Annual Report 2016-17

In 2016-17, QTC contributed significant, positive financial results for the State and its public sector entities through the delivery of debt funding and management, cash management, financial advisory, and specialist public finance education services. Its continued focus on delivering whole-of-State outcomes by providing advice and initiatives that enable clients to make better business decisions and improve revenue has been integral to this success.

The official copy of the Annual Report, as tabled in the Legislative Assembly of Queensland, can be accessed from the Queensland Parliament tabled papers website database.

2016-17 Annual Report (text version)

The Queensland Treasury Corporation Annual Report 2016-17 provides details of Queensland Treasury Corporation’s (QTC’s) achievements, outlook, performance and financial position for the 2016-17 financial year.

25 September 2017

The Honourable Curtis Pitt MP

Treasurer and Minister for Trade and Investment

GPO Box 611

Brisbane QLD 4001

Dear Treasurer

I am pleased to present the Annual Report 2016-17 for Queensland Treasury Corporation.

I certify that this Annual Report complies with:

  • the prescribed requirements of the Financial Accountability Act 2009 and the Financial and Performance Management Standard 2009, and
  • the detailed requirements set out in the Annual report requirements for Queensland Government agencies.

A checklist outlining the annual reporting requirements can be found at page 54 of this report or accessed at www.qtc.com.au.

Sincerely

Gerard Bradley

Chairman

Queensland Treasury Corporation (QTC) has a statutory responsibility to advance the financial position of the State, and a mandate to manage and minimise financial risk in the public sector and provide value-adding financial solutions to its public sector clients. Established under the Queensland Treasury Corporation Act 1988, QTC is a corporation sole, reporting through the Under Treasurer to the Treasurer and Queensland Parliament.

VISION

Securing Queensland’s financial success

MISSION

To deliver optimal financial outcomes through sound funding and financial risk management

VALUES

Client focus

We build strong partnerships with our clients to deliver simple and well-designed solutions that achieve quality outcomes for Queensland.

Team spirit

We work as one team, taking joint responsibility for achieving our vision and collaborating to achieve outstanding performance.

Excellence

We aim for excellence using flexible and agile processes to continuously improve.

Respect

We show respect by recognising contributions, welcoming ideas, acting with honesty, being inclusive and embracing diversity.

Integrity

We inspire trust and confidence in our colleagues, clients, stakeholders and investors by upholding strong professional and ethical standards.

2017-20 STRATEGIC GOALS

  1. State and client value
  2. Sustainable funding
  3. Organisational excellence

As the Queensland Government’s central financing authority, Queensland Treasury Corporation plays a pivotal role in securing the State’s financial success.

With a focus on whole-of-State outcomes, QTC provides a range of financial services to the State and its public sector entities, including local governments. These services include debt funding and management, cash management facilities and financial risk management advisory services.

Debt funding and management

QTC borrows funds in the domestic and global markets in the most cost-effective manner and in a way that minimises liquidity risk and refinancing risk. QTC achieves significant economies of scale and scope by issuing, managing and administering the State’s debt funding.

QTC works closely with Queensland’s public sector entities, including local governments, to assist them to effectively manage their financial transactions, minimise their financial risk and achieve the best financial solutions for their organisation and the State.

Financial risk management advisory services

QTC offers a range of financial risk management advisory services to clients, including:

  • support to ensure financial risks are identified and effectively managed
  • advice on financial and commercial considerations
  • expertise in financial transactions and structures
  • project management support to deliver key fiscal outcomes, and
  • collaboration with the financial markets and private sector institutions.

Cash management facilities

QTC assists the State’s public sector entities to make the best use of their surplus cash balances within a conservative risk management framework. It offers overnight and fixed-term facilities and a managed cash fund.

In 2016-17, Queensland Treasury Corporation delivered significant whole-of-State and client benefits, successfully funded the State’s $5.9 billion borrowing program, and realised an operating profit of $353.8 million. These results were achieved following the activation of QTC’s new business operating model, including the successful implementation of new enterprise IT platforms.

Operational excellence drives a successful year

Solid investor demand for QTC’s AUD benchmark bonds provided the foundation of the successful execution of the $5.9 billion 2016-17 borrowing program.

Despite a backdrop of improved global economic conditions, the operating environment remained challenging, with uncertainty led by geopolitical tensions and questions over monetary and fiscal policy in major economies. In addition, the Queensland economy continues to adjust following a period of significant mining investment.

QTC experienced another successful year with a range of milestone events highlighting the value created for Queensland. These include:

  • Successful early completion of the 2016-17 term debt borrowing program and prefunding of $2.4 billion for future borrowing programs, a total of $8.3 billion.
  • Smoothed and extended QTC’s bond maturity profile through $2.5 billion 2027 Benchmark bond issue.
  • Issued 30 year bonds.
  • Successfully piloted a ‘virtual bond’ using a blockchain platform.
  • Completed $750 million issue of QTC’s first Green Bond, the largest Green Bond issue by an Australian issuer at the time.
  • Repatriation to Treasury of $500 million in past surpluses.

Long-term assets

Separate from QTC’s capital markets operations, QTC’s long-term assets, which comprises the investments set aside primarily to support the State’s defined benefit superannuation, recorded an after tax operating profit of $224.6 million (2015-16: $908.6 million loss). Managed by QIC, these assets were transferred to QTC by the Queensland Government under an administrative arrangement in 2008; in return, QTC issued fixed-rate notes to the State that provide a fixed rate of return. While QTC bears the fluctuations in the value and returns on the asset portfolio, there is no cash flow effect for QTC. Any losses incurred by this segment have no impact on QTC’s capital markets activities or its ability to meet its obligations.

Credit ratings

Moody’s Investor Service rating outlook for Queensland was revised to stable from negative in April 2017. QTC is rated AA+/A-1+/Stable and Aa1/P-1/Stable from Standard & Poor’s and Moody’s respectively.

QTC’s advice benefits State

The 2016-17 financial year saw the Client Services Division continue to create significant value for the State, with a wide range of advisory projects reaping dividends for QTC’s public sector clients, including:

  • Facilitation of $4.35 billion in General Government debt reduction over the forward estimate through advice and improved cashflow management.
  • Financial Assurance Review completed that identified close to $8 billion worth of liability for Government in mining rehabilitation.
  • More than $600 million in new funds attracted to QTC’s cash fund as a result of repayment and investment advice.
  • Structured net debt solution delivered resulting in $2.2 billion debt reduction in FY17 for the State.
  • Forecasting models developed that cover 55 per cent of the State’s expenditure to better manage State finances.
  • Financial Education partnership with established University of Queensland offering public sector clients the opportunity to gain the knowledge required to better manage their finances.

Benefits realised from revitalised systems and processes

The simplification of systems and processes, the move to industry-standard software platforms and targeted recruitment has significantly increased productivity across the business. For example, more than 95 per cent of QTC’s client transactions now occur online via the QTC Link portal.

These positive results have led to increased value for our clients, and increased the overall value to the State generated by QTC.

Changes to Board membership

Stephen Roberts was appointed to QTC’s Capital Markets Board on 8 June 2017, with tenure to 30 June 2020. He brings extensive investment banking, leadership and governance expertise, developed across his career in global financial markets. Mr Roberts replaced Bill Shields who resigned on 31 December 2016.

Mr Shields made a significant contribution to QTC’s success during his 11 year tenure, bringing the benefit of his extensive experience in the banking and finance industry, government policy advice and specialisation in economics. On behalf of the Board, I thank him for his dedication and contribution.

It’s also my pleasure to again acknowledge the hard work of QTC’s employees, who have delivered significant value to the State over the 2016-17 financial year.

