1.5.1 Nature and Scope of Activities
Rural Finance is wholly owned by the Victorian Government and is a significant lender to Victoria’s primary producers and rural businesses.
 
We also administer a range of Government initiatives, which give effect to Government policy for the promotion, development and support of rural communities and industries in Victoria. The detailed public policy objectives which underpin these programs are identified within the statement of objectives for each program.
 
We are able to offer significant cost savings for Government by having an established infrastructure to administer these programs, thereby obviating the need for a separate resource and infrastructure to be established for each event.

Rural Finance has a state-wide on-line network and data base, permitting the simultaneous handling of a variety of tasks with high volume activity levels and comprehensive reporting capability.

Advice is offered on rural issues to the State Government through the State Treasurer and Minister for Agriculture and to many State Government departments through participation on Committees and direct exchanges.

Currently our principal activities are:

   1.5.1.1   Primary Industry Lending
A range of variable and fixed rate loans are available to primary producers at competitive interest rates and on appropriate terms.

   1.5.1.2   Rural Business Lending
Loans are available to develop and maintain rural businesses in Victoria, as required particularly those which “value add”, or where the industry is an integral part of a rural community.

   1.5.1.3   Exceptional Circumstances Support
Special assistance is available to normally profitable farmers whose businesses have been affected by adverse seasonal conditions or other rare and severe event deemed by the Australian Minister for Agriculture, Fisheries and Forestry to be an Exceptional Circumstance (EC).  We are currently administering EC for the State of Victoria following extended drought conditions.

   1.5.1.4   State Government Policy Initiatives
We are engaged by Government or its agencies to deliver specifically targeted programs aimed at achieving Government policy outcomes for rural Victoria. These programs are generally administered pursuant to directions received from the Treasurer of Victoria, which spell out the policy objectives of each program and address the business case and justification for such assistance.

To give an indication of the diversity, some of the programs previously handled include:

The Tobacco Licence Buy Back Scheme, the Rock Lobster Licence Buy Back Scheme, Fish Access Licence Buy Back Schemes, the Tambo Valley Land Aggregation Program, Rural Adjustment Schemes for a variety of industries, the Productivity Enhancement Program, the Marginal Dairy Farms Reconstruction Scheme, the Mallee Crop Planting Scheme, Exotic Disease and Chemical Residue Assistance Programs (such as Anthrax and Dieldrin soil residue), Bushfire Relief Schemes, Flood Relief Schemes and Farmbis.

Current programs include:

Marine Parks & Sanctuaries Compensation Program
Fishers and charter boat operators affected by the closure of specified Marine Parks and Sanctuaries can access assistance under specified eligibility criteria. The program is administered by Rural Finance under an agreement with the Department of Primary Industries.

Westernport Commercial Netting Licence Surrender and Relocation Program
Fishers affected by the decision to ban commercial netting in Western Port Bay effective from 30 Nov 2007 may seek financial assistance under specified eligibility criteria. This program is also administered by Rural Finance under an agreement with the Department of Primary Industries.

Contractor Assistance Program
Hardwood harvest and haulage contractors in the Otways Forest Management who are affected by the Our Forest Our Future policy may seek financial assistance under program guidelines aimed at easing their exit from the industry.  Rural Finance is administering the program on behalf of Government.

Productivity Improvement Grants
A Victorian Government Initiative designed to encourage farmers in the twenty most drought affected municipalities to undertake on-farm productivity improvements to mitigate against the effects of drought  Assistance of half the cost of the improvements up to a maximum of $3000 is available through Rural Finance

   1.5.1.5   Natural Disaster Relief Programs
Assistance is provided from time to time by Government to farmers and other landholders affected by a natural disaster.  Rural Finance administers these programs under direction from the Treasurer.

   1.5.1.6   Community Service Obligations
As a community service obligation, we support the revitalisation of rural and regional Victoria through the Young Farmers’ Finance Scheme which provides concessional finance for young farmers to participate in farming and contribute to the enhancement of productivity and economic growth of rural industries.
 
   1.5.1.7   Community Involvement
Sponsorships
Important rural events such as Victorian Country Swimming Championships, Victorian Rural Fire Brigade Championships and rural industry conferences are sponsored by Rural Finance.

Charity support
The staff with support of the organisation currently sponsor a number of charities through fundraising activities providing a valuable contribution to local and deserving causes.

Scholarships
Scholarships totalling $150,000 are funded each year for up to 20 undergraduate students to pursue an agricultural related career.  To date 92 scholarships have been awarded and $1.5M advanced.

1.5.2 Scale of the Business
As at 30 June 2007, Rural Finance’s loan book stood at $1,045.1M, including undrawn commitments. Rural Finance is a significant contributor to Victoria’s rural economy with a large client base of commercial farmers and rural based secondary industries.

1.5.3 Capital Structure
Rural Finance is wholly owned by the Victorian Government and at 30 June 2007 had equity of $221M and liabilities of $695M.

Our capital structure is conservative relative to other financial institutions so as to provide sufficient equity to enable it to make significant finance available to particular rural industries after allowing for the concentration of credit risk attributable to a confined geographical area and market segment.

