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ANNUAL REPORT2016-17

1Victorian Ports Corporation (Melbourne) 2016-17 Annual Report

The Hon. Luke Donnellan MPMinister for Ports1 Spring StreetMelbourne Victoria 3000

The Hon. Tim Pallas MPTreasurer1 Treasury PlaceMelbourne Victoria 3000

Dear Ministers,

Victorian Ports Corporation (Melbourne) 2016-17 Annual Report

I have much pleasure in submitting to you the Annual Report of Victorian Ports Corporation (Melbourne) for the period 1 July 2016 to 30 June 2017, in accordance with the provisions of the Transport Integration Act 2010 (Vic) and the Financial Management Act 1994 (Vic).

Yours sincerely,

James CainChairman

29 August 2017

Letter to the Ministers

2 Victorian Ports Corporation (Melbourne) 2016-17 Annual Report


Letter to the Ministers 1Section 1: Year in review 4 Mission, vision and values 5 From the Chairman 6 FromtheChiefExecutiveOfficer 7 Key achievements 8 VPCM – an overview 9 Port of Melbourne Lease Transaction 10 Functions and objects 12 Significantlegislativechanges 15 Operations 16 Trade performance 18 Finance in brief 20 Financial summary 22 Financial statements 23 Auditor-General’s Report 95Section 2: Governance and organisational structure 97 Corporate governance 98 Board of Directors 100 Board and Committee meetings 106 Organisational structure 108 Executive Management Team 109 Health and Safety 112Section 3: Workforce data 113 Our people 114 Comparative workforce data 114Section 4: Other disclosures 116 Local Jobs First – Victorian Industry Participation Policy 117 Advertising expenditure 117 Consultancy expenditure 117 Information and communication technology expenditure 117 Freedom of Information 118 Assets 118 Compliance with Building Act 1993 (Vic) 118 National Competition Policy 119 Compliance with the Protected Disclosure Act 2012 (Vic) 119 Privacy 120 Additional VPCM information available on request 120 Attestation for compliance with Ministerial Standing Direction 3.7.1 121Appendix A - Disclosure index 122Appendix B - Statement of Corporate Intent 124

Table of contents


Section 1:

Year in review


Mission, vision and values

Our missionWe contribute to the enhancement of the economic and social prosperity for the people of Victoria by providing vital infrastructure and services for trade and tourism. We do this by: •ensuringsafeandefficientnavigationofvessels • providing essential connectivity to Tasmania • realising Victorian trade and tourism opportunities for seaborne passengers and freight.

Our visionWe will be recognised for providing Victoria’s premier gateways for trade and tourism.

Our values• Safety - we lead the way in the provision of safe navigation and services.• Innovation - we deliver excellence in sustainable and practical solutions.• People - we support, respect, and challenge each other – we value diversity.• Customers and communities - we put our customers and communities at the centre of everything we do. • Integrity - always.


From the Chairman

The 2016-17 year has been one of the most significantinthehistoryofthePort.

On 1 November, the commercial operations of the port transferred to the Lonsdale Consortium, with Victorian Ports Corporation (Melbourne) (VPCM) taking on continuing responsibility for State retained functions including Harbour Master functions, channel access and maintenance, and Station Pier operations.

The successful medium-term lease of the port’s commercial operations resulted in a $9.7 billion return for the State – a record price for an asset of this type.

Theresultreflectswellonthecarefulmanagementand development of the port by Port of Melbourne Corporation (PoMC) and its predecessors. There can be no doubt that the Port of Melbourne is Australia’s leading maritime trade and logistics hub and the price paid for the lease is a tribute to the sound leadership and management of the port over many decades. The result allows government to invest in infrastructure and other assets that will contribute to the ongoing growth and development of our state.

It’s appropriate to acknowledge the many people who have worked at the port and whose efforts have contributed to the value realised in the lease transaction.

I acknowledge the management and staff of PoMC who worked tirelessly to support the successful transaction process. In particular I would like to recognise the work of PoMC Group CEO Nick Easy and chairman Mark Birrell and thank them for their leadership through the transaction process. I would also like to thank and recognise the contribution of the members of the PoMC Board who retired at the completion of the transaction.

Since 1 November, the newly branded VPCM has succeeded PoMC and has focused on its role to manage the assets and responsibilities remaining in State hands, particularly operations at Station Pier,andfacilitatingthesafeandefficientpassageof vessels using Port of Melbourne waters. I am pleased to report we have made a good start in the firsteightmonthsofVPCM’soperations.

VPCM’s Harbour Master controls about 100,000 hectares of port waters within Port Phillip Bay, including the channels and anchorages. Through thesechannels,theVesselTrafficServicesmanaged the safe passage of more than 3000 vessel visits throughout the year. We have also maintained a regular and productive dialogue with the new private port operators, Port of Melbourne, to support the transition and to ensure customers havecontinuingefficientaccesstomarketsthroughthe port.

Station Pier is Victoria’s most important maritime passengergateway.ItfulfilsakeyroleinlinkingTasmania to the mainland as host to TT Lines’ Spirit of Tasmania ferries as well as its role as Melbourne’s cruise passenger terminal. Station Pier makes a substantial contribution to growing tourist visitation and tourism-related economic growth in Victoria. We have started work to ensure Station Pier can continue to meet growing demand in this market and serve its role in bringing people into Victoria.

AswelooktotheyearaheadandVPCM’sfirstfull year of operations, on behalf of the Board, I would like to thank the management and staff of VPCM for their work during an extremely busy year of transition. I welcome those new to VPCM,particularlyChiefExecutiveOfficerRachelJohnson, and look forward to an exciting new era for Melbourne’s port.

James CainChairman


From the Chief Executive Officer

On 1 November 2016, Victorian Ports Corporation (Melbourne) (VPCM) was formed by the Victorian Government following the successful completion of the lease of the Port of Melbourne commercial operations. VPCM has assumed responsibility for those activities which remain with the State, including the provision of safe navigation, waterside emergency management and towage regulation in the Port of Melbourne as well as the management of Station Pier and West Finger Pier.

The personnel for the new organisation have been drawn from the former Port of Melbourne Corporation structure and they have brought with them the customs, knowledge and experience that ensure continuity in the tradition of service excellence. We have also welcomed new people to the team who contribute different skills and experiences to the organisation. Together we are renewing our focus on our important customers, communities and stakeholders.

Creating the new organisation in this year of transition has presented its share of challenges as the governance, management and administrative foundations have been established. I am pleased to report that the delivery of services to port users and the provision of a safe marine environment have continuedwithoutdisruptionwhilethe‘backoffice’has been established. Importantly during the year and as a new team, we have maintained a forward-looking posture as we seek to improve and develop thecapacityandefficiencyoftheport.

This year we have invested time in developing strategies that align with the needs of our key customers. The marine services team are focused on ensuring safe navigation for larger vessels to ensure that the capacity of the port waters keeps pace with the growth in capacity ashore. Related to this effort is a key task for the business in ensuring thattheStatecontinuestorealisethebenefitsofavibrant maritime tourism sector. Our focus on the capacityandefficiencyofStationPierispartof this effort.

Among our tasks this year has been a review of all we do, and to explain this to our customers and the community. We have launched a new website, and published a revised and updated Harbour Master’s Directions.

The 2016-17 summer cruising season was again a great success. Melbourne welcomed a record 84 visits from cruise ships with more than 308,000 passengers and crew. Of these, 35 were turnaround visits in which all passengers disembarked at Station Pier and a new complement of passengers embarked. We were delighted that Princess Cruise Lines based Golden Princess (108,865 tons, 2600 guests, 1100 crew) at Melbourne for the season, making 18 visits, 15 of which were turnarounds.

VPCM is well aware of the heritage value of Station Pier and the need to keep it well maintained for the increasing cruise ship visits, and for its role as the sea gateway to Tasmania as host of TT-Line’s Spirit of Tasmania ferries. Our maintenance of the pier during the year has included the strengthening of existing mooring and fendering installations at the outer end of the pier. A major refurbishment of two passenger gangways was also completed in time for the 2016-17 cruising season. I would like to thank the Chairman and Board of Directors for their support in creating the new organisation and setting our course. I am greatly appreciative of my Executive Management Team and all of the VPCM staff members for their work during this challenging year. As a team, we have created a sound base for the business going forward.

Rachel JohnsonChief Executive Officer


Key achievements

Shipping and navigation• Facilitated 3128 ship visits to the Port of

Melbourne.• Published a new edition of the Harbour Master’s

Directions.

Cruise shipping• A record 84 cruise ship visits to Melbourne.• A record 308,346 cruise passengers and crew.• A record 35 turnaround visits.

Our people• Successful transition of staff from Port of

Melbourne Corporation to its successor organisation, Victorian Ports Corporation (Melbourne), and to the private lessor, Lonsdale Consortium, as part of the Port of Melbourne Lease Transaction.

• No lost time through injuries.• No lost time through industrial activities.

Station Pier• Carried out major safety upgrades and

maintenance programs on the structure.


VPCM – an overview

Victorian Ports Corporation (Melbourne) (VPCM) is responsible for the functions and activities remaining with the State following the lease of the commercial operations of the Port of Melbourne.

These include management of shipping and navigation in the port waters of the Port of Melbourne, waterside emergencies and marine pollution response, and the management of Station Pier as Victoria’s premier cruise shipping facility.

Strategic management VPCM is a statutory authority created by the Victorian Government and was established on 1 November 2016, following the Port of Melbourne Lease Transaction (PLT).

The Delivering Victorian Infrastructure (Port of Melbourne Lease Transaction) Act 2016 (Vic) that enabled the lease of port operations also provided for the establishment of VPCM. More details of this appear on pages 10 and 11.

In the reporting period, VPCM’s statutory objectives, powers and functions were carried out under the Transport Integration Act 2010 (Vic) and the Port Management Act 1995 (Vic).

In June 2017, VPCM was designated a State Port Entity, giving it authority to set fees and charges for its services.

Transport for Victoria The Transport Integration Amendment (Head, Transport for Victoria and Other Governance Reforms) Act 2017 established the Head, Transport forVictoriaasanewstatutoryofficeandthelead transport agency in Victoria to integrate and coordinate the State’s transport system. VPCM is now part of Transport For Victoria.

Shipping and navigation VPCM engages a licensed Harbour Master for the port waters of the Port of Melbourne in accordance with Chapter 6 of the Marine Safety Act 2010 (Vic). VPCM is also empowered to authorise persons to act as Assistant Harbour Masters, in accordance with section 229 of the Marine Safety Act 2010 (Vic).

VPCM operates modern communication centres at the Port Operations Control Centre (Melbourne VTS) and Point Lonsdale (Lonsdale VTS) to support safe navigation services in the port waters of the Port of Melbourne.

Tourism gateway VPCM manages Station Pier as Victoria’s premier cruise shipping gateway. The terminal also accommodates TT-Line’s Spirit of Tasmania passenger ferries and other visiting ships, including Australian and international navy vessels.

Infrastructure VPCM is responsible for the maintenance of the heritage-listed Station Pier and the historic Point Lonsdale Lighthouse building at the Heads that houses Lonsdale VTS.

Trade TT-Line’s Spirit of Tasmania ferries carry cargo between Tasmania and Station Pier. Cargo types include containers, breakbulk and accompanied passenger vehicles.

Historical development Growing trade to the new colony of Victoria, particularly after the discovery of gold in the 1850s, led to the establishment of the Melbourne Harbor Trust in 1877 as an authority for the development and management of the Port of Melbourne. Since 1979 when the Trust became the Port of Melbourne Authority, this work has been carried out by successor organisations and now VPCM continues the work of managing safe navigation in Port Phillip Bay.


Port of Melbourne Lease Transaction

The Victorian Government’s successful medium-term lease of the commercial operations of the Port of Melbourne was completed in the 2016-17 financialyear.

On 1 July 2016, the Port of Melbourne Corporation Group was formed. The Group consisted of PoMC and its two subsidiary entities, Port of Melbourne Operations Pty Ltd and Melbourne Port Lessor Pty Ltd.

Port of Melbourne Operations Pty Ltd was responsible for those port operations that were to be leased to a private operator from 1 November 2016. Melbourne Port Lessor Pty Ltd managed the port land, buildings and improvements that were to be leased and then became the landlord of the leased commercial operations.

PoMC Directors oversaw all operations until 31 October 2016.

On 19 September 2016, the Lonsdale Consortium was announced as the successful bidder for Port of Melbourne Operations Pty Ltd.

The Delivering Victorian Infrastructure (Port of Melbourne Lease Transaction) Act 2016 (Vic) provided for the establishment of Victorian Ports Corporation (Melbourne) (VPCM) to manage those functions and activities which remained with the State. On 1 November 2016, VPCM was established as the successor entity to PoMC, with a changed operating environment and responsibilities.

The PoMC board stood down and a new board and executive management team assumed responsibility for VPCM.


Before the Port of Melbourne Lease Transaction - 1 July 2016 to 31 October 2016

Port of Melbourne Corporation Group

After the Port of Melbourne Lease Transaction – From 1 November 2016

Three separate entities

Lonsdale Consortium trading as

Port of Melbourne Private lessor of the

commercial operations of the Port of Melbourne.

Victorian Ports Corporation (Melbourne) Successor organisation to

PoMC, a Victorian Government statutory

authority.

Management of shipping and navigation, Station

Pier, waterside emergencies and marine

pollution response.

Melbourne Port Lessor Pty Ltd

A State Business Enterprise.

Landlord of the leased

commercial operations of the Port of Melbourne.

Port of Melbourne Corporation (PoMC) Responsible for:

• management of shipping and navigation, Station Pier, waterside emergencies and marine pollution response

• the 2 subsidiary entities.

PoMC subsidiary Melbourne Port Lessor Pty Ltd

Management of port land, buildings and improvements that were to be leased.

PoMC subsidiary Port of Melbourne Operations Pty Ltd

(as Trustee for the Port of Melbourne Unit Trust)

Management of the port operations that were to be leased.

Definitions used in this document:• Port of Melbourne Corporation (PoMC) = the consolidated entity operating from 1 July 2016 to 31 October

2016• Victorian Ports Corporation (Melbourne) (VPCM) = the single entity operating from 1 November 2016 to

30 June 2017.


Transport Integration Act 2010 (Vic) The Transport Integration Act 2010 (Vic) (TIA) commenced on 1 July 2010. Its purpose is to create a new framework for the provision of an integrated and sustainable transport system in Victoria consistent with the vision statement contained in section 6 which reads: ‘The Parliament recognises the aspirations of Victorians for an integrated and sustainable transport system that contributes to an inclusive, prosperous and environmentally responsible State’ VPCMisdefinedasa‘transportbody’undertheTIA.

Under section 24 of the TIA, VPCM is required to have regard to the ‘transport system objectives’, ‘decision-makingprinciples’andanyapplicable‘specifiedpolicyprinciples’whenperformingitsfunctionsorexercisingits powers under any ‘transport legislation’. Transport legislation includes the Port Management Act 1995 (Vic) and the Marine Safety Act 2010 (Vic).

The transport system objectives provide for:• Social and economic inclusion• Economic prosperity• Environmental sustainability• Integration of transport and land use•Efficiency,coordinationandreliability• Safety, health and wellbeing

The decision making-principles provide for:• Integrated decision-making• Triple bottom line assessment• Equity• Transport system user perspective• The precautionary principle• Stakeholder engagement and community participation• Transparency

Section 141D: Object - for PoMC 1 July 2016 to 31 October 2016The primary object of PoMC was to manage and develop the port of Melbourne consistent with the vision statement and the transport system objectives.

The primary object included:a. to ensure, in collaboration with relevant responsible bodies, that the port of Melbourne was effectively

integrated with the transport system and other systems of infrastructure in the State;b. to facilitate, in collaboration with relevant responsible bodies, the sustainable growth of trade through the

port of Melbourne;c. to ensure that essential port services of the port of Melbourne were available and cost effective;d. to establish and manage channels in port of Melbourne waters for use on a fair and reasonable basis.

Section 141E: Functions - for PoMC 1 July 2016 to 31 October 2016The functions of PoMC were to:a. plan for the development and operation of the port of Melbourne;b. provide land, waters and infrastructure necessary for the development and operation of the port of

Melbourne;c. develop, or enable and control the development by others of, the whole or any part of the port of

Melbourne;d. manage, or enable and control the management by others of, the whole or any part of the port of

Melbourne;

Functions and objects


e. provide, or enable and control the provision by others of, services for the operation of the port of Melbourne;

f. promote and market the port of Melbourne;g. facilitate the integration of infrastructure and logistics systems in the port of Melbourne with the transport

system and other relevant systems outside the port of Melbourne;h. manage and, in accordance with standards developed by the Director, Transport Safety, to dredge and

maintain channels in port of Melbourne waters;i. provide and maintain, in accordance with the standards developed by the Director, Transport Safety,

navigation aids in connection with navigation in port of Melbourne waters;j. generally direct and control, in accordance with the Marine Safety Act 2010 (Vic), the movement of vessels

in port of Melbourne waters;k. perform functions in accordance with a direction given by the Minister under section 141H of the Act;l. perform any other functions or duties conferred on PoMC by any other Act or any regulations under any

other Act.

In performing its functions, PoMC was required to:a. carry out its functions consistently with State policies and strategies for the development of the Victorian

port and freight networks; andb. to the extent that it was possible to do so consistently with paragraph (a) above, operate in a commercially

sound manner having regard to: i. thebenefitsofincreasedcompetitionbetweenpersonsandbodiesthatprovideservicesrelatedto

the operation of the port of Melbourne; ii. the persons living or working in the immediate neighbourhood of the port of Melbourne; iii. the need to conduct research and collect information relating to the performance of the functions

and the operation of the port of Melbourne so as to enable PoMC to meet its primary object; iv. theneedtodealefficientlywithanycomplaintsrelatingtotheperformanceofitsfunctions.

Section 141D: Object - for VPCM 1 November 2016 to 30 June 2017The primary object of VPCM is to ensure that port of Melbourne waters and port of Melbourne land are managed for use on a fair and equitable basis and to manage and develop Station Pier and West Finger Pier consistent with the vision statement and the transport system objectives.

The primary object includes:a. to ensure, in collaboration with relevant responsible bodies, that the port of Melbourne waters, Station

Pier and West Finger Pier are effectively integrated with the transport system and other systems of infrastructure in the State;

b. to establish and manage channels in port of Melbourne waters for use on a fair and reasonable basis.

Section 141E: Functions - for VPCM 1 November 2016 to 30 June 2017The functions of VPCM are to:a. to promote and market the port of Melbourne;b. to establish and manage and dredge and maintain channels in port of Melbourne waters;c. to provide and maintain navigation aids in connection with navigation in port of Melbourne waters;d.topublishinformationaboutthedepthsandconfigurationsofchannelsandberthsinportofMelbourne

waters;e. to provide or maintain systems related to navigation in port of Melbourne waters including managing vesseltrafficandvesselcommunicationsandschedulingandallocatingvesselstoberthsinthosewaters;

f. to generally direct and control, in accordance with the Marine Safety Act 2010, the movement of vessels in port of Melbourne waters;

g. to regulate towage services in accordance with the Port Management Act 1995;


h. in relation to Station Pier and West Finger Pier: • to plan for the development and operation of the piers; • to provide land, waters and infrastructure necessary for the development and operation of the piers; • to develop, or enable and control the development by others of, the whole or any part of the piers; • to manage, or enable and control the management by others of, the whole or any part of the piers; • to provide, or enable and control the provision by others of, the whole or any part of the piers; • to facilitate the integration of infrastructure and logistics systems in the piers with the transport

system and other relevant systems outside the piers;i. to perform functions in accordance with a direction given by the Minister under section 141H of the Act;j. to perform any other functions or duties conferred on VPCM by any other Act or any regulations under any

other Act.

In performing its functions, VPCM must:a. carry out its functions consistently with State policies and strategies for the development of the Victorian

port and freight networks; andb. to the extent that it is possible to do so consistently with paragraph (a) above, operate in a commercially

sound manner having regard to: i. thebenefitsofincreasedcompetitionbetweenpersonsandbodiesthatprovideservicesrelatedto

the operation of the port of Melbourne; ii. the persons living or working in the immediate neighbourhood of the port of Melbourne; iii. the need to conduct research and collect information relating to the performance of the functions

and the operation of the port of Melbourne so as to enable VPCM to meet its primary object; iv.theneedtodealefficientlywithanycomplaintsrelatingtotheperformanceofitsfunctions.

Section 152: PowersAs a ‘transport corporation’ under the Act, VPCM has power to do all things that are necessary or convenient to be done for or in connection with, or as incidental to, the achievement of its object and the performance of its functions.


Delivering Victorian Infrastructure (Port of Melbourne Lease Transaction) Act 2016 (Vic)The Delivering Victorian Infrastructure (Port of Melbourne Lease Transaction) Act 2016 (Vic) received royal assent on 22 March 2016. The legislation establishes arrangements for the Victorian Government’s medium-term lease of the port of Melbourne, including amendments to the Transport Integration Act 2010 (Vic), the Port Management Act 1995 (Vic) and the Marine Safety Act 2010 (Vic). The Delivering Victorian Infrastructure (Port of Melbourne Lease Transaction) Act 2016 (Vic) commenced operation in stages and effected a change to PoMC’s name to VPCM effective 1 November 2016. VPCM is responsible for overseeingandundertakingspecificfunctionstoberetainedbytheStateofVictoriafollowingPLTclose.These functions include vessel scheduling, safety functions such as the Harbour Master, Station Pier, towage and marine pollution response.

Transport Integration Amendment (Head, Transport for Victoria and Other Governance Reforms) Act 2017 (Vic)The Transport Integration Amendment (Head, Transport for Victoria and Other Governance Reforms) Act 2017 (Vic) received royal assent on 14 February 2017 and the majority of its provisions commenced on 12 April 2017. The legislation establishes a new statutory body, Transport for Victoria (TfV) which is the “lead transport agency” for Victoria. TfV’s functions include leading the strategic planning of all forms of transport and to develop strategies and plans to facilitate the integration and improvement of all forms of transport in Victoria. In the Transport Integration Amendment (Head, Transport for Victoria and Other Governance Reforms) Act 2017(Vic),VPCMisdefinedasa“sectortransportagency”andisamenabletodirectionby TfV in relation to the performance of VPCM’s functions.

Emergency Management Amendment (Critical Infrastructure Resilience) Act 2014 (Vic)The Emergency Management Amendment (Critical Infrastructure Resilience) Act 2014 (Vic) commenced on 1 July 2015. The legislation amends the Emergency Management Act 2013 (Vic) and provides for new emergency risk management arrangements for Victorian critical infrastructure. It establishes a system to classifyVictoriancriticalinfrastructureas‘significant’,‘major’or‘vital’,andimposesobligationsonownersandoperatorsof‘vital’criticalinfrastructure.At30June2016,theportofMelbournehadnotbeenclassified.

Significant legislative changes


Operations

Ship visitsVPCM facilitated 3128 ship visits to the Port of Melbourne in 2016-17, including 84 cruise ship visits and 418 Spirit of Tasmania visits.

Included in these visits was the ANL Woomera (5056TEU)on6January2017,thefirstshiptovisit the new fully automated Victoria International Container Terminal (VICT) at Webb Dock East.

Marine and navigationA fully revised and rewritten edition of Harbour Master’s Directions was published in June 2017, to take effect from 1 August 2017.

Cruise shippingMelbourne welcomed a record 84 cruise ship visits for the 2016-17 season, with 83 berthing at Station Pier. These ships brought 308,346 passengers and crew. Of these, 35 were turnaround visits in which all passengers disembarked and a new complement of passengers embarked. There were 10 overnight stays by cruise ships.

Golden Princess homeported at Melbourne for the season, making 18 visits, 15 of which were turnarounds.

SixcruiseshipsmadetheirfirstvisittoMelbourneand were given commemorative plaques by VPCM to mark the occasion.

Four cruise ships visited during the Melbourne Cup carnival in November, with Pacific Pearl, Pacific Jewel and Carnival Spirit berthing at Station Pier. While Station Pier has ample berthing capacity throughout the October-May season, strong demand for ships during Cup week saw Victoria Dock host Pacific Dawn. Organisers of the Melbourne Cup Carnival, Victoria Racing Club, reported that cruise ships brought almost 8000 visitors to the race meetings.

Cruise ship visits to Station Pier have almost tripled in the past decade, when just 30 ships visited during the 2006-07 season, bringing 350 per cent more passengers to the city. VPCM will continue to work with cruise lines to ensure Melbourne continuestobenefitfromthisfast-growingtourismsector.

Passenger ferriesTT-Line’s Spirit of Tasmania ferry service at Station Pier showed continued growth with 836 sailings and approximately 430,000 passengers for the 12-month period.

MaintenanceMaintenance work at Station Pier keeps faith with its heritage listing but also enables its role in passenger vessel visits. VPCM works closely with Heritage Victoria for all works on the pier.

Works started at the completion of the 2016-17 cruising season to strengthen existing mooring and fendering installations at the outer end of the pier and are due for completion before the 2017-18 season begins. These works involve replacement of the pier’s concrete deck in some locations, reinforcing of selected piles, installation of 30 new piles and installing stronger mooring bollards. New rubber fenders will be installed on the last 50 m of the berth face on both the Outer West and Outer East berths.