Looking to the future

QTC will continue to focus on fulfilling its responsibility to advance the financial position of the State, while helping manage and minimise financial risk in the public sector. QTC’s ability to cost-effectively raise funds to support the State’s borrowing program remains the cornerstone of our business. Further opportunities to help QTC’s public sector clients through the provision of advice will continue to be realised over time.

QTC’s results in the 2016-17 financial year were strong and, as the benefits continue to flow from our revitalised business model and increased capability, we anticipate another solid year of performance in 2017-18.

G P Bradley
Chairman
25 September 2017

P C Noble
Chief Executive
25 September 2017

Supplementary update: QTC wins prestigious industry awards

In July 2017, QTC won two awards for Operational Excellence at the International Quality and Productivity Centre Awards in:

  • Customer Centricity and Experience, and
  • Cultural Transformation.

Both award submissions focused on QTC’s successful Strategic Change Program, and the awards were an acknowledgement of the hard work of employees and the strong results achieved by the Program in the 2016-17 financial year.

In addition to these awards, QTC also took out the Australian HR Team of the Year (<1,000 employees) at The Australian HR Awards announced in September 2017.

Creating value for the State and clients

In 2016-17, QTC contributed significant, positive financial results for the State and its public sector entities through the delivery of debt funding and management, cash management, financial advisory, and specialist public finance education services. QTC’s continued focus on delivering whole-of-State outcomes by providing advice and initiatives that enable clients to make better business decisions and improve revenues has been integral to this success.

In the year under review, QTC completed a broad range of financial advisory assignments to assist its clients and the State to address financial and risk management issues.

More than 200 major client advisory assignments were delivered, equivalent to $25 million in client service hours. QTC assisted clients to deliver budget savings, improve revenue and mitigate financial risks. Assignments included:

  • high-level, business forward planning for major Government entities
  • financial assurance reviews to reduce risk and avoid cost
  • surplus cash management strategies
  • business sustainability and credit related advice across a range of QTC’s clients
  • developing industry-specific financial modelling tools to improve clients’ business practices
  • business case and project evaluation for infrastructure and assets of all sizes, and
  • procurement and tender evaluation, including contract reviews and market sounding proposals.

QTC developed forecasting models that account for 55 per cent of the State’s expenditure to support:

  • eight out of 16 hospital and health services
  • housing, homelessness and youth justice
  • the criminal justice system, and
  • the Department of Education and Training.

Delivering on the debt action plan

Working closely with Queensland Treasury, QTC facilitated the design and delivery of a number of initiatives from the review of the State’s balance sheet and implementation of the Government’s Debt Action Plan, including the:

  • facilitation of $4.35 billion in General Government debt reduction over the forward estimate through advice and improved cashflow management
  • structuring of a net debt solution resulting in a reduction in the debt to revenue ratio of 60 per cent, and
  • lengthening of the duration of core debt from 5.25 years to 5.75 years.

Fostering strong relationships with local governments

Throughout the year, we have worked closely with our local government clients and provided a broad range of advice ranging from structural options for major council-owned assets and project evaluation to business case assessment for new council infrastructure.

Facilitating innovative funding

On 15 March 2017, QTC issued an inaugural AUD750 million seven year Green Bond with a coupon of 3.00 per cent. This was the largest and longest tenor AUD green bond from an Australian issuer at the time. QTC Green Bonds are guaranteed by the Queensland State Government, issued under the AUD Bond Program with 144A capability and certified by the Climate Bonds Initiative.

Breakout points

  • $4.35 billion reduction in general government debt
  • $750 million QTC Green Bond issued to benefit green projects
  • $8.8 billion funds under management in QTC’s Cash Fund
  • more than 95% of QTC’s client transactions occurred online

QTC continued to provide low-cost loans and high-performing investment facilities throughout 2016-17.

Debt management

QTC has continued to successfully deliver its core mandate of providing clients with a lower cost of funds—by capturing the significant economies of scale and scope in the issuance, management and administration of the State’s debt.

Cash management

QTC offers cash management products that enable its clients to maximise the value of their surplus funds. In 2016-17, QTC’s Capital Guaranteed Cash Fund provided strong returns and outperformed its benchmark, the Bloomberg AusBond Bank Bill Index, by 79 basis points. During the year, QTC’s Cash Fund attracted new clients and, on 30 September 2016, it reached a milestone with more than $10 billion of funds under management—the highest amount in its history. At the end of the 2016-17 financial year it remained one of the largest managed funds in Australia with $8.8 billion under management.

Client access website portal

In 2016-17, QTC made significant progress with the implementation of QTC Link—a new client portal as part of the organisation’s online offering to clients. QTC Link, through its industry-standard transaction platform, enabled 96 per cent of QTC’s client transactions to take place online.

QTC’s role in equipping clients with specialist financial knowledge and capabilities has continued. From July 2016 until May 2017, more than 600 clients attended QTC-delivered courses with a post-course satisfaction evaluation of 9 out of 10.

In May 2017, QTC partnered with The University of Queensland to develop and deliver a new enhanced and expanded education program tailored specifically to public sector clients. The partnership model has enabled QTC to deliver a new accredited program, the Graduate Certificate in Business Leadership (Public Sector Finance). As a result, the number of workshops available to Queensland public sector clients has expanded to 16 with more under consideration.

Total Debt Outstanding
(Market Value)
30 June 17
A$000
Total Debt Outstanding
(Market Value)
30 June 16
A$000
Government General* 33 655 316 38 394 707
Energy 24 999 435 25 970 955
Water 13 994 598 14 597 305
Local Governments 6 449 434 6 507 397
Transport 4 891 024 4 276 921
Education 710 367 706 016
Other 402 234 369 726
Total 85 102 408 90 823 027
* Government General includes the following State Government departments: Education and Training, Housing and Public Works, State Development, Transport and Main Roads, Health and Treasury.

Achieving sustainable access to funding

In 2016-17, QTC raised $5.9 billion of term debt to meet its clients’ annual funding requirements and refinance debt maturities. QTC also undertook an additional $2.4 billion pre-funding, reducing future borrowing programs. New strategic initiatives were implemented to further diversify QTC’s investor base, including a QTC Green Bond—the largest AUD green bond issue from an Australian issuer at the time.

QTC continued to demonstrate its reputation as a premium issuer with its investors, through the high-quality execution of term debt issuance. Using the strength of its AA+ credit rating, QTC provided the market with diverse, liquid lines that resulted in $8.3 billion being successfully raised for the State’s borrowing and refinancing requirement.

The original estimated term debt requirement for 2016-17 was $7.3 billion. This was revised down to $5.9 billion following the Government’s Mid-Year Fiscal and Economic Review, released in December 2016.

QTC undertook a range of activities to complete its annual borrowing program and support its bonds in the market, including:

  • completing the term debt requirement of $5.9 billion
  • prefunding $2.4 billion towards the future funding requirements
  • issuing $5.75 billion of benchmark bonds via public issuance, including two syndicated transactions for $2.25 billion and seven tenders for $3.5 billion
  • issuing one new benchmark bond maturing in 2027
  • issuing a new 2024 green bond—the largest by an Australian issuer at the time—of $750 million by syndication, and
  • issuing $615 million equivalent of new 30 year Euro and AUD bonds.

QTC maintained its focus on providing its Fixed Income Distribution Group and investor base with greater flexibility and improved transparency.

On 14 June 2017, QTC announced its $6.8 billion term debt borrowing requirement for the 2017-18 fiscal year.

Breakout points

  • $5.9 billion debt raised to meet the State’s borrowing requirement
  • $2.4 billion in prefunding towards future funding requirements
  • Strong, liquid benchmark bonds program: $136 billion QTC bonds traded in the secondary market

Pullout box

QTC’s ‘Invest in QTC’ app has a library of publications about QTC and Queensland for institutional investors and is available for Apple and Android users.

Note: Not available in the United States.

