966 to 1990, Mr Rizzo was with the ANZ Banking Group, notably as Chief Exectutive, ANZ New Zealand from 1988 to 1990. In 1990 he became Chief Executive Officer of the State Bank of Victoria and Chief General Manager, Retail Banking on the SBV's merger with the Commonwealth Bank. Mr Rizzo is currently Chairman of Foxtel and the Financial Reporting Council. He is also a Director of IBM Global Services Australia Limited, and has previously served as Chairman and Director of numerous companies.

. toa G h ¡ e ve bette r sol u t ions On 4 September Michael Dontschuk Corporate was appointed Managing Director Governance ofTCV.

Senior Management Board Composition During 1999-00 the executive team comprised the The Treasury Corporation of Victoria Act 1992 (the TCV Act) Managing Director, David Carruthers; Executive General provides for a Board of Directors consisting of the Chief Manager Treasury and Client Services, Michael Dontschuk; Executive Officer and between five and seven other and Executive General Manager International and Corporate Directors appointed by Victoria's Governor in Council on Services, John Davies. These three executives formed the the recommendation of the Treasurer of Victoria. senior management team at TCV to ensure the The Chief Executive Officer of the Corporation (the implementation of the Corporation's objectives. Managing Director) cannot be appointed Chairperson or Effective 4 September 2000 Michael Dontschuk, the former Deputy Chairperson of the Board. Officers of the Executive General Manager Treasury and Client Services, Corporation, other than the Managing Director, are not was appointed Managing Director. Details of his eligible to be Directors. qualifications and experience are shown on page 16. Under the TCV Act, the Managing Director is appointed by the Board with the approval of the Treasurer of Victoria for a John Davies Fellowship Dip.Bus.Stud.,CPA term not exceeding five years but is eligible for John manages the areas of Corporate Services, Legal reappointment. Corporation Directors are appointed for a Services, Credit Management, Planning and Marketing, maximum period of three years and are also eligible for Banking and Settlements and Human Resources. In addition, reappointment. he is the Corporation's Secretary. John has been employed at TCV for seven years. He has a background in treasury The Governor in Council determines Directors' management having held senior positions at the Australian remuneration, other than that of the Managing Director or a Wheat Board and State Electricity Commission, where he Director who is also an officer of the public service. Detail worked for 22 years. of remuneration of Directors' and senior management is given in Note 20 of the financial statements.

18 Working together... Responsibilities of Directors Code of Conduct Under the TCV Act the Board is responsible for the affairs of The Corporation has established a code of conduct for all the Corporation. The Board reviews and approves strategic staff and consultants or contractors. This code is based on plans annually, monitors performance of the Corporation the code of conduct developed by the Australian Financial and of the Chief Executive Officer, assesses and monitors Markets Association. Compliance with the code of conduct business risks, the achievement of financial objectives and is an inviolable condition of each employee's contract and provides overall policy guidance. all staff are encouraged to use the code as a frame of reference in their daily activities. The Board also approves key policies in relation to risk management activities and monitors the management of the Audit Committee Corporation's business within the prudential framework All of the Corporation's Board of Directors are members of established by the Treasurer of Victoria. The Board meets the Audit Commitee and meetings are held every alternate monthly, and the Directors may meet with senior month. The primary objectives are to ensure that the management between Board meetings to review specific Corporation's internal control structure and processes are issues or matters of concern. appropriate for its activities.

The TCV Act requires a Director who has a pecuniary Remuneration Committee interest in a matter being considered by the Board, to All of the Corporation's Board of Directors, except the declare the nature of the interest at a meeting as soon as Managing Director, are members of this committee, which practicable after the relevant facts have come to their meets every alternate month, if required. The primary knowledge. It is required that such a declaration is recorded objectives are to ensure that TCV has appropriate processes in the minutes. The TCV Act also provides that, unless the to determine remuneration, to approve remuneration terms Board (excluding the Director) resolves otherwise, the for senior management and to set the terms and conditions Director must not be present during any deliberation with for the Managing Director. respect to the matter. The Director is not entitled to vote on the matter and, if the Director does vote on the matter, the TCV Act requires the vote to be disallowed.

5 Attendance In Dirvi tors ,il Directors meeting 1 JuK I «»«»9 - {0 limi- ¿000 Board Audit Remuneration No. of Meetings \o. of Mi-Hill-;» No. oí Meetings Director Meetings Al tended Meetings Mti-ndi'il Meetings Mti'iided Ian Fer MMIlil MÊSÊKSÈBÊStMmÊSÊÊÊSÊSBt •BÉIËÏI Reginald Nieolson SHHE^BWBI HBHHWBMK8 •SBSs^ÊÊBm David Carruthers • ••MI ¡SBBSSÊÊÊÊBm^ BBHte'Sj Duncan Andrews fifiMwralBBBi BBpHHwl Carolyr •HnpfS WÈBÊêÊÊÊÊÈ mmBBSSÊ^ David Meikleiohn wbhbbhmbrib •HHR^

Paul Rizzo SSHfipS HHmhPIMBSH aHHpj

I cave of absence granted on two occasions to ( hand's to the Hoaid ol Director subsequent In til lune pillili j Paul R1//0, both ot which coincided with Audil meetings lohn Astbury was appointed on II C David Craig was appointed 22

• Changes In the Hoaid in Direclms 1» H) (line JIMM) David ni tment expired on 1 09 ' i I Duncan Andrews appointment expired on 31 1 Michael Dontscliuk was appointed on 4.C | David Meiklejohn appointment expncd on 20 ( Paul Rizzo will rclire from the Board eltedive 'JO 00 t

.to achieve better solutions 19 APPENDIX 1 OUR CLIENTS INCLUDE

State of Victoria Ports Budget Sector Melbourne Port Corporation Victorian Channels Authority Electricity State Electricity Commission of Victoria Transport Public Transport Corporation Gas Roads Corporation Gascor Pty Ltd Victorian Rail Track Corporation Gas Transmission Corporation Melbourne City Link Authority Victorian Energy Networks Corporation (VENCorp) Education Water Council of Adult Education Metropolitan Monash University Melbourne Water Corporation City West Water Limited Sports and Recreation South East Water Limited Falls Creek Alpine Resort Management Board Yarra Valley Water Limited Lake Mountain Alpine Resort Management Board Regional Mount Buller Alpine Resort Management Board Barwon Region Water Authority Mount Hotham Alpine Resort Management Board Central Gippsland Region Water Authority Phillip Island Nature Park Board of Management Central Highlands Region Water Authority Melbourne and Olympic Parks Trust Coliban Region Water Authority The Victorian Arts Centre Trust East Gippsland Region Water Authority Tourism Victoria Gippsland and Southern Rural Water Authority Zoological Parks and Gardens Board Glenelg Region Water Authority Goulburn Murray Rural Water Authority Other Goulburn Valley Region Water Authority Boroondara Cemetry Trust Grampians Region Water Authority Country Fire Authority Lower Murray Region Water Authority Docklands Authority North East Region Water Authority Emergency Services Superannuation Board Portland Coast Region Water Authority Inner and Eastern Health Care Network South Gippsland Region Water Authority Melbourne Market Authority South West Water Authority Metropolitan Fire and Emergency Services Board Sunraysia Rural Water Authority Museums Board of Victoria Western Region Water Authority Rural Finance Corporation of Victoria Westernport Region Water Authority Transport Accident Commission Wimmera Mallee Rural Water Authority Urban Land Corporation

Other Clients At 30 June 2000 there were 59 other public sector entities which held deposits of $1.7 billion with TCV. 1 1

APPENDIX 2 DEALER PANELS

The Dealer Panel for TCV Hotstocks focuses on our dealing International Facilities requirements, including dealing in domestic inscribed stock, buy-backs and restructuring of non-Hotstock outstandings US$3,000 million Euro Medium Term Note and dealing in a variety of other financial market Morgan Stanley Dean Witter instruments used by TCV in balance sheet management Nomura International activities. UBS Warburg

Domestic Programs $A400 million Euro Commercial Paper Program (Hong Kong) Dealer Panel - Domestic BA Asia Limited ABN Amro Bank N.V. (Australian Branch) Deutsche Bank AG, London Branch Commonwealth Bank of Australia Commonwealth Bank of Australia CS First Boston Pacific Capital Markets Limited Deutsche Bank AC Macquarie Bank Limited Merrill Lynch International Australia Pty Limited National Australia Bank Limited RBC DS Global Markets Salomon Smith Barney Australia TD Securities UBS Warburg Australia Limited Westpac Banking Corporation

Domestic Promissory Note Panel Australia and New Zealand Banking Croup Limited Commonwealth Bank of Australia Macquarie Bank Limited KS» National Australia Bank Limited Westpac Banking Corporation

Dealer Hotstock Turnover - $billion

I 22 Sep 01 12.00% Il5 Oct 03 12.50% 115 Nov 06 10.25% Il5 Aug 08 7.50% 115 Sep 10 6.48%

$4.3 $5.7 » : &

$3.7

BBiiíSp r « > v , " V' m APPENDIX 3 LEGISLATION AND STATE POLICIES

Treasury Corporation of Victoria Act 1992 The TCV Act 1992 establishes the Corporation and sets out its functions and powers. The Act was reprinted on 20 August 1998 incorporating amendments up to Act No. 46/1998. Act No. 63/1999, which is not yet in operation, and 98/1998 also contain provisions which further amend the TCV Act.

Borrowing and Investment Powers Act 1987 The Corporation's power to borrow, invest and undertake financial arrangements is conferred under this Act.

Financial Management Act 1994 This annual report has been prepared in accordance with this Act. Information in respect of Part 9.1.3. (iv) of Directions of the Minister for Finance under this Act which is not contained in this annual report has been prepared and is available to the Treasurer, Members of Parliament and the public on request. In terms of Part 9.1.3(ii)(e), there have been no significant events subsequent to balance date.

Freedom of Information Act 1982 Pursuant to Section 40 of the TCV Act, the Corporation is not, and is not eligible to be declared to be, an agency or prescribed authority within the meaning of this Act.