In addition to this, work was completed on refurbishments to both the Parallel Elevated Gangway (PEG) and the Telescopic Elevated Gangway (TEL). This work was completed in time to service all cruise ship visits for the 2016-17 season.

Overheadshadefacilitieswerefittedatthenorth-east corner of the cruise terminal to provide shelter forpassengersqueuingfortaxis,andfivedrinkingwater fountains were installed to increase visitor comfort, particularly on hot days.

Inside the terminal, security scanning equipment was upgraded to meet the requirements of Australian Border Force.


PricingThroughout 2016-17, VPCM applied the fees and charges outlined in the Reference Tariff Schedule effective from 1 July 2016.

To give industry time to prepare for changes, VPCM informed its customers in June 2017 fees and charges would increase by a CPI increment of 2.1% from 1 October 2017.

CommunityMelbourne is a port city with urban communities bordering the areas of VPCM’s operations and landside links. Recognising the amenity expectations of neighbouring communities, VPCM liaises and meets regularly with residents, businesses and local government in the Port Melbourne area.

Safety and Environment Management Plan (SEMP)During the reporting period, VPCM operated under its Safety and Environment Management Plan (SEMP), independently audited in 2015-16. The plan is prepared in accordance with Ministerial Guidelines Port Safety and Environment Management Plans (November 2012), as required by section 91G of the Port Management Act 1995 (Vic).

Port Capacity ProjectThe Port Capacity Project in the Webb Dock precinctisthemostsignificantportprojectinageneration and during the period 1 July 2016 to 31 October 2016 two important milestones were reached as the project comes to a conclusion.

Webb Dock East container terminalIn July, PoMC completed works on Webb Dock East container berth 4. The berth was then transferred to the operators, Victoria International Container Terminal (VICT).

Road and civil worksAt the conclusion of road and civil works by PoMC in August, the internal Webb Dock road network became fully operational, connecting directly to the M1 access ramps.


Trade performance

ThePortofMelbourneLeaseTransaction(PLT)necessitatedtwosetsoftradedatatoreflectthe 2016-17financialyear:• For the four-month period before the PLT, from 1 July 2016 to 31 October 2016, PoMC had responsibility forthewholeofthePortofMelbourneandsothedatareflectsallofthetradetypesthroughalloftheportfacilities.

• For the eight-month period after the PLT, from 1 November 2016 to 30 June 2017, VPCM had responsibility fortradethroughStationPieronlyandthatdatareflectsthetradetypesforthatfacility.

Forthepurposesofthisreport,thetradedatahasbeencombinedtoprotectcommercialconfidentiality.

Information about the PLT is on pages 10 and 11.

Total tradeTotal trade was 43.1 million revenue tonnes for the 2016-17 period.

Container tradeTotal container throughput for 2016-17 was 22.5 million revenue tonnes.

New motor vehiclesNew motor vehicle trade for the 2016-17 period was 2.5 million revenue tonnes.

Liquid bulkLiquid bulk trade through the Port of Melbourne for the period 1 July 2016 to 31 October 2016 was 2.0 million revenue tonnes. This is for the four months of PoMC data only because VPCM does not receive liquid bulk cargo through its facilities.

Dry bulkDry bulk trade through the Port of Melbourne for the period 1 July 2016 to 31 October 2016 was 1.2 million revenue tonnes. This is for the four months of PoMC data only because VPCM does not receive dry bulk cargo through its facilities.

BreakbulkBreakbulk trade was 2.4 million revenue tonnes for the 2016-17 period.

Wheeled unitisedWheeled unitised units totalled 3.0 million revenue tonnes for the 2016-17 period.

Cargo type Throughput 2016-17Total trade 43.1 million revenue tonnesContainers 22.5 million revenue tonnesNew motor vehicles 2.5 million revenue tonnesLiquid bulk 2.0 million revenue tonnesDry bulk 1.2 million revenue tonnesBreakbulk 2.4 million revenue tonnesWheeled unitised 3.0 million revenue tonnesPoMC: Coastal trade – imports 3.8 million revenue tonnesPoMC: Coastal trade – exports 3.9 million revenue tonnesPoMC: Mainland coastal 1.8 million revenue tonnes


Coastal tradeCoastaltradefigureshavebeenderivedfromthefour months of PoMC data only.

• Coastal imports recorded 3.8 million revenue tonnes.

• Coastal exports recorded 3.9 million revenue tonnes.

• Mainland coastal trade recorded 1.8 million revenue tonnes.

Trade definitions1. Trade volume is measured in: • Revenue tonnes – quantity measure based

on the greater of weight in mass tonnes and volume in cubic metres

2. Trade information can be broken down into: • Overseas trade – trade between Melbourne

and non-Australian ports • Coastal trade – trade between Melbourne and

other Australian ports • Total trade – the sum of both overseas and

coastal trade


Finance in brief

On 1 July 2016, the Port of Melbourne Corporation Group was formed. The Group consisted of Port of Melbourne Corporation and two subsidiary entities, Port of Melbourne Operations Pty Ltd (as Trustee for the Port of Melbourne Unit Trust) and Melbourne Port Lessor Pty Ltd.

Port of Melbourne Corporation became known as Victorian Ports Corporation (Melbourne) (VPCM) on 1 November 2016 and the subsidiary entities exited the group as part of the Port of Melbourne Lease Transaction (PLT).

The Financial Statements for the year ended 30 June 2017 represent the four months of the consolidated entity known as the Port of Melbourne Corporation Group and eight months operations of the stand-alone entity, VPCM.

VPCM’s scope of business activities reduced considerably from the prior year as a result of the PLT. The initial impact of the PLT was shown in the 2015-16FinancialStatementswiththefinalisationof the transaction shown in the 2016 -17 Financial Statements.

VPCMdeliveredastrongfinancialperformancewithaprofitaftertaxof$30.4millionfortheyearended30June2017.The2016-17financialresultwasinfluencedbyone-offcostsandrevaluationmovements associated with the PLT.

Financial highlights for 2016-17 included: • completion of the $9.7 billion PLT • payment of $27.1 million for the Port Licence Fee

(PLF) • $33.3 million in capital expenditure • $103.2 in net assets •$30.4millionoperatingprofitaftertax.

Finance costsVPCM had interest revenue of $0.3 million for 2016-17 on cash reserves of $5.8 million. During the year, VPCM took on and repaid $18 million of short-term debt with Transport for Victoria.

Cash flowNetcashinflowsfromoperatingactivitieswere$21.8 million compared with $258.6 million in 2015-16. This decrease was primarily due to only

four months of comparable trading compared to twelve months in 2015-16.

Cashoutflowsfrominvestingactivitieswere $100.5 million compared to $238.8 million in 2015-16 due to a lower spend on the Port Capacity Project.

Cashinflowsfromfinancingactivitieswere$55.0 million in 2016-17 as a result of a capital contribution from the Department of Treasury and Finance.

Operating performanceVPCM’s earnings before interest and tax (EBIT) were $46.0 million for 2016-17.

Revenue before interest income decreased by $247.3 million due to the principal revenue-generating activities transferring to the new port operator post 1 November.

Operating expenditure deceased to $100.9 million from $266.8 million in 2015-16. This movement was associated with a decrease in operating costs following the PLT.

ProfitOperatingprofitaftertaxfor2016-17was$30.4million against the previous year total of $95.8 million.

VPCM’s income tax expense decreased to $15.5 millionprimarilyduetoalowerprofitbeforeincometax generated in 2016-17.

RevenueRevenue for 2016-17 totalled $146.9 million compared to $394.2 million in the previous year.

Trade-related revenue from wharfage charges of $97.6 million decreased by $164.1 million on the previous year ($261.7 million).

Property rental and licence fees of $19.0 million compared to $53.8 million in 2015-16 and channel fees of $17.6 million compared to $52.9 million in 2015-16 were consistent with expectations for a four-month comparable operating period.


ExpensesTotalexpenses(excludingfinancecharges)were$100.9 million representing a decrease of $165.9 million on the previous year.

As noted previously, this decrease was primarily the result of a change in operations following the PLT.

Balance sheetAs at 30 June 2017, VPCM’s net assets were $103.2 million.

The balance sheet comprised: • cash assets of $5.8 million consisting of cash

on hand and term deposits. Deposits earned a weighted average interest rate of 1.45% at 30 June 2017

• infrastructure, property, plant and equipment assets of $116.2 million including Station Pier land, buildings, infrastructure assets and capital works in progress. The key movements related to channels and land arising from the completion of the PLT.

Capital expenditureVPCM undertook capital expenditure projects totalling $33.3 million. Expenditure included: • Port Capacity Project • Station Pier Piles Rehabilitation • Station Pier Outer West Bollards•VesselTrafficServiceSystemResilience

Improvements • Accelerated Low Water Corrosion Protection

Program


Financial summary

<To come>

Year ended 30 June 2017 (i) 2016 2015 2014 2013$m $m $m $m $m

Operating results

Operating revenue 146.9 394.2 381.7 368.4 344.8

Operating expense (100.9) (266.8) (260.7) (237.0) (219.6)

Finance costs (0.1) 0.0 (69.7) (29.1) (31.4)

Operating profit before income tax 45.9 127.4 51.3 102.3 93.8

Income tax benefit/(expense) (15.5) (31.6) (5.4) (29.5) (27.9)

Operating profit after income tax 30.4 95.8 45.9 72.8 65.9

Financial status

Total assets 145.7 10,225.0 4,245.9 2,549.2 2,477.2

Total liabilities (42.6) (110.9) (880.5) (849.2) (814.0)

Net assets 103.2 10,114.1 3,365.4 1,700.0 1,663.2

Contributed capital and reserves 42.3 9,784.8 3,103.9 1,453.1 1,447.8

Retained profits 60.8 329.3 261.5 246.9 215.4

Total equity 103.2 10,114.1 3,365.4 1,700.0 1,663.2

Cash flows

Cash flows from operating activities 21.8 258.6 105.6 130.7 116.1

Cash flows from investing activities (100.5) (238.8) (306.5) (130.8) (56.6)

Cash flows from financing activities 55.0 (29.9) 204.3 (13.7) (63.7)

Net cash flow (23.7) (10.1) 3.4 (13.8) (4.2)

Capital works

Total expenditure 33.3 215.4 311.1 140.2 56.8

Dividend

Dividends paid 0.0 29.9 33.0 43.7 29.7

Financial strength

Gearing ratio (%) 0.0 0.0 0.0 20.4 19.6

Interest cover ratio (times) 0.0 0.0 2.5 6.2 5.5

Leverage ratio (times) 0.0 0.0 0.0 2.2 2.1

Financial summary

(i) In accordance with directions given by the Premier to the Port Corporation pursuant to section 20(2) of the Delivering Victorian Infrastructure (Port of Melbourne Lease Transaction) Act 2016 (Vic), the financial summary represents consolidated financial information for: Port of Melbourne Operations Pty Ltd (Port Manager) for the period 1 July 2016 - 31 October 2016, Melbourne Port Lessor Pty Ltd (Port Lessor) for the period 1 July 2016 - 31 October 2016, Port of Melbourne Corporation (renamed Victorian Ports Corporation (Melbourne) on 1 November 2016) for the period 1 July 2016 - 30 June 2017.

Year ended 30 June 2017 (i) 2016 2015 2014 2013$m $m $m $m $m

Operating results

Operating revenue 146.9 394.2 381.7 368.4 344.8

Operating expense (100.9) (266.8) (260.7) (237.0) (219.6)

Finance costs (0.1) 0.0 (69.7) (29.1) (31.4)

Operating profit before income tax 45.9 127.4 51.3 102.3 93.8

Income tax benefit/(expense) (15.5) (31.6) (5.4) (29.5) (27.9)

Operating profit after income tax 30.4 95.8 45.9 72.8 65.9

Financial status

Total assets 145.7 10,225.0 4,245.9 2,549.2 2,477.2

Total liabilities (42.6) (110.9) (880.5) (849.2) (814.0)

Net assets 103.2 10,114.1 3,365.4 1,700.0 1,663.2

Contributed capital and reserves 42.3 9,784.8 3,103.9 1,453.1 1,447.8

Retained profits 60.8 329.3 261.5 246.9 215.4

Total equity 103.2 10,114.1 3,365.4 1,700.0 1,663.2

Cash flows

Cash flows from operating activities 21.8 258.6 105.6 130.7 116.1

Cash flows from investing activities (100.5) (238.8) (306.5) (130.8) (56.6)

Cash flows from financing activities 55.0 (29.9) 204.3 (13.7) (63.7)

Net cash flow (23.7) (10.1) 3.4 (13.8) (4.2)

Capital works

Total expenditure 33.3 215.4 311.1 140.2 56.8

Dividend

Dividends paid 0.0 29.9 33.0 43.7 29.7

Financial strength

Gearing ratio (%) 0.0 0.0 0.0 20.4 19.6

Interest cover ratio (times) 0.0 0.0 2.5 6.2 5.5

Leverage ratio (times) 0.0 0.0 0.0 2.2 2.1

Financial summary



Financial statements

Financial statements for the year ended 30 June 2017


Victorian Ports Corporation (Melbourne)Comprehensive Operating StatementFor the year ended 30 June 2017 2017 2017 2016

Consolidated (i) Corporation ConsolidatedNotes $'000 $'000 $'000

Continuing operationsRevenue 3 20,026 29,211 22,629

Expenses 4(a) (31,468) (38,636) (34,820) Finance costs 9 (134) (134) - Loss before income tax from continuing operations (11,576) (9,559) (12,191) Income tax benefit relating to continuing operations 5(b) 910 304 10,403 Loss after income tax from continuing operations (10,666) (9,255) (1,788) Profit from discontinued operations after tax 4(b)(ii) 41,044 - 97,602 Gain from disposal of discontinued operations after tax 4(b)(iii) - 107,965 - Profit/(loss) for the period after income tax 21(b) 30,378 98,710 95,814

Other comprehensive incomeItems that will not be reclassified to profit after income taxEmployee benefits reserve movement 21(a) 8,066 8,066 (3,093) Other comprehensive income from discontinued operations 4(b)(ii) (366,996) - 4,132,815 Other comprehensive income/(loss) for the year, net of tax (358,930) 8,066 4,129,722

Total comprehensive income/(loss) for the year (328,552) 106,776 4,225,536


The above Comprehensive Operating Statement should be read in conjunction with the accompanying notes.

2


Victorian Ports Corporation (Melbourne)Statement of Financial PositionAs at 30 June 2017 2017 2017 2016

Consolidated (i) Corporation ConsolidatedNotes $'000 $'000 $'000

Current assetsCash and cash equivalents 10 5,845 5,845 29,526 Receivables 11 5,345 5,345 28,436 Current tax assets 6 11,641 11,641 - Other assets 12 584 584 1,689

23,415 23,415 59,651

Non-current assetsProperty, plant and equipment 14 116,199 116,199 10,144,972 Deferred tax assets 7 6,058 6,058 18,726 Intangible assets 15 62 62 1,722

122,319 122,319 10,165,420

Total assets 145,734 145,734 10,225,071

Current liabilitiesPayables 16 6,396 6,396 52,635 Provisions 18 19,086 19,086 31,034 Current tax liabilities 6 - - 3,598 Other liabilities 19 75 75 4,046

25,557 25,557 91,313

Non-current liabilitiesDeferred tax liabilities 8 16,750 16,750 18,427 Provisions 18 261 261 1,195

17,011 17,011 19,622

Total liabilities 42,568 42,568 110,935

NET ASSETS 103,166 103,166 10,114,136

EquityContributed capital 20 1,000 1,000 1,508,071 Reserves 21(a) 41,344 41,344 8,276,700 Retained profits 21(b) 60,822 60,822 329,365

TOTAL EQUITY 103,166 103,166 10,114,136

The above Statement of Financial Position should be read in conjunction with the accompanying notes.(i) In accordance with directions given by the Premier to the Port Corporation pursuant to section 20(2) of the Delivering Victorian Infrastructure (Port of Melbourne Lease Transaction) Act 2016 (Vic), the financial summary represents consolidated financial information for: Port of Melbourne Operations Pty Ltd (Port Manager) for the period 1 July 2016 - 31 October 2016, Melbourne Port Lessor Pty Ltd (Port Lessor) for the period 1 July 2016 - 31 October 2016, Port of Melbourne Corporation (renamed Victorian Ports Corporation (Melbourne) on 1 November 2016) for the period 1 July 2016 - 30 June 2017.

3


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6


Victorian Ports Corporation (Melbourne)Statement of Cash FlowsFor the year ended 30 June 2017

2017 2017 2016Consolidated (i) Corporation Consolidated

Notes $'000 $'000 $'000

Cash flows from operating activitiesReceipts from customers 186,099 47,486 436,028 Payments to suppliers and employees (90,112) (48,505) (105,479) Interest received 256 172 1,026 Interest paid (134) (134) (269) Income tax instalments (paid)/refund 6 (19,796) (4,692) 17,311 Goods and Services Tax (paid)/refund (7,347) 1,052 (10,178)

(47,163) (20,056) (79,758) Net cash inflow from operating activities 33 21,803 (24,677) 258,681

Cash flows from investing activitiesPayments for property, plant and equipment (101,728) (8,303) (241,042) Proceeds from disposal of intangible assets 1,244 4,294 - Proceeds from sale of property, plant and equipment - - 2,215 Net cash (outflow) from investing activities (100,484) (4,009) (238,827)

Cash flows from financing activitiesProceeds from borrowings 18,000 18,000 -Repayment of borrowings (18,000) (18,000) -

20 55,000 55,000 -

Divestment of subsidiary 21 - 40,005 -Capital contribution to Port Manager 21 - (90,000) -Dividends paid 21(b) - - (29,908) Net cash inflow/(outflow) from financing activities 55,000 5,005 (29,908)

(23,681) (23,681) (10,054)

29,526 29,526 39,580

10 5,845 5,845 29,526


Port Licence Fee

Capital contribution from the Department of Treasury and Finance

Net increase/(decrease) in cash and cash equivalents

Cash and cash equivalents at the beginning of the financial year

Cash and cash equivalents at the end of the financial year

The above Statement of Cash flows should be read in conjunction with the accompanying notes.

7


Victorian Ports Corporation (Melbourne)Notes to the Financial StatementsFor the year ended 30 June 2017

1

(a)

(i) Port Licence Fee (PLF)

(ii)

(b)

Summary of significant accounting policies

Victorian Ports Corporation (Melbourne) (VPCM) is a statutory authority established by the Victorian Government under the Transport Integration Act 2010 (Vic) (TIA). On completion of the Port of Melbourne Lease Transaction (PLT) on 31 October 2016, Port of Melbourne Corporation (an entity established under the Port Services Act 1995 (Vic)) changed its name on 1 November 2016 to VPCM. These financial statements cover VPCM as an individual reporting entity. The Board of VPCM is directly accountable to the Victorian Government through the Minister for Ports and the Treasurer.

VPCM is responsible for the management of shipping and navigation in the port waters of the Port of Melbourne, waterside emergency and marine pollution response and the management of Station Pier as Victoria's premier cruise shipping and Tasmanian passenger ferry facility. VPCM retains responsibility for the Harbour Master, Station Pier and West Finger Pier, relevant safety and environmental regulation, waterside emergency management and marine pollution response. Prior to the completion of the PLT on 31 October 2016, VPCM was also responsible for the strategic management and development of the Port of Melbourne including facilitating trade and trade-related businesses. The trade and trade-related businesses in the Port of Melbourne were container and general cargo. These activities where consolidated for the first four months of the financial year 2016-17, the full financial year 2015-16 and formed part of the PLT which are disclosed as discontinued operations in Note 4(b).

These financial statements incorporate all activities of VPCM.

Corporate information

In accordance with the Port Management Amendment (Victorian Ports Corporation (Melbourne) Licence Fee) Act 2012 (Vic), VPCM was required to remit to the Victorian Government an annual Port Licence Fee (PLF). This requirement commenced on 1 July 2012 and, following the completion of the PLT, VPCM is no longer required to pay the PLF.

Port Lease Transaction (PLT)On 31 October 2016, the Victorian Government achieved financial close of the transaction to lease the Port of Melbourne's commercial operations to the Lonsdale Consortium. Disclosures with respect to the PLT, including the result of the PLT which is classified as a discontinued operation, is presented separately from VPCM's continuing operation in Note 4(b).

Comparative figures in the Comprehensive Operating Statement and related notes have been restated accordingly. The discontinued operations represents the Port of Melbourne's commercial operations for the four months ended 31 October 2016 and the year ended 30 June 2016.

The financial statements of VPCM are general purpose financial statements in accordance with the Financial Management Act 1994 (Vic) and applicable Australian Accounting Standards and Interpretations (AAS). VPCM has been designated a "for profit" entity.

The annual financial statements were authorised for issue by the Board of VPCM on 29 August 2017.

Compliance with International Financial Reporting Standards (IFRS)

Statement of compliance

The Board of VPCM is of the view that the 2016-17 financial statements of VPCM also comply with IFRS as issued by the International Accounting Standards Board (IASB).

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(c)

(d)

(e) Foreign currency translation

The financial statements have been prepared on a going concern basis.

Accounting policies are selected and applied in a manner which ensures that the resulting financial information satisfies the concepts of relevance and reliability, thereby ensuring that the substance of the underlying transactions or other events is reported.

Basis of preparation

Summary of significant accounting policies (continued)

The financial statements have been prepared on an accruals and a historical cost basis, except for Property, plant and equipment which, subsequent to acquisition, are measured at a revalued amount being their fair value at the date of revaluation less any subsequent accumulated depreciation and subsequent impairment losses. Cost is based on the fair values of the consideration given in exchange for assets. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Subsidiaries are all entities (including structured entities) over which VPCM has control. VPCM controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity.

Principles of consolidation

As at 30 June 2017, VPCM no longer holds an interest in the Port of Melbourne Unit Trust (PoMUT), its Trustee company Port of Melbourne Operations Pty Ltd (PoMOPL) or Melbourne Port Lessor Pty Ltd (Port Lessor). The Statement of Financial Position at 30 June 2017 therefore represents the single entity position of VPCM.

During the year and prior to their disposal, VPCM recognised these entities as subsidiaries and, as reflected in the consolidated Comprehensive Operating Statement, Statement of Changes in Equity and Statement of Cash Flows, are therefore included in the period from 1 July 2016 to disposal on 31 October 2016.

Subsidiaries are fully consolidated from the date on which control is transferred to VPCM. They are deconsolidated from the date that control ceases.

Intercompany transactions, balances and unrealised gains on transactions between companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by VPCM.

Functional and presentation currencyBoth the functional and presentation currency of VPCM is Australian dollars ($).

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(f) Revenue

(ii) Charges for berth and area hire

(iii) Rent and licence fees

(iv) Interest revenue

(v) Government grants

(vii) Other revenue

VPCM recognises revenue when the amount of revenue can be reliably measured; it is probable that future economic benefits will flow to VPCM and specific criteria have been met for each of VPCM's activities as described below. The amount of revenue is not considered to be reliably measurable until all contingencies relating to the revenue have been resolved. VPCM bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.

All other revenue from major business activities is recognised at the time the service to which the revenue relates is provided or work is undertaken and the revenue is receivable.


Government grants are recognised at fair value where there is reasonable assurance that the grant will be received and all grant conditions will be met.

Channel fees are charged for the provision of channels for use by vessels in Port of Melbourne waters and the provision of associated services. Channel fees are levied per ship visit on the gross tons of vessels using the channels or in other manners specified for the provision of channel related services. Following completion of the PLT, VPCM charges an annual fixed amount for channel usage to the Lonsdale Consortium. This cost contribution is recognised when received or receivable.

(vi) Channel usage charges (Channel fees)

Revenue from operating leases is recognised in accordance with VPCM’s accounting policy outlined in Note 1(i).

Interest revenue is recognised as the interest accrues to the net carrying amount of the financial asset using the effective interest rate method.

Wharfage fees are charged per unit of quantity, volume or weight of cargo for all cargoes loaded on or discharged from vessels or between vessels in the Port of Melbourne. Revenue is recognised at the time of the related vessel’s departure from its designated berth.

Revenue is recognised for the major business activities as follows:

(i) Charges on goods (wharfage fees)

Berthage fees are charged to vessels per unit of berth occupancy. Revenue is recognised at the time of the vessels departure from its occupied berth.

Revenue is measured at the fair value of the consideration received or receivable.

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(g) Expenses

(h) Income tax

(i) Current tax

(ii) Deferred tax

VPCM is subject to the National Tax Equivalent Regime (NTER). In accordance with this legislation, VPCM is required to pay to the State Government Consolidated Fund, amounts determined to be equivalent to the amounts that would be payable by VPCM if it was subject to the Income Tax Assessment Act 1936 (Cwlth) and Income Tax Assessment Act 1997 (Cwlth).

Deferred income tax is provided on all temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period(s) when the asset and liability giving rise to them are realised or settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the reporting date.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Deferred income tax liabilities are recognised for all taxable temporary differences.