1.5.4 Basis of Charging (Interest Rates and Fees)
Interest rates are reviewed on a regular basis in line with market movements.  Fees are charged for loan and debit card establishment, variations to loan arrangements and upon mortgage discharge.  There are no other ongoing fees and charges levied on loans.

 
1.6 Key Business Policies

1.6.1 Accounting Policies
Financial statements are prepared on the historical cost basis (except where otherwise stated), and are drawn up in accordance with the Australian Equivalent of International Financial Reporting Standards, effective from 30 June 2006 and the Financial Management Act 1994 (as amended).  The accounting policies are detailed each year in the Annual Report.

1.6.2 Capital Investment
We are not a capital intensive organisation and do not require an expensive infrastructure to operate effectively.  The majority of operating infrastructure is leased.

1.6.3 Human Relations/Industrial Relations
The principles of Merit and Equity and the Code of Conduct as identified in the Public Administration Act 2004 are applied.

1.6.4 Customer Satisfaction
We seek to be honest and ethical in all our dealings.  Responsibilities to customers include confidentiality, accuracy, timeliness, fairness, politeness and service reliability.

While complaints are few, we are committed to investigating any that are received and to responding in a timely manner.

1.6.5 Dispute Resolution Procedures
Any claim arising from a dispute with employees or unfair dismissal is dealt with under our dispute resolution policy and procedures.

1.6.6 Employee Health and Safety
Rural Finance operates a non smoking work environment which extends to all regional offices and vehicles.  We also adopt a range of other health and safety practices and encourage a safe workplace through OH&S policies and information briefings to staff. Our OH & S committee meets quarterly and regular workplace audits are undertaken.

1.6.7 Office Premises
We lease premises from private owners in eleven locations throughout Victoria.  We work with owners to encourage them to provide buildings that are safe and fit to occupy.
 
1.6.8 Asset Management
Assets are assessed at the financial reporting date to ensure that their values do not exceed the recoverable amounts and that all assets are accounted for.

1.6.9 Competitive Neutrality
We are committed to observing the principles of competitive neutrality.

1.6.10 Business Risk
A Business Risk Management Register and Policy Statement has been established and is formally reviewed every six months.  It contains a comprehensive list of business risks confronting the organisation in the delivery of services.  The Audit Committee ensures that the Register and Policy Statement remains current and appropriate for our business activities.

The Anti Money Laundering and Counter Terrorism Financing Program has been implemented and staff training undertaken.

1.7 Regulatory Environment

1.7.1 Corporate Status
Rural Finance is fully corporatised under its statute and is a significant state owned financial enterprise.

1.7.2 Legislation
The Acts that directly impact us are as follows:

Rural Finance Act 1988
Financial Management Act 1994
Competition Policy Reform (Victoria) Act 1995
Occupational Health and Safety Act 2004
Building Act 1993
Public Administration Act 2004
Whistleblowers Protection Act 2001
Australian Workplace Relations Act 1996
Information Privacy Act 2000 / Health Records Act 2001
Victorian Industry Participation Policy Act 2003
Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) Act 2006
 
The Freedom of Information Act 1992 does not apply to the Rural Finance.

1.7.3 Corporate Governance and Monitoring
We adhere to the principles underpinning best practice in Corporate Governance, which are applied in a manner best suited to the organisation and to best serving the Board Members’ accountability to the Treasurer, as shareholder and to other stakeholders.  In carrying out the responsibilities and powers as set out in its Charter, the Board recognises its overarching responsibility to act confidentially, fairly, honestly, diligently and in accordance with the law in serving the interests of Government, employees, customers and the community.

The operations of Rural Finance are driven by our Vision, Mission and Values statements. The Values are reinforced by the Code of Conduct for the Victorian Public Sector to which Rural Finance is subject and require the observance of strict ethical guidelines. In addition, Board and Committee Charters set out the role and responsibilities of the Board, Committees and each Member.

Purpose and Role of the Board
The Board is responsible for:

• Determining the strategic direction for Rural Finance and approving, reviewing and monitoring the implementation of the strategic plan
• Approving budgets and other performance indicators, reviewing performance against them and initiating corrective action where required
• Ensuring high standards of corporate governance, legal and ethical behaviour and monitoring their compliance
• Fostering an organisational culture which reflects the desired values of the organisation
• Appointing the Chief Executive Officer (CEO) subject to ratification by the Treasurer, determining terms, conditions and remuneration of his/her appointment and reviewing his/her performance on a regular basis
• Ensuring that appropriate succession plans are in place and that the organisational structure, financial and human resources facilitate the implementation of the Board’s strategic direction
• Ensuring the identification, assessment and management of risks
• Ensuring that appropriate operational and financial policies and practices are in place and are regularly reviewed for currency.
  

1.7.4 National Tax Equivalent Regime
The Corporation is required to pay the equivalent of Commonwealth income tax to the State Government under the National Tax Equivalent Regime and is subject to scrutiny by the Australian Taxation Office.

1.7.5 Dividend Policy
Annual dividends are paid to the State Government as determined by the Treasurer, currently 50% of after tax profit.

2. Business Performance and Forecasts