Competition Policies Treasury Corporation of Victoria is listed as a Public Financial Enterprise in Table 1 Government Business Enterprises in "Competitive Neutrality, A Statement of Victorian Government Policy" published by the Department of Premier and Cabinet, June 1996. The table currently excludes TCV from nomination for the Commonwealth Tax Equivalent Regime, Commonwealth sales tax, State taxes and charges and relevant regulations. The policy statement also indicates that the State financial accommodation levy is not applicable to TCV because it is not a net borrower in its own right.

gHgjii-.i*-: : ' -g gig m APPENDIX 4 WORK- PLACE ISSUES

Equal Opportunity TCV is a proponent of equal opportunity in the workplace Consultants and our staff selection is based on skills, competence and The Corporation employs expert consultants only for experience. Our equal opportunity policies are regularly specific projects and to maintain best practice in the finance reviewed and updated and a staff awareness program industry. During 1999-00 three consultancies were is in place. undertaken costing a total of $60,654. The external services that we use on a contractual basis include internal audit and Industrial Relations legal advice, and do not constitute consultancies. Our record of no time lost owing to industrial disputes or due to industrial accidents continued throughout the year and no workers compensation claims were submitted by our employees.

Superannuation All employees are eligible to join our superannuation scheme, which is an accumulation fund, providing optional death and disability benefits. In 1999-00 our fund is administered by NSP Buck Ltd and managed by a Trustee Company whose Directors are two TCV appointed and two member elected trustees. John Davies is Chairman of the Trustee Company. 97 per cent of employees are members of our Fund and 3 per cent are members of the State Superannuation Scheme. The Fund offers a comprehensive member investment choice option.

Staff Seminars - "What TCV is all about" In 1999-00 the "What TCV is all about" monthly information sessions continued. These sessions for staff are on topical issues impacting on the organisation and the financial markets. The topical nature of these sessions explains the voluntary attendance rate of 80 per cent on average.

Topics Date TCV's Treasury Operations 08.11.99 Central Financing Authorities 16.02.00 TCV Health and Fitness program 23.03.00 Strategic direction of the front office, 04.05.00 middle office and client services The personal and organisational implications 05.06.00 of the Goods and Services Tax Corporate Health and Office Ergonomics 26.06.00 APPENDIX 5 COMMUNICATIONS

PUBIK M IONS Annual Report \ ^ ' The annual report can be downloaded »i r •• • \o- l'I'") > . s» : 1 1998-99 >~<.} . from our internet site. f-

INTrRNfcl Silt www.tcv.vic.gov.au : The TCV Internet site provides access to 'Monthly updates current information on the Victorian economy, - TCV financial market activity, and media releases. i^BgpliSSiB-S'; -i sjíít There is also the option to download the latest TCV annual report and selected presentations.

MEDIA Press Releases "No Funding Requirement for TCV in 1999-00" Dec 1999 "TCV Delivers Benefits For Victoria" Nov 1999 "Top Six Dealer Panel Members" Sep 1999

ELECTRONIC Reuters Page TCVM* Provides details of TCV Hotstocks MEDIA Reuters Page TCVN* Provides details of offshore stock Bloomberg TCVA* Provides information on TCV Market Activities; press releases and current contacts. Details of securities issued by TCV are also available on Bloomberg.

'¡". Reuters Australia Pty Ltd and Bloomberg are real-time global financial market information services

Major External Presentations '

OV tRShAS Presentations in New York, Frankfurt and London in company with Jun-Jul 2000 the Premier and Minister for Multicultural Affairs, the Horn Steve Bracks,- ;. ¡j "PfBBpiSi »«lili •MP and the ireasurer and Minister for State and Regional Development, the Hon. John Brumby, MP.

RUDC.n 2000-01 The Hon SteveBracks,' MP Premier.of Victoriaand.Minister for May 2000 ('»Jt.'Slr'V*;1* tMŒfiiïsiû Multicultural Affairs;discussed;his;first.budget at a luncheon arranged by "ICVi in co-operation', with,the Committee for Economic - RSiiP^lllffl^llt« Development of.Australia:iA simultaneous function;was also hoste« Sü PHmI MpyFCVi iñisyd' - JmPhI^ MSmmHHPI rXILRNAI A keynote speech at the Australian Finance and Capital Markets Confer ¡¡¡Itife on "th-e evolutio- n ol a centralised treasury" delivered by the Managing Director. •HP

nr i".1 APPENDIX 6 SELECTED OUTSTANDING BONDS

Issue Original Issue Maturity Coupon Total Amount Total Amount Currency Amount Date Date % Purchased by TCV Remaining Issued up to and including Outstanding at '000 30 June 2000 30 June 2000 '000 '000 Listed on the London Stock Exchange - Eurobonds and Euro Medium Term Notes

AUD 100,000 11.01.91 11.01.01 zero 54,972 45,028

AUD 125,000 30.05.91 30.05.01 12.250 53,477 71,523

USD 300,000 15.01.92 15.01.02 8.250 161,865 138,135

AUD 200,000 24.02.94 28.02.02 6.750 185,188 14,812

AUD 100,000 12.03.92 12.03.02 11.000 62,722 37,278

AUD 100,000 09.04.92 09.04.02 11.000 46,140 53,860

CAD 200,000 02.10.92 02.10.02 7.875 84,818 115,182

AUD 100,000 22.05.92 27.05.03 10.500 58,345 41,655

GBP 150,000 09.07:93 09.07.03 8.750 62,832 87,168

AUD 125,000 18.09.92 18.09.03 9.250 86,340 38,660

CAD 250,000 24.11.93 24.11.03 7.250 183,738 66,262

AUD 100,000 27.06.95 27.06.05 9.000 54,860 45,140

AUD 200,000 11.01.91 11.01.06 zero 107,631 92,369

AUD 200,000 11.01.91 11.01.11 zero 97,112 102,888

Listed on the Luxembourg Stock Exchange - Eurobonds and Global Bonds

AUD 100,000 12.12.91 12.12.01 10.500 44,232 55,768

AUD 200,000 16.04.92 16.04.02 zero 92,968 107,032

AUD 150,000 04.09.92 04.09.02 9.000 83,707 66,293

AUD 150,000 07.03.93 07.04.03 8.750 88,578 61,422

AUD 100,000 30.09.93 30.09.03 7.250 63,580 36,420

AUD 500,000 15.04.93 15.10.03 8.250 432,215 67,785

AUD 100,000 29.11.93 29.11.05 7.125 57,574 42,426

AUD 200,000 - 11.12.91 31.08.11 zero 74,201 125,799

Samurai Bonds - Issued in the name of VicFin and TCV

YEN 5,000,000 27.09.90 27.09.00 8.100 1,100,000 3,900,000

YEN 5,000,000 27.09.90 27.09.00 7.000 3,400,000 1,600,000

YEN 6,000,000 15.02.91 15.02.01 7.100 4,000,000 2,000,000

YEN 10,000,000 22.02.91 22.02.01 7.100 1,200,000 8,800,000

YEN 20,000,000 18.03.93 18.03.03 5.570 12,200,000 7,800,000

YEN 12,000,000 30.03.94 15.03.04 5.000 5,804,500 6,195,500

YEN 15,000,000 09.12.94 09.12.04 5.850 8,000,000 7,000,000

YEN 15,000,000 21.12.94 21.12.04 5.100 7,300,000 7,700,000

Swiss Franc Bonds and Notes

Sfr 150,000 24.08.93 24.08.01 4.750 7,030 142,970

Yankee Bonds - Issued in the name of VicFin and TCV

USD 531,355 01.10.91 01.10.01 8.450 377,237 154,188 Statement of Income and Expenditure Balance Sheet Cash Flow Statement Notes to and forming part of the Financial Statements Note 1 Statement of Accounting Policies Note 2 Income and Expenditure Items Note 3 Average Balance Sheet and Related Income Note 4 Dividends/Reserves Note 5 Cash & Cash Equivalents Note 6 Investments Note 7 Loans to the State of Victoria and Participating Authorities Note 8 Fixtures, Fittings and Equipment Note 9 Deposits from Public Sector Note 10 Client Loans and Deposits Outstanding Note 11 Borrowed Funds: Domestic Note 12 Borrowed Funds: Offshore Note 13 Foreign Currency Borrowings Note 14 (i) Interest Rate Risk Note 14 (ii) Weighted Average Yields Note 1 5 Net Fair Value Note 16 Derivative Financial Transactions Note 1 7 Superannuation Note 18 Auditor's Remuneration Note 19 Related Party Information Note 20 Remuneration Note 21 Contingencies/Commitments Note 22 Taxation Note 23 Provisions Note 24 Notes Supporting Cashflow Statement Note 25 Transactions with Other Government Controlled Entities Certification of Financial Statements Auditor-General's Report Financial Statements Statement of Income and Expenditure For the year ended 30 June 2000

1 2000 ' 1999 Note j SOOO's | $000's Net Income from Operations Kc),2 | 8,684 j 23,291

j 1

Administrative expenses 2 I (9,867) j (10,439)

Borrowing related expenses 2 I (2,633) 1 (2,867)

i (12,500) 1 (13,306) Administrative fees & recoveries 2 j 4,844 1 11,373

f (7,656) j (1,933)

1 1

Net Income before abnormal items 1 1,028 | 21,358

I i

Abnormal Items 2 1 (13,065) | - Net (Deficit)/Surplus I (12,037) | 21,358 1 1

Amount to be paid as a dividend 4 i I (14,000)

Retained earnings - opening balance 1 14,091 , I 6,733

Transfer from General Reserve | 10,000 I -

Special dividend 4 ! (10,000) I - f Retained earnings - Closing Balance Ü 2,054 \ 14,091

This statement should be read in conjunction with the accompanying notes. Balance Sheet As at 30 June 2000

2000 1999 Note $000's $000's Assets

Cash and cash equivalents 5 1,737,234 2,924,301

Receivables and prepayments 3,858 1,184

Accrued interest receivable 402,890 404,545

Investments 1(i),6 ? 4,647,941 3,687,132

Loans to Participating Authorities 7 8,903,008 9,706,757 Fixtures, fittings and equipment Kj),8 1,751 2,506 Total Assets 15,696,682 16,726,425

Liabilities 1 Accounts and other payables » 1,368 3,687

Accrued interest payable 512,189 558,009

Provisions 1(k),23 3,450 14,954

Deposits from public sector 9 2,460,533 2,448,359

Borrowed funds - Domestic 11 ì 9,352,156 9,135,497

Borrowed funds - Offshore 12 3,249,932 4,426,828

Total Liabilities Î 15,579,628 16,587,334

Equity

Contributed capital Ì 30,000 30,000

General reserve 4 85,000 95,000 Retained earnings ! 2,054 14,091

Total Equity 117,054 139,091 ! »