No deferred tax assets and liabilities will be recognised from the initial recognition of an asset or liability, excluding a business combination where there is no effect on accounting or taxable profit or loss.


Expenses from transactions are recognised as they are incurred and reported in the financial year to which they relate. Operating expenses generally represent day-to-day running costs incurred in normal operations.

Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry-forward of unused tax credits and unused tax losses can be utilised.

Income tax expense comprises current and deferred tax expense. Income tax expense is recognised in profit or loss except to the extent that it relates to items recognised directly in equity, in which case it is recognised directly in equity.

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(h) Income tax (continued)

(ii) Deferred tax (continued)

(i) Leases

(i) Operating lease

As lessor

As lessee

(j)

(k)

For the Statement of Cash Flows presentation purposes, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions and other short-term and highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

All assets are assessed annually for indications of impairment (i.e. as to whether their carrying value exceeds their recoverable amount).

The minimum lease payments of operating leases, where the lessor effectively retains substantially all of the risks and benefits of ownership of the leased item, are recognised as an expense in the year in which they are incurred. This reflects the pattern of benefits derived by VPCM.

Cash and cash equivalents


Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease agreement.

Impairment of assets

If there is an indication of impairment, the assets concerned are tested as to whether their carrying value exceeds their recoverable amount. Where an asset’s carrying value exceeds its recoverable amount, the difference is written off by a charge to profit or loss except to the extent that the write-down can be debited to an asset revaluation reserve amount applicable to that specific asset. The recoverable amount for an asset is measured at the higher of the present value of future cash flows expected to be obtained from the asset and fair value less costs to sell.

Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and VPCM intends to settle its current tax assets and liabilities on a net basis.

Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

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(l)

(m)

Receivables consist of contractual receivables and statutory receivables. Contractual receivables mainly include trade receivables in relation to goods and services. Statutory receivables include amounts owing from the Victorian Government and Goods and Services Tax (GST) input tax credits recoverable. Contractual receivables are classified as financial instruments in Note 26. Statutory receivables are not classified as financial instruments as they do not arise from a contract.

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. Trade receivables are generally due for settlement within 15 to 30 days. VPCM’s trading terms allow for interest to be charged on unpaid amounts that are not settled within the normal trading terms.

Property, plant and equipment

Receivables


Collectability of trade receivables is reviewed on an ongoing basis. Individual debts that are known to be uncollectible are written off when identified. An impairment provision is recognised when there is objective evidence that VPCM may not be able to collect the receivable. Financial difficulties of the debtor or debts more than 120 days overdue are considered objective evidence of impairment. The amount of the impairment loss is the receivable's carrying amount compared to the present value of estimated future cash flows, discounted at the original effective interest rate. Cash flows relating to short-term receivables are not discounted if the effect of discounting is immaterial.

If an asset's carrying amount is decreased as a result of a revaluation, the decrease is recognised in profit or loss. However, the decrease is debited directly to equity under the heading of asset revaluation reserve to the extent of any credit balance existing in the revaluation reserve in respect of that asset.

All non-current physical assets are measured initially at cost and subsequently revalued at fair value less accumulated depreciation and impairment.

Non-current physical assets measured at fair value are revalued in accordance with Financial Reporting Direction 103F Non-Financial Physical Assets (FRD 103F). This revaluation process occurs every five years, based upon the asset’s classification under the Government Purpose Classification, but may occur more frequently if fair value assessments indicate material changes in values. Revaluation increments or decrements arise from differences between an asset’s carrying value and fair value.

If an asset's carrying amount is increased as a result of a revaluation, the increase is credited directly to equity under the heading of asset revaluation reserve net of applicable tax. However, the increase is recognised in profit or loss to the extent that it reverses a revaluation decrease previously recognised in profit or loss in respect of that asset.

Property, plant and equipment represent non-current assets comprising land, buildings and improvements, channel assets, and plant and equipment used by VPCM in its operations.

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(m)

2017 2016Channels (seabed and capital dredging) Indefinite (i) Indefinite (i)Channels (maintenence dredging) 5 years (ii) 40 yearsInfrastructure 2 - 85 years 2 - 85 yearsPlant and equipment 1 - 25 years 1 - 25 years

Gains and losses on disposals of assets are determined by comparing proceeds from sale with the carrying amount and selling costs. These are included in profit or loss. Upon disposal or derecognition, any revaluation reserve relating to the particular asset being sold or written off is transferred to retained profits.

(i) At 30 June 2016 and the conclusion of the PLT, the useful life of the Channels was reassessed to be indefinite and the residual value calculation of the Channels (as detailed in Note 14) has taken into account a perpetual useful life. This change in accounting estimate was a result of new information specific to the PLT and was not considered to be a correction of an error. The change in the accounting estimate occurred on 30 June 2016 and was effective on 1 July 2016.

(ii) Change in accounting estimatesThe estimated useful lives, residual values and depreciation method are reviewed at the end of each financial reporting period and, where revised, are accounted for as a change in an accounting estimate. Where depreciation rates or methods are changed, the net written down value of the asset is depreciated from the date of the change in accordance with the new depreciation rate or method.

(iii) AcquisitionThe purchase method of accounting is used for all acquisitions of assets, being the fair value of the assets provided as consideration at the date of acquisition plus any incidental costs attributable to the acquisition. Where assets are constructed by VPCM, the costs at which they are initially recorded include an appropriate share of labour costs incurred directly in the construction of the asset.

(ii) At 30 June 2017, the fair value of the channels was reassessed. In accordance with FRD 103F, the channel seabed and capital dredging was assessed to have an unlimited useful life. Maintenance dredging was assessed to have a useful life of 5 years as it has a purpose of clearing the channel of recently deposited material every five years.

All items with a cost or value in excess of $1,000 (2016: $1,000) and with a useful life greater than one year are recognised as assets. All items within the threshold of $91 to $1,000 (2016: $91 to $1,000) and with a useful life greater than one year are grouped and recognised as assets within the Low Value Asset Pool. All other items are expensed as acquired.


Property, plant and equipment (continued)

(i) Depreciation expenseLand held by VPCM is not depreciated. Depreciation on other assets is calculated using the straight-line method to allocate their cost or revalued amounts, net of their residual values, over their estimated useful lives (or, in the case of leasehold improvements and certain leased plant and equipment, the lease term if shorter) as follows:

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(m)

(n) Intangible assets

2017 2016Software and systems 4 years 4 years

(o) Financial instruments

(vi) Major maintenance dredging costsThe shipping channels in Port of Melbourne waters are subject to deterioration through siltation, which reduces the depth of water available to commercial shipping. The channels are restored to declared depths by routine maintenance dredging. Dredging and associated costs (including all costs incurred under the dredging contract to restore the channels to declared depths) are capitalised and amortised.

The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees on points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) over the expected life of the financial asset, or, where appropriate, a shorter period. Income is recognised on an effective interest rate basis for debt instruments.

Due to the nature of VPCM's activities, certain financial assets and liabilities arise under statute rather than a contract. Such financial assets and liabilities do not meet the definition of financial instruments per AASB 132 - Financial Instruments: Presentation. Statutory receivables and payables arising from taxes, fines and penalties do not meet the definition of financial instruments as they do not arise under contract. Refer to Note 26 for further details.

(iv) Recoverable amountAn asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount (refer to Note 1(j)).

Routine maintenance, repair costs and minor renewal costs are expensed as incurred. Where the repair relates to the replacement of a component of an asset and the cost exceeds the capitalisation threshold, the cost is capitalised and depreciated.

Property, plant and equipment (continued)

(v) Repairs and maintenance


Trade receivables and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as ‘loans and receivables’. Loans and receivables are measured at amortised cost using the effective interest method less impairment.

Intangible assets are initially recognised at cost. Subsequently, intangible assets with finite useful lives are carried at cost less accumulated amortisation and accumulated impairment losses. Costs incurred subsequent to initial acquisition are capitalised when it is expected that additional future economic benefits will flow to VPCM. Amortisation is calculated using straight line over their estimates useful life as follows:

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(p) Payables

(q)

(r) Finance costs

(s) Provisions

Estimated costs of environmental assessment, management and restoration of assets are recognised as a liability when the obligation is identified and the costs can be reliably estimated.

Provisions are recognised when VPCM has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated. Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the reporting date. The discount rate used to determine the present value reflects current market assessments of the time value of money and the risks specific to the liability.

Payables consist of contractual payables and statutory payables. Contractual payables include mainly trade payables' creditors in relation to goods and services. Statutory payables include GST payable, fringe benefits tax and other tax payable. Contractual payables are classified as financial instruments in Note 26. Statutory payables are not classified as financial instruments as they do not arise from a contract.


Trade payables are carried at amortised cost. Due to their short-term nature they are not discounted. They represent liabilities for goods and services provided to VPCM prior to the end of the financial year that are unpaid as at year end. The amounts are unsecured and are usually paid within 30 days of recognition.

Interest bearing liabilities

All interest bearing liabilities are initially recognised at fair value of the consideration received less directly attributable transaction costs. The measurement basis subsequent to initial recognition depends on whether VPCM has classified the debt as financial liabilities designated at fair value through profit and loss or financial liabilities at amortised cost.

The direct costs of land remediation are included in the cost of the land (where it is expected to enhance the value of the land by providing future economic benefits) and a corresponding liability or provision is recognised when the obligation for remediation arises and can be reliably estimated.

Finance costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale are expensed rather than added to the cost of the assets on the basis that VPCM's Property, plant and equipment are recognised at fair value. All other finance costs are recognised as expenses in the period in which they are incurred.

Interest bearing liabilities are fixed rate facility loans and are recorded at amortised cost. Interest bearing liabilities are classified as current liabilities unless VPCM has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date.

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(s) Provisions (continued)

(t) Employee benefits

(ii) Annual leave

(iii) Long service leave

Unconditional long service leave is disclosed as a current liability even when the liability is not expected to settle within 12 months as VPCM does not have an unconditional right to defer the settlement. Those liabilities which are expected to be wholly settled within 12 months of the reporting period, are measured at their undiscounted (nominal) values. Those liabilities that are not expected to be wholly settled beyond 12 months are measured at present value.

Conditional long service leave is disclosed as a non-current liability as there is an unconditional right to defer the settlement of the entitlement until the employee has completed the requisite years of service. Conditional long service leave is disclosed as a non-current liability measured at present value.

VPCM's land may be subject to varying degrees of contamination. Ongoing environmental assessment and restoration costs are progressively charged as part of the expenses from ordinary activities when incurred.

(i) Environmental restoration feasibility studies and remediation costs

(i) Wages, salaries and sick leave


Annual leave entitlements are accrued on a pro rata basis in respect of services provided by employees up to the reporting date, having regard to rates expected to apply when the liabilities are settled. The entire obligation has been recognised as a current liability as VPCM does not have an unconditional right to defer settlement. Those liabilities which are expected to be wholly settled within 12 months of the reporting period, are measured at their undiscounted (nominal) values. Those liabilities that are not expected to be wholly settled within 12 months are also recognised in the provision for employee benefits as current liabilities, but are measured at present value of the amounts expected to be paid when the liabilities are settled using the remuneration rate expected to apply at the time of settlement.

Liabilities for wages and salaries, expected to be settled within 12 months of the reporting date, are measured at their nominal amounts (including on-costs) using the remuneration rates expected to apply at the time of the settlement and are recognised as current liabilities. VPCM does not have an unconditional right to defer settlement of these liabilities. No liability is recognised for non-vesting sick leave as the anticipated pattern of future sick leave taken indicates that accumulated non-vesting leave will not be used.

Long service leave entitlements are assessed at balance date having regard to expected employees’ remuneration rates on settlement, employment related on-costs and other factors including expected accumulated years of employment on settlement and past experience. Commonwealth bond rates are used for discounting future cash flows.

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(t) Employee benefits (continued)

(iv) Superannuation

(u) Contributed capital

Past service cost is recognised immediately to the extent that the benefits are already vested, otherwise it is amortised on a straight-line basis over the average period until the benefits become vested.

Some VPCM employees are members of defined benefit superannuation schemes, being the Port of Melbourne Superannuation Fund and the State Superannuation Scheme. These defined benefit funds are closed to new members. VPCM does not recognise any defined benefit liability in respect of the State Superannuation Scheme. DTF recognises and discloses the defined benefit liabilities for the State Superannuation Scheme in its financial report. VPCM has no legal or constructive obligation to pay future benefits relating to its employees in the State Superannuation Scheme as its only obligation is to pay superannuation contributions as they fall due.

Transfers of net assets arising from administrative restructures and/or from all other arrangements which are deemed to be contributions by owners, where there is insufficient contributed capital for distribution, are recognised as an expense by the transferor and income by the transferee in accordance with Financial Reporting Direction 119A - Transfers through Contributed Capital (FRD 119A). Alternatively, if the transferor has approval to reclassify sufficient accumulated funds to contributed capital prior to, or at, the time of the asset transfer date then a distribution from contributed capital can occur.


Consistent with applicable Australian reporting requirements and the Financial Management Act 1994 (Vic), transfers and appropriation for additions of net assets between VPCM and State Government Departments designated as contributed capital, are recognised as capital transactions.

Contributions to defined benefit schemes are based on a percentage of members' annual salary as actuarially determined and reviewed annually. Any deficiency in the net assets of a defined benefit scheme is recognised as a liability when it arises. Refer to Note 22 for further details.

The net liability recognised in the Statement of Financial Position represents the present value of the defined benefit obligation, adjusted for unrecognised past service cost, net of the fair value of the plan assets. Any asset resulting from this calculation is limited to past service cost, plus the present value of available refunds and reduction in future contributions to the plan.

A liability in respect of the Port of Melbourne Superannuation Fund is recognised in the Statement of Financial Position in the provision for employee benefits, and is determined using the Projected Unit Cost Method, with actuarial valuations being carried out at each reporting date. Actuarial gains and losses are recognised in Other Comprehensive Income in the period in which they occur.

Contributions to defined contribution funds are made in accordance with the Superannuation Guarantee (Administration) Act 1992 (Cwlth). Contributions are charged as an expense as the contributions are paid or become payable.

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(v) Commitments

(w) Contingent assets and contingent liabilities

(x) Dividend policy

(y)

(z) Rounding of amounts

Unless otherwise stated, amounts in the financial report have been rounded to the nearest thousand dollars or in certain cases to the nearest dollar.

Revenues, expenses and assets are recognised net of GST except where the amount of GST incurred is not recoverable, in which case it is recognised as part of the cost of acquisition of an asset or part of an item of expense. The GST recoverable from, or payable to, the Australian Taxation Office is included as part of statutory receivables or statutory payables.

VPCM pays dividends in accordance with a determination of the Treasurer of Victoria under the Transport Integration Act 2010 (Vic). The obligation to pay a dividend arises after consultation between VPCM’s Board, the Minister for Ports and the Treasurer of Victoria. Following this consultation process, the Treasurer makes a formal determination. Only dividends declared on or before reporting date are recognised as a liability.

Goods and Services Tax (GST)

Commitments for future expenditure include operating and capital commitments arising from contracts. These commitments are disclosed in Note 29 at their nominal values inclusive of GST.

Contingent assets and contingent liabilities are not recognised in the Statement of Financial Position, but are disclosed by way of a note and, if quantifiable, are measured at nominal value. Contingent assets and liabilities are presented inclusive of GST. Refer to Note 27 for further details.


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(aa)

(ab)

Reference SummaryApplication

date Impact on VPCM’s financial

statementsAASB 9 Financial Instruments

The key changes include the simplified requirements for the classification and measurement of financial assets, a new hedging accounting model and a revised impairment loss model to recognise impairment losses earlier, as opposed to the current approach that recognises impairment only when incurred.

1/1/2018 The assessment has identified that the financial impact of available for sale (AFS) assets will now be reported through other comprehensive income (OCI) and no longer recycled to the profit and loss. While the preliminary assessment has not identified any material impact arising from AASB 9, it will continue to be monitored and assessed.

New accounting standards and interpretations applicable but not operative


At the date of this financial report the following standards and interpretations which are applicable to VPCM, have been issued but are not yet operative. A discussion of their future requirements and their impact on VPCM is as follows:

VPCM has applied the following standards and amendments for the first time for their annualreporting period commencing 1 July 2016:

New and amended accounting standards and interpretations that became operative during the year

AASB 2015-2: Amendments to Australian Accounting Standards – Disclosure initiative:Amendments to AASB 101.

The adoption of these amendments did not have any impact on the current period or any prior period and is not likely to affect future periods.

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(ab)AASB 15 Revenue from Contracts with Customers

The core principle of AASB 15 requires an entity to recognise revenue when the entity satisfies a performance obligation by transferring a promised good or service to a customer.

1/1/2018 The changes in revenue recognition requirements in AASB 15 may result in changes to the timing and amount of revenue recorded in the financial statements. The Standard will also require additional disclosures on service revenue and contract modifications. A potential impact will be the upfront recognition of revenue from licences that cover multiple reporting periods. Revenue that was deferred and amortised over a period may now need to be recognised immediately as a transitional adjustment against the opening returned earnings if there are no former performance obligations outstanding.

AASB 16 Leases The key changes introduced by AASB 16 include the recognition of most operating leases (which are currently not recognised) on Statement of Financial Position.

1/1/2019 The assessment has indicated that as most operating leases will come on Statement of Financial Position, recognition of lease assets and lease liabilities will cause net debt to increase. Depreciation of lease assets and interest on lease liabilities will be recognised in the Comprehensive Operating Statement with marginal impact on the operating surplus.The amounts of cash paid for the principal portion of the lease liability will be presented within financing activities and the amounts paid for the interest portion will be presented within operating activities in the Statement of Cashflow.No change for lessors.


New accounting standards and interpretations applicable but not operative (continued)

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(a)

(b)

Critical accounting estimates and judgements

In the application of AASs, management is required to make judgements, estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstance, the results of which form the basis of making the judgments. Actual results may differ from these estimates.

A provision is recognised for the present value of anticipated costs of future restoration of contaminated land. The provision is based on estimates and time frames provided by external consultants. The estimates include future costs associated with remediation. The calculation of this provision requires estimations such as degree of contamination and contaminated land area compared with past experiences. These uncertainties may result in future actual expenditure differing from the amounts currently provided. The provision recognised for each site is periodically reviewed and updated based on the facts and circumstances available at the time. Changes to the estimated future costs for sites are recognised in the Statement of Financial Position by adjusting both the expense or asset value (if applicable) and provision.

Critical accounting judgements

Critical judgements that management has made in the process of applying VPCM’s accounting policies and that have the most significant effect on the amounts recognised in the financial statements are:

Estimates and judgements are continually evaluated and are based on historical experience and other factors including expectations of future events that may have a financial or disclosure impact on VPCM and are believed to be reasonable under the circumstances.

(i) Recovery of deferred tax assetsDeferred tax assets are recognised for deductible temporary differences as management considers that it is probable that future taxable profits will be available to utilise these temporary differences.

(ii) Fair value of property, plant and equipmentAll non-current physical assets are measured initially at cost and subsequently revalued at fair value in accordance with FRD 103F.

Key sources of estimation uncertainty

(i) Remediation of contaminated land

(iii) Defined benefit superannuation planThe value of the defined benefit superannuation plan has been calculated using the Projected Unit Credit method, as required by AASB 119. The objective under this method is to expense each member's benefits in the Fund as they would accrue, taking into consideration future salary increases and the benefit allocation formula. Thus the total benefit to which each member is expected to become entitled is broken down into units, each associated with a year of past or future credited service.

No provision was required to be recognised in 2016-2017 and the balance of the provision is nil at 30 June 2017 (2016: Nil).

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(ii) Fair value measurement and valuation processes

The categorisation of fair value measurement into different levels of the fair value hierarchy depends on the degree to which the inputs into the fair value measurement are observable and the significance of the inputs into the fair value measurement. The hierarchy gives the highest priority to (unadjusted) quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable valuation inputs. The hierarchy categorises the inputs used in valuation techniques into three levels:

Critical accounting estimates and judgements (continued)

VPCM's Property, plant and equipment assets are measured and disclosed at fair value for financial reporting purposes as per Note 14. VPCM's financial assets and liabilities are disclosed at fair value for financial reporting purposes as per Note 26. In order to determine fair value of an asset or a liability, VPCM uses market-observable data to the extent it is available.

Level 1 inputs are quoted prices in active markets for identical assets or liabilities that the entity can access at the measurement date. A quoted market price in an active market provides the most reliable evidence of fair value and is used without adjustment to measure fair value whenever available, with limited exceptions.

In 2017, the fair value of the channels was assessed as required by FRD 103F with the channel seabed and capital dredging having an unlimited useful life and maintenance dredging having a five year useful life.

The channels are subject to annual fair value assessments as required by FRD 103F.(iii) Fair value measurement of channels

Level 2 inputs are inputs other than quoted market prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include:- quoted prices for similar assets or liabilities in active markets- quoted prices for identical or similar assets or liabilities in markets that are not active- inputs other than quoted prices that are observable for the asset or liability, for example interest rates and yield curves observable at commonly quoted intervals, implied volatilities, credit spreads, etc.- inputs that are derived principally from or corroborated by observable market data by correlation or other means ('market-corroborated inputs').

Level 3 inputs are unobservable inputs for the asset or liability. Unobservable inputs are used to measure fair value to the extent that relevant observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date. An entity develops unobservable inputs using the best information available in the circumstances, which might include the entity's own data, taking into account all information about market participant assumptions that is reasonably available.

In 2016, the fair value of the channels was assessed based on the market-based evidence of fair value arising from the conclusion of the PLT. Further details of the estimates and assumptions are disclosed in Note 14.

24


Victorian Ports Corporation (Melbourne)Notes to the Financial StatementsFor the year ended 30 June 2017 2017 2017 2016

Consolidated Corporation ConsolidatedNotes $'000 $'000 $'000

3 Revenue

Continuing operationsOperating revenuesCharges on goods (wharfage fees) 10,088 10,088 9,871 Rent and licence fees 1,195 1,195 792 Channel usage charges (channel fees) - - 6,410 Land tax recovered from tenants 21 21 - Charges for berth and area hire 2,354 2,354 2,253 Other charges for services (i) 12,531 17,531 2,162 Recoverable works (2,212) (2,212) 103 Loss on disposal of Port Manager and Port Trust (4,185) - - Total operating revenues 19,792 28,977 21,591

Other incomesInterest revenue 26(a) 172 172 991 Other revenue 62 62 47 Total other incomes 234 234 1,038

Total revenues from continuing operations 20,026 29,211 22,629

Revenue from discontinued operations is disclosed separately in Note 4(b).

(i) Other charges for services include contribution to Port Corporations costs by the Port Manager under the Port Concession Deed and Port Operations Service Deed.

25




4(a) Expenses

Continuing operationsOperating expenses

Port Licence Fee (ii) - - - Depreciation and amortisation expenses 33 7,697 7,697 7,481 Contractors and consultant expenses 12,458 12,458 10,140 Salaries and employee benefits expenses 8,093 8,093 13,877 Land tax (recovery)/expenses (1,523) (1,523) - Operating lease expenses - minimum lease payments 429 429 322 Debt forgiven (Port Lessor) - 7,173 - Other expenses 3,496 3,491 2,473 Total operating expenses (i) 30,650 37,818 34,293

Other expenses

33 818 818 412

- - 115 818 818 527

Total expenses from continuing operations 31,468 38,636 34,820

Expenses from discontinued operations are disclosed separately at Note 4(b).

Year ended 30 June 2017

Loss on disposal of property, plant and equipmentRevaluation decrements - Property, plant and equipment

(ii) The Port Management Amendment (Port of Melbourne Corporation Licence Fee) Act 2012 (Vic) which received Royal Assent on 6 March 2012 with an effective date of commencement of 1 July 2012, required PoMC to remit to the Victorian Government an annual Port Licence Fee (PLF). Post the PLT, this fee was paid upfront by the Lonsdale Consortium.

The quantum of the PLF for 2016-17 was $81.3 million, however only $27.1 million was payable by VPCM to the Victorian Government prior to the completion of the PLT. Total operating revenue during the four months ended 31 October 2016 includes $26.4 million of revenue related to the recovery of the PLF. This represents an under-recovery of $0.8 million when compared to the $27.1 million PLF payable to the Victorian Government for 2016-17. Following the completion of the PLT, VPCM is no longer required to pay the PLF.

(i) Total operating expenses for the current reporting period include $4.4 million (2016: $7.2 million) of costs incurred on the Port of Melbourne Lease Transaction.

26



4(b) Discontinued operations(i) Port of Melbourne Lease Transaction

On 11 March 2016, the State instructed the VPCM Board to acquire 31 land parcels (21,931 square metres in total) of freehold land within the Port of Melbourne from DTF. The instructions were issued in accordance with a Direction from the Treasurer and the Minister for Ports dated 15 May 2015.

On 21 March 2016, VPCM (as parent entity), following Board approval, established the following Corporations Act companies, each with $10 as share capital: - Port of Melbourne Operations Pty Ltd - Melbourne Port Lessor Pty Ltd.