2016-17 Public issuance graphic

JULY 2016 – JUNE 2017

Amount Date Issuance
$500m 5 Jul 2016 2026 benchmark bond
Tender
$500m 16 Aug 2016 2026 benchmark bond
Tender
$500m 6 Sep 2016 2023-26 benchmark bonds
Multi-bond line tender
$1.5b 27 Oct 2016 2027 benchmark bond
Syndicated new bond
$500m 22 Nov 2016 2025-26 benchmark bonds
Multi-bond line tender
$500m 24 Jan 2017 2025 benchmark bond
Tender
$750m 9 Feb 2017 2026 benchmark bond
Syndicated tap
$750m 15 Mar 2017 2024 Green Bond
Syndicated new bond
$500m 4 Apr 2017 2027-28 benchmark bonds
Multi-bond line tender
$500m 25 May 2017 2021-23 benchmark bonds
Multi-bond line tender

As at 30 June 2017

QTC has a diverse range of funding facilities in a variety of markets and currencies. The majority of QTC’s funding is sourced through long-term debt facilities, with QTC’s AUD benchmark bonds comprising the principal sources of funding.

Overview as at 30 June 2017 Size($M) Maturities Currencies
Short-term Domestic T-Note Unlimited 7–365 days AUD
Euro CP USD10,000 1–364 days Multi-currency
US CP USD10,000 1–270 days USD
Long-term AUD Bond Unlimited 13 benchmark lines: 2017-2028, 2033 AUD
3 AGG* lines: 2017-2021 AUD
1 QTC Green Bond: 2024 AUD
1 floating rate note: 2018

1 capital indexed bond: 2030

1 preferred line: 2047

AUD
Global AUD Bond AUD20,000 AGG* line: 2017 (transferable to domestic bonds) AUD
Euro MTN USD10,000 Any maturity subject to market regulations Multi-currency
US MTN USD10,000 9 months – 30 years Multi-currency

*AGG – Australian Government Guaranteed

QTC’s proactive management of the borrowing program and the management of its client funding and balance sheet activities helped to smooth and extend its maturity profile and support QTC’s bond spreads. Management of QTC’s liquid assets, funding execution, QTC’s Cash Fund, client debt transactions and debt rebalancing provided significant savings during 2016-17, while QTC’s total debt outstanding at year end was approximately $90 billion.

QTC’s issuance strategy continues to support its commitment to a diverse range of funding sources to complement its core AUD benchmark bond program. This diversity has seen it utilise a variety of instruments in the past year including green bonds, bond maturities out to 30 years and non-Australian dollar denominated bonds, as well as its AUD benchmark bond program. There was strong investor demand for each of QTC’s public issuances.

In 2017-18, QTC proactively managed its bond maturity profile to reduce refinancing risk by achieving more even maturities across the curve. This included reducing 2017 and 2018 maturities by $3 billion to reduce refinancing risk, improve credit metrics and smooth and extend the maturity profile. The issuance of $2.5 billion in a new 2027 benchmark bond also contributed to smoothing and extending QTC’s maturity profile.

QTC continued to focus on activities to expand its investor base, delivering an enhanced and effective domestic and global intermediary relationship program during the year. In partnership with Commonwealth Bank of Australia, QTC delivered a successful North Queensland investor conference. Open and transparent communication with the market remains a key focus. QTC continues to regularly engage with both its Fixed Income Distribution Group and investors through annual roadshow activities.

Pullout box

On 15 March 2017, QTC issued an inaugural AUD750 million 7 year Green Bond with a coupon of 3.00 per cent. This was the largest and longest tenor AUD green bond from an Australian issuer at the time—providing investors with a differentiated product and enabling QTC to tap into discreet investment pools.

Realising operational excellence

QTC is committed to maintaining high organisational standards to provide an environment where corporate goals can be achieved and organisational risks are actively monitored and addressed. QTC’s Strategic Change Program delivered significantly over and above the targeted benefits this financial year.

In 2016-17, QTC activated its new business operating model and a range of new technologies that enhanced its financial and risk management systems and processes.

The successful implementation of new IT platforms automated many formerly manual processes, leading to significant productivity gains across the organisation. In addition, QTC’s ability to create value for clients has been substantially enhanced following the creation of new roles and the recruitment of a significant number of new people. Highlights include:

  • transition from 250 applications to four core software platforms
  • 96 per cent of client transactions completed online – more than 50 per cent in excess of target
  • reduction in time spent rebalancing portfolios from approximately 120 hours to approximately 6 hours per month
  • employee productivity increased, and reduced employee induction times
  • 76 per cent employee engagement – a 33 per cent increase in 12 months
  • 73 per cent reduction in the number of policy documents, and
  • new employees rate recruitment satisfaction at 88 per cent.

Our focus on achieving operational excellence continues, with more gains to be made as we continue to incrementally improve our systems, processes and our approach to the attraction and retention of high calibre employees.

QTC manages its risks within an enterprise-wide risk management framework. The framework supports the achievement of QTC’s corporate objectives by providing assurance that QTC’s risks are identified, assessed and adequately and appropriately managed.

QTC produces a risk appetite statement that establishes clear boundaries in which QTC’s material risks should be managed.

The framework identifies key internal controls, and through periodic attestation by control owners, assurance is given to management and the Board that these controls are operating effectively.

Throughout 2016-17, QTC managed its portfolio market risk exposures, including interest rate, foreign exchange and counterparty risk, within its Board-approved risk management framework. QTC continues to hold a portfolio of diverse, liquid financial securities to meet the State’s liquidity requirements, consistent with its internal and external policies.

QTC recruits from the global financial industry to attract and retain its high calibre of employees. Pursuant to the Queensland Treasury Corporation Act 1988, QTC employees are hired on individual contracts, with employment practices aligned to the financial markets in which QTC operates.

QTC’s Board regularly reviews QTC’s remuneration framework, which comprises fixed and variable remuneration. The reviews are benchmarked against remuneration data from the Financial Institutions Remuneration Group (FIRG) that provides salary survey data for the Australian finance industry. QTC’s variable remuneration framework provides an opportunity for an annual short-term incentive for eligible employees designed to ensure market competitiveness and reward outstanding organisational, group and individual performance. The QTC Board approves the entitlement to, and the quantum of, the annual review of fixed remuneration and variable short-term incentives.

To realise the intent and benefits of QTC’s organisational transformation, this year’s focus areas have been on recruitment and induction of new employees aligned to the new business operating model and organisational structure, and on delivering the anticipated ‘end state’ organisational culture—agile, energised, outperforming and engaged.

Key initiatives to support these focus areas included targeted recruitment, leadership development, talent management and succession planning programs, professional development initiatives, and culture and diversity programs. Culture transformation has been supported by a series of organisation-wide and team-based culture development programs. An employee engagement and culture survey, held during the Strategic Change Program, measured an employee engagement rate of 76 per cent.

Leadership development continues to be an area of organisational priority. In the year under review, focus has included a foundational leadership program for QTC’s emerging leaders, and leadership coaching refreshers for QTC’s senior leaders.

QTC’s Strategic Change Program identified a range of opportunities in workforce composition, flexible work arrangements and employee wellbeing.

QTC’s Diversity and Inclusion Strategy recognises that diversity of perspective and experience improves performance, manages risk, and improves decision-making. Under the strategy’s three priority streams of culture, disability and gender, a number of initiatives were implemented, including:

  • activities to celebrate the 26 nationalities represented in QTC’s workforce
  • two partnerships with external organisations to provide employment opportunities for people with a disability, and
  • targeted mentoring for women in non-traditional roles.

The focus on diversity has resulted in a continued increase of women in senior leadership roles, with females now comprising 44 per cent of Managing Directors and Executive Directors. This improvement compares favourably to the gender mix in senior leadership roles when compared to 2012, when only 20 per cent of these roles were held by women.