Total Equity and Liabilities Ì 15.696,682 16,726,425

This statement should be read in conjunction with the accompanying Notes. Cash Flow Statement For the year ended 30 June 2000

| 2000 1999 Note 1 $000's $000's ! Cash Flows from Operating Activities } (

Interest received from Participating Authorities | 427,440 905,949

Interest paid on borrowings | (471,470) (1,293,504)

Net cash (received) paid - market transactions | (53,328) 33,431

Interest received on investments and cash I 329,686 255,780

Fees and commissions received | 5,150 11,384

Cash paid to suppliers and employees I (9,748) (11,659)

Net Cash from Operating Activities 24(ii) 227,730 (98,619) ì i Cash Flows from Investing Activities 1 i i Reduction in loans to Participating Authorities | 958,964 6,114,037

Purchase of investments | (790,052) (1,247,860) Payments for fixtures, fittings and equipment I (350) (1,022) Net Cash from Investing Activities ; 168,562 4,865,155 ì 1 Cash Flow from Financing Activities | |

ì i Reduction in borrowings | (1,571,451) (5,751,780)

Increase (reduction) in deposits from authorities :r 12,174 1,179,594

Dividend paid |r (14,000) (16,000)

Special dividend paid ? (10,000)

Net Cash Flow from Financing Activities { (1,583,277) (4,588,186) ! 1 Net Increase (Decrease) in Cash Held 178,350 -, (1,186,985) I 1 Cash Held at Beginning of Year 2,924,219 2,745,869

1 1 Cash Held at End of Year f 1,737,234 2,924,219

i 1

Reconciliation of Cash j j

Cash and cash equivalents in balance sheet 5 1,737,234 { 2,924,219

Cash per the Cash Flow Statement I 1.737,234 2,924,219

This statement should be read in conjunction with the accompanying Notes. Notes to and forming part of the Financial Statements

Note 1 Statement of Accounting Policies

(a) Basis of Accounting The financial statements have been prepared in accordance with Australian Accounting Standards, the requirements of the Financial Management Act 1994, and other mandatory professional reporting requirements.

(b) Change in Accounting Policy Certain indexed based structures are accounted for on an historical cost basis.

The structures consist of capital indexed bonds, indexed annuity bonds and an indexed swap; each underlying instrument differs as to the recognition of the applicable indexation subsequent to a CPI release date. In accounting for these instruments, under historical cost, a change in accounting policy has been adopted to align the recognition of indexation for each instrument and thus the impact on profit and loss during the period to maturity.

Two changes have been adopted, being:

• Provision created for the last period prior to maturity where the capital indexed bonds will not receive indexation, in comparison to indexed annuity bonds which will be impacted. This provision is reviewed annually; and,

• Adjustment to the current financial year results to reflect the timing differences in indexation recognition.

In addition, the treatment of indexation has been amended to reflect the underlying economic substance of the transactions accounted for on an historical cost basis by ensuring that the quarterly CPI changes are applied to both the assets and liabilities through to maturity.

The impact of the change in accounting policy is detailed in Note 15, Net Fair Value.

(c) Income Recognition and Valuation

Income from Operations Treasury Operations income reflects the outcome of the integrated day to day management of the total financial exposures of the Corporation. This income arises from the aggregate of interest income, interest expense, realised gains and losses and unrealised gains and losses incurred in the management of both physical and derivative positions.

Valuation of Financial Assets and Liabilities Certain indexed based structures are accounted for on an historical cost basis as detailed in Notel(b). The net fair value of these transactions is disclosed in Note 15.

All other financial instruments in the balance sheet are stated at market value representing net fair value. Any unrealised profits and losses from revaluation are reported in the Statement of Income and Expenditure. Transactions are recognised on a settlement date basis. However, market rate exposure on unsettled transactions as at balance date is brought to account in the Statement of Income and Expenditure

Market valuations are performed with reference to appropriate market sourced rates for the underlying asset or liability. Market rates for loans to authorities are based on rates commensurate with the TCV rate for similar securities.

(d) Derivative Financial Instruments TCV enters into derivative financial instruments, as outlined in Note 16, to manage the financial risks inherent in its asset and liability management activities.

Those derivative instruments used to manage interest rate risk are valued to market on a daily basis and the resulting profits and losses recognised in the Statement of Income and Expenditure. On settlement, the realised gains and losses resulting from derivative instruments are reported immediately in the Statement of Income and Expenditure.

Currency swaps used to manage currency risk are accounted for as stated in Note (1)(h).

(e) Assets and Liabilities Assets and liabilities are classified according to their nature and presented in an order that reflects relative liquidity. Derivatives are classified in the balance sheet to reflect the classification of the underlying transactions.

(f) Debt and Loans Reconstruction TCV debt securities may be repurchased from the market and cancelled. Similarly, loans to authorities may be repaid before maturity and replaced with new loans. Gains and losses associated with these repurchases/prepayments are recognised immediately in the Statement of Income and Expenditure. Notes to and forming part of the Financial Statements

(g) Amortisation of Discount/Premiums Discounts and premiums on assets (including loans to Participating Authorities) and liabilities are amortised over the term of the asset or liability on historical or constant yield basis, with the amortisation being taken to the Statement of Income and Expenditure.

(h) Foreign Currency Translation Assets and liabilities and associated hedging arrangements denominated in foreign currencies are initially recorded at the spot rate at the date of the transaction and are translated at the current exchange rates at balance date.

Net unrealised gains and losses arising from translation of foreign currency assets and liabilities are brought to account in the Statement of Income and Expenditure.

(i) Stock Lending The issue of stock secured by the provision of substitute stock of the Australian Government or a State Government (through a State Central Financing Authority) is accounted for at face value in the balance sheet as a liability under "Borrowed funds: Domestic". An equivalent amount, being the amount of stock to be paid back, is shown as an asset under "Investments".

(j) Depreciation of Fixtures, Fittings and Equipment Depreciation of fixtures, fittings and equipment is calculated on a straight line basis using rates designed to allocate the cost over the expected useful life of the asset. Software costs of computer systems are capitalised and amortised over estimated useful life of 3 years.

(k) Provisions Long service leave is based on contractual requirements and assessments having regard to staff departures, leave utilisation, future salary increases and appropriate discount factors. Long service leave is payable, pro-rata, to employees with more than seven completed years of approved service.

Provision for annual leave represents the liability for the unused leave entitlements for employees.

Provision for indexation recognition represents the estimate of indexation in the last period prior to maturity where the Capital Indexed Bonds will not be impacted by indexation, in comparison to Indexed Annuity Bonds which will include indexation for the last period prior to maturity.

No provision for bad or doubtful debts, including impaired loans, has been made as at 30 June 2000 as all amounts owed to TCV are expected to be recovered in the normal course of business. Provision for dividend is usually paid within four months of recognition.

(I) Repurchase Agreements Securities sold/purchased under repurchase agreements are retained in the financial statements and a counterparty asset/liability is disclosed under the classification Investments — receivables from financial institutions / Domestic borrowings - payables to financial institutions. Interest on the counterparty loan/deposit is charged to income and expenditure.

(m) Cash Flow Statement For the purpose of the cashflow statement, cash includes 11 am deposits with financial institutions and liquid investments maturing in less than three months.

(n) Receivables and payables Interest receivable/payable is accrued in accordance with the terms and conditions of the underlying financial instruments.

Receivables are carried at amounts due. The collectibility of debts is assessed at balance date and specific provision is made for any doubtful debts.

Accounts and other payables represent liabilities for goods and services provided prior to the end of the financial year and which are unpaid. The amounts are unsecured and are usually paid within 30 days of falling due.

(o) Rounding

Amounts have been rounded to the nearest thousand dollars, unless otherwise indicated,

(p) Comparative Figures Where necessary, comparative figures have been adjusted to conform with changes in presentation in the current year. Notes to and forming part of the Financial Statements

• " —1 Note 2 Income and Expenditure Items 2000 I 1999 $000's j $000's

Net Income from Operations j !

Interest income on cash and cash equivalents 153,761 I 135,361

Interest income on investments 275,377 ( 145,345

Interest income on loans to Participating Authorities 593,028 ( 864,207

Interest expense on borrowings (1,066,122) I (1,153,754)

Realised and unrealised market movements 52,640 I 35,146

Adjustment regarding a more accurate allocation of discount/premium on foreign currency borrowings (3,014)

i 8,684 I 23,291

? I

Administration Expenses I

Salaries and related employee expenses . ' 5,324 I 5,555

Depreciation of miscellaneous assets 1,104 I 1,163

Professional fees and contract services 807 I 879

Rent and power 649 l 600

Market information services 475 I 506

Promotional expenses 188 j 284

Legal costs 74 I 192

Other expenses 1,246 1 1,260

9,867 1 10,439 ! J Borrowing Related Expenses i

Financial institutions duty & other charges 1,431 I 1,325

Rating agency fees 450 I 355

Dealer fees 275 I 550

Registry fees 265 I 372 Other costs 212 . I 265

2,633 I 2,867 I ! Administrative Fees and Recoveries 4,844 j 11,373

Administration fees and recoveries income from fees charged for services provided to the Budget Sector and Participating Authorities is used to meet associated administrative and borrowing expense.

Abnormal Items

Correction of indexed bond/swap historic values at 30 June 1999 to recognise indexation in line with the underlying economic substance of the structured indexed transactions (Notes 1(b) and 15) | 7,477

Establishment of Indexation at Maturity Provision (Notes 1(b) and 15) | 2,621

Adjustment to recognise swap fees payable at 30 June 1999, previously deferred f 2,967

13,065

In 1998-99, the Corporation adopted historic cost accounting for certain indexed based structures. This approach incorrectly recognised $10,098,000 as income in 1998-99. Additionally, income of $2,967,000 in relation to a debt buyback transaction was treated as income while inadvertently deferring the offsetting expenses associated with that transaction. Consequently, 1998-99 Net Income from Operations was overstated by $13,065,000. The 1999-2000 accounts therefore reflect the reversal of the 1998-99 income incorrectly recognised of $13,065,000. However, no economic loss has been incurred as a result of this previously incorrect accounting treatment. Notes to and forming part of the Financial Statements

Note 3 Average Balance Sheet and Related Income

2(101) 2000 2000 1999 1999 1999 Average Income/ Average Average Income/ Average Balance Expense Kale Balance Expense Rate $000's $000's % $000's $000's %

Interest Earning Assets I

Cash and cash equivalents 2,356,006 153,761 6.53% 2,841,473 135,361 4.76%

Investments 4,991,781 ' 282,255 5.65% 3,045,621 145,345 4.77%

Loans to Participating Authorities 9,108,840 591,865 6.50% 13,857,746 864,207 6.24%

16,456,627 , 1,027,881 6.25% 19,744,840 1,144,913 5.80% i 1 Non-Interest Earning Assets ! Investments 7,018 117

Fixtures fittings & equipment 2,087 2,543

Receivables & Prepayments .903 2,692

10,008 5,352 1 ! Total Assets 16,466,635 19,750,192 1 1 Interest Bearing Liabilities I Deposits from public sector 2,881,783 156,362 • 5.43% 2,517,001 114,626 4.55% Borrowed funds domestic 9,697,545 618,055 6.37% 1 2,208,244 632,940 5.18%

Borrowed funds offshore 3,755,570 244,780 6.52% 4,835,513 374,056 7.74%

16,334,898 1,019,197 ' 6.24% 19,560,758 1,121,622 5.73%

Net Income from Operations 8,684 23,291 1 ' 1 Non-Interest Bearing Liabilities f !