The nature and operations and principal activities of the subsidiaries are as follows:- Port Lessor owns the relevant port land, channels and fixtures and granted an interim lease of these assets to Port Manager, and- Port Manager entities (PoMO and PoMUT) owns other (i.e. non-land and majority of working capital) assets and liabilities that enable the business of the Port of Melbourne.

The disclosure with respect to the Port of Melbourne Lease Transaction (PLT) that was included in the prior year Annual Financial Statements has been reproduced below in order to provide an accurate chronological record of the timeline over the two financial years 2016 and 2017. The relevant Ministerial Directions that impact these financial statements have been detailed below.

Ministerial Directions (including instructions from the Victorian State Government (the State) given to VPCM have been issued by the Minister for Ports (with approval from the Treasurer) under section 163(b) of the Transport Integration Act 2010 (Vic).

On 5 August 2015, the Upper House of the Victorian Parliament established a Select Committee (Port of Melbourne Select Committee ) of eight members to inquire into and report on the proposed lease of the Port of Melbourne. The reporting date for the inquiry was 30 November 2015.

On 8 December 2015, the Port of Melbourne Select Committee tabled its report entitled Inquiry into the proposed lease of Port of Melbourne in the Victorian Parliament.

On 10 March 2016, the Delivering Victorian Infrastructure (Port of Melbourne Lease Transaction) Bill 2015, was passed by the Victorian Parliament. This legislation authorised and facilitated the leasing of land and disposal of other assets of VPCM (the Port Package) to the private sector via newly created VPCM subsidiaries and amended existing legislation to provide for an appropriate regulatory regime for the Port of Melbourne.

On 11 March 2016, the State instructed the VPCM Board to establish the following subsidiaries and unit trust:- Port of Melbourne Operations Pty Ltd (PoMOPL), a Corporations Act 2001 (Cwlth) (Corporations Act) company established as a wholly owned subsidiary of VPCM;- Melbourne Port Lessor Pty Ltd (Port Lessor), a Corporations Act company established as a wholly owned subsidiary of VPCM; and- Port of Melbourne Unit Trust (PoMUT), a unit trust of which PoMOPL has been appointed as Trustee and the units of which are wholly owned by VPCM.

27



4(b) Discontinued operations (continued)(i) Port of Melbourne Lease Transaction (continued)

On the same day, VPCM applied for and was granted 10 Initial Units in the Port of Melbourne Unit Trust. VPCM agreed to pay the Trustee (PoMOPL) $10 for the 10 Initial Units. VPCM also agreed to be bound by the Trust Deed constituting the PoMUT. The PoMOPL as trustee for the PoMUT are collectively referred to as 'Port Manager' throughout these financial statements.

On 19 September 2016, following a successful bidding process which was led by DTF along with their Joint Financial Advisers, the Treasurer announced the successful bidder for the PLT as the Lonsdale Consortium. The following events on 19 September 2016:- signing of the Sale and Purchase Deed between the State and the Lonsdale Consortium,- release of total Bid Price for the 50-year lease and- overview of the assets subject to the 50-year lease.

On 21 March 2016, the Treasurer commenced the formal PLT process for a 50-year lease and disposal of other assets and liabilities of VPCM with expressions of interest requested from bidders. The functions of the Harbour Master including emergency management and business operations at Station Pier were to be retained under the State's control and did not form part of the Port Package.

On 31 October 2016, financial close with the Lonsdale Consortium was achieved and included:- divestment of VPCM's wholly owned Port Manager entities (PoMO and PoMUT) from VPCM to the Lonsdale Consortium, and- lease and upfront payment of fixed assets (Channels, Land and Infrastructure) from VPCM's wholly owned subsidiary Port Lessor to the Lonsdale Consortium for a period of 50 years.

The two VPCM subsidiaries and the unit trust were established in order to facilitate the proposed business separation effective 1 July 2016, of the relevant assets and liabilities, functions and responsibilities of VPCM into those that are to be offered to a private operator and those that will be retained by the Victorian Government. From the time of their establishment to 30 June 2016, the two subsidiaries and the unit trust remained dormant.

On 22 March 2016, the Delivering Victorian Infrastructure (Port of Melbourne Lease Transaction) Bill 2015 received Royal Assent and was subsequently enacted as the Delivering Victorian Infrastructure (Port of Melbourne Lease Transaction) Act 2016 (Vic).

On 20 June 2016, a number of statutory vesting orders (effective from 1 July 2016) declared under section 86 of the Delivering Victorian Infrastructure (Port of Melbourne Lease Transaction) Act 2016 (Vic) were received from the Premier of Victoria transferring specific assets, rights and liabilities from VPCM to Port Lessor and Port Manager.

On 1 July 2016, certain assets, rights and liabilities of VPCM were transferred to Port Lessor and Port Manager. The transfers were accounted for in accordance with FRD 119A - Transfers through Contributed Capital as designated by the Minister for Ports via a letter dated 27 June 2016.

On 26 October 2016, a number of transfer orders (effective from 31 October 2016) were received from the State transferring specific assets and Port Lessor from VPCM to the State.

28



4(b) Discontinued Operations (continued)(i) Port of Melbourne Lease Transaction (continued)

On the same date:- Port Lessor transferred to its Lonsdale Consortium lease premium receivable,- VPCM transferred its Port Manager sale proceeds receivable to the State of Victoria and ultimately the Victorian Transport Fund. - The corporation was renamed from Port of Melbourne Corporation to Victorian Ports Corporation (Melbourne) in accordance with the Delivering Victorian Infrastructure (Port of Melbourne Lease Transaction) Act 2016 (Vic).- VPCM also transferred its interest in Port Lessor to the Department of Economic Development, Jobs, Transport and Resources (DEDJTR). The above transfers were accounted for in accordance with FRD 119A - Transfers through Contributed Capital as designated by the Minister for Ports via a letter dated 26 October 2016.

The discontinued operations represent the Port of Melbourne’s commercial operations for the four months ended 31 October 2016 and the year ended 30 June 2016. The results for the PLT transaction up to the date of disposal are presented below in accordance with AASB 5 Non-Current Assets Held for Sale and Discontinued Operations.

29


Victorian Ports Corporation (Melbourne)Notes to the Financial StatementsFor the year ended 30 June 2017 2017 2016

Consolidated Consolidated$'000 $'000

Notes 4 month 12 month31-Oct-16 30-Jun-16

4(b) Discontinued operations (continued)(ii) Financial performance of operation disposed

Charges on goods (wharfage fees) 87,471 251,804 Rent and licence fees 17,846 52,976 Channel usage charges (channel fees) 17,603 46,474 Land tax recovered from tenants 688 5,068 Charges for berth and area hire 1,497 4,559 Other charges for services 967 2,919 Recoverable works 432 7,295 Interest received 84 91 Other revenue 327 409 Total Revenues 126,915 371,595

Port Licence Fee 27,107 80,222 Depreciation and amortisation expenses 14,186 95,751 Contractors and consultants expenses 14,709 23,800 Salaries and employee benefits expenses 5,544 15,550 Land tax expenses 1,173 5,555 Operating lease expenses - minimum lease payments 1,029 2,640 Other operating expenses 1,865 7,091 Loss on disposal of Property, plant and equipment 3,802 1,215 Revaluation decrements - Property, plant and equipment - 115 Finance costs - 4 Total Expenses 69,415 231,943

Profit before income tax from discontinued operations 57,500 139,652 Income tax expense 16,456 42,050 Profit after income tax from discontinued operations 41,044 97,602

Other comprehensive income from discontinued operations(366,996) 5,911,158

- (1,773,187) Employee benefits reserve movement - (5,156)

(366,996) 4,132,815

(325,952) 4,230,417

Income tax on items that will not be reclassified to profit after income tax

Total other comprehensive income from discontinued operations

Total comprehensive income for the year from discontinued operations

Asset revaluation reserve movement

30



4(b) Discontinued operations (continued)

(ii) Financial performance of operation disposed (continued)

PLF - Year ended 30 June 2017

PLF - Year ended 30 June 2016

Net profit from discontinued operations

(iii)

The net profit from discontinued operations was attributed entirely to the owners of VPCM (the State).

Net assets disposed of in discontinued operationsAs at 30 June 2016, the valuation of the Channels and the residual values struck for Land, Channels and other Infrastructure assets at the end of the lease term include management judgements and assumptions that are inherently subject to estimation uncertainty and are based on professional judgement and other factors that are believed to be reasonable under the circumstances. As at 31 October 2016, the valuation of the transaction net assets was finalised based on a final bid price allocation plus estimated residual values. These are as follows:

The quantum of the PLF for 2015-16 was $80.2 million and this was payable by VPCM to the Victorian Government in four equal quarterly instalments of $20.05 million. Total operating revenue includes $81.5 million of revenue related to the recovery of the PLF. This represents an over-recovery of $1.3 million when compared to the $80.2 million PLF payable to the Victorian Government for 2015-16.

The quantum of the PLF for 2016-17 was $81.3 million, however only $27.1 million was payable by VPCM to the Victorian Government prior to the completion of the PLT. Total operating revenue during the four months ended 31 October 2016 includes $26.4 million of revenue related to the recovery of the PLF. This represents an under-recovery of $0.8 million when compared to the $27.1 million PLF payable to the Victorian Government for 2016-17. Following the completion of the PLT, VPCM is no longer required to pay the PLF.

31



4(b) Discontinued Operations (continued)

(iii)

2017 2016Consolidated Corporation

$'000 $'0004 month 12 month

$'000 $'000

Carrying amount of net assets sold (Port Manager) 107,965 - Carrying amount of net assets leased (Port Lessor) - - Channels 5,695,549 - - Land and Infrastructure 2,786,938 - - Capital works in progress 1,183,920 - Carrying amount of PLT net assets 9,774,372 -

Consideration received or receivable from Lonsdale Consortium:- Port Manager entities 107,965 107,965- Lease Premium 8,837,917 - Total PLT consideration (50-year lease) 8,945,882 107,965PLT net asset residual value (transferred to DEDJTR) 828,490 - Total PLT value 9,774,372 107,965Carrying amount of PLT net assets 9,774,372 - Gain (loss) on lease transaction and transfer of Port Lessor - 107,965

(iv) Net cash flow on disposal

Net assets disposed of in discontinued operations

Cash consideration from the Lonsdale Consortium ($8,945,882) was paid directly to the State and ultimately the Victorian Transport Fund and is accounted for as a distribution in the Statement of Changes in Equity.

* Note, the consolidated carrying amount is inclusive of $828,490 in residual value. The Corporation's investment in Port Manager and Port Lessor was $20.

32




5 Income tax expense

(a) Income tax expense

Continuing operationsCurrent tax/(benefit) 2,697 (13,155) 968 Movement in deferred tax 10,991 10,991 (4,626) Current Tax effect in subsidiaries - 3,180 - Deferred tax - research and development tax credit (1,320) (1,320) (6,745) Under/(over) - - -

12,368 (304) (10,403)

(Increase)/decrease in deferred tax assets 7 12,668 12,668 (3,690) (Decrease) in deferred tax liabilities 8 (1,677) (1,677) (6,455)

10,991 10,991 (10,145)

Discontinued operationsCurrent tax 3,178 - 47,498 Movement in deferred tax - - (5,519) Under/(over) - - 71 Income tax reported in the statement of comprehensive income from discontinued operations 3,178 - 42,050

15,546 (304) 31,647 Total income tax expense/(benefit) recognised in the statement of comprehensive income

Income tax expense/(benefit) recognised in the statement of comprehensive income from continuing operations

Deferred income tax (benefit)/expense included in income tax expense comprises:

33




5 Income tax expense (continued)

(b) Numerical reconciliation of income tax expense to prima facie tax payable

Continuing operationsProfit/(loss) before income tax expense (11,576) (9,559) (12,191) Tax at the Australian tax rate of 30% (2016 - 30%) (3,473) (2,868) (3,657) Deferred tax - research and development tax credit (1,320) (1,320) (6,746)

3,883 3,884 - Income tax (benefit)/expense from continuing operations (910) (304) (10,403)

Discontinued operationsProfit before income tax expense 57,500 - 139,651 Tax at the Australian tax rate of 30% (2016 - 30%) 17,250 - 41,895

Under/(over) provided in prior year - - 71

(794) - 83 Income tax expense from discontinued operations 16,456 - 42,049

Total income tax charge/(benefit) 15,546 (304) 31,646

(c)

Asset revaluation reserve 21(a) - - 1,773,187 - - 1,773,187

Tax effect of amounts which are not deductible/(taxable) in calculating taxable income:

Tax effect of sundry amounts which are not deductible/(taxable)

Tax expense/(income) relating to items of other

Tax effect of sundry amounts which are not deductible/(taxable)

34




6 Current tax assets/liabilities

Current tax assets 11,641 11,641 - Income tax liabilities - - 3,598

11,641 11,641 3,598

Movement in current tax (assets)/liabilities:

3,598 3,598 (35,557)

5(a) 2,697 (13,155) 968

5(a) 3,180 19,032 47,498 (1,320) (1,320) (26,693)

- - 71 32 (19,796) (19,796) 17,311

(11,641) (11,641) 3,598

7 Deferred tax assets

The balance comprises temporary differences attributable to:Employee benefits 5,804 5,804 9,669 Provisions (35) (35) (33) Income received in advance 53 53 4,841 Project costs - - 3,834 Accrued expenses 236 236 415

6,058 6,058 18,726

Movement in deferred tax assets:

Carrying amount 1 July 18,726 18,726 15,036

5(a) (12,668) (12,668) 3,690 Carrying amount 30 June 6,058 6,058 18,726

(i) The research and development tax incentive offset for the current reporting period was $1.32 million (2016: $26.7 million) based on eligible research and development expenditure of $3.43 million (2016: $66.7 million) that was undertaken as part of the Port Capacity Project.

Charged to income tax expense - continuing operationsCharged to income tax expense - discontinued operations

Credited/(charged) to Comprehensive Operating Statement

Research and development tax incentive offset (i)

Carrying amount 30 June

Carrying amount 1 July

Under/(over) provision in prior yearIncome tax instalment (paid)/refund

35




8 Deferred tax liabilities

The balance comprises temporary differences attributable to:Depreciation 16,740 16,740 80,491 Capitalised research and development - - 29,458 Revalued Property, plant and equipment - - 2,463,817 Prepayments 10 10 - Derecognition of Deferred tax liabilities (i) 21 (a) - - (2,555,339)

16,750 16,750 18,427

Movement in deferred tax liabilities:

Carrying amount 1 July 18,427 18,427 786,857

5(a) (1,677) (1,677) (6,455) (Credited)/charged to Statement of Equity - - 1,773,417 Capitalised research and development - - 19,947 Derecognition of Deferred tax liabilities (i) 21 (a) - - (2,555,339) Carrying amount 30 June 16,750 16,750 18,427

9 Finance costs

Interest expense 26(a) 80 80 - Other financing charges 54 54 -

134 134 -

10 Cash and cash equivalents

Cash at bank and in hand (ii) 1,595 1,595 10,292 Deposits (iii) 4,250 4,250 19,234

26(b) 5,845 5,845 29,526

(iii) Deposits earnt a weighted average interest rate of 1.45% at 30 June 2017 (2016: 1.70%).(ii) Cash at bank earnt a weighted average interest rate of 1.00% at 30 June 2017 (2016: 1.25%).

(Credited)/charged to Comprehensive Operating Statement

Year end 30 June 2016(i) Due to the conclusion of the PLT, management assessed the manner of recovery in which the Deferred tax liabilities will be utilised in the future. As a result, the Deferred tax liabilities pertaining to the Port Package assets were de-recognised and transferred to the Asset Revaluation Reserve in the Equity section of the Statement of Financial Position.

36




11 Receivables

CurrentContractualTrade receivables (i) (ii) 26(b) 4,780 4,780 25,342 Less provision for doubtful debts (iii) - - -

4,780 4,780 25,342

StatutoryGST Input tax credit recoverable 565 565 3,094

565 565 3,094

5,345 5,345 28,436

(ii) Ageing of past due but not impaired31 - 60 days - - 1,425 61 - 90 days - - 162 91 - 120 days - - 123

- - 1,710 (iii) Trade receivables write-offs

12 Other assets

CurrentPrepayments 561 561 1,585 Other assets 23 23 104

584 584 1,689

13 Interests in other entities Country2017 2016

Port of Melbourne Operations Pty Ltd Australia - 100%Melbourne Port Lessor Pty Ltd Australia - 100%Port of Melbourne Unit Trust Australia - 100%

(i) Refer to Note 4(b) for PLT transactions related to VPCM's interests in other entities.

Ownership

In the current financial year there were no trade receivables write-offs (2016: Nil).

(i) Refer to Note 1(l) for terms that apply to trade receivables and Note 26 for the nature and extent of risks arising from contractual receivables.

37


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-

231,

199

231,

199

Disp

osal

s(4

2)

(2

,252

)

(2

,714

)

(8

82)

-

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,890

)

Tr

ansf

ers

-

-

236

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)

-

-

Reva

luat

ion

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ents

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ing

the

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ct o

f PLT

-

458,

393

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Reva

luat

ion

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ents

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ecifi

c to

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4,48

7,08

9 95

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,600

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Depr

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ount

30

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201

65,

747,

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3,09

1,85

7 97

0,66

5 35

,188

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6 10

,144

,972

At 3

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Fair

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e 20

155,

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3,09

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7 74

9,12

9 31

,105

-

9,

535,

341

Cost

119,

666

-

257,

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15,8

32

299,

386

692,

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Accu

mul

ated

dep

reci

atio

n(3

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-

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-

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193)

N

et b

ook

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nt5,

747,

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3,09

1,85

7 97

0,66

5 35

,188

29

9,38

6 10

,144

,972

40



14 Property, plant and equipment (continued)

a) Land, infrastructure assets and plant and equipment

Consolidated

Asset ClassCarrying amount

Level 1 Level 2 Level 3$'000 $'000 $'000 $'000

Land 13,905 - 13,905 - Infrastructure 77,499 - 77,499 - Plant and equipment 16,765 - - 16,765 Total 108,169 - 91,404 16,765

Consolidated

Channels$'000

Land$'000

Infra-structure

$'000

Plantand

equip-ment$'000

Opening balance - 1 July 2016 5,747,876 - - 35,188 Disposals (5,747,876) - - (18,423) Closing balance - 30 June 2017 - - - 16,765

Reconciliation of Level 3 fair value as at 30 June 2017:

Fair value measurement at reporting period using

2017 Fair Value Assessment

VPCM engages external, independent and qualified valuers to determine the fair value of its fixed assets every five years. The last full independent valuation was performed as at 30 June 2015.

In accordance with FRD103F: Non-Financial Physical Assets requirements, as at each balance date, management assess the compounded impact of movement in the fair value inputs since the last full revaluation date. To the extent that the compounded movement in the fair value inputs is greater than 10% but not in excess of 40%, a managerial revaluation will be performed. To the extent that the compounded movement in the fair value inputs equals or exceeds 40%, a full revaluation by external, independent and qualified valuers will be performed. No adjustment to carrying amount is required if the compounded movement in the fair value inputs is less than or equal to 10%.

As at 30 June 2017, management assessed that the compounded movement in the fair value inputs since the last full revaluation date was less than 10% and therefore no adjustment to carrying amount is required. Values calculated during the 30 June 2015 full independent valuation were escalated to 30 June 2017 with relevant consumer price indices and depreciation rates to estimate the magnitude of the compound movement in the fair value inputs.

Fair value measurement hierarchy for assets as at 30 June 2017

It should be noted that since the fair value of the Land and Infrastructure asset classes has been determined on the basis of market based evidence their classification with respect to the fair value hierarchy has been determined as being Level 2 in nature. The Land and Infrastructure classes were classified as Level 3 in 2016.

41




Bid componentAsset Class

Allocation of Bid Price

Residual value

Total fair value

$'000 $'000 $'000Port lease premium Land 2,855.1 222.9 3,078.0 Port lease premium Infrastructure 852.2 13.6 865.8 Channel Seabed subsublease premium Channels 5,183.0 564.9 5,747.9 Consideration for shares and units in Port Manager entities

42.1 - 42.1

2016 Fair Value Assessment

As discussed in Note 1(a) Corporate information - the financial statements have incorporated a subsequent event in accordance with AASB 110 - Events after the Reporting Period due to the following events that occurred on 19 September 2016:- announcement of the Lonsdale Consortium as the successful bidder;- signing of the Sale and Purchase Deed between the State and the Lonsdale Consortium; - release of total Bid Price for the 50-year lease; and- overview of the assets subject to the 50-year lease.

Fair values of asset classes as at 30 June 2016

Infrastructure and Plant & equipment

As part of the conclusion of the PLT, the Lonsdale Consortium allocated its Bid Price across the following components that make up the Port Package:- Up-front licence fees in regard to the Port Licence Fee for 15 years from the date of commencement of the 50-year lease (as determined by the Treasurer)- Channel Seabed subsublease premium- Port lease premium- shares and units in Port Manager entities (PoMO and PoMUT).

Management utilised Lonsdale Consortium's Bid Price to inform its valuation approach with respect to the Port Package assets that are held by VPCM as at 30 June 2016.

It should be noted that the resultant impact from the PLT on the fair value of the asset classes held by VPCM as at 30 June 2016, is limited to the Port Package assets only, i.e. those assets that have been transferred from VPCM to Port Lessor and Port Manager effective 1 July 2016. The assets that have been retained by VPCM effective 1 July 2016 do not form part of the PLT and their fair value in VPCM's books as at 30 June 2016 remains unchanged from any PLT related adjustments.

42




(a) Channels

At 30 June 2017, the fair value of the channels was reassessed. In accordance with FRD 103F, the channel seabed and capital dredging was assessed to have an unlimited useful life. Maintenance dredging was assessed to have a useful life of 5 years as it has a purpose of clearing the channel of recently deposited material every five years.

It was considered appropriate that VPCM should take into account and reflect the final Bid Price of the PLT in determining the fair value of its assets (specific to the Port Package) as at 30 June 2016 given AASB 116 Property, plant and equipment requires measurement at fair value.

2016 Fair Value Assessment (continued)

The Bid Price of $9.7 billion offered by Lonsdale Consortium reflects the market value of the PLT. The Bid Price allocation methodology adopted by the State was considered to be reasonable and in line with the Australian Accounting Standards and Financial Reporting Directions. The allocation of the lease transaction price to the Land and Infrastructure assets was determined based on market driven data where possible and other relevant management assumptions, with the remaining value allocated to the Channels. Property, plant and equipment values was allocated based on the assessed depreciated replacement cost for these assets.The allocation of the Bid Price was based on supportable evidence and utilised calculations undertaken by the State's advisors who have used market based information where possible.

The Channel Seabed subsublease was offered to the Lonsdale Consortium for a fixed period of 50 years and the hand-back provisions in the Port Concession Deed required the Lonsdale Consortium to maintain the Channels in their functional form throughout the lease period and up to the time of the expiration of the lease. As a result, a residual value (in addition to the Bid Price allocation of the Channel Seabed subsublease) was required to be calculated and included in the total fair value of the Channels as at 30 June 2016.The residual value was calculated by independent valuation experts, PwC Australia, who were engaged by the State. In order to determine the residual value for the Channels, PwC Australia calculated the value of the Port in perpetuity and deducted the Bid Price (fair value of the lease) along with the assessed residual value (beyond 50-year lease period) of any other remaining assets. The residual value of the Channels is $564.9 million.In order to calculate the value of the Port in perpetuity, PwC Australia calculated a terminal value (beyond the 50-year lease period) and added this to the allocated Bid Price. The inputs into the model were determined as follows:- Discount rate adopted 8.6%- Projected cash flow inputs and outputs- Long-term growth rate.

43




(a) Channels (continued)Channels sensitivity analysis

b) Land and Infrastructure

c) Plant and equipment

Discount rate - a change in the discount rate can have a significant impact on the residual value of the Channels as determined via PwC Australia. An increase in the discount rate by 0.5% will have an unfavourable impact of $171.6 million on the residual value of the Channels. A decrease in the discount rate by 0.5% will have a favourable impact of $194.7 million on the residual value of the Channels.

The Port lease was offered to the Lonsdale Consortium for a fixed period of 50 years and the hand-back provisions in the Port Concession Deed required the Lonsdale Consortium to maintain the land assets (including Infrastructure assets) in their functional form throughout the lease period and up to the time of the expiration of the lease. As a result, a residual value (in addition to the consideration for the Port lease) was required to be calculated and included in the total fair value of the Land and Infrastructure assets as at 30 June 2016.The residual value was calculated by independent valuation experts, Jones Lang LaSalle (JLL), who were engaged by the State. In order to determine the fair value of the Land assets, JLL has adopted the capitalisation of net income approach. JLL took into consideration the overall Land package that was offered as part of the PLT, modelled the income and cash flows to determine the resultant investment parameters indicated by the transaction targeting the Port lease premium offered by the Lonsdale Consortium. Based on the leasehold arrangements in place as at 30 June 2016 the resultant Capitalisation Rate evidenced by the transaction equated to 4.5% which was assessed as being reasonable. Therefore, the discount rate utilised was determined to be calculated based on market based parameters as a direct function of the Bid Price submitted by the Lonsdale Consortium.