The implementation of the Strategic Change Program resulted in changes to the workforce profile. At the end of the 2016-17 financial year, there were 183 full-time equivalent employees (including fixed-term employees). The separation rate for the year was 38.6 per cent.

QTC’s policies support flexible working, where flexibility will contribute to QTC achieving its corporate objectives. Flexible working arrangements in place at QTC during the reporting period included part-time work, job share, purchased annual leave, phased retirement and flexible hours of work.

QTC has a corporate health and wellbeing program that provides activities to promote physical and mental wellbeing. Activities for the 2016-17 financial year have included flu vaccinations, health assessments, skin checks, team sports, healthy eating seminars, and mental health and resilience sessions.

QTC continued its practice of regularly reviewing and updating its policies and procedures to comply with changes in the legislative and regulatory environment and to ensure employees have access to avenues through which to raise concerns, including an internal grievance process.

Ensuring corporate governance

QTC is committed to maintaining high standards of corporate governance to support its strong market reputation and ensure that organisational goals are met and risks are monitored and appropriately addressed. QTC’s corporate governance practices are continually reviewed and updated in line with industry guidelines and standards.

QTC was established by the Queensland Treasury Corporation Act 1988 (the QTC Act) as a corporation sole (ie, a corporation that consists solely of a nominated office holder). The Under Treasurer of Queensland is QTC’s nominated office holder. QTC has delegated its powers to its two boards:

  • the Queensland Treasury Corporation Capital Markets Board (the Board), which was established in 1991 and manages all of QTC’s operations except those relating to certain superannuation and other long-term assets, and
  • the Long Term Asset Advisory Board, which was established in July 2008 and advises in relation to certain superannuation and other long-term assets that were transferred to QTC from Queensland Treasury on 1 July 2008.

QTC and the Capital Markets Board have agreed the terms and administrative arrangements for the exercise of the powers that have been delegated to the Board by QTC (as the corporation sole).

The Board operates in accordance with its charter, which sets out its commitment to various corporate governance principles and standards, the roles and responsibilities of the Board and its members (based on its delegated powers), and the conduct of meetings. The charter provides that the role and functions of the Board include:

  • overseeing QTC’s operations, including its control and accountability systems
  • approving the strategic direction of QTC and significant corporate strategic initiatives
  • approving key policies and corporate performance objectives
  • setting the risk appetite within which management is expected to operate
  • approving the annual budget as proposed by management
  • approving financial and other reporting to the market and stakeholders
  • approving the remuneration framework
  • monitoring of financial, operational and corporate performance against agreed outcomes
  • monitoring and measuring the performance of QTC’s management and implementation of strategy and policies, including assessing whether appropriate resources are available
  • reviewing and monitoring systems of risk management and internal compliance and controls, and
  • monitoring compliance with all relevant legal, tax and regulatory obligations.

The Board typically holds monthly meetings (except in January, April and November) and may, whenever necessary, hold additional meetings.

Board appointments

The Board comprises board members who are appointed by the Governor-in-Council, pursuant to section 10(2) of the QTC Act, with consideration given to each Board member’s qualifications, experience, skills, strategic ability and commitment to contribute to QTC’s performance and achievement of its corporate objectives. QTC’s Board is entirely constituted of non-executive directors.

Conflict of interest

Board members are required to monitor and disclose any actual or potential conflicts of interest. Unless the Board determines otherwise, a conflicted Board member may not receive any Board papers, attend any meetings or take part in any decisions relating to declared interests.

Performance and remuneration

To ensure continuous improvement and to enhance overall effectiveness, the Board conducts an annual assessment of its performance as a whole. Board members’ remuneration is determined by the Governor-in-Council (details are disclosed in QTC’s financial statements).

Board committees

The Board has established three committees, each with its own terms of reference, to assist it in overseeing and governing various QTC activities.

Accounts and Audit Committee

The Accounts and Audit Committee has responsibility for the:

  • adequacy and effectiveness of internal controls, including for the prevention of fraud
  • integrity of financial statements
  • adequacy and effectiveness of compliance monitoring, and
  • audit effectiveness.

The Accounts and Audit Committee must have at least three members and meet at least four times a year.

During the year the Accounts and Audit Committee recommended the adoption of the half year and annual financial statements, reviewed external and internal audit reports and the progress in implementing the recommendations from those reports, and reviewed the Queensland Audit Office’s Client Service Plan and QTC’s Internal Audit Plan.

As required by the Audit Committee Guidelines: Improving Accountability and Performance issued by Queensland Treasury, QTC’s Accounts and Audit Committee has observed its terms of reference and has had due regard to the Audit Committee Guidelines.

Human Resources Committee

The Human Resources Committee has responsibility for:

  • the appropriateness of any new or amended human resources policy
  • the framework for, and review of, employee remuneration and performance, and
  • employment terms and conditions.

The Human Resources Committee must have at least three members and meet at least three times a year. The Human Resources Committee has observed its terms of reference.

Funding and Markets Committee

The core responsibilities of the Funding and Markets Committee is to assist the Board by making recommendations about the policy to enhance the performance and management of risk in the areas of funding accessibility (including liquidity) and balance sheet management, and to support QTC’s risk appetite with a focus on effectiveness and performance.

The Committee must have at least three members and meet at least four times a year. The Funding and Markets Committee has observed its terms of reference.

Board Accounts &
Audit Committee
Funding & Markets Committee Human Resources
Committee
Meetings held 10 4 4 3
Gerard Bradley 10 2 4 3
Warwick Agnew 9 4
Tonianne Dwyer 10 3
Anne Parkin 10 4 2
Stephen Roberts^ 1 0
Bill Shields* 4 1
Jim Stening 9 4
Karen Smith-Pomeroy** 10 4 4

* Mr Shields resigned from the Board effective 31 December 2016. He attended four Board meetings out of five held during the period. He also attended one Funding and Markets Committee meeting held out of two during the period.

^ Mr Roberts joined the Board on 8 June 2017. He attended one Board meeting out of one held during the period. Mr Roberts was appointed to the Funding and Markets Committee on 15 June 2017, however no Committee meetings were held during the period.

† Mr Bradley attended two meetings as the Chairman of the Board.
** Ms Smith-Pomeroy was a Funding and Markets Committee member until 15 June 2017.

Board members are appointed by the Governor-in-Council, pursuant to section 10(2) of the Queensland Treasury Corporation Act 1988 on the recommendation of the Treasurer and in consultation with the Under Treasurer. Members are chosen on their ability and commitment to contribute to QTC’s performance and achievement of its stated objectives.

Gerard Bradley

BCOM, DIPADVACC, FCA, FCPA, FAICD, FIML

Chair Appointed 10 May 2012 with tenure to 30 June 2019

Board Committees

· Member, Human Resources Committee

· Member, Funding and Markets Committee

Prior to his appointment as the Chair of QTC’s Board, Mr Bradley was the Under Treasurer and Under Secretary of the Queensland Treasury Department, a position he held from 1998 to 2012. He was also a QTC Board member from 2000-2007.

Mr Bradley has extensive experience in public sector finance gained in both the Queensland and South Australian treasury departments. He was Under Treasurer of the South Australian Department of Treasury and Finance from 1996 to 1998, and of Queensland’s Treasury Department from 1995 to 1996. Mr Bradley held various positions in Queensland Treasury from 1976 to 1995, with responsibility for the preparation and management of the State Budget and the fiscal and economic development of Queensland.

He is currently a Non-Executive Director and Chairman of Queensland Treasury Holdings Pty Ltd and related companies, and a Non-Executive Director of Star Entertainment Group Ltd, Pinnacle Investment Management Group Limited and the Winston Churchill Memorial Trust.