Provisions 4,490 6,053

Accounts and other payables 1,438 1,517

5,928 7,570 1 i Total Liabilities 16,340^826 19,568,328 Notes to and forming part of the Financial Statements

Note 4 Dividends/Reserves

Dividend

Under Section 31 of the Treasury Corporation of Victoria Act 1992, TCV is required to pay dividends to the Government of Victoria, as the Treasurer shall determine. At 30 June 2000, no dividend (1999: $14 million) has been provided for in the accounts of TCV.

During the financial period, TCV declared and paid a special dividend of $10 million (1999: $Nil) to the Government of Victoria.

Reserves It is TCV's policy to maintain an adequate capital base to mitigate the risks inherent in its asset and liability management activities. The General Reserve :

(i) covers interest rate risk which could arise in the event of future adverse market changes; and,

(ii) provides capital to cover any potential market and counterparty risk associated with financial arrangements entered into between TCV and external counterparties.

An amount of $10 million (1999 $Nil) has been transferred from General Reserve to Retained Earnings during the year ended 30 June 2000.

Note 5 Cash and Cash Equivalents

Contractual maturity in At call Less than Total 3 months 2000 $000's $000's $000's Cash at bank and on hand 16,522 16,522 Deposits with futures clearing house 3,039 3,039 Receivables from financial institutions 230,000 484 230,484 Short term discounted securities 1,487,189 1,487,189 Total Cash and Cash Equivalents 249,561 1,487,673 1,737,234

At call Less than Total 3 months

1999 $000's $000's $000's Cash at bank and on hand 17,707 17,707 Deposits with futures clearing house 2,551 2,551 Receivables from financial institutions 340,873 82 340,955 Short term discounted securities 2,563,088 2,563,088 Total Cash and Cash Equivalents 361,131 2,563,170 2,924,301 Notes to and forming part of the Financial Statements

Note 6 Investments

Contractual maturity in Less than 3 months 1 to 2 to Greater than Total 3 months to 1 year 2 years 5 years 5 years 2000 $000's $000's $000's $000's $000's $000's

Stock lending 19,000 19,000

Floating rate securities 4,998 4,998

Short term discounted securities 870,786 870,786

Offshore issued securities 120,160 73,711 122,447 316,318

Fixed interest securities 25,472 1,086,076 1,243,251 519,580 2,874,379

Index linked securities 130,847 130,847

Index linked securities at historical cost 3,162 425,445 428,607

Other 1,869 308 287 504 38 3,006

Total Investments 20,869 1,019,888 1,160,074 1,366,202 1,080,908 4,647,941

Less than 3 months 1 to 2 to Greater than Total 3 months to 1 year 2 years 5 years 5 years 1999 $000's $000's $000's $000's $000's $000's

Stock lending 7,000 7,000

Floating rate securities 5,051 5,051

Short term discounted securities 103,557 103,557

Offshore issued securities 9,134 65,813 94,827 169,774

Fixed interest securities 392 174 26,433 2,156,465 682,837 2,866,301

Index linked securities 113,483 113,483

Index linked securities at historical cost 418,375 418,375

Other 465 1,455 908 726 37 3,591

Total Investments 16,991 105,186 93,154 2,252,018 1,219,783 3,687,132 Notes to and forming part of the Financial Statements

Note 7 Loans to the State of Victoria and Participating Authorities

Section 8(1 ) of the Treasury Corporation of Victoria Act 1992 ("the TCV Act") states that one of the functions of the Corporation is to provide financial accommodation to a Participating Authority or the State of Victoria. Outstanding loans at balance date, by contractual maturity, are categorised as follows:

At call Less than 3 months 1 to 2 to Greater than Total 3 months to 1 year 2 years 5 years 5 years 2000 $000's $000's $000's $000's $000's $000's 000's

Overnight & short term cash 58,500 58,500

Short term discounted loans 29,680 81,382 111,062

Floating rate loans 74,958 78,508 153,466

Fixed interest loans 182,684 155,804 756,614 2,085,910 4,146,015 7,327,027

Index linked loans 4,990 9,155 146,575 980,476 1,141,196

Fixed interest loans at historical cost 48 202 411 2,324 108,848 111,833

Interest rate swaps (76) (76)

Total Loans to Participating Authorities 58,500 212,412 317,336 844,688 2,234,733 5,235,339 8,903,008

At call Less than 3 months 1 to 2 to Greater than Total 3 months to 1 year 2 years 5 years 5 years 1999 $000's $000's $000's $000's $000's $000's $000's

Overnight & short term cash 613,613 613,613

Short term discounted loans 27,632 65,014 92,646

Floating rate loans 60,081 66,943 74,962 25,009 226,995

Fixed interest loans 239,116 411,542 784,183 2,182,536 3,802,330 7,419,707

Index linked loans 103 11,271 157,755 1,072,801 1,241,930

Fixed interest loans at historical cost 1,563 4,744 6,449 20,899 78,108 111,763

Interest rate swaps 103 103

Total Loans to Participating Authorities 613,613 328,495 548,243 876,968 2,386,199 4,953,239 9,706,757

Refer to Note 10 for details of loans by client.

Note 8 Fixtures, Fittings and Equipment

: 2000 1999 I $000'- j $000's

Fixtures, fittings, computers and equipment | . .. 5,811 | 5,596

Accumulated depreciation ' (4,060), j (3,090)

Written down value of miscellaneous assets . ; 1,751 j 2,506

Depreciation rates used are 33% in respect of computer hardware and software, and 20% in respect of furniture, fittings and equipment. Notes to and forming part of the Financial Statements

Note 9 Deposits From Public Sector

Deposits at balance date, by contractual maturity, are categorised as follows:

At call Less than 3 months Total 3 months to 1 year 2000 $000's $000's $000's $000's

Deposits from Public Sector 900,022 1,518,584 41,927 2,460,533

At call Less than 3 months Total 3 months to 1 year

1999 SOOO's $000's SOOO's SOOO's

Deposits from Public Sector 1,565,213 783,568 99,578 2,448,359

Refer to Note 10 for details of deposits by client.

Note 10 Client Loans and Deposits Outstanding

2000 2000 1999 1999 I $000's $000's SOOO's SOOO's Loans Deposits Loans Deposits

State of Victoria I 6,099,72 3 (115,000) 6,894,089 Participating Authorities: I Melbourne Water Corporation I 1,216,352 (8,900) 1,236,647 Yarra Valley Water Limited 499,044 (10,475) 505,586 South East Water Limited I 321,871 (8,246) 343,817 (6,400) Rural Finance Corporation I 249,481 (9,000) 219,152 City West Water Limited ¡11» 183,645 (300) 212,622 (774) Melbourne Port Corporation 1 83,612 (11,537) 105,104 (19,757) State Electricity Commission of Victoria Shell ! (189,462) (398,387) Other Participating Authorities 249,280 (429,174) 189,740 (460,605) Public Sector Entities: i State Superannuation Fund 1 (564,471 ) Government Superannuation Office î (343,217) Victorian Superannuation Board 1 (24,206) (838,918) Victorian Funds Management Corporation ! (281,085) (297,090) Victorian Government Trust Funds ! (353,408) (212,842) Victorian Managed Insurance Authority I (105,002) Other Public sector entities 1 (112,052) (108,584) L 8,903,008 _ =(2,460,533) „ 9,706,757 (2,448,359) Notes to and forming part of the Financial Statements

Note 11 Borrowed Funds: Domestic

Financial accommodation obtained by TCV pursuant to Sections 8 and 9 of the Borrowing and Investment Powers Act 1987 has the benefit of the guarantee of the Government of Victoria contained in Section 32 of the TCV Act 1992.

Contractual maturity in At call Less than 3 months 1 to 2 to Greater than Total 3 months to 1 year 2 years 5 years 5 years 2000 $000's $000's $000's $000's $000's $000's $000's

Benchmark Programmes Hotstocks 1,049,234 1,115,620 4,169,099 6,333,953

Promissory Notes 488,794 488,794

488,794 1,049,234 1,115,620 4,169,099 6,822,747

Domestic Borrowings - Other Payables to financial institutions 21,500 10,429 1,000 32,929

Stock lending 19,000 19,000

Long term bonds 242,543 86,384 73,557 106,396 115,809 624,689

Commonwealth Government 27,351 906 45,700 3,485 77,442

Indexed linked securities 2,614 30,992 115,928 1,063,460 1,212,994

Indexed linked securities at historical cost 558,747 558,747

Interest rate swaps (45) 64 4,074 12,844 (13,329) 3,608

Total Domestic Borrowings - Other 21,500 271,927 117,413 109,529 280,868 1,728,172 2,529,409

Total Borrowed Funds: Domestic 21,500 271,927 606,207 1,158,763 1,396,488 5,897,271 9,352,156

At call Less than 3 months 1 to 2 to Greater than Total 3 months to 1 year 2 years 5 years 5 years 1999 $000's $000's $000's $000's $000's $000's $000's

Benchmark Programmes Hotstocks 2,418,159 3,249,696 5,667,855

Domestic Borrowings - Other Payables to financial institutions 37 37

Stock lending 7,000 7,000

Long term bonds 790,683 70,404 347,297 137,917 175,215 1,521,516

Commonwealth Government 1,010 27,816 45,900 3,801 78,527

Indexed linked securities 103 5,904 162,085 1,140,688 1,308,780

Indexed linked securities at historical cost 553,195 553,195

Interest rate swaps 47 4,779 (3,448) 1,891 (4,682) (1,413)

Total Domestic Borrowings - Other 797,870 76,193 377,569 347,793 1,868,217 _ 3,467,642

Total Borrowed Funds: Domestic 797,870 76,193 377,569 2,765,952 5,117,913 9,135,497 Notes to and forming part of the Financial Statements

Note 12 Borrowed Funds: Offshore

Financial accommodation obtained by TCV pursuant to Section 9 of the Borrowing and Investment Powers Act 1987, has the benefit of the guarantee of the Government of Victoria contained in Section 32 of the TCV Act 1992.