Having regard to the open and transparent Bid process (undertaken by DTF and its Joint Financial Advisers) and the resultant Port lease premium obtained, it was determined that the inputs into the valuation reflect a market based outcome and therefore were assessed as being Level 2 in nature.

The assessment of fair value for the Plant and equipment class of assets was undertaken with reference to the Consumer Price Index (CPI). As the compounded movement in the CPI did not change by an amount greater than 10% it was determined that the carrying amount of the Plant and equipment class of assets approximated fair value.

2016 Fair Value Assessment (continued)

44




Asset ClassCarrying amount


Channels 5,747,876 - - 5,747,876 Land 3,091,857 - 3,091,857 - Infrastructure 970,665 - 970,665 - Plant and equipment 35,188 - - 35,188 Total 9,845,586 - 4,062,522 5,783,064

Reconciliation of Level 3 fair value as at 30 June 2016:

Channels$'000

Land$'000

Infra-structure

$'000

Plantand

equip-ment

Opening balance - 1 July 2015 1,221,475 1,674,952 770,370 37,920 Additions 88,558 7,752 236,712 4,211 Disposals (42) (2,252) (2,714) (882) Transfers in/(out) - within Level 3 - - 236 (236) Transfers into/(out of) Level 3 - (3,091,857) (970,665) - Revaluation adjustments 4,487,089 1,411,405 12,664 - Depreciation (49,204) - (46,603) (5,825) Closing balance - 30 June 2016 5,747,876 - - 35,188

It should be noted that since the fair value of the Land and Infrastructure asset classes was determined on the basis of market based evidence their classification with respect to the fair value hierarchy has been determined as being Level 2 in nature. The Land and Infrastructure classes were classified as Level 3 in 2015.

Fair value measurement hierarchy for assets as at 30 June 20162016 Fair Value Assessment (continued)

Fair value measurement at reporting period using:

45




15 Intangible assets

Software and systemsAt cost 377 377 4,991 Accumulated amortisation (315) (315) (3,269)

62 62 1,722

Movement in intangible assets:Carrying amount - 1 July 2016 1,722 1,722 3,259 Transfer from capital works in progress 14 - - 265

(4,614) (4,614) -

3,051 3,051 - Disposals - - (202) Amortisation expense (97) (97) (1,600) Carrying amount - 30 June 2017 62 62 1,722

16 Payables

CurrentContractual

- - 20,056 Trade payables (i) (ii) 4,748 4,748 8,279 Accrued expenses (ii) 1,277 1,277 20,018

26(h) 6,025 6,025 48,353 Statutory

FBT (receivable)/payable (120) (120) 108 GST payable 491 491 4,174

371 371 4,282

6,396 6,396 52,635

(i) Refer to Note 1(p) for terms that apply to payables.

17 Interest bearing liabilities

Port Licence Fee payable

(ii) Refer to Note 26 for the nature and extent of risks arising from contractual payables and maturity analysis of contractual payables.

VPCM borrowed $18,000,000 from Treasury Corporation Victoria (TCV) in July 2016 and subsequently repaid the whole of the balance in October 2016. As at balance date, its interest bearing liabilities remains Nil (2016: Nil).

During the current financial year and up to 30 June 2017, VPCM had no unused overdraft facility (2016: $1,000,000).

Transfer in/(out) to other classes-Cost transferred PLTTransfer in/(out) to other classes-Acc depn transferred PLT

46




18 Provisions

Current2,186 2,186 7,192

22(a) 16,900 16,900 23,842 19,086 19,086 31,034

Non-current261 261 1,195

Total Provisions 19,347 19,347 32,229

(i) Employee benefits and related on-costs

Current employee benefits

498 498 1,686

170 170 507

1,245 1,245 4,094 16,900 16,900 23,842

Non-current employee benefits226 226 1,036

Total employee benefits 19,039 19,039 31,165

Current on-costs 273 273 905 Non-current on-costs 35 35 159 Total on-costs 308 308 1,064

Total employee benefits and related on-costs 19,347 19,347 32,229

(ii) Movement in Provisions2017 2017 2017

$'000 $'000 $'000

On-costs TotalConsolidatedOpening balance 7,323 1,064 8,387 Additional provision recognised 816 119 935 Reductions arising from payments (2,271) (331) (2,602) Reductions transfer out (3,653) (533) (4,186)

(76) (11) (87) Closing balance 2,139 308 2,447

Employee benefits - defined benefits superannuation fund liability (i)

Employee benefits - employee leave provisions (i)

Employee benefits - employee leave provisions (i)

Unconditional and expected to wholly settle within 12 months

Unconditional and expected to wholly settle within 12 months

Unconditional and expected to wholly settle after 12 months

Long service leave entitlements

Annual leave entitlements

Defined benefits superannuation fund liability

Long service leave entitlements

Un-wind of discount and effect of changes in discount rate

Employee benefits

47




18 Provisions (continued)

(ii) Movement in Provisions (continued)

On-costs TotalCorporationOpening balance 7,323 1,064 8,387 Additional provision recognised 494 72 566 Reductions arising from payments (1,949) (284) (2,233) Reductions transfer out (3,653) (533) (4,186)

(76) (11) (87) Closing balance 2,139 308 2,447

2016 2016 2016$'000 $'000 $'000

ConsolidatedOpening balance 6,863 992 7,855 Additional provision recognised 2,702 427 3,129 Reductions arising from payments (2,036) (323) (2,359)

(206) (32) (238) Closing balance 7,323 1,064 8,387

19 Other liabilities2017 2017 2016

Consolidated Corporation Consolidated$'000 $'000 $'000

Income in advance 75 75 3,929 Other liabilities - - 117

75 75 4,046


The movement in the Port of Melbourne Superannuation Fund liability is disclosed in Note 22(a). Only movements in provisions for annual leave and long service leave entitlements and on-costs are presented in the table above.

Employee benefits


48




20 Contributed capital

Carrying amount 1 July 1,508,071 1,508,071 1,510,321

32 55,000 55,000 (2,250) Capital contribution to Subsidiary/(Port Manager) - (90,000) -

21(b) 8,140,347 8,521,685 -

- (55,608) - Distribution to Victorian Transport Fund (9,737,418) (9,973,148) - Transfer from Retained Earnings under FRD 119A 35,000 35,000 - Carrying amount 30 June 1,000 1,000 1,508,071

Capital Management

VPCM manages capital risk through the monitoring and reporting of key ratios to the Board on a monthly basis including:- Interest cover ratio- Gearing ratio- Leverage ratio- Liquidity ratio


Distribution to Department of Economic Development, Jobs, Transport and Resources

Reclassification of retained profits to contributed capital under FRD 119A

The key ratios monitored are based on DTF's Treasury Management Guidelines and that future decisions regarding capital investment and funding requirements ensure that VPCM does not breach these key ratios. Target maximum gearing is between 0% - 35%.

There have been no changes to the general processes and procedures that are applied by VPCM in managing capital risk since 2016.

VPCM does not have any externally imposed debt related covenants, financial ratios or any other capital requirements.

VPCM’s Treasury Management Policy and procedures are in compliance with the Borrowing and Investment Powers Act 1987 (Vic), the DTF's Treasury Management Guidelines and Standing Direction 4.5.6 Treasury Risk Management.

In accordance with the Borrowings and Investment Powers Act 1987 (Vic), the Treasurer granted a temporary purpose financial accommodation of $20 million to VPCM for the reporting period 1 November 2016 to 30 June 2017 (2016: $166 million). This facility was unused in 2016-17.

As at year end 30 June 2017, the majority of VPCM's financial ratios are consistent with those at year end 30 June 2016.

49




21 Reserves and retained profits

(a) Reserves

Asset revaluation reserve 38,326 38,326 8,281,748 Employee benefits reserve 3,018 3,018 (5,048)

41,344 41,344 8,276,700

Movement in asset revaluation reserve:Carrying amount 1 July 8,281,748 8,281,748 1,590,422

21(b) (624) (624) (1,984)

4(b)(ii) (366,996) - 5,911,158

21(b) (7,875,802) (8,242,798) -

4(b)(ii) - - (1,773,187)

8 - - 2,555,339 Carrying amount 30 June 38,326 38,326 8,281,748

Movement in employee benefits reserve:Carrying amount 1 July (5,048) (5,048) 3,201

8,066 8,066 (3,093)

4(b)(ii) - - (5,156) Carrying amount 30 June 3,018 3,018 (5,048)

Transfer to retained earnings on assets disposed

De-recognition of Deferred tax liabilities - specific to the PLT

Movements in actuarial gains/losses - discontinued operations

Movements in actuarial gains/losses - continuing operations

Tax effect charged to Other Comprehensive Income - discontinued operations

This reserve has been set up in accordance with the revised AASB 119 Employee Benefits to capture the movements in the actuarial gains and losses in respect of the Port of Melbourne Superannuation Fund. Refer to Note 22 for further details.

VPCM has a separate asset revaluation reserve for Land, Infrastructure and Plant and equipment. The reserves record the increments and decrements in the fair value of the assets net of the tax effect.

Reclassification of reserves to retained profits under FRD 119A

Revaluation adjustment- discontinued operations

50




21 Reserves and retained profits (continued)

(b) Retained profits

Carrying amount 1 July 329,365 329,365 261,475 Profit after income tax 30,378 98,710 95,814

21(a) 7,875,802 8,242,798 -

20 (8,140,347) (8,521,685) -

4(b)(iii) - (107,965) -

Dividends paid 32 - - (29,908) Distribution from subsidiary - Port Manager - 53,975 -

21(a) 624 624 1,984

20 (35,000) (35,000) - Carrying amount 30 June 60,822 60,822 329,365

Transfer from asset revaluation reserve on assets disposed

Transfer to Contributed Capital under FRD 119A

Reclassification of retained profits to contributed capital under FRD 119A

Derecognised assets and liabilities of Port Manager

Reclassification of reserves to retained profits under FRD 119A

51



22 Superannuation

Defined benefit superannuation plan

Contribution recommendations

The Fund only has defined benefit members and is closed to new members. Members receive pension benefits on retirement, death and disablement. On withdrawal, members have a choice of receiving a lump sum benefit and/or a deferred pension benefit.

A liability in respect of the Port of Melbourne Superannuation Fund (Fund) is recognised in the Statement of Financial Position, and is measured as the present value of the Defined Benefit Obligation at 30 June 2017 less the fair value of the superannuation fund’s assets at that date and any unrecognised past service cost. The present value of the Defined Benefit Obligation is based on expected future payments which arise from membership of the fund to year end, calculated annually by an independent actuary using the projected unit credit method. Consideration is given to the expected future wage and salary levels, experience of employee departures and periods of service.

Future taxes, such as taxes on investment income and employer contributions, are taken into account in the actuarial assumptions used to determine the relevant components of VPCM’s defined benefit liability.

Employer contributions to the defined benefit superannuation plan are based on recommendations by the plan’s actuary. Actuarial assessments are made annually and the last such assessment was made at 30 June 2016. The objective of funding is to ensure that the benefit entitlements of members and other beneficiaries are fully funded by the time they become payable. VPCM has no legal obligation to settle this liability with an immediate contribution or additional one-off contributions.

The Superannuation Industry Supervision (SIS) legislation governs the superannuation industry and provides the framework within which superannuation plans operate. The SIS Regulations require an actuarial valuation to be performed for each defined benefit superannuation plan every three years, or every year if the plan pays defined benefit pensions.

The Fund’s Trustee is responsible for the governance of the Fund. The Trustee has a legal obligation to act solely in the best interests of Fund beneficiaries. The Trustee has the following roles: - Administration of the Fund and payment to the beneficiaries from Fund assets when required in accordance with the Fund rules;- Management and investment of the Fund assets; and- Compliance with superannuation law and other applicable regulations.

The prudential regulator, the Australian Prudential Regulation Authority (APRA), licenses and supervises regulated superannuation plans.

As at 30 June 2017, the Fund has six active members (2016: 8), two deferred pension members (2016: 1) and 24 members drawing a pension (2016: 24).

52



22 Superannuation (continued)

Funding method

Nature of asset/liability

The defined benefit assets are invested in the BT Institutional Retirement PST and the Schroder Balanced Fund Standard Class. The assets are diversified within these investment options and therefore the Fund has no significant concentration of investment risk.There were no plan amendments affecting the defined benefits payable, curtailments or settlements during the year. No other post retirement benefits are provided to the employees who are members of the Fund.

The Fund typically exposes VPCM to actuarial risks such as investment risk, salary growth risk, legislative risk, pension risk and inflation risk as outlined in more detail below:

Investment risk - the risk that investment returns will be lower than assumed and VPCM will need to increase contributions to offset this shortfall.

Pension risk - the risk that, firstly pensioner mortality will be lighter than expected, resulting in pensions being paid for a longer period. Secondly, that a greater proportion of eligible members will elect to take a pension benefit, which is generally more valuable than the corresponding lump sum benefit.

Inflation risk - the risk that inflation is higher than anticipated, increasing pension payments, and thereby requiring additional employer contributions.

Salary growth risk - the risk that wages or salaries (on which future benefit amounts will be based) will rise more rapidly than assumed, increasing defined benefit amounts and thereby requiring additional employer contributions.

Legislative risk - the risk that legislative changes could be made which increase the cost of providing the defined benefits.

VPCM may, at any time by notice to the Trustee, terminate its contributions. VPCM has a liability to pay the contributions due before the effective date of the notice, but there is no requirement for it to pay further contributions, irrespective of the financial condition of the fund. However, VPCM does have a constructive obligation for the fund and therefore has recognised a current liability in the Statement of Financial Position in respect of its defined benefit superannuation arrangements. Refer to Note 18.

The method used to determine the employer contribution recommendations at the last actuarial review was the aggregate funding method. The method adopted affects the timing of the cost to VPCM.

The Port of Melbourne Superannuation Fund does not impose a legal liability on VPCM to cover any deficit that exists in the fund. If the fund were wound up, there would be no legal obligation on VPCM to make good any shortfall. The Trust Deed of the fund states that if the fund winds up, the remaining assets are to be distributed by the Trustee of the fund in an equitable manner as it sees fit.

53





(a)

Net defined benefit liability/(asset) at start of the year 23,842 23,842 14,869 + Current services cost 919 919 740 + Net interest 585 585 463 - Actual return on Fund assets less interest income 2,750 2,750 (982)

(3,523) (3,523) 6,773

(1,792) (1,792) 493 - Employer contributions 381 381 478 Net defined benefit liability/(asset) at end of the year 16,900 16,900 23,842

(b)

Fair value of Fund assets at beginning of the year 28,051 28,051 29,129 + Interest income 799 799 1,062 + Actual return on Fund assets less interest income 2,750 2,750 (982) + Employer contributions 381 381 478 + Contributions by Fund participants 71 71 79 - Benefits paid 1,176 1,176 1,425 - Taxes, premiums and expenses paid 363 363 290 Fair value of Fund assets at end of the year 30,513 30,513 28,051

Movements in the fair value of the Defined Benefit Fund assets were as follows:

Reconciliation of the Net Defined Benefit Liability/(Asset)

Movements in the net defined benefit liability/(asset) were as follows:

Reconciliation of Fair Value of Defined Benefit Fund Assets

+ Actuarial (gain)/losses arising from changes in financial assumptions+ Actuarial (gain)/losses arising from changes in liability experience

54





(c)

51,893 51,893 43,998 + Current service cost 919 919 740 + Interest cost 1,384 1,384 1,525 + Contributions by Fund participants 71 71 79

(3,523) (3,523) 6,773

(1,792) (1,792) 493 - Benefits paid 1,176 1,176 1,425 - Taxes, premiums and expenses paid 363 363 290

47,413 47,413 51,893

(d)

Asset category Carrying amount


Cash and cash equivalents - - - - Equity instruments - - - - Debt instruments - - - - Real Estate - - - - Investment funds - Growth Fund 30,513 - 30,513 - Asset-backed securities - - - - Structured debt - - - - Total 30,513 - 30,513 -

As at 30 June 2017

The fair value of the Fund assets does not include amounts relating to VPCM's own financial instruments or any property occupied, or other assets used.

Reconciliation of Defined Benefit Obligation

Movements in the defined benefit obligation were as follows:

Fair value of Defined Benefit Fund assets

Fair value measurement at reporting period using:

+ Actuarial (gain)/losses arising from changes in financial assumptions+ Actuarial (gain)/losses arising from changes in liability experience

Present value of Defined Benefit Obligation at end of the year

Present value of Defined Benefit Obligation at beginning of the year

55




(e) The percentage invested in each asset class at reporting date2017 2016

% %Australian equity 33 33 International equity 23 22 Fixed income 20 23 Property 3 4 Alternatives/Other 11 12 Cash 10 6

100 100

(f) Significant actuarial assumptions at the reporting date

Assumptions to determine Defined Benefit Cost 2017 2016% %

Discount rate 2.9 3.7 Expected salary increase rate 3.125 3.348 Expected pension increase rate 2.5 2.5

Pension mortality Mercer

Standard Mercer

Standard

Assumptions to determine Defined Benefit Obligation 2017 2016% %

Discount rate 3.3 2.9 Expected salary increase rate 3.0 3.125 Expected pension increase rate 2.5 2.5

Pension mortality Mercer

Standard Mercer

Standard

(g) Sensitivity Analysis

The Defined Benefit Obligation as at 30 June 2017 under several scenarios is presented below.Scenario A: 0.5% per annum discount rate sensitivityScenario B: 0.5% per annum higher salary increase rate sensitivityScenario C: 0.5% per annum higher pension increase rate sensitivityScenario D: 90% of the Mercer Standard pensioner mortality sensitivity

Base Case

ScenarioA

ScenarioB

ScenarioC

ScenarioD

Discount rate 3.3% pa -0.5% paSalary increase rate 3.0% pa +0.5% paPension increase rate 2.5% pa +0.5% pa

Pensioner mortality assumption Mercer

Standard 90%Defined Benefit Obligation ($'000) 47,413 51,824 47,551 51,638 48,689

56




(h) Funding arrangements

(i) Expected contributions2018

$'000Expected employer contributions 618

(i) Maturity profile of Defined Benefit Obligations

$'00030 June 2017 1,212 30 June 2018 1,499 30 June 2019 1,721 30 June 2020 1,818 30 June 2021 1,855 Following 5 years 10,024

(j) Asset-Liability matching strategies

The financing objective adopted for the year ended 30 June 2017 was for the Fund to maintain the value of its assets at least equal to: - for defined benefits, the greater of 110% (2016: 110%) of Vested Benefits and 100% (2016: 100%) of the Actuarial Value of Accrued Benefits; and - to achieve, as far as possible, a stable level of future Employer contributions.

The weighted average duration of the defined benefit obligation as at 30 June 2017 is 16 years.

There are no asset and liability matching strategies adopted by the Fund.

For the year ended 30 June 2017, based on the actuaries recommendation, VPCM contributed the following to the Fund: - 20% (2016: 20%) of superannuation salaries; and - additional lump sum contributions of $25,000 per month (2016: $23,175) to finance expected administration and insurance costs. - additional contribution of $20,000 per month to address a projected funding gap from FY 2017-18 onwards.

The weighted average duration of the defined benefit obligation as at 30 June 2016 was 16 years.

57



23 Responsible persons

(a) Names

Responsible Ministers:The Hon. Luke Donnellan MP Minister for PortsThe Hon. Tim Pallas MP Treasurer of Victoria

Directors The Hon. Mark Birrell

Mr J Cain

Ms J van Reyk Ms D Beale Appointed 2 November 2016Mr J Chen Appointed 2 November 2016Mr P Tuohey Appointed 2 November 2016Mr D B Cranwell Resigned 31 October 2016Mr I Dickson Resigned 31 December 2016Mr J Fitzgerald Resigned 31 October 2016Mr J Marshall Resigned 31 December 2016Mr B Nicholls Resigned 31 December 2016Ms A Williams Resigned 31 October 2016

Accountable Officer:Mr N Easy Chief Executive Officer (resigned 31 October 2016)

Ms R Johnson Chief Executive Officer (commenced 1 November 2016)

(b)

2017 2016$10,000 to $19,999 3 - $20,000 to $29,999 3 - $30,000 to $39,999 4 - $50,000 to $59,999 1 7 $60,000 to $69,999 - 1 $70,000 to $79,999 1 - $100,000 to $109,999 - 1 $210,000 to $219,999 1 - $230,000 to $239,999 1 - $590,000 to $600,000 - 1 Total number of responsible persons 14 10 Total remuneration ($ 000s) $ 863 $ 1,163

In accordance with the Ministerial Directions issued by the Minister for Finance under the Financial Management Act 1994 (Vic), the following disclosures are made regarding responsible persons for the reporting period.

The names of persons who held the positions of Ministers and Accountable Officers in VPCM at any time during the financial year were:

RemunerationRemuneration received or receivable by responsible persons in connection with the management of VPCM during the reporting period was:

Income band

Deputy Chairman until 31 October 2016 and Chairman from 2 November 2016Director until 31 October 2016 and Deputy Chair from 2 November 2016

Chairman (resigned 31 October 2016)

58



24 Remuneration of executives(a)

2017 2016(i)

$'000 $'000Short-term employee benefits 4,579 - Post-employment benefits 505 - Other long-term benefits 51 - Total remuneration 5,135 - Total number of executives 56 56Total annualised employee equivalents 24.5 55.1

Short-term employee benefits include amounts such as wages, salaries, annual leave or sick leave that are usually paid or payable on a regular basis, as well as non-monetary benefits such as allowances and free or subsidised goods or services.

(i) No comparatives have been reported because remuneration in the prior year was determined in line with the basis and definition under FRD 21B. Remuneration previously excluded non-monetary benefits and comprised any money, consideration or benefit received or receivable, excluding reimbursement of out-of-pocket expenses, including any amount received or receivable from a related party transaction. Refer to the prior year’s financial statements for executive remuneration for the 2015-16 reporting period.(ii) The total number of executive officers includes persons who meet the definition of Key Management Personnel (KMP) of the entity under AASB 124 Related Party Disclosures and are also reported within the related parties note disclosure (Note 32).(iii) Annualised employee equivalent is based on paid working hours of 38 ordinary hours per week over the 52 weeks for a reporting period.

The number of executive officers, other than ministers and accountable officers, and their total remuneration during the reporting period are shown in the table below. Total annualised employee equivalents provides a measure of full-time equivalent executive officers over the reporting period. Remuneration comprises employee benefits in all forms of consideration paid, payable or provided by the entity, or on behalf of the entity, in exchange for services rendered, and is disclosed in the following categories.

Several factors affected total remuneration payable to executives over the year.

Other long-term benefits include long service leave, other long service benefits or deferred compensation.

Termination benefits include termination of employment payments, such as severance packages.

In addition, some executive officers were eligible for a retention payment arrangement associated with the PLT. This arrangement was approved by the then Treasurer on 4 November 2014. Retention payments are for key executives critical to the continuing effective operation of the business and the provision of full support in the period of preparing the business for the lease of the Port of Melbourne. These payments also encourage the retention of the executives until transaction close. Payments were made by VPCM in instalments between completion of due diligence and transaction close. In 2016-17, retention payments of $508,641 (2016: $123,914) were made.

Remuneration of executive officers(Including Key Management Personnel - see related parties note)

The bonus payments depend on the terms of individual employment contracts. Some contracts provide for an annual bonus payment whereas other contracts only include the payment of bonuses on the successful completion of the full term of the contract. A number of these contract completion bonuses became payable during the year.

As a result of the PLT, a number of executive officers transferred from VPCM to the new operator. This has had a significant impact on the annualised employee equivalents.

Post-employment benefits include pensions and other retirement benefits paid or payable on a discrete basis when employment has ceased.

59


Victorian Ports Corporation (Melbourne)Notes to the Financial Statements 2017 2017 2016For the year ended 30 June 2017 Consolidated Corporation Consolidated

Notes $'000 $'000 $'000

25 Remuneration of auditors

Victorian Auditor-General's Office

Audit of financial reports 78,800 78,800 87,900

26 Financial Instruments

(a) Categorisation of financial instrumentsContractual financial assets

Current assetsCash and cash equivalents 10 5,845 5,845 29,526 Receivables - Trade receivables 11 4,780 4,780 25,342 Total contractual financial assets 10,625 10,625 54,868

Contractual financial liabilitiesLiabilities at amortised costCurrent liabilitiesPayables 16 6,025 6,025 48,353 Interest bearing liabilities 17 - - - Non-current liabilitiesInterest bearing liabilities 17 - - - Total contractual financial liabilities 6,025 6,025 48,353

During the year the following fees were paid or payable for services provided by the auditors of VPCM:

Details of significant accounting policies and methods adopted including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, with respect to each class of financial asset, financial liability and equity instruments are disclosed in Note 1 to the financial statements.

The main purpose in holding financial instruments is to prudentially manage VPCM's financial risks within the State Government's policy parameters. VPCM's main financial risks include credit risk, liquidity risk and foreign currency risk. VPCM manages these financial risks in accordance with its Treasury Management Policy.