Warwick Agnew

BEcon, MSocSc (Econ), MAppFin

Graduate of Australian Institute of Company Directors

Appointed 13 November 2014 with tenure to 30 June 2020

Board Committees

· Member, Accounts and Audit Committee

Warwick Agnew is Queensland Treasury’s Deputy Under Treasurer, Agency Performance and Investment, previously holding the positions of Deputy Under Treasurer, Commercial Advisory and prior the department’s Chief Operating Officer.

Throughout his career, Mr Agnew has held senior leadership positions across both public and private sector organisations including roles with Queensland Treasury and Trade, Queensland Treasury Corporation and ASX-listed entities, Macquarie Capital and Transfield Services.

Mr Agnew’s extensive experience has seen him undertake senior roles involving social and economic infrastructure projects, economic analysis and policy, financial and commercial procurement, corporate finance advisory services, and operations and maintenance services at a national level. Mr Agnew represents Queensland Treasury on the Long Term Asset Advisory Board and holds a Director position on the Queensland Rural and Industry Development Authority Board and the Public Trustee Investment Board. Mr Agnew is an Independent Director on the Board of Surf Lifesaving Queensland.

Tonianne Dwyer

BJuris (Hons), LLB (Hons), GAICD

Appointed 14 February 2013 with tenure to 30 June 2020

Board Committee

· Chair, Human Resources Committee

Tonianne Dwyer is a lawyer by profession with a career of more than 25 years in international investment banking and finance in both executive management and board positions.

Ms Dwyer’s executive experience covered a broad range of sectors, including real estate investment and development, financial services, health and aged care, education, research and development, and media. She held senior roles with Hambros Bank Limited, Societe Generale and Quintain Estates & Development PLC including a role with the finance division of the UK Department of Health. Over her executive career she had experience in the UK, Europe and Wall Street.

Ms Dwyer currently holds directorships with Metcash Limited, DEXUS Property Group, DEXUS Wholesale Property Fund, ALS Limited and Oz Minerals Limited. She is also a Senator and Deputy Chancellor of the University of Queensland.

Anne Parkin

B Science (Hons), Dip. Ed, Dip. SEC, MBA, MAICD, F FIN

Appointed 1 July 2016 with tenure to 30 June 2019

Board Committees

· Member, Accounts and Audit Committee

· Member, Human Resources Committee

Anne Parkin has more than 25 years’ of international management and board level experience across Asia-Pacific banking and financial services.

Ms Parkin has held diverse leadership roles in domestic and global broking and banking, superannuation administration, retail management and education in both the public and private sectors. At an executive level, Anne has experience operating in highly regulated businesses including banking with Credit Suisse, UBS, and in Australian superannuation.

Ms Parkin is Chairman of Eco Fuels Innovations and previously, was a Non-Executive Director of both Credit Suisse Securities in Malaysia and the Philippines. As an Executive Director, she was a member of the Hong Kong Control Committee responsible for oversight of operational risk for Credit Suisse Hong Kong and its affiliates, while as Operations Executive, she was accountable for operational matters with local regulators including the Hong Kong Monetary Authority and Hong Kong Securities & Futures Commission.

In recognition of her expertise in the Asia-Pacific, Ms Parkin was invited to participate in the Asia Securities Industry & Financial Markets Association (ASIFMA).

Stephen Roberts

BEcon

Appointed 8 June 2017 with tenure to 20 June 2020

Board Committee

· Member, Funding and Markets Committee

Stephen Roberts brings extensive investment banking, leadership and governance expertise, developed across his career in the global financial markets. He is the former Chief Executive and Chief Country Officer of Citigroup Australia, where he was responsible for the Citi franchise in Australia and New Zealand. Prior to that, Mr Roberts was the Managing Director, Institutional Business, Citigroup Australia, with responsibility for the institutional business, including corporate and investment banking, markets, and transaction services. He has also held senior roles with Salomon Brothers/Citigroup Hong Kong, Lehman Brothers in Hong Kong, Salomon Brothers in London, Melbourne, Sydney and New York.

Mr Roberts is a current Director of the Great Barrier Reef Foundation, a Director of the Bradman Foundation, and an Adjunct Professor of Finance, Sydney University.

Karen Smith-Pomeroy

ADip (Accounting), GAICD, FIPA, FFIN

Appointed 9 July 2015 with tenure to 8 July 2019

Board Committee

· Chair, Accounts and Audit Committee

Karen Smith-Pomeroy is an experienced financial services senior executive with a specialty in risk and governance.

She held senior executive roles with Suncorp Group Limited from 1997 to 2014, including Executive Director, Suncorp Group subsidiary entities from 2009 to 2014. She has also held positions on a number of Boards and committees including Queensland Department of Local Government, Community Recovery and Resilience, CS Energy Limited and Tarong Energy Corporation Limited.

Ms Smith-Pomeroy is a Non-Executive Director of National Affordable Housing Consortium Limited, Stanwell Corporation Limited, InFocus Limited and Kina Securities Limited. She is a Queensland Advisory Board member of Australian Super and is also an Independent Audit Committee member of the Queensland Department of Infrastructure, Local Government and Planning, and South Bank Corporation.

Jim Stening

DipFinServ, FAICD

Appointed 13 November 2014 with tenure to 30 June 2020

Board Committee

· Chair, Funding and Markets Committee

Jim Stening has more than 30 years’ experience in financial markets in the fixed income asset class, including hands-on trading and investing in Australian and global capital markets.

Mr Stening has extensive experience in debt markets, business development, executive management and corporate governance across a diverse range of economic cycles. He has held senior roles at NAB, Merrill Lynch and Banco Santander in addition to his role as founder and Managing Director of FIIG Securities Limited, Australia’s largest specialist fixed-income firm.

Mr Stening is the Managing Director of FIIG Securities Limited (and related companies) and Chairman of OzFish Unlimited.

The Long Term Asset Advisory Board (LTAAB) was established in July 2008, following the transfer of certain superannuation and other long-term assets from Treasury to QTC (primarily for reasons relating to market volatility).

The LTAAB has power delegated from QTC to:

  • manage the sufficiency of the funding of the long-term assets
  • set investment objectives and strategies for the long-term assets
  • set the appropriate investment structure for the long-term assets, and
  • monitor investment performance of the long-term assets.

The LTAAB holds meetings at least four times per year and held six in the year under review.

The LTAAB members are appointed by the Governor-in-Council, pursuant to section 10(2) of the QTC Act.

The members of LTAAB are

Name Position
Jim Murphy, Under Treasurer Chairperson
Philip Noble, Chief Executive, QTC Member
Wayne Cannon, State Actuary Member
Dennis Molloy, Deputy Under Treasurer (Economics and Fiscal) Member
Warwick Agnew, Deputy Under Treasurer (Agency Performance and Investment) Member

The LTAAB has observed its terms of reference.

In accordance with the provisions of the Auditor-General Act 2009, the Queensland Audit Office is the external auditor for QTC. The Queensland Audit Office has the responsibility for providing Queensland’s Parliament with assurances as to the adequacy of QTC’s discharge of its financial and administrative obligations.

The Financial and Performance Management Standard 2009 (Qld) (Standard) governs the operation of QTC’s internal audit function. QTC outsourced its independent internal audit function to Ernst and Young (EY) for the 2016-17 financial year. Internal audit reports to the Accounts and Audit Committee and is conducted under an Internal Audit Policy, consistent with the relevant audit and ethical standards. The role of internal audit is to support QTC’s corporate governance framework by providing the Board (through the Accounts and Audit Committee) with:

  • assurance that QTC has effective, efficient and economical internal controls in place to support the achievement of its objectives, including the management of risk, and
  • advice with respect to QTC’s internal controls and business processes.