Contractual maturity in Less than 3 months 1 to 2 to Greater than Total 3 months to 1 year 2 years 5 years 5 years $000's $000's $000's $000's $000's $000's

2000

Euro medium term notes 14,908 292,262 307,170

Eurobonds 118,735 576,961 610,053 220,853 1,526,602

Globals 71,595 71,595

Samurai bonds 45,689 103,508 67 436,955 586,219

Yankee bonds 226,349 226,349

Yen private loans 210,417 321,580 531,997

Total Borrowed Funds: Offshore 45,689 222,243 1,028,702 1,732,445 220,853 3,249,932

1999

Euro medium term notes 52,256 24,453 283,679 54,140 414,528

Eurobonds 625,962 125,275 124,498 1,332,699 221,690 2,430,124

Globals 81,541 81,541

Samurai bonds 185,128 256,969 257,040 699,137

Yankee bonds 263,945 263,945

Yen private loans 216,276 168,921 152,356 537,553

Total Borrowed Funds: Offshore 678,218 149,728 525,902 2,387,754 685,226 4,426,828 Notes to and forming part of the Financial Statements

Note 13 Foreign Currency Borrowings

TCV's currency exposure as a result of the offshore funding programmes is hedged by way of forward foreign exchange contracts, cross currency swaps or financial assets denominated in the same currency.

Face Value of Foreign Currency Borrowings and Related Exposures

2000 Less than 1 to 2 to Greater than Total 1 year 2 years 5 years 5 years $000's $000's $000's $000's $000's

Japanese yen

Foreign Currency Borrowing (258,049) (237,154) (865,459) (1,360,662)

Swap Payable (248,348) (1,325) (415,058) (664,731 )

Swap Receivable 506,435 238,483 1,280,595 2,025,513

Foreign Exchange Contracts (140) (140)

Net Face Value 38 4 (62) (20)

US dollars

Foreign Currency Borrowing (488,064) (488,064)

Swap Payable (370,062) (2,265,843) (10,855) (2,646,760)

Swap Receivable 370,062 2,740,331 10,855 3,121,248

Foreign Currency Investments 13,584 13,584

Net Face Value 0 8 0 8

Swiss francs

Foreign Currency Borrowing (146,537) (146,537)

Swap Payable (7,190) (7,190)

Swap Receivable 153,727 153,727

Net Face Value 0 0

Canadian dollars

Foreign Currency Borrowing (204,306) (204,306)

Swap Payable (232,025) (232,025)

Swap Receivable 435,469 435,469

Foreign Currency Investments 830 830

Net Face Value (32) (32)

British pounds

Foreign Currency Borrowing (221,070) (221,070)

Swap Payable (35,506) (35,506)

Swap Receivable 256,576 256,576

Net Face Value 0 0

In both Net Face Value (as shown above) and in Market Value terms, the exposure to foreign currency is negligible. Notes to and forming part of the Financial Statements

Note 13 Foreign Currency Borrowings (continued)

Face Value of Foreign Currency Borrowings and Related Exposures

1999 Less than 1 to 2 to Greater than Total 1 year 2 years 5 years 5 years $000's $000's $000's $000's $000's

Japanese yen

Foreign Currency Borrowing '244.804; (594,661 ) (336,107) (1,175,572 )

Swap Payable (156,751 ) (142,082) (130,530) (429,363)

Swap Receivable 401,555 736,731 466,637 1,604,923

Foreign Exchange Contracts (68) (68)

Net Face Value 0 (80) 0 (80]_

US dollars

Foreign Currency Borrowing (290,826) ¡3.186 ':824,0I/!:

Swap Payable (42,697) (335,900) (2,004,414) (2,383,011 )

Swap Receivable 333,485 335,900 2,497,211 3,166,596

Foreign Currency Investments 39,433 39,433

Net Face Value (38) 0 (956] (994)

Swiss francs

Foreign Currency Borrowing (48,948) (139,961) 188,909:

Swap Payable (6,884) (6,884 !

Swap Receivable 48,948 146,845 195,793

Net Face Value 0 0 0_

Canadian dollars

Foreign Currency Borrowing (200,489) (200,489 )

Swap Payable (200,597) (200,597)

Swap Receivable <98.')72 398,972

Foreign Currency Investments 2,176 2,176

Net Face Value 62 62

British pounds

Foreign Currency Borrowing (307,297) (208,138) (515,435)

Swap Payable (54,639) (33,429) <88<0681

Swap Receivable 361,936 . 241,567 603,503

Net Face Value 0 0 0 Notes to and forming part of the Financial Statements

Note 14 (i) Interest Rate Risk

Next interest repricing in: Financial Assets Less than 3 months 1 to 2 to Greater than Non interest Total 3 months to 1 year 2 years 5 years 5 years bearing 2000 $000's $000's $000's $000's $000's $000's $000's

Cash and Cash Equivalents

Cash at bank and on hand 16,522 16,522

Deposits with futures clearing house 3,039 3,039

Receivables from financial institutions 230,484 230,484

Short term discounted securities 1,487,189 1,487,189

Total Cash and Cash Equivalents 1,737,234 1,737,234

Investments

Stock lending 19,000 19,000

Floating rate securities 4,998 4,998

Short term discounted securities 870,786 870,786

Offshore issued securities 120,160 73,711 122,447 316,318

Fixed interest securities 25,472 1,086,076 1,243,251 519,580 2,874,379

Index linked securities 130,847 130,847

Index linked securities at historical cost 3,162 425,445 428,607

Forward rate agreements (1,754) (1,754)

Other 1,869 2,062 287 504 38 4,760

Total Financial Investments 6,867 1,019,888 1,160,074 1,366,202 1,075,910 19,000 4,647,941

Loans to Participating Authorities

Overnight & short term cash 58,500 58,500

Short term discounted loans 29,680 81,382 111,062

Floating rate loans 153,466 153,466

Fixed interest loans 182,684 155,804 756,614 2,085,910 4,146,015 7,327,027

Index linked loans 4,990 9,155 146,575 980,476 1,141,196

Fixed interest loans at historical cost 48 202 411 2,324 108,848 111,833

Interest rate swaps (76) (76)

Total Loans to Participating Authorities 424,302 242,378 766,180 2,234,809 5,235,339 8,903,008

Other Financial Assets

Receivables and prepayments 3,858 3,858

Accrued interest receivable 402,890 402,890

Total Other Financial Assets 406,748 406,748 Notes to and forming part of the Financial Statements

Note 14 (i) Interest Rate Risk (continued)

Next interest repricing in: Financial Liabilities Less than 3 months 1 to 2 to Greater than Non interest Total 3 months to 1 year 2 years 5 years 5 years bearing 2000 SOOO's $000's $000's $000's $000's $000's $000's

Deposits from Public Sector 2,418,606 41,927 2,460,533

Domestic Borrowings

Hotstocks 1,049,234 1,115,620 4,169,099 6,333,953

Payables to financial institutions 31,929 1,000 32,929

Stock lending 19,000 19,000

Promissory notes 488,794 488,794

Long term bonds 242,543 86,384 73,557 106,396 115,809 624,689

Commonwealth Government 27,351 906 45,700 3,485 77,442

Indexed linked securities 2,614 30,992 115,928 1,063,460 1,212,994

Indexed linked securities at historical cost 558,747 558,747

Interest rate swaps (51,716) (10,670) (23,901 ) 103,084 (13,189) 3,608

Total Domestic Borrowings 222,756 595,473 1,130,788 1,486,728 5,897,411 19,000 9,352,156

Offshore Borrowings

Euro medium term notes 14,908 292,262 307,170

Eurobonds 118,735 576,961 610,053 220,853 1,526,602

Globals 71,595 71,595

Samurai bonds 45,689 103,508 67 436,955 586,219

Yankee bonds 226,349 226,349

Yen private loans 210,417 321,580 531,997

Total Offshore Borrowings 45,689 222,243 1,028,702 1,732,445 220^853 3,249,932

Other Financial Liabilities

Accounts and other payables 1,368 1,368

Accrued interest payable 512,190 512,190

Provision for Indexation Adjustment 2,668 2,668

Total Other Financial Liabilities 516,226 516,226 Notes to and forming part of the Financial Statements

Note 14 (i) Interest Rate Risk (continued)

Next interest repricing in: Financial Assets Less than 3 months 1 to 2 to Greater than Non interest Total 3 months to 1 year 2 years 5 years 5 years bearing 1999 $000's $000's $000's $000's $000's $000's $000's

Cash and Cash Equivalents

Cash at bank and on hand 17,707 17,707

Deposits with futures clearing house 2,551 2,551

Receivables from financial institutions 340,873 340,873

Short term discounted securities 2,563,088 2,563,088

Total Cash and Cash Equivalents 2,924,219 2,924,219

Investments

Stock lending 7,000 7,000

Floating rate securities 5,051 5,051

Short term discounted securities 103,557 103,557

Offshore issued securities 9,134 65,813 94,827 169,774

Fixed interest securities 392 174 26,433 2,156,465 682,837 2,866,301

Index linked securities 113,483 113,483

Index linked securities at historical cost 418,375 418,375

Forward rate agreements 15 15

Other 465 1,440 908 726 37 3,576

Total Financial Investments 15,042 105,186 93,154 2,252,018 1,214,695 7,037 3,687,132

Loans to Participating Authorities

Overnight & short term cash 613,613 613,613

Short term discounted loans 27,632 65,014 92,646

Floating rate loans 226,995 226,995

Fixed interest loans 239,116 411,542 784,183 2,182,536 3,802,330 7,419,707

Index linked loans 103 11,271 157,755 1,072,801 1,241,930

Fixed interest loans at historical cost 1,563 4,744 6,449 20,899 78,108 111,763

Interest rate swaps (3,004) 3,107 103

Total Loans to Participating Authorities 1,106,018 481,300 805,010 2,361,190 4,953,239 9,706,757