60


Victorian Ports Corporation (Melbourne)Notes to the Financial Statements 2017 2017 2016For the year ended 30 June 2017 Consolidated Corporation Consolidated

Notes $'000 $'000 $'000

26 Financial Instruments (continued)

(a) Categorisation of financial instruments (continued)

Net holding gain/(loss) on financial instruments by category

3, 4(b)(ii) 256 172 1,082

4(b)(ii),9 (134) (134) (4) Total 122 38 1,078

(b) Credit quality of contractual financial assets that are neither past due nor impaired

Financialinstitu-

tioncredit rating

AAA

Govern-ment

agencycreditrating

AAA

Third parties'

credit rating other than

AAA

Total

Notes $'000 $'000 $'000 $'0002017Current assets Cash and cash equivalents 10 1,595 4,250 - 5,845 Receivables - Trade receivables (i) 11 - - 4,780 4,780

1,595 4,250 4,780 10,625

2016Current assetsCash and cash equivalents 10 10,292 19,234 - 29,526 Receivables - Trade receivables (i) 11 - - 25,342 25,342

10,292 19,234 25,342 54,868

(i) The total amounts disclosed exclude statutory receivables.

Interest expense on contractual financial liabilities (ii)

Interest income on contractual financial assets (i)

(i) The net holding gain/(loss) on contractual financial assets equates to the interest income on cash and cash equivalents.

(ii) The net holding gain/(loss) on contractual financial liabilities equates to the interest expense on interest bearing liabilities.

61




(c) Credit risk

(d) Market risk

Notes

Carrying amount

$'000

Netresult

interest rate -100 basis

points

Netresult

interest rate +100 basis

points

10 5,845 (58) 58

10 29,526 (295) 295

VPCM does not engage in hedging for its contractual assets. VPCM only deals with banks with high credit ratings.

A movement of 100 basis points up and down in market interest rates is "reasonably possible" over the next 12-month period. A sensitivity analysis with respect to cash and cash equivalents on the following basis is presented in the table below.

The provision for impairment of financial assets is calculated based on past experience and current and expected changes in clients' credit ratings. An ageing analysis is provided in Note 11 to outline VPCM’s exposure to credit risk.

Interest rate risk sensitivity

2017 - Contractual financial assets

2016 - Contractual financial assetsCash and cash equivalents

Cash and cash equivalents

Credit risk refers to the risk that the counterparty will default on its contractual obligations resulting in a financial loss to VPCM. The carrying amount of VPCM's financial assets recognised in the Statement of Financial Position, net of any provisions for doubtful debts, represents VPCM's maximum exposure to credit risk from financial assets.

VPCM actively manages its credit risk using a range of processes and procedures. These include performing credit checks for new and existing customers as required, obtaining bank guarantees where considered appropriate and monitoring the performance of significant trading partners on an ongoing basis.

Market risk refers to the risk that VPCM's profit or loss or equity could change as a result of changes in market prices. Market risk comprises currency risk, interest rate risk and other price risk. VPCM's policy is to continuously monitor its exposure to market risk arising from existing and future transactions.

VPCM is not exposed to significant currency risk in the current or comparative reporting periods since its operative functional currency is Australian dollars ($).

62




(e) Financial Risk Management

(f) Liquidity risk

VPCM maintains a comprehensive Risk Management System which is integrated with its business planning processes. There is a formally documented Risk Management Policy, Risk Management Procedures and a framework which are consistently applied across all levels of the business. A Financial Risk Management Assessment is presented to the Audit and Finance Committee of the Board on an annual basis in line with the requirements of the Standing Directions of the Minister for Finance, under the Financial Management Act 1994 (Vic). In addition, a quarterly risk status report is presented to the Risk Committee and the Board outlining VPCM's significant material risks including financial risks. Each risk is reviewed regularly against the risk matrix to ensure the level of risk is appropriate and the treatment and controls are adequate.

Liquidity risk is the risk that VPCM will be unable to meet its financial obligations as and when they fall due. VPCM, cognisant of the seasonal nature of the Cruise industry, manages its liquidity risk to ensure that adequate cash funds are available at all times to meet its commitments as they arise. This objective is met through:- sound cash management practices;- regular identification and monitoring of the maturity profile of liquid assets and liabilities together with regular cash flow forecasting;- having sufficient temporary purpose financial accommodation from Treasury Corporation of Victoria; and- investments that are limited to highly liquid and secure assets.

VPCM's maximum exposure to liquidity risk is the carrying amount of financial liabilities as disclosed in the Statement of Financial Position.

63




(g) Net fair value of financial assets and liabilities

Comparison betweencarrying amount and fair value

NotesCarrying amount Fair value

Carrying amount Fair value

2017 2017 2016 2016$'000 $'000 $'000 $'000

Contractual financial assets Current assetsCash and cash equivalents 10 5,845 5,845 29,526 29,526 Receivables - Trade receivables 11 4,780 4,780 25,342 25,342

10,625 10,625 54,868 54,868 Contractual financial liabilitiesCurrent liabilitiesPayables 16 6,025 6,025 48,353 48,353

6,025 6,025 48,353 48,353

The net fair value of VPCM’s financial instruments assets and liabilities is determined with reference to market prices where a market exists or the net present value of expected future cash flows using a discount factor of the current interest rate applicable to liabilities with a similar risk profile as follows:

Level 1 - the fair value of financial instruments with standard terms and conditions and traded in active liquid markets are determined with reference to quoted market prices;

Level 2 - the fair value is determined using inputs other than quoted prices that are observable for the financial asset or liability, either directly or indirectly; and

Level 3 - the fair value is determined in accordance with generally accepted pricing models based on discounted cash flow analysis using unobservable market inputs.

The net fair value of VPCM’s cash and deposits and non-interest bearing financial assets and liabilities is equal to their carrying value.

64




(g) Net fair value of financial assets and liabilities (continued)

Fair value hierarchy of financial assets and liabilities Notes Fair value

2017$'000

Contractual financial assets Current assetsCash and cash equivalents 10 (i) 5,845 Receivables - Trade receivables 11 (i) 4,780

10,625 Contractual financial liabilitiesCurrent liabilitiesPayables 16 (ii) 6,025

6,025 Discounted cash flow

(i) Counterparty's credit risk is considered to be a significant valuation input. However, considering the nature of VPCM's financial assets the risk is considered to be very low.

(ii) Credit risk and interest rate risk are considered to be the significant valuation inputs. However, considering the nature of VPCM's financial liabilities the risks are considered to be very low.

All the above financial assets and liabilities are considered to fall within Level 2 of the fair value hierarchy. There has been no change in the fair value hierarchy of the above financial assets and liabilities during the reporting period.

Valuationtechnique

Valuation input

Notional amount Discounted cash flow

65




(h) Interest rate risk and financial liability and financial asset maturity analysis

Floating interest

Non-interest bearing 1

year or less Total2017 $'000 $'000 $'000

Financial assetsCash and cash equivalents 5,845 - 5,845 Receivables - Trade receivables - 4,780 4,780

5,845 4,780 10,625 Weighted average interest rate 1.33% -% -%

Financial liabilitiesPayables - 6,025 6,025

- 6,025 6,025 Weighted average interest rate -% -% -%Net financial assets/(liabilities) 5,845 (1,245) 4,600

Floating interest

Non-interest bearing 1

year or less Total2016 $'000 $'000 $'000

Financial assetsCash and cash equivalents 29,526 - 29,526 Receivables - Trade receivables - 25,342 25,342

29,526 25,342 54,868 Weighted average interest rate 1.54% -% -%

Financial liabilitiesPayables - 48,353 48,353

- 48,353 48,353 Weighted average interest rate -% -% -%Net financial assets/(liabilities) 29,526 (23,011) 6,515

The exposure to interest rate risks, the effective weighted average interest rates for financial assets and financial liabilities and their maturity profiles at the reporting date are as follows:

66



27 Contingencies

Contingencies as at 30 June 2017

28 Assets and liabilities transfers between public sector entities



On the same day (28 April 2016) but prior to the acquisition, the Committee of Management at Ann Street Pier was revoked and the crown land parcels under VPCM’s control were transferred to the Department of Environment, Land, Water and Planning (DELWP) via contributed capital at a value of $2.25 million in line with an allocation statement signed by the Minister for Ports. The transfer was recognised as a distribution by owners in accordance with FRD 119A - Transfers through Contributed Capital.

During 2016-17, assets and liability transfers between public sector entities related solely to the PLT. These transfers are disclosed in the discontinued operations section in Note 4(b) and relate to: - Port Lessor transferred its Lonsdale Consortium lease premium receivable to the State of Victoria and ultimately the Victorian Transport Fund,- VPCM transferred its Port Manager sale proceeds receivable to the State of Victoria and ultimately the Victorian Transport Fund. - VPCM transferred its interest in Port Lessor to the Department of Economic Development, Jobs, Transport and Resources (DEDJTR).

Land holdings at the Port Operations Control Centre may be subject to contamination. All previous land holdings that were transferred to Port Lessor were transferred with warranties that hold VPCM harmless in the event of any future contamination developments.

Management is of the opinion that provisions are not required in respect of the above matter, as they are considered highly improbable that a future sacrifice of economic benefits will be required or the amounts are not capable of accurate assessment.

On 28 April 2016, VPCM acquired 31 land parcels (21,931 square metres in total) of freehold land within the Port of Melbourne from the DTF for a consideration of $7.75 million (based on a market valuation conducted by the Valuer-General Victoria). The acquisition was conducted following VPCM Board approval on 18 April and in accordance with a Direction from the Treasurer and the Minister for Ports dated 15 May 2015 and further instruction from the State dated 11 March 2016.

67



Consolidated Corporation ConsolidatedConsolidated$'000 $'000 $'000

29 Commitments for expenditure

(a) Commitments for expenditure

Capital expenditure commitments

6,498 6,498 44,988 Total capital expenditure commitments 6,498 6,498 44,988

Operating expenditure commitments

8,295 8,295 42,137 Total operating expenditure commitments 8,295 8,295 42,137

Total commitments for expenditure 14,793 14,793 87,125

(b) Commitments for expenditure payable

Capital expenditure commitments payable- within one year 6,107 6,107 44,924 - later than one year but not later than five years 391 391 64 - later than five years - - - Total capital expenditure 6,498 6,498 44,988

Operating expenditure commitments payable (excluding lease commitments)- within one year 8,222 8,222 37,326 - later than one year but not later than five years 73 73 4,811 - later than five years - - -

8,295 8,295 42,137

Total commitments for expenditure payable 14,793 14,793 87,125

Total operating expenditure commitments (excluding lease commitments)

Commitments for the construction and acquisition of Property, plant and equipment, contracted for at balance date but not incurred or recognised as liabilities

Commitments for the payments of operating expenditure excluding lease commitments contracted for at balance date but not incurred or recognised as liabilities

68




30 Leases

Operating leasesNon-cancellable operating lease receivable- within one year 827 827 104,402 - later than one year but not later than five years 2,814 2,814 449,354 - later than five years 284 284 2,877,608

3,925 3,925 3,431,364

Non-cancellable operating lease payable- within one year 437 437 3,380 - later than one year but not later than five years 182 182 616 - later than five years 402 402 931

1,021 1,021 4,927

Subsequent to completion of the PLT (1 November 2016 onwards)VPCM has entered into a number of short-term leases and preferential berthing licences for land, buildings and infrastructure. The leases and licences terms range from one year to five years.

Prior to completion of the PLT (31 October 2016) VPCM entered into a number of long and short-term leases and preferential berthing licences for land, buildings and infrastructure. The leases and licences terms ranged from one year and up to 25 years or more in some cases.

Longer-term leases were entered into where VPCM required the tenant to invest substantial capital to improve the land and provide infrastructure. Ministerial approval was required for leases with terms greater than 25 years in duration, including an option term.

Generally, rental income under leases was reviewed to market at two or three yearly intervals. Some leases provide for annual or biennial CPI reviews or an agreed fixed increase.

In 2016, VPCM recognised leases related to the Port Capacity Project given the scheduled completion of the project in 2017. These leases were derecognised by VPCM as part of the PLT.

VPCM leases various offices and equipment under non-cancellable operating leases expiring within 1 to 14 years. The leases have varying terms that are negotiated on renewal of the leases.

69



31 Events occurring after the reporting period

32 Related party transactions

2017 2016Consolidated Consolidated

$'000 $'000Operating revenue 440 895 Operating expenses (9,929) (10,010) Finance charges (134) - Port Licence Fee 4(i) (47,163) (79,758) Dividend received/(paid) 21(b) - (29,908) Income tax instalments refund/(paid) 6 (19,796) 17,311 Assets 15,924 27,214 Liabilities 450 3,687

20 55,000 10,002

The entity has no material or significant events occurring after the reporting date and to the date of these Financial Statements that would affect significantly the figures included in them.


VPCM is a wholly owned and controlled entity of the State of Victoria.

All related party transactions have been entered into on an arm’s length basis.

Related parties of VPCM include:- all key management personnel and their close family members and personal business interests (controlled entities, joint ventures and entities they have significant influence over);- all cabinet ministers and their close family members; and- all departments and public sector entities that are controlled and consolidated into the whole of state consolidated financial statements.

Significant transactions with government-related entities

The Victorian State Government prepares consolidated financial statements relating to its controlled entities. For the purpose of preparing the State Government's Annual Financial Report (AFR), transactions which VPCM has undertaken with other State Government controlled entities will be eliminated in the State Government's AFR.

The aggregate amounts of VPCM's transactions conducted during the year and its assets and liabilities at the end of the year which relate to State Government controlled entities are as follows:

Key management personnel (KMP) are those who, directly or indirectly, have authority and responsibility for planning, directing and controlling the activities of VPCM. This includes responsible Ministers, Directors, Chief Executive Officer and Executive General Mangers. KMP for 2017 are detailed in the following page:

70



32 Related party transactions (continued)

Key management personnel (KMP) (continued)

2017 2016$'000 $'000

Short-term employee benefits 1,922 2,399 Post-employment benefits 122 166 Other long-term benefits 17 - Total 2,061 2,565

- the Hon. Luke Donnellan MP - Portfolio Minister- the Hon. Tim Pallas MP - Shareholder Minister- Mr J Cain - Director- Ms J van Reyk - Director- the Hon. Mark Birrell - Director (KMP until 31 October 2016)- Mr D Cranwell - Director (KMP until 31 October 2016)- Mr J Fitzgerald - Director (KMP until 31 October 2016)- Ms A Willams - Director (KMP until 31 October 2016)- Mr I Dickson - Director (KMP until 31 December 2016)- Mr J Marshall - Director (KMP until 31 December 2016)- Mr B Nicholls - Director (KMP until 31 December 2016)- Ms D Beale - Director (KMP from 2 November 2016)- Mr J Chen - Director (KMP from 2 November 2016)- Mr P Tuohey - Director (KMP from 2 November 2016)- Mr N Easy - Chief Executive Officer (KMP until 31 October 2016)- Ms R Johnson - Chief Executive Officer (KMP from 1 November 2016)- Ms C Anderson - EGM Business and Planning (KMP until 31 October 2016)- Mr K Gordon - EGM Port Operations (KMP until 31 October 2016)- Mr M O'Meara - EGM Commercial (KMP until 31 October 2016)- Mr J Price - EGM Port Capacity (KMP until 31 October 2016)- Captain R Stanbrook - EGM Marine and Navigation (KMP from 1 November 2016)- Mr J Bazelmans - EGM Strategy, Risk, Environment and Infrastructure (KMP from 1 November 2016)- Mr J Bell - EGM Finance and Corporate Support (KMP from 1 November 2016)

The compensation detailed below excludes the salaries and benefits the Portfolio and Shareholder Ministers receive. The Ministers' remuneration and allowances are set by the Parliamentary Salaries and Superannuation Act 1968 (Vic) and are reported within the Department of Parliamentary Services' Financial Report.

Compensation of KMP (i)

(i) Note that KMPs are also reported in the disclosure of remuneration of responsible persons (Note 23) and executive officers (Note 24).

71



32 Related party transactions (continued)

Key management personnel (KMP) (continued)

33

2017 2017 2016Consolidated Corporation Consolidated

Notes $'000 $'000 $'000

Net result for the period 21(b) 30,378 98,710 95,814

Depreciation and amortisation 4(a),4b(ii) 21,883 7,697 103,232 Loss on sale of non-current assets 4(a) 4,621 818 1,627 (Gain)/loss on disposal of discontinued operations 3 4,185 (107,965) - Defined Benefit Superannuation Scheme adjustment 1,124 1,124 - Revaluation of long service leave liability (56) (56) - Revaluation (gain)/loss on Property, plant and equipment 4 - - 230 Debt forgiveness 4(a) - 7,173 -

Change in operating assets and liabilitiesDecrease in receivables 11 20,562 15,714 68,323 Decrease in deferred tax assets 7 12,668 11,920 3,690 Decrease in other operating assets 12 3,633 4,103 419 (Decrease) in payables 16 (46,239) (37,503) (61,876) (Decrease)/increase in provision for income taxes payable 6 (11,641) (11,641) 39,155 (Decrease)/increase in deferred tax liabilities 8 (1,677) (1,677) 13,493 (Decrease)/increase in current provisions 18 (12,733) (8,548) 1,191 (Decrease)/increase in non current provisions 18 (3,971) (3,612) 66 (Decrease)/increase in other liabilities 19 (934) (934) (6,683)

Net cash (outflow)/inflow from operating activities 21,803 (24,677) 258,681

Transactions and balances with key management personnel and other related parties

Mr M Birrell was a director of VPCM and is a director of the Victorian Chamber of Commerce and Industry (VCCI). VPCM is a corporate member of VCCI. Expenses incurred in 2017 were $16,667 (2016: $26,475).

Reconciliation of profit after income tax to net cash inflow from operating activities

Non-cash movements in income and expense

No other transactions have occurred with KMP and their related parties. There are no outstanding balances, including commitments, with such parties.

Given the breadth and depth of State government activities, related parties transact with the Victorian public sector in a manner consistent with other members of the public e.g. stamp duty and other government fees and charges. Further employment of processes within the Victorian public sector occur on terms and conditions consistent with the Public Administration Act 2004 (Vic) and Codes of Conduct and Standards issued by the Victorian Public Sector Commission. Procurement processes occur on terms and conditions consistent with the Victorian Government Procurement Board requirements.The terms and conditions of transactions entered into with responsible persons’ related entities occurred within a normal customer and supplier relationship on terms and conditions no more favourable than those available, or which might reasonably be expected to be available, on similar transactions to other entities on an arm’s length basis.

72


Victorian Ports Corporation (Melbourne)Certification of Financial Statements30 June 2017

We certify that the attached financial statements for Victorian Ports Corporation (Melbourne) has been prepared in accordance with the Standing Direction 4.2 of the Financial Management Act 1994 (Vic), applicable Financial Reporting Directions, Australian Accounting Standards, including Interpretations and other mandatory professional reporting requirements.

We further state that, in our opinion, the information set out in the Comprehensive Operating Statement, Statement of Financial Position, Statement of Changes in Equity, Statement of Cash Flows and notes to and forming part of the financial statements, presents fairly the financial transactions during the year ended 30 June 2017 and financial position of Victorian Ports Corporation (Melbourne) as at 30 June 2017.

The financial statements comply with International Financial Reporting Standards as issued by the International Accounting Standards Board.

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

We authorise the attached financial statements for issue on 29 August 2017.

Mr J CainChairman29 August 2017

Ms R JohnsonChief Executive Officer29 August 2017

Mr J BellExecutive General ManagerFinance and Corporate Support29 August 2017

73


Independent Auditor’s Report To the Board of Victorian Ports Corportion (Melbourne)

Opinion I have audited the financial report of Victorian Ports Corportion (Melbourne) (the corporation) and it's controlled entities (together the consolidated entity) which comprises the:

statement of financial position as at 30 June 2017 comprehensive operating statement for the year then ended statement of changes in equity for the year then ended statement of cash flows for the year then ended notes to the financial statements, including a summary of significant accounting

policies certification of financial statements.

In my opinion the financial report presents fairly, in all material respects, the financial positions of the corporation and consolidated entity as at 30 June 2017 and their financial performance and cash flows for the year then ended in accordance with the financial reporting requirements of Part 7 of the Financial Management Act 1994 and applicable Australian Accounting Standards.

Basis for Opinion

I have conducted my audit in accordance with the Audit Act 1994 which incorporates the Australian Auditing Standards. My responsibilities under the Act are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of my report.

My independence is established by the Constitution Act 1975. My staff and I are independent of the corporation and consolidated 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. My staff and I have also fulfilled our other ethical responsibilities in accordance with the Code.

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

Board's responsibilities for the financial report

The Board of the corporation and consolidated entity is responsible for the preparation and fair presentation of the financial report in accordance with Australian Accounting Standards and the Financial Management Act 1994, and for such internal control as the Board determine is necessary to enable the preparation and fair presentation of a financial report that is free from material misstatement, whether due to fraud or error.

In preparing the financial report, the Board is responsible for assessing the corporation and consolidated entity's ability to continue as a going concern, and using the going concern basis of accounting unless it is inappropriate to do so.

Auditor-General’s Report


2

Auditor’s responsibilities for the audit of the financial report

As required by the Audit Act 1994, my responsibility is to express an opinion on the financial report based on the audit. My objectives for the audit 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 the 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 our 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 the purpose of expressing an opinion on the effectiveness of the corporation and consolidated 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 corporation and consolidated 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. My conclusions are based on the audit evidence obtained up to the date of my auditor’s report. However, future events or conditions may cause the corporation and consolidated 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.

MELBOURNE 1 September 2017

Anna Higgs as delegate for the Auditor-General of Victoria


Section 2:

Governance and organisational structure


Corporate governance

The Transport Integration Amendment (Head, Transport for Victoria and Other Governance Reforms) Act 2017 established the Head, TransportforVictoriaasanewstatutoryofficeandthe lead transport agency in Victoria to integrate and coordinate the State’s transport system. VPCM is now part of Transport For Victoria. VPCM is governed by a Board of Directors which sets the strategic direction for the business to achieve its corporate goals, compliance, risk and legislative requirements.

The primary responsibility of the VPCM Board is to ensure that the Port of Melbourne waters and channels in Port of Melbourne waters are managed for use on a fair and reasonable basis and to manage and develop Station Pier and West Finger Pier consistent with the vision statement and transport system objectives as set out in the Transport Integration Act 2010 (Vic) (TIA).

Accountable to the Minister for Ports, Directors are appointed pursuant to section 145(1) of the TIA having regard to the expertise necessary for VPCM to achieve its objectives and functions. Directors areappointedontermsandconditionsspecifiedin the instrument of appointment and have overall responsibility for the governance of VPCM and may exercise the powers conferred on VPCM.

With the aim of achieving best practice, the Board has developed and endorsed a set of governance principles which are in line with its responsibilities under the TIA. As a result, the primary focus of the Board is on:• setting the strategic direction of VPCM including

the approval and oversight of the corporate plan, annual operating and capital budgets, risk management framework and policy and strategy, corporate policies and all delegations of authority (includingfinancialdelegations)madepursuanttosection 170 of the TIA

• having regard to the transport system objectives, the decision-making principles and any relevant statement of policy principles in carrying out its functions and exercising its powers

• ensuring accountabilities to the Minister for Ports and the Treasurer of Victoria under the legislation are understood by VPCM

• approving capital projects where the total project value exceeds $1 million (or any other capital projectsofstrategicsignificance)

• monitoring compliance with legislative and

regulatory requirements, ethical standards and external commitments

• monitoring VPCM’s operational performance•overseeingtheadequacyofVPCM’sfinancial

controls• approving and overseeing VPCM’s operating and

capital budgets• appointing and reviewing the performance of the ChiefExecutiveOfficer

• promoting safety as a matter of priority having regard to the safety and security of the Port of Melbourne

• (for PoMC from 1 July 2016 to 31 October 2016) • approving capital projects where the

total project value exceeded $5 million (or any other capital projects of strategic significance)

• having regard to the safety and security of the Port of Melbourne

• encouraging the business of the Port of Melbourne.

Details of the number of Board and Committee meetings, together with the number of meetings attended by each of the Directors are provided on page 106.

Ministerial Directions The following Ministerial Directions were received during the reporting period:

Port of Melbourne – non payability of State Taxes and Fees - August 2016The Special Minister of State, as delegate for the Premier, issued a Direction under the Delivering Victorian Infrastructure (Port of Melbourne Lease Transaction) Act 2016 (Vic) directing that no State tax or fee is payable by a person or body in relation to: the Sale and Purchase Deed of all the issued shares in Port of Melbourne Operations Pty Ltd (POMOPL) and all of the issued units in the Port of Melbourne Unit Trust; the transfer of shares in POMOPL or in the Port of Melbourne Unit Trust; or the grant, transfer surrender, variation oramendmentofspecifiedleases,subleases,subsubleases or subsubsubleases.

Designation of Associated Assets – August 2016The Premier, issued a Direction under the Delivering Victorian Infrastructure (Port of Melbourne Lease Transaction) Act 2016 (Vic)


related to designating the Channel Seabed lease land and VicTrack lease land as associated assets for the purposes of the Act. Vesting of Port Assets – September 2016The Special Minister of State, as delegate for the Premier, issued a Direction under the Delivering Victorian Infrastructure (Port of Melbourne Lease Transaction) Act 2016 (Vic) related to the vesting ofspecifiedportassetsfromPoMCandMelbournePort Lessor Pty Ltd to POMOPL and from POMOPL to PoMC.