Internal audit is responsible for:

  • developing an annual audit plan, based on the assessment of financial and business risks (based on QTC’s approved significant risks and internal workshops) aligned with QTC’s strategic goals and objectives, and approved by the Accounts and Audit Committee
  • providing regular audit reports and periodic program management reports to the management team and the Accounts and Audit Committee, and
  • working constructively with QTC’s management team to challenge and improve established and proposed practices and to put forward ideas for process improvement.

In the year under review, EY completed its internal audits in accordance with the approved annual audit plan.

QTC has had due regard to Treasury’s Audit Committee guidelines, in establishing and supervising its outsourced internal audit function and, together with the Accounts and Audit Committee, in overseeing and monitoring the internal audit function.

The responsibility for the day-to-day operation and administration of QTC is delegated by the Board to the Chief Executive and the Executive Management Team. The Chief Executive is appointed by the Board. Executives are appointed by the Chief Executive. As with the Board, Executive Management Team appointments are made on the basis of qualifications, experience, skills, strategic ability, and commitment to contribute to QTC’s performance and achievement of its corporate objectives

QTC’s Executive Management Team as at 30 June 2017

Philip Noble Chief Executive
Grant Bush Deputy Chief Executive and Managing Director, Funding and Markets
Mark Girard Managing Director, Client Advisory
Rupert Haywood Managing Director, Risk and Financial Operations
Jane Keating Managing Director, Corporate Services

 

Financial Statements

The foregoing general purpose financial statements have been prepared in accordance with the Financial Accountability Act 2009 and other prescribed requirements.

The Directors draw attention to note 2(a) to the financial statements, which includes a statement of compliance with International Financial Reporting Standards.

We certify that in our opinion:

  • the prescribed requirements for establishing and keeping the accounts have been complied with in all material respects
  • the foregoing annual financial statements have been drawn up so as to present a true and fair view of Queensland Treasury Corporation’s assets and liabilities, financial position and financial performance for the year ended 30 June 2017, and
  • the management report includes a fair review of the information required under article 3(2)(c) of the Law of January 11, 2008 on transparency requirements for issuers of securities on the Luxembourg Stock Exchange.

The financial statements are authorised for issue on the date of signing this certificate which is signed in accordance with a resolution of the Capital Markets Board.

G P Bradley

Chairman

P C Noble

Chief Executive

Brisbane 18 August 2017

To the Capital Markets Board of Queensland Treasury Corporation

Report on the audit of the financial report

Opinion

I have audited the accompanying financial report of Queensland Treasury Corporation. The financial report comprises the balance sheet as at 30 June 2017, the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, notes to the financial statements including summaries of significant accounting policies and other explanatory information, and the certificate given by the Chairman and Chief Executive.

In my opinion, the financial report:

a) gives a true and fair view of Queensland Treasury Corporation’s financial position as at 30 June 2017, and its financial performance for the year then ended;

b) complies with the Financial Accountability Act 2009, the Financial and Performance Management Standard 2009 and Australian Accounting Standards; and

c) also complies with International Financial Reporting Standards as disclosed in Note 2(a).

Basis for opinion

I conducted my audit in accordance with the Auditor-General of Queensland Auditing Standards, which incorporate the Australian Auditing Standards. My responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of my report.

I am independent of the entity in accordance with the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to my audit of the financial report in Australia. I have also fulfilled my other ethical responsibilities in accordance with the Code and the Auditor-General of Queensland Auditing Standards.

I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion.

Key audit matter

Key audit matters are those matters that, in my professional judgement, were of most significance in my audit of the financial report of the current period. These matters were addressed in the context of the audit of the financial report as whole, and in forming the auditor’s opinion thereon, and I do not provide a separate opinion on these matters.

Gain on onlendings ($136 million), loss on financial liabilities at fair value through profit or loss ($554 million) and gain on derivatives ($353 million)

Refer to notes 2(o) and 3 in the financial report

Key audit matter

In the current financial year, Queensland Treasury Corporation finalised the replacement of its legacy middle and back office system which calculates gain/(loss) on onlendings, financial liabilities at fair value through profit or loss and derivatives. The replacement of this system required additional audit evidence to support the gains/losses on these instruments to ensure that the gains/(losses) were materially correct.

Gains/(losses) on onlendings and derivatives represents 16% and 36% of the total gain/(loss) on financial assets respectively, and gain/(loss) on financial liabilities at fair value through profit or loss represents 72% of gains/(losses) on financial liabilities. These have a material impact on the statement of comprehensive income.

Gains/(losses) on financial assets and financial liabilities were a key audit matter for the following reasons:

  • management used alternative models to support the calculation of gains/(losses) on onlendings, financial liabilities at fair value through profit or loss and derivatives reported in the financial statements for the financial year ended 30 June 2017,
  • the methodology used in the calculation of gains/(losses) on onlendings, and financial liabilities at fair value through profit or loss and derivatives was complex as they depend on:
    • the opening and closing market values of onlendings, financial liabilities and derivatives (together known as ‘financial instruments’)
    • cash flow transactions for the financial year ended 30 June 2017.
  • incorrect valuation of the financial instruments and incorrect quantum of cash flow transactions can have a material impact on the interest income and income expense calculated by the models.
  • gains/(losses) on financial assets and financial liabilities were the most material component of the statement of comprehensive income.

How my audit addressed the key audit matter

Management’s models calculate gains/(losses) on onlendings, financial liabilities at fair value through profit or loss and derivatives as a sum of the movement in the market value of financial instruments and the interest cash flow transactions for the financial year ended 30 June 2017.

My procedures included, but were not limited to:

Step 1: Assessing the model and inputs

a) assessed the adequacy of management’s controls over the process for calculating gains/(losses) on onlendings, financial liabilities at fair value through profit or loss and derivatives including the controls over the integrity of the model used.

b) confirmed the movement in the market values of financial instruments for the financial year ended 30 June 2017 by:

i. agreeing the market values of financial instruments in the model at the start of the period to the audited financial statements as at 30 June 2016

ii. agreeing the market values of financial instruments in the models as at 30 June 2017 to the valuation testing undertaken (refer step 2 below on the work performed over market values)

iii. calculating the overall movement in the market value of the financial instruments as the difference between i and ii above.

c) agreed a sample of the cash flow transactions used in the models to the supporting documentation to ensure accuracy of the cash flows.

d) recalculated the interest income and interest expense by summing the output in b) and c) above.

e) reviewed and assessed the formula used in the models to ensure the calculation is materially correct and that there are no inconsistencies in the formula applied.

Step 2: Recalculating the market value of non-derivative financial instruments as at 30 June 2017

a) obtained the prices/input from an independent source and tested a sample of valuations of the onlending balances and compared these to the values determined by QTC.

b) using the same pricing source, determined the valuation of financial liabilities at fair value through profit or loss and compared these to the values determined by QTC.

c) agreed the gains/(losses) on onlendings and financial liabilities at fair value through profit or loss derived from the models to the general ledger.

Step 3: Recalculating the market value of derivative financial instruments as at 30 June 2017

a) engaged a specialist, to assess the valuation of derivative balances. This included an assessment of the reasonableness of the valuation methodology applied by QTC and the key inputs in the yield curve by:

  • comparing the yield rates against those from Bloomberg, a third-party pricing source that is available by subscription and widely used in the financial services industry
  • reviewing the reasonableness of the inputs used, such as cash flows, interest rates etc where market data is not available by comparing these inputs to a comparable financial instrument.

b) In engaging a specialist to assist me in addressing the key audit matter:

  • evaluated their qualifications, competence, capabilities, and objectivity
  • assessed the nature, scope and objectives of the work completed for appropriateness
  • evaluated the findings and conclusions for relevance, reasonableness and are consistency with other audit evidence obtained.

c) agreed the gains/(losses) on derivatives derived from the models to the general ledger.