Other Financial Assets

Receivables and prepayments 1,184 1,184

Accrued interest receivable 404,545 404,545

Total Other Financial Assets 405,729 405,729 Notes to and forming part of the Financial Statements

Note 14 (i) Interest Rate Risk (continued)

Next interest repricing in: Financial Liabilities Less than 3 months 1 to 2 to Greater than Non interest Total 3 months to 1 year 2 years 5 years 5 years bearing 1999 $000's $000's $000's $000's $000's $000's $000's Deposits from Public Sector 2,348,781 99,578 2,448,359

Domestic Borrowings

Hotstocks 2,418,159 3,249,696 5,667,855

Payables to financial institutions 37 37

Stock lending 7,000 7,000

Long term bonds 790,683 70,404 347,297 137,917 175,215 1,521,516

Commonwealth Government 1,010 27,816 45,900 3,801 78,527

Indexed linked securities 103 5,904 162,085 1,140,688 1,308,780

Indexed linked securities at historical cost 553,195 553,195

Interest rate swaps (310,969) 520,825 (103,449) (107,136) (684) (1,413)

Total Domestic Borrowings 479,854 592,239 277,568 2,656,925 5,121,911 7,000 9,135,497

Offshore Borrowings

Euro medium term notes 76,709 283,679 54,140 414,528

Eurobonds 625,962 125,275 124,498 1,332,699 221,690 2,430,124

Globals 81,541 81,541

Samurai bonds 185,128 256,969 257,040 699,137

Yankee bonds 263,945 263,945

Yen private loans 216,276 168,921 152,356 537,553

Total Offshore Borrowings 702,671 125,275 525,902-' 2,387,754 685,226 4,426,828

Other Financial Liabilities

Accounts and other payables 3,687 3,687

Accrued interest payable 558,009 558,009

Provision for dividend 14,000 14,000

Total Other Financial Liabilities 575,696 575,696 Notes to and forming part of the Financial Statements

Note 14 (ii) Weighted Average Yields

Weighted average yields as at balance date are presented in the following table.

2000 2000 2000 1999 1999 1999 Less than 1 to Greater than Less than 1 to Greater than 1 year 5 years 5 years 1 year 5 years 5 years o/ % % % /o % 0//o

Cash and Cash Equivalents

Floating .6.00 4.75

Fixed 6.12 : 4.85 I I Investments j j

Floating • 6.16 4.92

Fixed . 6.24 6.18 6.44 4.99 5.86 6.36

Indexed 3.28 3.66 i • I Loans to Participating Authorities [ |

Floating 6.14 4.80

Fixed 6.20 6.26 6.47 5.03 5.77 6.42

Indexed 2.95 2.93 3.16 3.38 3.46 3.54

» Ì

Deposits Public Sector : Floating 5.88 •••II« 4.75

Fixed S:12 i 4.75 I I Domestic Borrowings I |

Floating 6.00

Fixed ! 6.10 6.24 6.53. 4.76 5.81 6.55 i Indexed 2.95 2.93 3.15 ! 3.38 3.44 3.54 I Offshore Borrowings ]

Floating | 4.90

Fixed | 6.27 6.26 6.60 ] 4.91 6.29 7.11 I I Interest Rate Swaps ! | Floating t 6.14 1III1IÏ&I 4.91 4.75 Fixed : •IlifSl^iP 6.58 ..,.•0 I 4.99 5.78 6.74 Notes to and forming part of the Financial Statements

Note 15 Net Fair Value

Certain indexed based structures are accounted for on an historical cost basis. The market value of these instruments is disclosed below, representing net fair value. All other financial instruments are stated at market value in the balance sheet representing net fair value.

lilldk Net i.iir Book Net fair Value Value Value Value 2(1011 2000 1999 1999 SOOO's SOOO's SOOO's SOOO's

Indexed linked investments at historical cost 428,607 430,251 , 418,375 409,290

Fixed interest loans at historical cost 111,832 103,187 I 111,763 101,324

Indexed linked borrowings at historical cost (558,747), (572,088) I (559,360) (550,390)

Indexed swap (36) 1,179 I 1,439

Accrued Interest 1,462 1,461 I 1,432 1,432

Cash and other balances 16,882 16,882 " I 27,790 27,790

Net Position 0 (19,128) ! o (9,115)

Change In Accounting Policy

The impact of the change in accounting policy to align the recognition of indexation applicable to the instruments accounted for under a historical cost basis, as detailed in Note!(b), has led to a change in the carrying amounts of instruments in the indexed based structures and net surplus as at 30 June, 2000 as follows:

New Previous Balance Accounting Accounting Sheet Policy Policy Impact 2000 2000 2000 $000's SOOO's SOOO's

Indexation Adjustment Current Period 3,162 3,162

Provision for Indexation Recognition at Maturity (2,668)* (2,668)

Net surplus 494 494

* Opening Balance at 30 June 1999 ($2,621,000 )

Treated as an Abnormal Item (Refer Note 2)

The following table shows the information that would have been disclosed in the prior financial year if the new accounting policy had always been applied.

New Previous Balance Accounting Accounting Sheet Policy Policy Impact 1999 1999 1999 SOOO's $000's SOOO's

Indexation Adjustment (Current) (533) (533)

Provision for Indexation Recognition at Maturity (2,621 ) (2,621 )

Net surplus (3,154) (3,154) Notes to and forming part of the Financial Statements

Note 15 Net Fair Value (continued)

The impact of the change in accounting treatment to reflect the underlying economic substance of the transactions accounted for on a historical cost basis, as detailed in Note! (b), has led to a change in the carrying amounts of instruments in the indexed based structures and net surplus as at 30 June, 2000 as follows:

New Previous Balance Accounting Accounting Sheet Policy Policy Impact 2000 2000 2000 $000's $000's $000's

Increase in Investments 428,607 428,607

Increase Fixed Interest Loans 111,832 111,832

Increase in Domestic Borrowings (558,747) (549,904) (8,843)

Decrease in Accrued Interest 1,462 1,572 (110)

Net Swap Value (36) (36)

(16,882) (7,893) (8,989)

The following table shows the information that would have been disclosed in the prior financial year if the new accou nting policy had always been applied.

New Previous Balance Accounting Accounting Sheet Policy Policy Impact 1999 1999 1999 $000's $000's $000's

Increase in Investments 418,375 418,375

Increase Fixed Interest Loans 111,763 111,763

Increase in Domestic Borrowings (559,360) (553,195) (6,165)

Decrease in Accrued Interest 1,432 1,556 (124)

Net Swap Value (1,188) (1,188)

(27,790) (22,689) (7,477)

No adjustment has been made to opening retained earnings. The decrease in net surplus for the current financial year incorporates the impact relating to the prior financial year (Refer Note 2). Notes to and forming part of the Financial Statements

Note 16 Derivative Financial Transactions

TCV enters into derivative financial instruments such as exchange traded futures and options, forward rate agreements, swaps and forward foreign exchange contracts to manage the interest rate and currency risk inherent in the borrowing and asset management activities of the Corporation.

Forward rate agreements are entered into with expiration terms ranging out to six months. Interest rate option contracts have repricing terms up to six months. Interest rate swap contracts include fixed, floating and indexed cashflows. These net cashflows may occur quarterly, semi annually and annually. Maturity of these swaps range from less than three months to greater than five years. Maturity and interest rate risk information for forward rate agreements and interest rate swaps is disclosed in Notes 6, 7, 11 and 14. Notional amount, market value and credit exposure is disclosed below.

Currency swap contracts include cashflows on a quarterly, semi annual or annual basis. Maturity of these swaps range from less than three months to greater than five years. Currency swaps have been entered into to swap cashflows on underlying borrowings in foreign currency to Australian dollar cashflows. Details of currency swap contracts and underlying foreign currency borrowings are provided in Note 13.

Foreign exchange options and foreign exchange contracts at balance date (Australian dollar equivalents) are as follows:

Foreign exchange options Sell Australian Dollars Average Contract Rate

filili) 1999 2000 1999

MllHI's $000's

Buy US dollars

Less than 1 year 132,(•"'!• 113,134 0.7232 0.7216

1 -2 years 70,140 120,428 0.7325 0.7232

2-5 years 80,340 •ÉoÜfloBIH 0.7323

Buy Australian Dollars Average Contract Rate

JIIII» 1999 Jiiiin 1999

$l)(l()'s $000's

Sell US dollars

Less than 1 year 132,1." " 113,134 0.72 $2 0.7216

1-2 years 70,140 120,428 0./32.T 0.7232

2-5 years |BBÉ8iBIÌSj I 80,340 0.7320 0.7323

Foreign exchange contracts Sell Australian Dollars Average Contract Rate

>000 1999 1999 $>noo\ $000's Buy US dollars 1

Less than 1 year ;9,I06 I 129,738 0.6379 0.6353

1-2 years 24,643 I 102,041 0.6164 0.6218

2-5 years •0,060 I 52,133 0.5897 0.6076 I Buy Deutsche marks 1 Less than 1 year 91 : 2,127 0.9941 1.0142

Buy Japanese yen

Less than 1 year 4,957 63.79 Notes to and forming part of the Financial Statements

Note 16 Derivative Financial Transactions (continued)

Foreign exchange options Buy Australian Dollars Average Contract Rate P^BÄJIH 1999 21)1111 1999 S>(MII)'s t $000's !

Sell US dollars j i .

Less than 1 year I 89,106 I 129,738 I 0.6092 I 0.6257

1 -2 years I 24,643 I 102,041 I 0.6086 I 0.6244

2-5 years 30,060 I 52,133 J 0.5781 ? I 0.5978 1 i 1 i Sell Deutsche marks 1 j I 1

Less than 1 year I 91 I 2,127 I 0.9941 I 1.0142 (111 Sell Japanese yen : :; Less than 1 year 38 I ! 61.80 ; 1 -2 years I I ' 2-5 years 102 1 f 61.20 j

Interest rate risk and credit risk

Interest rate risk inherent in TCV's asset and liability management activities is monitored on a daily basis against Board approved limits using the Value at Risk methodology. Value at Risk is a measure of the estimated loss faced by TCV within a certain level of confidence over a given holding period under normal market conditions.

The three major risks involved with financial instruments are :

• market

• liquidity

• credit

Exposure to market and liquidity risk is minimised by :

1. the Corporation not being a price maker in derivative financial instruments but being a price taker in its use of derivatives;

2. the Corporation dealing in highly liquid markets in respect of the futures transactions.

