Achieving our Mission

In last year's report I noted that the 2003/06 Corporate Plan had been a back-to-basics strategic planning process designed to answer questions about the market opportunities for TASCORP going forward. Businesses exist as part of a market and so their success or failure is very much driven by changes in that market, and the way in which they adapt to those changes.

In July 2003 we embarked on a journey to:

• become our clients' preferred supplier of treasury advice, products and services,
• build a recognised competency in funds management, and
• further develop our risk management capabilities.

This was the mission (the medium term goals for the business) that emerged from the 2003 corporate planning process. I am pleased to report that we made steady progress towards achieving our mission, in the 2003/04 financial year.

On the client front, we worked on a number of different investment and borrowing opportunities during the year. This work was recognised in the responses to our annual client survey completed in June 2004. As the table below illustrates, respondents rated both our investment services and our advisory services more highly than they did the year before. This is a key prerequisite to achieving preferred-supplier status.

Rating of TASCORP Services by Clients

(percentage of survey respondents who rated TASCORP's services "good" or "excellent")

Our funds management business successfully tendered for several cash and fixed interest investment mandates during 2003/04. We won this business against private sector competition in tenders conducted by asset consultants. In total, TASCORP secured five new and retained two existing funds management mandates during the year. Collectively, these mandates represent $164 million of funds under management.

The key thrust of our risk management initiatives in 2003/04 was the establishment of a dedicated asset and liability management (A&LM) function within TASCORP. A&LM is concerned with the management of the corporation's balance sheet and the resultant risk/return outcomes that arise as a consequence of holding large amounts of interest bearing assets and liabilities. Our expectation is that this initiative will assist us in our efforts to improve the return we make on the effective capital employed by TASCORP.

Borrowing Activities

TASCORP's borrowings totalled $4,119 million as at 30 June 2004. Very favourable issuance conditions in the domestic bond market (see Graph 1 below) prompted us to issue over $1 billion of Preferred Stocks (bond issues concentrated to specific maturity dates and paying the same coupon rate) during the year. These funds were used to (i) retire the Preferred Stock that matured in August 2003, (ii) invest in short term investments pending the maturity of the November 2004 Preferred Stock, and (iii) refinance short term borrowings.

Graph 1

Graph 2

In contrast to the very favourable issuance conditions in the domestic bond market, demand for our Euro Commercial Paper (ECP) was relatively lacklustre. Although TASCORP continued to post prices in the ECP market throughout the year, the margins Asian and European investors were looking for were a lot higher than the margins we could achieve in Australia. As a consequence our ECP issuance in 2003/04 was approximately half what it is normally, and outstandings declined throughout the year (see Graph 3).

TASCORP took the decision to withdraw from the US Commercial Paper (USCP) market in early 2004. The USCP market has become so large that TASCORP can no longer compete for investor interest in that market. TASCORP's USCP outstandings averaged less than USD300 million in the two years leading up to the decision.

Graph 3

Graph 4