Other information

The Board is responsible for the other information. The information comprises the information included in the entity’s annual report for the year ended 30 June 2017, but does not include the financial report and my auditor’s report thereon.

My opinion on the financial report does not cover the other information and accordingly I do not express any form of assurance conclusion thereon.

In connection with my audit of the financial report, my responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or my knowledge obtained in the audit or otherwise appears to be materially misstated.

If based on the work performed, I conclude that there is a material misstatement of this other information, I am required to report that fact. I have nothing to report in this regard.

Responsibilities of the Board for the financial report

The Board is responsible for the preparation of the financial report that gives a true and fair view in accordance with the Financial Accountability Act 2009, the Financial and Performance Management Standard 2009 and Australian Accounting Standards, and for such internal control as the Board determines is necessary to enable the preparation of the financial report that is free from material misstatement, whether due to fraud or error.

The Board is also responsible for assessing Queensland Treasury Corporation’s ability to continue as a going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting, unless it is intended to abolish the entity or otherwise cease operations.

Auditor’s responsibilities for the audit of the financial report

My objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes my opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report.

As part of an audit in accordance with the Australian Auditing Standards, I exercise professional judgement and maintain professional scepticism throughout the audit. I also:

  • Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for my opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
  • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for expressing an opinion on the effectiveness of the entity’s internal control.
  • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Board.
  • Conclude on the appropriateness of the Board’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the entity’s ability to continue as a going concern. If I conclude that a material uncertainty exists, I am required to draw attention in my auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify my opinion. I base my conclusions on the audit evidence obtained up to the date of my auditor’s report. However, future events or conditions may cause the entity to cease to continue as a going concern.
  • Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation.

I communicate with the Board regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that I identify during my audit.

From the matters communicated with the Board, I determine those matters that were of most significance in the audit of the financial report of the current period and are therefore the key audit matters.

Report on other legal and regulatory requirements

In accordance with s.40 of the Auditor-General Act 2009, for the year ended 30 June 2017:

a) I received all the information and explanations I required.

b) In my opinion, the prescribed requirements in relation to the establishment and keeping of accounts were complied with in all material respects.

Brendan Worrall

Auditor-General of Queensland

Queensland Audit Office Brisbane

For the year ended 30 June 2017

Review of Operations

QTC made an operating profit for the year ended 30 June 2017 of AUD 353.8 million consisting of the following operating segment results:

Capital Markets Operations

During the period from 1 July 2016 to 30 June 2017, QTC continued in its ordinary course of business as the State of Queensland’s central financing authority and corporate treasury services provider. The operating profit after tax for the year ended 30 June 2017 for the Capital Markets Operations segment was AUD 129.2 million.

Long Term Assets

QTC holds a portfolio of assets which were transferred to QTC by the State Government under an administrative arrangement. These assets are the investments of QTC’s Long Term Assets segment and were accumulated to fund superannuation and other long-term obligations of the State. In return for the portfolio of assets, QTC issued to the State fixed rate notes which has resulted in the State receiving a fixed rate of return on the notes, while QTC bears the impact of fluctuations in the value and returns on the asset portfolio.

The operating profit after tax for the Long Term Assets segment was AUD 224.6 million with positive returns received across all asset classes.

Principal risks and uncertainties

Financial markets were volatile for the first half of 2016-17 following the unexpected results of the Brexit referendum and US Presidential election. Despite this volatility, risk assets performed strongly and bond yields rose, due to indications of looser policy settings and consistent improvement in global economic conditions. In the second half, risk assets continued to perform well, however bond and foreign exchange markets reversed their earlier moves based on rising geopolitical risks and questions over the size and timing of fiscal easing in the US.

How financial markets deal with rising interest rates and a removal of the liquidity provided by asset purchase programs is a key risk for 2017-18. Yields increased at the end of 2016-17 as several global central banks indicated the possibility of tightening monetary policy settings. Investors are likely to focus on geopolitical tensions and the strength of the global and domestic economies in the financial year ahead. We do not expect these uncertainties will have a material impact on QTC’s Capital Markets performance or its ability to fund the State’s borrowing requirement in 2017-18.

Appendices

QTC is required to make various disclosures in its Annual Report. QTC is also required to make various disclosures on the Queensland Government’s Open Data website (qld.gov.au/data) in lieu of inclusion in its Annual Report. This Appendix sets out those mandatory disclosure statements that are not included elsewhere in the report or made available on the Open Data website.

Information systems and record keeping

During the year, QTC continued its compliance with the provisions of the Public Records Act 2002, and its implementation of the Information Standard 40: Recordkeeping and Information Standard 31: Retention and Disposal of Public Records.

QTC has continued its work with State Archives on the development of a QTC-specific Local Retention and Disposal Schedule, and provides training to staff in the appropriate management of public records in all formats, including email.

During the year, QTC continued to enhance its electronic document management system for improved information management and storage cost reduction.

Public Sector Ethics Act

QTC provides the following information pursuant to obligations under section 23 of the Public Sector Ethics Act 1994 (Qld) to report on action taken to comply with certain sections of the Act.

QTC employees are required to comply with QTC’s Code of Conduct for employees, which aligns with the ethics principles and values in the Public Sector Ethics Act 1994 (Qld), as well as the Code of Ethics and Code of Conduct established by the Australian Financial Markets Association of which QTC is a member. Both codes are available to employees via QTC’s intranet. Copies of these codes can be inspected by contacting QTC’s Human Resources Group (see Appendix E for contact details). Appropriate education and training about the code of conduct has been provided to QTC staff.

QTC’s human resource management and corporate governance policies and practices ensure that QTC:

  • acts ethically with regard to its Code of Conduct and within appropriate law, policy and convention, and
  • addresses the systems and processes necessary for the proper direction and management of its business and affairs.

QTC is committed to:

  • observing high standards of integrity and fair-dealing in the conduct of its business, and
  • acting with due care, diligence and skill.

QTC’s Compliance Policy requires that QTC and all employees comply with the letter and the spirit of all relevant laws and regulations, industry standards, and relevant government policies, as well as QTC’s own policies and procedures.

Remuneration: Board and Committee

For the year ending 30 June 2017, the remuneration and committee fees of the QTC Capital Market Board members (excluding superannuation contributions and non-monetary benefits) were as follows:

Board Committee
Chairperson $100,527 Chairperson $6,658
Member $33,551 Member $5,152

 

The total remuneration payments made to the members of the QTC Capital Market Board was $327,349 and the total on-costs (including travel, accommodation, and hiring of motor vehicles for the members) was $19,515.

No payments in relation to remuneration or on-costs (including travel, accommodation, and hiring of motor vehicles for the members) were made to members of the Long Term Asset Advisory Board in the year ending 30 June 2017.

Related entities

The related entities in Note 22 are not equity accounted in the financial report of the Queensland Treasury Corporation. These entities are consolidated into Queensland Treasury’s financial report.

Australian Government Guarantee (AGG): Also known as the Commonwealth Government Guarantee. In response to the global financial crisis, on 25 March 2009, the Australian Government provided a time-limited, voluntary guarantee over existing and new Australian state and territory government borrowing. On 16 June 2009, the Queensland Government took up the guarantee on all existing QTC AUD denominated benchmark bond lines (global and domestic) with a maturity date of between 12 months and 180 months (1-15 years). The RBA approved QTC’s application on 11 December 2009. The AGG was withdrawn for new borrowings after 31 December 2010.

Basis point: One hundredth of one per cent (0.01 per cent).

Bitcoin: A type of digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank.

Blockchain: Allows secure online transactions via a digital ledger in which transactions made in bitcoin or another cryptocurrency are recorded chronologically and publicly. The information is decentralised and cannot be copied.

Bond: A financial instrument where the borrower agrees to pay the investor a rate of interest for a fixed period of time. A typical bond will involve regular interest payments and a return of principal at maturity.

