Concise Consolidated Income Statement

for the year ended 30 June 2007

	2007 $m	2006 $m
Income from changes in fair value	2,558.8	2,602.3
Less: Expenses from changes in fair value	(2,512.6)	(2,547.0)
Net income from changes in fair value	46.2	55.3
Fees and commissions	23.2	24.4
Total net income	69.4	79.7
Less: General administrative expenses
Staff costs	(12.9)	(11.1)
Financial services costs	(1.3)	(1.1)
Information technology costs	(3.0)	(2.3)
Premises and administration costs	(4.5)	(4.1)
Transaction costs	(2.0)	(2.2)
Total general administrative expenses	(23.7)	(20.8)
Profit before income tax equivalent expense	45.7	58.9
Income tax equivalent expense	(11.9)	(15.3)
Profit for the year	33.8	43.6

 

This concise report is derived from the full financial report for the year ended 30 June 2007.

The concise financial report cannot be expected to provide as full an understanding of the financial performance, financial position and financing and investing activities of New South Wales Treasury Corporation (TCorp) and its controlled entities as the full financial report.

The full financial report will be sent on request free of charge. Requests can be made on TCorp’s website at www.tcorp.nsw.gov.au or by telephone on 02 9325 9325.

The accompanying discussion and analysis, and notes form part of these concise financial statements.

Discussion and Analysis of the Concise Consolidated Income Statement

The unique nature of TCorp’s activities on behalf of the State, and the fact that the majority of its assets are subject to guarantee from the New South Wales Government, make traditional financial measures such as return on capital or return on assets of limited relevance in assessing the performance of TCorp.  Importance is placed on efficiently meeting the borrowing requirements of the State, as well as TCorp’s performance as a manager of debt and asset portfolios. 

In this context, TCorp achieved a profit for the year after income tax equivalent expense of $33.8 million.  This is considered to be a very solid result even though it was down on the 2006 financial year. 

Net income from changes in fair value is impacted by a number of factors including the size of TCorp’s balance sheet, available funding opportunities and the timing of TCorp’s core Benchmark Bond maturities.  The current financial year was impacted by all of these issues.   In particular, revenue decreased due to the following:

• Over the last several years, TCorp has been able to access favourable sources of funding in offshore markets.  Due to the strengthening of the Australian dollar and changes in relative interest rate differentials, there was very limited scope in the 2007 financial year to access these opportunistic funding activities, which in turn adversely impacted revenue.
• Average liquid securities held decreased by approximately $2 billion between the 2007 and 2006 financial years.  Larger amounts of liquid securities were required to be held over 2006 in order to meet the maturity of the May 2006 Benchmark Bond series.  This fall in average securities balances also resulted in an adverse impact on revenue.    

TCorp’s expenses increased primarily as a result of an increase in the number of personnel.  This is the first significant increase in personnel in many years and is driven by the need to support future growth of TCorp’s business.  This growth will be in response to the government’s well publicised increase in infrastructure over the coming years, much of which will be supported by TCorp’s borrowing program. 

The increase in information technology costs is due the current project in place to replace TCorp’s core treasury and debt management systems.

TCorp is subject to tax equivalent payments to the New South Wales Government at an amount equal to 26% of profits.