Port of Melbourne Corporation – September 2016Execution of Documents and Project AssistanceThe Special Minister of State, as delegate for the Premier, issued a Direction under the Delivering Victorian Infrastructure (Port of Melbourne Lease Transaction) Act 2016 (Vic) related to the execution of documents and project assistance including instructions regarding the application of the 1997 Tax Act in relation to the lease of port land and the sublease of the Channel Seabed, take necessary actions to give effect to the Completion Readiness Plan and execution of documents related to the Western Distributor Project.

Port of Melbourne Operations Pty Ltd – September 2016Execution of Documents and Project AssistanceThe Special Minister of State, as delegate for the Premier, issued a Direction under the Delivering Victorian Infrastructure (Port of Melbourne Lease Transaction) Act 2016 (Vic) related to the execution of documents and project assistance including instructions regarding the application of the 1997 Tax Act in relation to the lease of port land and the sublease of the Channel Seabed, take necessary actions to give effect to the Completion Readiness Plan and execution of documents related to the Western Distributor Project.

Melbourne Port Lessor Pty Ltd – September 2016 Execution of Documents and Project AssistanceThe Special Minister of State, as delegate for the Premier, issued a Direction under the Delivering Victorian Infrastructure (Port of Melbourne Lease Transaction) Act 2016 (Vic) related to the execution of documents and project assistance including

instructions regarding the application of the 1997 Tax Act in relation to the lease of port land and the sublease of the Channel Seabed, take necessary actions to give effect to the Completion Readiness Plan and execution of documents related to the Western Distributor Project.

Port of Melbourne Corporation – October 2016Transfer of shares in Melbourne Port Lessor Pty LtdThe Special Minister of State, as delegate for the Premier, issued a Direction under the Delivering Victorian Infrastructure (Port of Melbourne Lease Transaction) Act 2016 (Vic) related to the transfer of shares in Melbourne Port Lessor Pty Ltd, including execution of the relevant Deeds and documents.

Melbourne Port Lessor Pty Ltd – October 2016Transfer of shares in Melbourne Port Lessor Pty LtdThe Special Minister of State, as delegate for the Premier, issued a Direction under the Delivering Victorian Infrastructure (Port of Melbourne Lease Transaction) Act 2016 (Vic) related to the transfer of shares in Melbourne Port Lessor Pty Ltd, including execution of the relevant Deeds and documents.

Declaration of pecuniary interestsAllDirectorsandnominatedofficerscompletedadeclaration of pecuniary interests.

Business risksThe procedures and policies established at Board and management level are designed to protect VPCM’s assets and interests, uphold the integrity of its reporting systems, maintain its operational viability and ensure compliance with legislative requirements.

VPCM is managed through a comprehensive set of policies and procedures that are subject to regular auditreview.Theseincludefinancialreporting,environmental management, risk management and internal control policies and procedures.


Board of Directors

James Cain, ChairmanJames Cain was appointed Chair of Victorian Ports Corporation (Melbourne) on 2 November 2016.

James was previously appointed Deputy Chairman of PoMC on 1 July 2010 and reappointed on 15 July 2013. He held this position until 31 October 2016.

He has an extensive background in project development management in property and infrastructure, in both the public and private sectors. James’ professional experience includes 12 years with property and construction company Lend Lease in various roles including General Manager for Victoria, TasmaniaandSouthAustralia,andfiveyearswiththeVictorian Government as Executive Director of Major Projects Victoria, the Victorian Government’s major capital works agency. Since 2006, James has developed his interests in commercial, infrastructure and property areas through his own consulting business. James is also Chair of the Industry Superannuation Property Trust (ISPT). He was Chair of Port of Hastings Corporation until September 2010 and was a Director of Victorian Rail Track (VicTrack) between April 2008 and July 2010.

Board Committee membership:From 1 July to 31 October 2016:• Chair, People and Transition Committee• Chair, Risk CommitteeFrom 2 November 2016:• Chair, Remuneration and People Committee•RiskCommittee(exofficiomember)•AuditandFinanceCommittee(exofficiomember)

Janice van Reyk, Deputy ChairJanice van Reyk was appointed Deputy Chair of Victorian Ports Corporation (Melbourne) on 2 November 2016. Janice was previously appointed a Director of PoMC on 25 October 2011 and reappointed on 1 October 2014. She held this position until 31 October 2016. She is an experienced non-executive Director with broad based business skills gained as a senior executive in listed industrial companies. She is a non-executive Director of Lochard Energy Group, Chair of its Audit Committee; a non-executive Director of Citywide, Chair of its Safety Risk and Environment Committee and a member of its Audit and Finance Committee; and a member of the Northern Territory Environment Protection Authority. Janice has an extensive professional background inmajorcapitalprojects,infrastructure,financeandcapital markets, mergers and acquisitions, commercial negotiations, risk management, environmental management and stakeholder engagement. JaniceisaCertifiedPractisingAccountant(CPA)and also holds a Master of Commerce, a Master of Environment (Hons), Bachelor of Laws (Hons) and a Bachelor of Arts (Economics). Janice is a Fellow of the Australian Institute of Company Directors and a Leadership Victoria Fellow.

Board Committee membership:• Chair, Audit and Finance Committee• Risk Committee


Deb Beale Deb Beale was appointed a Director of Victorian Ports Corporation (Melbourne) on 2 November 2016.

Deb’s broad experience includes the areas of finance,corporategovernance,fundraising,publicrelations and risk management.

She has served, and continues to serve, on a number of government, public, private and not-for-profitboards.

Shebeganherworkingcareerinthefinanceindustry where she was employed by Merrill Lynch for over a decade. She then moved to Ernst & Young where she specialised in risk management, government relations and governance.

Deb has a Bachelor of Commerce from the University of Melbourne, a Graduate Diploma from the Securities Institute of Australia and a Masters of Business Administration from Melbourne Business School.

Board Committee membership:• Chair, Risk Committee• Remuneration and People Committee

James Chen James Chen was appointed a Director of Victorian Ports Corporation (Melbourne) on 2 November 2016.

James has over 25 years’ corporate and consulting experience, predominantly within the shipping and logistics sector but also in infrastructure, resources and telecommunication industries in Australia and Asia.

In the shipping and logistics sector, James established JPC Containers and built the organisation to become one of the largest shipping container management service providers in Victoria. In 2002, he established a new towage company (Australian Maritime Services P/L), operating in the ports of Melbourne, Sydney and Brisbane.

James continues to be involved in port development strategies and opportunities where improved efficiencies,growthandeconomicbenefitscanbemaximised and realised for the key stakeholders.

James holds a Bachelor of Science degree. He is a member of the Australia-China Business Association.

Board Committee membership:• Audit and Finance Committee• Risk Committee


Peter Tuohey Peter Tuohey was appointed a Director of Victorian Ports Corporation (Melbourne) on 2 November 2016.

Peterisafifthgenerationgrain,woolandprimelamb producer whose experience in freight and logistics has seen him appointed to a number of advisory roles.

Peter is Chair of the Victorian Government’s Grains Logistics Taskforce, Chairman of Melbourne Market Authority, a member of the Ministerial Freight Advisory Council, a member of the Victorian Road Freight Advisory Council, a member of the Victorian Ministerial Freight Committee, and a member of the Victorian Water Board Selection Panel.

He continues to represent the interest of farmers at a state level as a representative on the Victorian Agricultural Advisory Council. At the Victorian Farmers Federation (VFF) he served as President from 2012 to 2016 and Vice President from 2009 to 2012. He was also Chair of the VFF’s Farm Business and Regional Development Committee from 2010 to 2013. At the national level, Peter was a Board Director of the National Farmers Federation from 2012 to 2016 and served on its Economics Committee.

Peter was also a member of the Victorian Freight and Logistics Council from 2009 to 2012.

Board Committee membership:• Audit and Finance Committee• Remuneration and People Committee

Ingilby Dickson Ingilby Dickson was appointed as a Director of PoMC on 1 January 2013 and reappointed on 1 January 2016. He held this position until 31 October 2016 and then continued as a Director of VPCM until 31 December 2016.

Ingilby joined the PoMC Board having served as General Manager Supply Chain and Processing for BlueScope Steel, commencing with the company in 2003asthefirstexternalheadoftheTransportandLogistics function until 2015.

Ingilby is a Director of DGL Logistics, Ron Finemore Transport and Advisory Director of Martin and Pleasance.

Ingilby was appointed to the NSW Road Freight Advisory Council in 2007 and was awarded Freight Personality of the Year at the Australian Freight and Logistics Industry Awards that same year. Ingilby is also a Board member for the Australian Logistics Council. Prior to his appointment at BlueScope Steel as Vice President Logistics and Procurement, Ingilby held senior Supply Chain and Logistics positions with Goodman Fielder, Toll, Mayne Nickless and Hutchison Australia. He is a Director of Anglesea Surf Life Saving Club.

Ingilby holds a Bachelor of Business, Graduate Diploma in Accounting, Graduate Diploma in Institute of Directorships and is a Fellow of the CharteredInstituteofTransportandaCertifiedPractising Accountant.

Board Committee membership:• Audit and Finance Committee


Jim Marshall Jim Marshall was appointed as a Director of PoMC on 15 July 2013. He held this position until 31 October 2016 and then continued as a Director of VPCM until 31 December 2016.

Jim is a Director of Sai Chang (a joint venture between Australia Post and China Post). He is also a Trustee of the Australia Post Superannuation Scheme.

Having served as the Executive General Manager Postal Services at Australia Post, Jim oversaw a $3.6 billion business encompassing the letters, parcels and international mail businesses as well as the enterprise sales force. Prior to 2010, he managed the Mail and Network Division for nine years and was previously the Group Manager, NationalOperationsinAustraliaPost’sHeadOfficeoverseeingsignificantchangeprogramsintheoperations of the business.

Jim was also a member of Australia Post’s Executive Committee, a Director of Australian Air Express, Chairman of Post Logistics Australasia and Chairman of Printsoft Holdings.

Awarded a Public Service Medal in the January 2012 Australia Day Honours, Jim holds a Bachelor of Arts, Bachelor of Economics and Masters of Business Administration from the University of Adelaide.

Board Committee membership:• People and Transition Committee• Risk Committee

Bruce Nicholls Bruce Nicholls was appointed as a Director of PoMC on 1 January 2013 and reappointed on 1 January 2016. He held this position until 31 October 2016 and then continued as a Director of VPCM until 31 December 2016.

Bruce joined the PoMC Board with an extensive background in international trade and investment, having served as Trade Commissioner for Australia in India, Germany, Switzerland, China and Hong Kong, before returning to the private sector to serve on the boards of several public companies in Hong Kong and Australia.

Bruce has served as Chairman of the Royal Automobile Club of Australia, as a director of Crownhampton International (HK) Limited, Promet Petroleum Limited and Goulburn Valley Water Corporation. He is a director of Norcen Financial Services and Chadcorp Communications.

Bruce also served as President of the Australia China Chamber of Commerce & Industry and as a Trustee of the Committee for Economic Development of Australia. He holds a Bachelor of Commerce Degree in Economics, a Diploma in Business and is a Foundation Fellow of the Australian Institute of Company Directors.

Board Committee membership:• People and Transition Committee• Risk Committee


Mark Birrell,

Chairman of PoMC Mark Birrell was appointed Chairman of PoMC on 18 October 2011 and reappointed on 1 October 2014 and retired on 31 October 2016.

Mark is the Chairman of Infrastructure Australia and serves on the Board of the Victorian Chamber of Commerce and Industry. He is Chairman of PostSuper Pty Ltd, of Regis Healthcare Limited and of the Australian Payments Council.

An experienced company director and corporate adviser, Mark was the founding Chairman of Infrastructure Partnerships Australia and has served previously as Chairman of Evans & Peck Limited and National Leader of the Infrastructure Group at Minter Ellison Lawyers.

Hehasasignificantpublicpolicybackgroundthrough his earlier roles as Minister for Major Projects and then Minister for Industry, Science & Technology.

Mark holds a Bachelor of Economics and Bachelor of Laws degrees and is a Fellow of the Australian Institute of Company Directors.

Board Committee membership:• People and Transition Committee (exofficiomember)• Risk Committee (exofficiomember)• Audit and Finance Committee (exofficiomember)

David Cranwell David Cranwell was appointed as a Director of PoMC on 1 July 2003 and reappointed on 1 July 2006, 2008, 2010, 15 July 2013 and 1 October 2014. He held this position until 31 October 2016.

David is a Partner of Spencer Stuart, a leading global senior level executive search and director recruitment partnership.

Before joining Spencer Stuart, David spent 11 years in a number of roles with Mayne Group Ltd, including Director of Development; CEO Asia covering China, Thailand, Malaysia, Singapore and Indonesia; CEO of the global logistics business; and more recently, Group General Manager of Pharmacy Retailing and Distribution.

During his time in the health sector, David played an active role serving as President of the National Pharmaceutical Services Association and Chairman, Medicines Partnership of Australia.

David has a Master of Nautical Science degree from RMIT University, Melbourne, an MBA from the Graduate School of Management at Melbourne University,andqualifiedasaMasterMariner Class 1 with ANL.



John Fitzgerald John Fitzgerald was appointed as a Director of PoMC on 1 January 2013 and reappointed on 1 January 2016. He held this position until 31 October 2016.

John joined the PoMC Board with extensive experience in infrastructure delivery and was the acting CEO of Infrastructure Australia until March 2015. He is also the Independent Chair of the ACT Government Capital Metro Agency Project Board; Chair of Assetco Management Pty Ltd and related companies; Chair of the NSW Government Steering Committee for the Sydney International Convention, Exhibition and Entertainment Precinct Project; a Director of the Barangaroo Delivery Authority; and a Director of the Victorian Funds Management Corporation.

John is a specialist advisor to KPMG on infrastructure and government sectors and his previous Board positions included Director on the National Advisory Board of Infrastructure Partnerships Australia and Executive Director Department of Treasury and Finance (Victoria) Executive Board.

With more than 30 years of commercial and financialexperienceininfrastructure,Johnwaspreviously a Deputy Secretary, Commercial Division, Department of Treasury and Finance, and has held senior management positions in banking andfinance.

John holds a Master of Public Infrastructure (Research) from the University of Melbourne and is a Fellow of the Australian Institute of Company Directors and the Institute of Public Administration Australia (Victoria).

Board Committee membership:• Audit and Finance Committee• People and Transition Committee

Alice Williams Alice Williams was appointed as a Director of PoMC on 15 July 2013. She held this position until 31 October 2016.

Alice has more than 25 years of senior management and board level experience in corporate and government sectors and investment banking. She has been actively involved in strategy and policy development, corporate advisory and funds management through her consulting practice which has been engaged by Australian Government organisations iincluding the Australian Competitition and Consumer Commission, to undertake reviews of competition policy and regulation.

Alice was formerly a Director of NM Rothschild and Sons (Australia) Limited, Director of Strategy and Planning for Ansett Australia Holdings Limited and a Vice President at JP Morgan Australia. Alice has also held management positions with Elders Finance Group, Hong Kong Bank of Australia Limited and Citi NA in London.

Alice is a non-executive Director on a range of government, public and private Boards including Djerriwarrh Investments, Equity Trustees Ltd, Guild Group, Defence Health, Cooper Energy, Barristers Chambers Ltd, Foreign Investment Review Board and Victorian Funds Management Corporation. Alice is also a Member of the Felton Bequest Committee.

Alice holds a Bachelor of Commerce from Melbourne University and is a Chartered Financial Analyst (Virginia, USA). She is a Fellow of the Australian Institute of Company Directors and a FellowCertifiedPractisingAccountant.



Board and Committee meetings

Audit and Finance Committee TheAuditandFinanceCommittee’sobjectiveistosupporttheBoardbyoverseeingfinancialandcapitalinvestment activities, internal and external audit functions, compliance requirements and the effectiveness of the internal control environment.

Members of the Audit and Finance Committee are Board Directors and are independent members in accordance with the requirements of section 2.2(f) of the Standing Directions of the Minister for Finance under the Financial Management Act 1994 (Vic).

People and Transition Committee For the period 1 July 2016 to 31 October 2016, the People and Transition Committee’s objectives were to support the Board:• with regard to the people-related transitional arrangements associated with the Port of Melbourne Lease

Transaction• by reviewing and overseeing PoMC’s policies and processes relating to the remuneration of executives and

the development of PoMC’s people and its culture.

Remuneration and People CommitteeThe Remuneration and People Committee’s objective is to support the Board by reviewing and overseeing VPCM’s policies and processes relating to the remuneration of executives and the development of VPCM’s people and its culture.

Risk Committee The Risk Committee’s objective is to support the Board by overseeing the risk management framework andpolicytoevaluateeffectivenessofriskidentificationandmanagementandcompliancewithinternalguidelines and external requirements.

Attendance at Board and Board Committee meetings PoMC - 1 July 2016 to 31 October 2016

Chairman /Director

Board Audit and Finance Committee

People and Transition Committee

Risk Committee

Meetings eligible to

attend

Meetings attended


attend

Meetings attended


attend

Meetings attended


attend

Meetings attended

M Birrell (Chairman)

5 5 1 0 2 2 1 1

J Cain (Deputy Chairman)

5 5 - - 2 2 1 1

D Cranwell 5 4 1 1 - - - -I Dickson 5 4 1 1 - - - -J Fitzgerald 5 4 1 1 2 2 - -J Marshall 5 5 - - 2 2 1 1B Nicholls 5 5 - - 2 2 1 1J van Reyk 5 5 1 1 - - 1 1A Williams 5 5 1 1 - - - -


Subsidiary governancePoMC’s Board Directors were also Directors of the established subsidiaries Port of Melbourne Operations PtyLtdandMelbournePortLessorPtyLtd.TheBoardofeachsubsidiarymetfivetimesbetween1Julyand31 October 2016.

Port of Melbourne Operations Pty Ltd and Melbourne Port Lessor Pty Ltd, attendance at Board Meetings - 1 July 2016 to 31 October 2016

Chairman / Director Port of Melbourne Operations Pty Ltd Melbourne Port Lessor Pty Ltd

Meetings eligible to attend

Meetings attended Meetings eligible to attend

Meetings attended

M Birrell (Chairman) 5 5 5 5J Cain (Deputy Chairman) 5 5 5 5D Cranwell 5 4 5 4I Dickson 5 4 5 4J Fitzgerald 5 4 5 4J Marshall 5 5 5 5B Nicholls 5 5 5 5J van Reyk 5 5 5 5A Williams 5 5 5 5

VPCM – 2 November 2016 to 30 June 2017

Chairman /Director

Board Audit and Finance Committee

Remuneration and People Committee

Risk Committee


attend

Meetings attended


attend

Meetings attended


attend

Meetings attended


attend

Meetings attended

J Cain (Chairman)

7 7 4 2 1 1 3 3

J van Reyk (Deputy Chair)

7 6 4 4 - - 3 3

D Beale 7 6 - - 1 1 3 3J Chen 7 6 4 4 - - 3 1I Dickson* 2 2 1 1 - - - -J Marshall* 2 2 - - - - 1 1B Nicholls* 2 2 - - - - 1 1P Tuohey 7 6 4 3 1 1 - -

* Term of appointment expired on 31 December 2016.


Organisational structure

Assets & Infrastructure Finance Marine & Navigation

Strategy & Risk Legal Safety & Business Resilience

Information Technology Board Secretariat Security

Property Management Business Support

Station Pier / Cruise Shipping Corporate Affairs

People & Culture

Chief Executive Officer Rachel Johnson

Strategy, Risk, Environment & Infrastructure

Jeff Bazelmans

Finance & Corporate Support Jack Bell

Marine & Navigation Captain Roy Stanbrook


Executive Management Team

Rachel Johnson, Chief Executive OfficerRacheltookuptheroleofinauguralChiefExecutiveOfficerofVPCMinNovember2016,followingtheVictorian Government’s successful leasing of the Port of Melbourne’s commercial operations to a private sector operator.

Rachel has wide-ranging experience of Australian freight and logistics businesses and the development and operation of transport infrastructure in both the public and private sectors.

ShehasheldseniorpositionsinNewSouthWalesgovernmentbodiesaswellasinanumberofhigh-profileprivate sector companies.

Rachel holds a Bachelor of Science (Honours), Aeronautical Engineering, is a graduate of the Australian InstituteofCompanyDirectorsandhasadvancedmanagementqualifications.

Captain Roy Stanbrook, Harbour Master/Executive General Manager – Marine & NavigationRoy is the Harbour Master of the Port of Melbourne and leads the Marine and Navigation division. His divisionisresponsibleforsafenavigationintheportwatersofthePortofMelbournethroughVesselTrafficServices as well as emergency management and health and safety.

He joined VPCM’s predecessor organisation PoMC as Harbour Master in 2014.

Roy brings wide experience to the role having previously held the positions of Chief Executive of the Gibraltar Port Authority and Captain of the Port, and before that as Harbour Master for the Lower District of the Port of London Authority.

HequalifiedasaMasterMarinerwhileservingintheRoyalFleetAuxiliaryandalsohasexperienceinmaritime education as a senior lecturer at Warsash Maritime Academy, UK.

RoyholdsanSTCWMasterUnlimitedCertificateofCompetencyandisaFellowoftheNauticalInstituteanda Younger Brother of Trinity House.

Jeff Bazelmans, Executive General Manager – Strategy, Risk, Environment & InfrastructureJeff leads a diverse division that includes the management of Victoria’s premier cruise shipping facility at Station Pier, cruise tourism, tenant management, asset management, infrastructure development, environment and information technology services.

He gained broad experience in the ports industry at VPCM’s predecessor organisation PoMC. Joining in 2005, Jeff led the environment program for the successful Channel Deepening Project. He then worked on PoMC’s $1.6 billion Port Capacity Project and held senior executive roles including Executive General Manager Business and Planning and was an executive member of the Port of Melbourne Lease Transaction Team.

Before joining PoMC Jeff held senior positions in a number of consultancies and previous to that he was Deputy Director Environmental Science at Environment Protection Authority (Victoria).

Jeff has a PhD (Biochemistry), a Bachelor of Science (Hons) (Biochemistry) and a Bachelor of Applied Science (Chemistry, Biochemistry).


Jack Bell, Executive General Manager - Finance & Corporate SupportJackleadsthedivisionresponsibleforfinanceandthecorporatesupportareasofBoardsecretariat,legalcounsel, corporate affairs, human resources and administration.

JackjoinedVPCMin2016,bringingexperiencefromtheseniorfinanceexecutiveroleshehasheldacrossdiverse industries during his career. He has led teams in national and multinational organisations, held CFO and Company Secretary positions and has also worked in consultancy.

Jack is a CPA and holds a Bachelor of Economics. He is also a Fellow of the Governance Institute of Australia and a Fellow of the Institute of Company Directors.

Nick Easy, Chief Executive Officer PoMC GroupNickcommencedasChiefExecutiveOfficerofPoMCinFebruary2014,providingleadershipforthestrategicmanagement of Australia’s largest container and automotive port. On 1 July 2016, Nick became Chief ExecutiveOfficerofPortofMelbourneCorporationGroup.

PriortojoiningPoMC,NickwastheChiefExecutiveOfficerattheMetropolitanFireandEmergencyServiceBoard (MFB) from June 2011 until February 2014 where he was responsible for leading an organisation of 2300 staff through a period of sector reform while it continued to deliver emergency services to the Victorian community and beyond.

Before taking up the MFB appointment, Nick had previously served with PoMC and its forerunner for over 13 years in various senior management positions, most notably as Executive General Manager Port Capacity and Executive General Manager Channel Deepening Project.

Nick holds a Bachelor of Applied Science Planning, a Post-Graduate Diploma in Environmental Management and is a member of the Australian Institute of Company Directors.

Nick transferred to Lonsdale Consortium on 1 November 2016.

Caryn Anderson, Executive General Manager - Business and PlanningCaryn led a division which oversaw trade development and marketing, infrastructure and land use planning, information technology services and port community relations. Caryn also coordinated the planning and preparatory phases of the Port Lease Transaction ahead of the functional separation of the business.

Having joined PoMC in 2006, Caryn’s widely regarded expertise in trade and strategic infrastructure development drew on over 20 years’ experience in the Australian and international ports, shipping and logistics sector.

Inadditiontoherpracticalindustryexperience,Carynholdsformalqualificationsinscienceandpostgraduatequalificationsinlawandbusiness.

Caryn transferred to Lonsdale Consortium on 1 November 2016.


Keith Gordon, Executive General Manager - Port OperationsKeith oversaw a wide range of operational responsibilities including marine and navigation services, environment services, asset and spatial data management, infrastructure projects, cruise shipping, port security, safety and emergency management.

Before joining PoMC in 2006, Keith held a number of senior management roles including that of Chief ExecutiveOfficerofGeraldtonPortAuthority.KeithalsoservedasGeneralManagerPortsforTollHoldingswith responsibility for the ports of Geelong and Hastings for almost a decade.