Credit risk, which arises due to the potential of a counterparty to default under the terms of a derivative contract, is monitored daily against prudentially set credit limits for each counterparty. The Corporation avoids concentration of exposures to any one counterparty and has a wide range of approved counterparties

TCV's maximum credit risk to the various classes of financial assets is represented by the market value of those assets, except for certain derivative transactions - swaps, forward rate agreements, forward foreign exchange contracts and options. The credit equivalent amounts (current replacement value and an allowance for potential future exposure) for these derivative transactions are calculated in accordance with the Australian Prudential Regulation Authority's (APRA) capital adequacy guidelines. TCV's loans to Participating Authorities are guaranteed by the Government of Victoria and are, therefore, considered to be credit risk free. Notes to and forming part of the Financial Statements

Note 16 Derivative Financial Transactions (continued)

2000 2000 2000 1999 1999 1999 Category of derivative Nnliun.il Market Assesn-d Notional Market Assessed Aniounl Valut.1 C red» Amount Value Credit Exposure* Exposure* , $000's •jOOO's $000's $000's $000's $000's

Currency swaps I . 7,438,823 (14,937) 1,215,216 7,356,366 (60,903) 749,641

Interest rate swaps I 5,179,293 (3,345) 81,701 4,800,301 1,681 76,224

Forward rate agreements I 3,461,000 (1,754) 215 1,055,000 15 39

Foreign exchange contracts I 292,895 4,723 18,369 572,147 3,539 44,854

Foreign exchange options I 437,363 49,419 627,803 62,558

Exchange traded futures contracts ; ,2,511,500 (78) 449,300 (182)

"The exposures as detailed are gross prior to risk weighting. No account is taken of the value of any collateral or other security arrangements nor have any exposures been netted for credit purposes.

The capital required to support this credit risk, calculated in accordance with the APRA prudential statements in relation to capital adequacy was $69.6 million (based on TCV's requirement to maintain a minimum capital adequacy ratio of 8% of risk weighted assets). At 30 June,2000, after allowing $10.2 million of capital to support market risk, TCV held $106.8 million of capital to support credit risk.

Concentration of Credit Risk - by credit rating (Standard & Poors)

2000 AAA AA+/AA/AA- A+/A/A- BBB Victorian Total Public Authorities $000's $000's $000's $000's $000's 000's

Cash and Cash Equivalents 243,505 1,315,298 178,431 1,737,234

Securities Investments 3,467,429 957,560 103,005 97,940 4,625,934

Derivatives 464,659 796,904 56,566 43,730 3,060 1,364,919

4,175,593 3,069,762 338,002 43,730 101,000 7,728,087

Concentration of Credit Risk - by type of counterparty

2000 Commonwealth State Foreign Banks Non-bank Other Victorian Total Government Government Government Financial Public Institution Authorities $000's $000's $000's SOOO's SOOO's $000's SOOO's

Cash and Cash Equivalents 90,000 1,647,234 1,737,234

Securities Investments 1,394,888 2,053,912 14,433 970,211 94,550 97,940 4,625,934

Derivatives 23 1,361,859 3,037 1,364,919

1,394,888 2,143,935 14,433 3,979,304 94,550 100,977 7,728,087 Notes to and forming part of the Financial Statements

Note 16 Derivative Financial Transactions (continued)

Concentration of Credit Risk - by credit rating (Standard & Poors) 1999 AAA AA+/AA/AA- A+/A/A- BBB Victorian Total Public Authorities $000's $000's $000's $000's $000's $000's

Cash & cash equivalents 54,875 2,804,955 64,389 2,924,219

Securities investments 3,344,315 236,777 95,530 3,676,622

Derivatives 326,630 514,731 49,762 35,120 7,073 933,316

3,725,820 3,556,463 114,151 35,120 102,603 7,534,157

Concentration of Credit Risk - by type of counterparty

1999 Commonwealth State Foreign Banks Non-bank Other Victorian Total Government Government Government Financial Public Institution Authorities $000's $000's $000's $000's $000's $000's $000's

Cash & cash equivalents 2,924,219 2,924,219

Securities investments 949,668 2,223,637 42,468 305,451 89,051 66,347 3,676,622

Derivatives 70,658 1,290 10,277 439,271 406,037 5,783 933,316

1,020,326 2,224,927 52,745 3,668,941 495,088 72,130 7,534,157

Note 17 Superannuation

TCV made contributions to the following superannuation funds for staff and directors:

Name of Fund Contributions 1 Contributions Made Made 2000 1 1999

Treasury Corporation of Victoria Superannuation Fund (TCVSF) $359,484 1 $274,617

State Superannuation Fund $25,024 1 $26,933

First Exar Superannuation Fund $1,050 I $2,100

BT Superannuation Fund $30,000 I

Superannuation contributions were made at least on the minimum 7% Superannuation Guarantee Charge contribution level. Several staff elected to have a greater proportion of their remuneration paid as superannuation on a salary sacrifice basis.

Contributions to the State Superannuation Fund were made as required by the fund (currently at the rate of 13.4% of superannuation salary as defined for members of this Fund).

The TCVSF is a fully funded accumulation fund with no unfunded liabilities and TCV has made all payments to cover its liability for members of that fund. All payments due for employees and directors who are members of other funds have also been made.

Note 18 Auditor's Remuneration

Amounts received or due and receivable by the Auditor-General in relation to the audit of the TCV financial statements for the year ended 30 June 2000:

2000 1999 $000's $000's

Auditor General 100 129 Notes to and forming part of the Financial Statements

Note 19 Related Party Information

TCV, being the debt management and borrowing authority for the State of Victoria, provides financial accommodation to the budget sector and Participating Authorities in the Non Budget sector.

Details of such accommodation as at 30 June 2000 are set out in Notes 7, 9 and 10. All transactions are priced in accordance with TCV's lending policies

For the purposes of Part 9.4 of the Directions of the Minister for Finance under the Financial Management Act 1994, the following Directors together with the Honourable John Brumby MP, Treasurer for Victoria, (formerly Honourable Alan R. Stockdale and Honourable Steve Bracks, MP) are the responsible persons of TCV:

Ian N. Ferres, Chairman Reginald A.D. Nicolson, Deputy Chairman (appointment renewed for the period 1 January 2000 to 31 December 2001) David Carruthers, Managing Director Duncan G. Andrews (appointment expired on 31 December 1999) David E. Meiklejohn (appointment expired on 20 June 2000) Paul J. Rizzo S. Carolyn H. Kay

TCV undertakes transactions with entities of which the above may also be a Director. These transactions are undertaken in the ordinary course of business, are at arms length and carry normal commercial terms. These entities are:

Ian N. Ferres Director, Swiss Re Australia Ltd;

Director, Victorian Funds Management Corporation; and v Director, Australian Unity Limited;

Reginald A.D. Nicolson Chairman Telstra Super Pty Ltd; and Chairman of Bank of Tokyo Mitsubishi (Australia) Ltd.

S. Carolyn H. Kay Director, Victorian Funds Management Corporation; Advisory Director, Morgan Stanley Dean Witter; and Director, Colonial State Bank

Paul) Rizzo Group Managing Director, Finance & Administration - Telstra, Director IBM Global Services Australia Limited; Chairman of the Financial Reporting Council; and Director of IBM Global Services Australia Limited.

TCV Directors have the benefit of indemnities given by the Treasurer of Victoria pursuant to the Financial Management Act 1994 and by Victorian Managed Insurance Authority pursuant to the Victorian Managed Insurance Authority Act 1996. Notes to and forming part of the Financial Statements

Note 20 Remuneration

Directors The total remuneration paid to Directors for the year is $519,072 (1999 : $564,250). These amounts include salary, performance bonuses and payments made to superannuation funds on behalf of Directors.

The following analysis of Directors' remuneration is provided :

Remuneration Paid 2000 - No. of 1999-No. of Directors Directors

$340,000-$349,999 1

$310,000-$319,999

$60,000 to $69,999

$30,000 to $39,999

$10,000 to $19,999

Executive Officers

The following analysis of remuneration received by executive officers (excluding the Managing Director) is provided. Executive officers are those with the delegated authority to manage the Corporation's business activities. Remuneration includes salary, performance bonuses, superannuation, fringe benefits (expense reimbursements, cars and car parking) and FBT paid by TCV in relation to benefits received.

Remuneration Paid 2000 - No. of 1999 — No. of Executive Executive Officers Officers

$290,000 to $299,999 1 1

$240,000 to $249,999 1

$220,000 to $229,999 1

$210,000 to $219,999 1

$170,000 to $179,999 1

$160,000 to $169,999 2 2

$100,000 to $109,999 1

The total remuneration paid to the above personnel for the year is $1,157,826 (1999 : $1,068,555). Notes to and forming part of the Financial Statements

Note 21 Contingencies/Commitments

From time to time, TCV has incurred contingent liabilities as part of its general function to engage in activities relating to the finances of the Victorian public sector, as is prescribed by its enabling legislation and approved by the Treasurer.

In this regard, indemnities have been provided by TCV to third parties involved either directly or indirectly in financing arrangements with TCV, which relate to the maintenance of the financial outcome expected to be available to those parties over the term of the transaction. TCV's exposure arising as a result of indemnities and other financial obligations of this type is itself either guaranteed or otherwise fully indemnified by the State of Victoria.

TCV is of the view that the existence of such supporting indemnification arrangements with the State of Victoria is sufficient to justify not raising any specific provisions in respect of the transactions referred to in the previous paragraph.

TCV has a commitment to provide funding to participating authorities to the extent of Treasurer's approval limits.

On 28 June 1996, TCV terminated a "Gold Loan" arrangement that had been entered into by its predecessor, The Victorian Public Authorities Finance Agency, in 1987. TCV was the plaintiff in a court action regarding this matter. Some issues were settled in TCV's favour prior to trial. Judgement was delivered on the remaining matters in the Supreme Court on 6 November 1998. TCV has appealed to the Court of Appeal with regard to one issue of the decision. TCV is fully indemnified by the State of Victoria in respect of this transaction.

In order for State Electricity Commission of Victoria (SECV) to participate in the national electricity market administered by National Electricity Market Management Company Limited (NEMMCO), a guarantee must be provided to NEMMCO by an acceptable financial institution. The Corporation has provided such guarantee whereby it undertakes to pay to NEMMCO on demand any and all amounts to an aggregate amount not exceeding $22,500,000 (as at 30 June 2000) as security for the obligations of SECV to NEMMCO.