Commonwealth Government Guarantee (CGG): See Australian Government Guarantee above.

CP (commercial paper): A short-term money market instrument issued at a discount with the full face value repaid at maturity. CP can be issued in various currencies with a term to maturity of less than one year.

Credit rating: Measures a borrower’s creditworthiness and provides an international framework for comparing the credit quality of issuers and rated debt securities. Rating agencies allocate three kinds of ratings: issuer credit ratings, long-term debt and short-term debt. Issuer credit ratings are among the most widely watched. They measure the creditworthiness of the borrower including its capacity and willingness to meet financial obligations. QTC has a strong rating from two rating agencies—Standard & Poor’s, and Moody’s.

Cryptobond: A bond issued using blockchain technology.

Cryptocurrency: A type of digital currency that uses cryptography for security and anti-counterfeiting measures.

Fixed Income Distribution Group: A group of financial intermediaries who market and make prices in QTC’s debt instruments.

Floating rate notes (FRNs): A debt instrument which pays a variable rate of interest (coupon) at specified dates over the term of the debt, as well as repaying the principal of the maturity date. The floating rate is usually a money market reference rate, such as BBSW, plus a fixed margin. Typically the interest is paid quarterly or monthly.

GOC: Government-owned Corporation.

Green Bond: QTC Green Bonds are guaranteed by the Queensland State Government, issued under the AUD Bond Program with 144A capability and certified by the Climate Bonds Initiative. Proceeds from QTC Green Bonds are to be used to fund qualifying green projects and assets for the State of Queensland. The proceeds are allocated to specific projects that support Queensland’s transition to a low-carbon and climate resilient economy. The qualifying green projects and QTC’s Green Bond Framework have been certified by the Climate Bonds Initiative and verified by DNV GL, an approved third-party assurance provider.

Issue price: The price at which a new security is issued in the primary market.

Liquid: Markets or instruments are described as being liquid, and having depth, if there are enough buyers and sellers to absorb sudden shifts in supply and demand without price distortions.

Market value: The price at which an instrument can be purchased or sold in the current market.

MTN (Medium-Term Note): A financial debt instrument that can be structured to meet an investor’s requirements in regards to interest rate basis, currency and maturity. MTNs usually have maturities between 9 months and 30 years.

QTC: Queensland Treasury Corporation.

RBA: Reserve Bank of Australia.

T-Note (Treasury Note): A short-term money market instrument issued at a discount with the full face value repaid at maturity. T-Notes are issued in Australian dollars with a term to maturity of less than 1 year.

Summary of requirement Basis for requirement Annual report reference
Letter of compliance A letter of compliance from the accountable officer or statutory body to the relevant Minister/s ARRs – section 7 Page 1
Accessibility Table of contents

Glossary

ARRs – section 9.1 Inside front cover

Appendix B

Public availability ARRs – section 9.2 Appendix D
Interpreter service statement Queensland Government Language Services Policy

ARRs – section 9.3

Appendix D
Copyright notice Copyright Act 1968

ARRs – section 9.4

Back cover
General information Introductory information ARRs – section 10.1 Page 2
Agency role and main functions ARRs – section 10.2 Page 2-3, back cover
Operating environment ARRs – section 10.3 Pages 3-11, 13
Non-financial performance Government’s objectives for the community ARRs – section 11.1 Pages 6-11
Agency objectives and performance indicators ARRs – section 11.3 Pages 4-11
Financial performance Summary of financial performance ARRs – section 12.1 Pages 4-5, Notes to Financial Statements: Pages 22-45
Governance – management and structure Organisational structure ARRs – section 13.1 Pages 12-16
Executive management ARRs – section 13.2 Page 5, 16
Public Sector Ethics Act 1994 Public Sector Ethics Act 1994

ARRs – section 13.4

Appendix A
Governance – risk management and accountability Risk management ARRs – section 14.1 Page 10
Audit committee ARRs – section 14.2 Pages 12-13
Internal audit ARRs – section 14.3 Page 16
Information systems and recordkeeping ARRs – section 14.5 Appendix A
Governance – human resources Workforce planning and performance ARRs – section 15.1 Pages 10-11
Open Data Consultancies  ARRs – section 33.1 Appendix A
Overseas travel ARRs – section 33.2 Appendix A
Queensland Language Services Policy ARRs – section 33.3 Appendix A
Financial statements Certification of financial statements FAA – section 62

FPMS – sections 42, 43 and 50

ARRs – section 17.1

Page 45
Independent Auditor’s Report FAA – section 62

FPMS – section 50

ARRs – section 17.2

Pages 46-47

Note: This checklist excludes reference to any requirements that do not apply to QTC for the current reporting period.

FAA: Financial Accountability Act 2009; FPMS: Financial and Performance Management Standard 2009; ARRs: Annual report requirements for Queensland Government agencies.

Queensland Treasury Corporation

Level 31, 111 Eagle Street
Brisbane Queensland Australia

GPO Box 1096
Brisbane Queensland Australia 4001

Telephone: +61 7 3842 4600
Facsimile: +61 7 3221 4122
Email: enquiry@qtc.com.au
Internet: www.qtc.com.au

Queensland Treasury Corporation’s annual and half-yearly reports  (ISSN 1837-1256 print; ISSN 1837-1264 online) are available on QTC’s website at www.qtc.com.au/about-qtc/annual-reports. If you would like a copy of a report posted to you, please call QTC’s reception on +61 7 3842 4600.

If you would like to comment on a report, please complete the online enquiry form located on our website.

Telephone
Queensland Treasury Corporation Reception +61 7 3842 4600
Stock Registry (Link Market Services Ltd) 1800 777 166

 

National Interpreter Symbol with Text

QTC is committed to providing accessible services to Queensland residents from culturally and linguistically diverse backgrounds. If you have difficulty understanding this report, please contact QTC’s reception on +61 7 3842 4600 and we will arrange for an interpreter to assist you.

Download QTC’s dealer panels (as at 30 June 2017)

Download QTC’s issuing and paying agents

Information for institutional investors

Core to its key funding principles, QTC is committed to being open and transparent with investors and its partners in the financial markets.

Through its website, QTC provides a range of information for investors on its various funding facilities and annual borrowing program. The website also hosts an analysts’ centre with information and links about Australia and Queensland to help investors gain a better understanding of:

  • the different levels of government in Australia
  • the forms of fiscal support the Australian Government provides to the states and territories
  • relevant governance practices, legislation and polices
  • financial data and budget information, and
  • economic and trade data.

QTC also offers investors the ability to subscribe to quarterly funding updates in English, Japanese, as well as Modern Chinese and Traditional Chinese.

Website: qtc.qld.gov.au/institutional-investors

Quarterly investor updates: Subscribe from the institutional investor section of the website

Invest in QTC app: QTC’s ‘Invest in QTC’ app has a library of publications about QTC and Queensland for institutional investors and is available from the App Store and Google Play.
Note: App is not available in the United States.

Bloomberg ticker: qtc

Availability of annual reports

QTC’s annual and half-yearly reports (ISSN 1837-1256) are available on QTC’s website for the past five financial years, earlier years are available by request. Printed copies can also be provided; please contact us for further information.

Feedback

We are committed to continually improving our Annual Report. Your feedback on QTC’s Annual Report, including presentation, ease of navigation, value of information, style of language, level of detail and suggestions for improvement, can be provided via our online enquiry form.

Disclaimer

The materials presented on this site are provided by the Queensland Treasury Corporation for information purposes only. Users should note that the electronic versions of the Annual Report on this site are not recognised as the official or authorised version. The official copy of the Annual Report, as tabled in the Legislative Assembly of Queensland, can be accessed from the Queensland Parliament tabled papers website database.