The guarantee is issued pursuant to section 9 (1) of the Treasury Corporation of Victoria Act 1992 and is approved by the Treasurer. The guarantee is fully supported by an indemnity from SECV and by non-withdrawable deposits which SECV is obliged to maintain with TCV in an amount of 101% of the amount guaranteed.

Traded Securities Not Yet Settled

Category Face value maturing in: 2 to Total 5 years $000's $000's

Buyback of offshore borrowings 47,431 47,431

Lease Commitments

Commitments in respect of non-cancellable operating leases due

2000 1999 $ $

Not later than 1 year 576,976 572,208

Later than 1 year but not more than 5 years 2,179,873 2,356,065

Later than 5 years 400,784

2,756,849 3,329,057

Note 22 Taxation

TCV is not a tax payer under the Income Tax Assessment Acts, accordingly no income tax is applicable. TCV is also not subject to the Taxation under State Owned Enterprises Tax Equivalent system for the 1999-00 financial year. Notes to and forming part of the Financial Statements

Note 23 Provisions

2000 1999 $000's $000's

Employee entitlements 782 954

Dividend to be paid to the Government of Victoria 14,000

Indexation recognition 2,668 I I Total Provisions 3,450 .,., 14,954

* Refer Note 15 Change in Accounting Policy

Note 24 Notes Supporting Cashflow Statement

(i) Cash flows presented on a net basis

Cash flows arising from:-

-Payments for/sales of investment securities;

-Loans granted to/repaid from public authorities;

-Deposits accepted from/repaid to authorities;

-Proceeds from issuance of borrowings/repayment of borrowings;

are presented on a net basis in the Cashflow Statement.

(ii) Reconciliation of Net Cash from Operating Activities to Net (Deficit)/ Surplus

2000 1999 $000's $000's

Net (deficit)/surplus (12,037) 21,358

Amortisation : discount on investments (86,778) (24,585)

discount on loans to authorities (166,623) 9,826

discount on borrowings 635,771 (44,360)

Revaluation of: investments (71,897) 125,736

loans to authorities 11,408 207,458

borrowings (39,313) (334,910)

Depreciation of miscellaneous assets . 1,104 1,163 Decrease/(increase) in accounts receivable and prepayments (2,673) , 1,408

(Decrease)/increase in accrued interest payable (45,819) 174,196

Decrease/fincrease) in accrued interest receivable 1,655 (237,839)

(Decrease)/increase in accounts payable 436 1,771

(Decrease)/increase in accrued employee benefits "(172) 159 lncrease/(decrease) in provisions 2,668

Net Cash from Operating Activities 227,730 (98,619)

(iii) Financing Facilities

$US 100 million (1999 : $US 100 million) credit facility extended by Morgan Guaranty Trust Company of New York to facilitate securities transactions through the Euroclear system.

In addition to cash and cash equivalents, TCV holds a substantial portfolio of liquid assets that can be readily converted into cash. These assets comprise money market investments and Semi-Government and Commonwealth Government securities. Notes to and forming part of the Financial Statements

Note 25 Transactions With Other Government Controlled Entities

During the 1999/00 financial year transactions were undertaken with other Victorian Government controlled entities. These transactions are summarised as follows:

'Intra' is the aggregate transactions with the Department of Treasury and Finance. 'Inter' reflects those transactions with other Victorian Government Departments.

During the year a special dividend of $10 million was raised and paid. (1999 : $Nil)

2000 2000 2000 1999 $000's $000's $(l()ll's $000's Intra Inter Tot il Total

Assets 7,482,158 1,489,783 8,971,941 9,777,126

Liabilities 965,239 552,385 1,517,624 1,588,539

Revenue •505,053 91,490 596,543 1,119,459

Expenses 78,314 30,505 108,819 112,558

Certification of Financial Statements

In our opinion, the financial statements of the Treasury Corporation of Victoria, comprising the statement of income and expenditure, balance sheet, statement of cash flows and Notes to and forming part of the financial statements, prepared for the year ended 30 June 2000:

(a) present fairly the financial transactions of the Treasury Corporation of Victoria during the financial year ended 30 June 2000 and its financial position as at 30 June 2000, and

(b) have been prepared in accordance with Australian Accounting Standards and the Financial Management Act 1994.

At the date of signing we are not aware of any circumstances which would render any particulars included in the statements to be misleading or inaccurate.

IAN N. FERRES DAVID CARRUTHERS GEOFFREY G. ANDERSON Chairman Managing Director Principal Accounting Officer Date: 1 September 2000 Date: 1 September 2000 Date: 1 September 2000 Auditor-General's Report

To the Members of the Parliament of Victoria, the responsible Ministers and the Members of the Board of the Treasury Corporation of Victoria

Matters relating to the electronic presentation of the Audited Financial Report

This audit report relates to the financial report of the Treasury Corporation of Victoria for the financial year ended 30 June 2000 included on the Corporation's web site. The Managing Director of the Corporation is responsible for the integrity of the Corporation's web site. I have not been engaged to report on the integrity of the Corporation's web site. The audit report refers only to the statements named below. It does not provide an opinion on any other information which may have been hyperlinked to or from these statements. If users of this report are concerned with the inherent risks arising from electronic data communications they are advised to refer to the hard copy of the audited financial report to confirm the information included in the audited financial report presented on this web site.

Audit Scope

The accompanying financial report of the Treasury Corporation of Victoria for the financial year ended 30 June 2000, comprising a statement of income and expenditure, balance sheet, cash flow statement and notes to the financial statements, has been audited. The Members of the Board of the Corporation are responsible for the preparation and presentation of the financial report and the information it contains. An independent audit of the financial report has been carried out in order to express an opinion on it to the Members of Parliament of Victoria, the responsible Ministers and the Members of the Board of the Corporation as required by the Audit Act 1994.

The audit has been conducted in accordance with Australian Auditing Standards to provide reasonable assurance as to whether the financial report is free of material misstatement. The audit procedures included an examination, on a test basis, of evidence supporting the amounts and other disclosures in the financial report, and the evaluation of accounting policies and significant accounting estimates. These procedures have been undertaken to form an opinion as to whether, in all material respects, the financial report is presented fairly in accordance with Australian Accounting Standards and other mandatory professional reporting requirements and complies with the requirements of the Financial Management Act 1994, so as to present a view which is consistent with my understanding of the Corporation's financial position, the results of its operations and its cash flows.

The audit opinion expressed in this report has been formed on the above basis.

Audit Opinion

In my opinion, the financial report presents the financial position of the Treasury Corporation of Victoria as at 30 June 2000 and the results of its operations and its cash flows for the year ended on that date in accordance with Australian Accounting Standards and other mandatory professional reporting requirements and complies with the requirements of the Financial Management Act 1994.

J W Cameron Auditor-General MELBOURNE 11 September 2000 Executive Michael Dontschuk [email protected] 03 9651 4810 Christine Strachan (PA) [email protected] 03 9651 4866 John Davies [email protected] 03 9651 482/ Janine Miller (PA) [email protected] 03 9651 4841

Client Services Bernard Gastin [email protected] 03 9651 4825 Adam Donaldson [email protected] 03 9651 4819 Liz Georgeson [email protected] 03 9651 4803 Mary Graham [email protected] 03 9650 7577 Tania Ventura [email protected] 03 9650 7577

Treasury Services Andrew Harrex [email protected] 03 9650 7577 Deborah Beckman [email protected] 03 9650 7577 Stewart Cox [email protected] 03 9650 7577 Stephen Howard [email protected] 03 9650 7577 Justin Lofting [email protected] 03 9650 7577 Luke Muttdon [email protected] 03 9650 7577 Simon Wilson [email protected] 03 9650 7577

Middle Office Ian Mackenzie [email protected] 03 9651 48/4 Giovanna Baffi [email protected] 03 9651 4822 Michele Olson [email protected] 03 9651 4878

Banking & Settlements Geoff Wilkie [email protected] 03 9651 4843 Brendan Adams [email protected] 03 9651 4849 Steve Bikakis [email protected] 03 9651 4847 Gerry Garcia [email protected] 03 9651 4850 Lorraine Stellini [email protected] 03 9651 4851

Accounting Geoff Anderson [email protected] 03 9651 4869 Heidi Fawcett [email protected] 03 9651 4877 Kate Mahony [email protected] 03 9651 4862 Jenny McKinley* [email protected] 03 9651 4833 Hui Meng Voon [email protected] 03 9651 4808

Systems Warren Murray [email protected] 03 9651 4858 Duncan Briggs [email protected] 03 9651 41 74 Alfred Cheung [email protected] 03 9651 4865 Rhonda Dixon [email protected] 03 9651 4855 Ken O'Brien [email protected] 03 9651 4176 Fiki Sanerive [email protected] 03 9651 41 74 Mark Velio [email protected] 03 9651 4872

Corporate Services Irini Alaouna (Marketing) [email protected] 03 9651 4886 Charles Brass (Human Resources) [email protected] 03 9651 4873 Euan Macallan (Legal) [email protected] 03 9651 4814 Terry MilHgan (Credit) [email protected] 03 9651 4897 Tina Ryan (Marketing) [email protected] 03 9651 4826

Internal Audit Ian Ritter

*On maternity leave Address Level 12, 1 Collins Street, Melbourne, Victoria 3000

Internet www. tc v. v i c. go v. a u

[email protected] To email any staff member use the first initial, dot, then the surname of the person required followed by ©tcv.vic.gov.au For example [email protected]

Telephone 03 9651 4800 General enquiries 03 9650 7577 Dealing Room 03 9651 4847 Settlements

Facsimile 03 9651 4880 General 03 9650 7557 Dealing Room 03 9651 4890 Corporate Services 03 9651 4899 Settlements

Tlx:AA1 51 935 answerback TRCORP

Registry of Inscribed Stock Inscribed stock registries are operated by National Registries Ply Ltd, at Level 23, 367 Collins Street, Melbourne, Victoria 3000 telephone: 03 9275 7999 fascimile 03 9670 6373

Government Bonds of Victoria Freecall Number 1800 628 008

Designated Investment Bonds For information on Designated Investment Bonds issued under the Australian Department of Immigration and Ethnic Affairs Migration Regulations, please email [email protected] or telephone 03 9650 7577

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Adding value to the State of Victoria