With over 30 years’ experience in the shipping and logistics industry, Keith had a strong understanding of PoMC’s commercial and operational requirements and obligations.

Keith transferred to Lonsdale Consortium on 1 November 2016.

Matt O’Meara, Executive General Manager - CommercialMattledPoMC’sCommercialDivisionandwasresponsibleforoverseeingfinancialmanagement,portpricing,planningandanalysis,investmentevaluation,taxation,insurance,treasuryandfinancialoperations,legal services, Board support, corporate governance arrangements and knowledge management and administration.

HavingjoinedPoMCin2009,MatthasworkedinseniorfinancerolesformorethanadecadeinAustraliaandoverseas.MattholdsaBachelorofBusiness(Accounting)andisaCertifiedPractising Accountant (CPA).

Matt transferred to Lonsdale Consortium on 1 November 2016.

Jason Price, Executive General Manager - Port CapacityJason was responsible for leading PoMC’s Port Capacity Division. This division oversaw the planning, approval, management and development of container and automotive capacity for the Port of Melbourne.

Jason was also responsible for managing PoMC’s property holdings including the strategic development of property assets, commercial use of land and improvements, together with leasing arrangements and liaison with port tenants.

Joining the Executive team in June 2009, Jason has extensive experience in service delivery in complex environments, with nearly two decades of professional practice in project and contract management. Before joining PoMC in 2007, Jason held a number of senior management positions with international building and construction materials supplier Boral Limited, and construction and mining equipment manufacturer Caterpillar.JasonholdsaBachelorofEngineeringandpostgraduatemanagementqualifications.

Jason transferred to Lonsdale Consortium on 1 November 2016.


Health and safetyAs an integral part of its safety culture, VPCM takes a proactive approach to managing its occupational health and safety (OH&S) responsibilities and delivers initiatives and programs designed to prevent safety incidents and injuries.

Alongside a broad range of safety inductions for employees and contractors, VPCM also uses the automated Port of Melbourne Incident and Emergency Response System (PIER) to report and address hazards, incidents and injuries.

In 2016-17, there were no reportable injuries and no lost time injuries.

Health and safety


Section 3:

Workforce data


VPCM recognises that to deliver its services and manage its infrastructure in a safe and sustainable manner it is dependent on the recruitment and retention of exceptional staff members with a diverse range of skills.

Employee relationsCompletion of the Port of Melbourne Lease Transaction (PLT) culminated in the separation of the PoMC business and staff in November 2016. The PLT was the key focus of PoMC staff communications and People and Culture activities from 1 July to 31 October 2016, preparing staff for the transition.

From the beginning of VPCM’s operations on 1 November, the focus of People and Culture activities has been on supporting staff through the transition and ensuring continuing business as usual.

Statutory complianceThere was no lost time through industrial relations activities in 2016-17.

VPCM complies with all relevant statutory requirements in relation to employment legislation, which is captured in the Enterprise Agreement. VPCM monitors the National Employment Standards and Fair Work Act 2009 (Cwlth) to ensure compliance.

VPCM fosters a culture where it values human rights and subscribes to the Victorian Charter of Human Rights and Responsibilities.

VPCM’s Workplace Relations Policy underpins a commitment to ensuring that all employees are free to work in a harmonious and safe environment, adhering to the VPCM Code of Organisational Values and Behaviour of Employees and to reject discrimination and harassment in the workplace.

Comparative workforce dataAnnualised total salary, by $20,000 bands for executives

Our people

Income band (salary) Executives< $160,000 1$160,000 - $179,999 3$180,000 - $199,999 1$200,000 - $219,999 2$220,000 - $239,999 0$240,000 - $259,999 1$260,000 - $279,999 1$280,000 - $299,999 0$300,000 - $319,999 1Total 10


Staff at last pay period in 2016-17

June 2017All employees Ongoing Fixed term and

casualNumber FTE Full-time Part-time FTE Number FTE

GenderMale 42 42 29 0 29 13 13Female 14 14 5 0 5 9 9Age15-24 0 0 0 0 0 0 025-34 6 6 0 0 0 6 6

35-44 14 14 11 0 11 3 3

45-54 14 14 8 0 8 6 655-64 21 21 14 0 14 7 7

65+ 1 1 1 0 1 0 0

EBA employees

46 46 34 0 34 12 12

Senior employeesExecutives 10 10 0 0 0 10 10

Total employees

56 56 34 0 34 22 22

Staff at last pay period in 2017 and 2016 comparison

2017 2016

Male Female Total Male Female Total

Full-time permanent 29 5 34 101 35 136

Full-time temporary 13 9 22 35 20 55

Part-time 0 0 0 2 11 13

Totals 42 14 56 138 66 204

Dem

ogra

phic

dat

aC

lass

ifica

tion

data


Section 4:

Other disclosures


The period referred to is 1 July 2016 to 30 June 2017 unless otherwise stated.

Local Jobs First - Victorian Industry Participation PolicyThe Victorian Industry Participation Policy Act 2003 requires public sector bodies to report on the implementation of the Local Jobs First - Victorian Industry Participation Policy (Local Jobs First - VIPP). Departments and public sector bodies are required to apply the Local Jobs First - VIPP in all procurement activities valued at $3 million or more in metropolitan Melbourne and for state-wide projects, or $1 million or more for procurement activities in regional Victoria.

During 2016-17, there was no procurement to which Local Jobs First – VIPP or Local Industry Development Plan were applicable.

Advertising expenditureDuring the period, 1 July 2016 to 30 June 2017, VPCM undertook advertising in support of its ‘Steer Clear’ campaigntopromoteandadvocatesafeboatingonPortPhillipBaywithspecificregardtothedangersofanchoring and mooring in shipping channels. Working alongside Victoria Water Police, Transport Safety Victoria, Port Phillip Sea Pilots, the Australian Volunteer Coast Guard and VRFish (Victorian recreational fishingpeakbody)theSteerClearcampaignwasadvertisedinFishing Monthly publication. Total expenditure was less than $100,000.

Consultancy expenditure

Details of consultants under $10,000In 2016-17, there were no consultancies engaged during the year where the total fees payable to the individual consultancies was less than $10,000.

Details of consultancies (valued at $10,000 or greater)In 2016-17, there were 78 consultancies where the total fees payable to the consultants were $10,000 or greater. The total expenditure incurred during 2016-17 in relation to these consultancies is $14,468,362 (excluding GST). Details of individual consultancies can be found on the Victorian Ports Corporation (Melbourne) website at www.vicports.vic.gov.au.

Information and communication technology expenditureFor the 2016-17 reporting period there was a total Information and communication technology (ICT) expenditure of $3.1 million with the details shown below.

All operational ICT expenditure

ICT expenditure related to projects to create or enhance ICT capabilities

Business As Usual (BAU) ICT expenditure

Non-Business as Usual (non-BAU) ICT expenditure

Operational expenditure

Operational expenditure

$3.1 million Nil Nil Nil


ICT expenditure refers to VPCM’s costs in providing business enabling ICT services within the current reporting period. Non-BAU ICT expenditure relates to extending or enhancing the Department’s current ICT capabilities. BAU ICT expenditure is all remaining ICT expenditure which primarily relates to ongoing activities to operate and maintain the current ICT capability.

Freedom of InformationThe Freedom of Information Act 1982 (Vic) (FOI Act) enables members of the public to obtain information held by VPCM.

During the reporting period two requests were received, both of which came directly from the public. Two requests from previous reporting periods were decided during the year. One request was denied in full and was reviewed by the FOI Commissioner who upheld PoMC’s decision. The other request was allowed in part and no further review was sought by that applicant.

During the period there were two reviews by the FOI Commissioner (in relation to the already mentioned decision from the previous reporting period and a decision carried over from the 2014-15 reporting period). One review that was in progress at the Victorian Civil and Administrative Tribunal from the previous reporting period was withdrawn by consent.

The outcomes of the two FOI requests made in the reporting period were as follows:• one request was granted in full subject to deletions of personal information• one request lapsed as the applicant did not, on request, provide the application fee or provide evidence that

payment should be waived because paying it could cause hardship

No requests are still in progress.

Requests for documentsRequests for documents under the FOI Act should be made in writing and addressed to:

FreedomofInformationOfficerVictorian Ports Corporation (Melbourne) GPO Box 261Melbourne VIC 3001

The request should provide such information as is reasonably required to enable the documents to be identified,andincludea$28.40applicationfeeorevidencethatpaymentshouldbewaivedbecausepayingitcould cause hardship.

AssetsAll assets were noted on a register maintained by the organisation in accordance with the Financial Management Act 1994 (Vic).

Compliance with the Building Act 1993 (Vic)Buildings were maintained in accordance with relevant building and maintenance provisions in the Building Act 1993 (Vic) and Building Regulations 2006.

To ensure buildings conform with building standards, VPCM retains experienced building maintenance contractors who are required to be up to date with all relevant standards.

VPCM uses an asset management system for recording maintenance requests, essential service inspections,reporting,scheduling,andrectificationandmaintenanceworksonexistingbuildings.


During the reporting period:• VPCM carried out two major works projects (greater than $50,000)•VPCMdidnotissueanybuildingpermits,occupancypermitsorcertificatesoffinalinspectioninrelationto

buildings it owns• there were no emergency orders or building orders issued in relation to buildings• no buildings were required to be brought into conformity with building standards.

National Competition PolicyPoMC in the period 1 July 2016 to 31 October 2016 and VPCM in the period 1 November 2016 to 31 June 2017 complied with the Victorian Government’s requirements in respect of the National Competition Policy by adopting the following behaviours and principles:•clearandnon-conflictingobjectives• managerial responsibility, authority and autonomy• independent and objective performance monitoring• performance-based rewards and sanctions• competitive neutrality in input and output markets• clear delineation of commercial and non-commercial activities•clearlydefinedfinancialreportingrequirements• separate accounting for and funding of non-commercial activities• appropriate return on assets used in the commercial activity• application of a tax equivalent regime• debt guarantee fees•arrangementsforallocationofprofitsfromcommercialactivities

Compliance with the Protected Disclosure Act 2012 (Vic)The purpose of the Protected Disclosure Act 2012 (Vic) (PDA) is to encourage and facilitate disclosure of improperconductbypublicofficersandpublicbodiesandtoprovideprotectionforpersonswhomakethosedisclosures.

PoMC was a public body in the period 1 July 2016 to 31 October 2016 and thereafter VPCM is a public body and disclosures under the PDA for the period 1 November 2016 to 30 June 2017 can therefore be made aboutVPCMorVPCM’smembers,officersoremployees.

Reporting proceduresDisclosures of improper conduct or detrimental action by VPCM or any of its employees may be made to any of the following VPCM personnel:•ProtectedDisclosureOfficer• Manager or supervisor of the disclosure• Manager or supervisor of the person who is the subject of the disclosure.

Alternatively, disclosures may also be made directly to the Independent Broad-based Anti-corruption Commission (IBAC) at:

Independent Broad-based Anti-corruption CommissionLevel 1, North Tower, 459 Collins StreetMelbourne VIC 3001

Tel: 1300 735 135Internet: www.ibac.vic.gov.auEmail: See the IBAC website for the secure email disclosure process which also provides for anonymous disclosures.


Further informationThe Protected Disclosure Policy and Procedures which outline the system for reporting disclosures of improperconductordetrimentalactionbyVPCMoranyofitsemployeeand/orofficersareavailableonVPCM’s website.

Disclosures under the Protected Disclosure Act 2012 (Vic)

PrivacyThe Privacy and Data Protection Act 2014 (Vic) (PDPA) requires the responsible collection and handling of personal information in the Victorian public sector. The PDPA applied to PoMC in the period 1 July 2016 to 31 October 2016 and to VPCM for the period from 1 November 2016 to 30 June 2016 and therefore both PoMC and VPCM had responsibilities under the PDPA which include:• to collect, use and disclose personal information only in accordance with the Information Privacy Principles

set out in the PDPA• to provide individuals with access to information about them held by VPCM and by its contracted service

providers• to provide individuals with the right to request VPCM to correct information about them held by VPCM and

its contracted service providers• to set out in a document clearly expressed policies on its management of personal information and making

the document available to anyone on request

During 2016-17, there were no complaints by an individual to PoMC, VPCM or the Commissioner for Privacy and Data Protection about an act or practice of PoMC or VPCM that may be an interference with the privacy of an individual.

Additional VPCM information available on requestThe following information relating to VPCM, relevant to the period 1 July 2016 to 30 June 2017, has been prepared and is available to the Minister, Members of Parliament and the public on request:•Astatementthatdeclarationsofpecuniaryinterestshavebeendulycompletedbyallrelevantofficers•Detailsofsharesheldbyaseniorofficerasnomineeorheldbeneficiallyinastatutoryauthorityor

subsidiary• Details of publications produced by VPCM about the port of Melbourne and how these can be obtained• Details of changes in prices, fees, charges, rates and levies charged by VPCM• Details of any major external reviews carried out on VPCM• Details of major research and development activities undertaken by VPCM• Details of overseas visits undertaken including a summary of the objectives and outcomes of each visit• Details of major promotional, public relations and marketing activities undertaken by VPCM to develop

community awareness of the organisation and its services• Details of assessments and measures undertaken to improve the occupational health and safety of

employees• General statements on industrial relations within VPCM and details of time lost through industrial accidents

and disputes• A list of major committees sponsored by VPCM, the purposes of each committee and the extent to which

the purposes have been achieved• Details of all consultancies and contractors including consultants/contractors engaged, services provided;

and expenditure committee to for each engagement.

The number of disclosures made by an individual to VPCM and notified to the independent Broad-based Anti-corruption Commission

2016-17 2015-16

Assessable disclosures Nil Not applicable


Attestation for compliance with Ministerial Standing Direction 3.7.1In accordance with Standing Direction 3.7.1 of the Minister for Finance, I, James Cain, certify that Victorian Ports Corporation (Melbourne) has risk management processes in place consistent with the Australian/New Zealand Risk Management Standard (AS/NZS ISO 31000:2009) and an internal control system is in place that enables the executive of Victorian Ports Corporation (Melbourne) to understand, manage and satisfactorilycontrolriskexposures.TheBoardverifiedthisassuranceandthattheriskprofileofVictorianPorts Corporation (Melbourne) has been critically reviewed within the last 12 months.

James CainChairman


Appendix A:

Charter and purpose PageFRD 22H Manner of establishment and the relevant Ministers 98FRD 22H Purpose, functions, powers and duties 12-14FRD 22H Nature and range of services provided 9

Management and structureFRD 22H Organisational structure 108

Financial and other informationFRD 10A Disclosure index 122, 123FRD 10A Application and operation of the Privacy and Data Protection Act 2014 (Vic) 120FRD 10A Ministerial Directions pursuant to Delivering Victorian Infrastructure (Port of Melbourne

Lease Transaction) Act 2016 (Vic)98, 99

FRD 10A Statement of Corporate Intent pursuant to Section 79Q of the Transport Integration Act 2010 (Vic)

124-128

FRD 22H Occupational health and safety policy 112FRD 22H Employment and conduct principles and workforce data 114

FRD 22H Summaryofthefinancialresultsfortheyear 22FRD 22H Significantchangesinfinancialpositionduringtheyear 20, 21FRD 22H Operational and budgetary objectives and performance against objectives 124-128FRD 22H Subsequent events 91FRD 22H Application and operation of Freedom of Information Act 1982 (Vic) 118FRD 22H Compliance with building and maintenance provisions of Building Act 1993 (Vic) 118FRD 22H Statement on National Competition Policy 119FRD 22H Application and operation of the Protected Disclosure Act 2012 (Vic) 119FRD 22H Details of consultancies over $10,000 117FRD 22H Details of consultancies under $10,000 117FRD 22H Analysisofoperatingresultsandfinancialposition 20-22, 24, 25FRD 22H Disclosure of ICT expenditure 117FRD 22H Statement of availability of other information 120FRD 25C Victorian Industry Participation Policy disclosures 117FRD 30C Standard Requirements for the design and print of annual reports 1-128

Standing Directions of the Minister for Finance under the Financial Management Act 1994 (Vic) – other informationSD 2.2 (f) Audit Committee - independence of committee members 106SD 3.7.1 Victorian Government Risk Management Framework Attestation 121

Financial ReportSD 5.2.1 (a) Comprehensive Operating Statement 24SD 5.2.1 (a) Statement of Financial Position 25SD 5.2.1 (a) Statement of Changes in Equity 26-28SD 5.2.1 (a) Statement of Cash Flows 29


Other requirements PageSD 5.2.1 (a) Notestofinancialstatements 30-93SD 5.2.1 (a) Compliance with Financial Reporting Directions 24-94SD 5.2.1 (a) Compliance with Australian accounting standards and other authoritative pronouncements 24-94SD 5.2.2 (a) Accountableofficer’sdeclaration 94SD 5.2.2 Rounding of Amounts 41

Other disclosures as required by Financial Reporting Directions in the notes to the financial statementsFRD 03A Accounting for Dividends 22, 28, 91FRD 17A LongServiceLeave,WageInflationandDiscountRates 39FRD 21C Responsiblepersons,ExecutiveofficersandotherPersonnelintheFinancialReport 79, 80FRD 100A Financial Reporting Directions - Framework 30, 94FRD 103F Non-Current Physical Assets 59-66FRD 105B Borrowing Costs 70FRD 106A Impairment of Assets 34FRD 108C ClassificationofEntitiesasFor-Profit 30FRD 109A Intangible Assets 37, 67FRD 110A Statement of Cash Flows 29FRD 112D DefinedBenefitSuperannuationObligations 40, 73-78 FRD 114B Financial Instruments 37, 81-87FRD 119A Contributions by Owners 40, 70FRD 120K Accounting and Reporting Pronouncements applicable to the 2016-17 Reporting Period 42, 43

Legislation PageBorrowing and Investment Powers Act 1987 (Vic) 70Building Act 1993 (Vic) 119Delivering Victorian Infrastructure (Port of Melbourne Lease Transaction) Act 2016 (Vic) 9, 10, 15, 24-26,

28, 29, 49, 50Emergency Management Act 2013 (Vic) 15Emergency Management Amendment (Critical Infrastructure Resilience) Act 2014 (Vic) 15Financial Management Act 1994 (Vic) 1, 30, 40, 79, 84,

94, 106Freedom of Information Act 1982 (Vic) 118Marine Safety Act 2010 (Vic) 9, 12, 13, 15Port Management Act 1995 (Vic) 9, 12, 13, 16, 17Privacy and Data Protection Act 2014 (Vic) 120Protected Disclosure Act 2012 (Vic) 119Transport Integration Act 2010 (Vic) 1, 9, 12, 16, 30,

41, 48, 98, 124, 125

Transport Integration Amendment (Head, Transport for Victoria and Other Governance Reforms Act 2017 (Vic) 9, 16, 98Victorian Industry Participation Policy Act 2003 (Vic) 117Corporations Act 2001 (Cwlth) 48Income Tax Assessment Act 1936 (Cwlth) 33Income Tax Assessment Act 1997 (Cwlth) 33Fair Work Act 2009 (Cwlth) 114

Superannuation Guarantee (Administration) Act 1992 (Cwlth) 40

Disclosure index


Appendix B:

VPCM has been required to prepare the following Statement of Corporate Intent under the Transport Integration Act 2010 (Vic) (TIA).

VPCM is undergoing a foundation period following the Port of Melbourne Lease Transaction, becoming anorganisationresponsibleforamodifiedsetofportfunctionsandactivitiesfromitspredecessor,PortofMelbourne Corporation.

VPCM overview and assetsVPCM is a statutory authority created by the Victorian Government following the successful completion of the lease of the Port of Melbourne Corporation commercial operations. This transaction is commonly referred to as the Port Lease Transaction (PLT). VPCM commenced operations on 1 November 2016.

VPCM has assumed responsibility for those functions and activities which remain with the State, including VesselTrafficServicesforsafenavigation,watersideemergencymanagement,towageregulationandmanagement of the Station Pier terminal and West Finger Pier. Station Pier is Victoria’s primary cruise vessel and Tasmania passenger ferry terminal.

On 12 April 2017, Transport for Victoria (TfV) was established as the umbrella entity and lead agency for the planning, management and coordination of Victoria’s transport system. VPCM is a transport sector agency of TfV.

Corporate planning frameworkVPCM has developed an integrated corporate planning framework which is presented in Table 1. The framework involves the consideration of corporate strategy and is primarily driven by policies, legislation and the external and internal environment. This framework provides direction and strategic choice for each level of business planning.

Table 1 – VPCM corporate planning framework

External Guiding direction Government legislation, regulation and policiesOperating and strategic

environmentExternal and internal environmental factors that affect VPCM’s strategic

considerations and directionInternal Corporate strategic

directionMinisterial strategic

directionsBoard strategic

directionsCorporate mission, vision and values

Corporate planning framework

Corporate Plan Statement of Corporate Intent

Implementation framework

Strategic initiatives delivery and outcomes

Collaborative initiatives with Government

Ongoing operational plans, policies and

processesPerformance monitoring

and reportingQuarterly Business

Performance Reports

VPCM key performance indicators and benchmarks


Statement of Corporate Intent

Corporate opportunities and challengesVPCM faces a number of challenges and opportunities following the changes to structure and responsibilities resulting from the PLT.

• Focus on customers - 2017-18 will be a foundation year for VPCM, building on the changes from 2016-17 and working on the opportunities afforded by a more concentrated focus on our key customers for marine and navigation services and the growing cruise industry.

• Focus on stakeholders - it is important that planning for operational and strategic objectives must be based on understanding, engagement and collaboration with a wide range of Government, industry and community stakeholders.

Corporate planning framework mapTable 2 – Select VPCM corporate planning framework map elements

Strategic objectives Corporate delivery focus Major 2017-18 activities, projects and deliverables

Objective 1:Safety, security & sustainability

Prioritising safety in all activities and ensuring that the port is physically secure and operations are conducted in a sustainable manner.

Provide a safe VPCM working environment for VPCM people and network users and protect the port environment from environmental and security threats and hazards.

Objective 2:Commercial focus

•Maintainingfinancialsustainabilityso VPCM is positioned to pay a Dividend to the State in accordance with s161 of the TIA.

• Ensuring VPCM is structured and resourced to operate on a commercial basis and make a profittopaytherequiredlevelofDividend when directed.

Deliver a dividend to the State as directed.

Objective 3:Customer focus

Focusing on stakeholder needs and requirements, particularly regarding Station Pier, marine and navigation services and contractual relationships with the Port of Melbourne Operator.

Deliver marine, navigation and port services to transport network users.

Objective 4:Productivity focus

Delivering value to our customers andstakeholdersthroughefficientinternal systems, processes and innovation.

Manage Port of Melbourne waters and channels in Port of Melbourne waters on afairandreasonablebasisandefficientlymanage Station Pier and the West Finger Pier.

Objective 5:People, Culture & Community focus

Focusing on VPCM people, culture and our community responsibilities.

Provide an effective VPCM workplace and port community organisation.


Strategic initiativesForthe2017-18financialyear,VPCMwillconcentrateontwostrategicinitiativeswhichreflectouractivitiesand objectives resulting from the PLT.

• Vessel Traffic Services upgrade TheVesselTrafficServices(VTS)istheprimaryriskmitigationmeasureusedtoenhancethesafetyofvessels within the port waters of the Port of Melbourne. VPCM is currently undergoing a review of the existing VTS systems with a view to update a range of systems and associated equipment to modernise the service.

• Cruise vessel and Tasmanian ferry capacity enhancement The growth in both the cruise industry and the Tasmanian ferry service necessitates planning for increased capacity to cater for greater numbers and size of cruise vessels visiting the region. Enhanced capacity will ensureVictoriacancontinuetobenefitfromthissegmentofthetourismindustry.

Risk managementVPCM maintains a comprehensive corporate risk management framework which is integrated into all business planning and activities, including corporate planning. The key elements of the VPCM risk management framework include the:

• Risk Management Policy - the policy provides a structured and consistent approach to risk management across the corporation which aligns strategy, processes, people, technology and knowledge. The purpose of the policy is to evaluate and manage the uncertainties which VPCM is facing

• Risk Management Plan and Procedures – the plan and procedures include details regarding the applicationofriskmanagementatcorporateanddivisionallevelsandalsoforsignificantprojects.VPCMuses the processes and procedures outlined within these documents to evaluate and prioritise the risk within the VPCM operating and business context

• Corporate and Project / Program Risk Registers – the registers hold the risk management information relevant to the respective business level and activity and are informed by annual risk management assessments. VPCMcontinuouslyundertakesinternalreviews,updatesandrefinementsofthisriskmanagementframework which are complemented with external strategic reviews as required.

Performance indicators and metricsVPCM has developed an integrated set of Key Performance Indicators (KPIs) and metrics which are used to assesstheeffectivenessandefficiencyoftheoperationsofVPCM.TheKPIsaremetricswhicharelargelyorfully under the control of VPCM.


Table 3 - Summary of VPCM Key Performance Indicators

Key Performance Indicators (KPIs)

Definitions Reporting frequency

Strategic Objective 1 – Safety, security & sustainability focusAll Injury Frequency Rate (AIFR) The AIFR is calculated as the total injuries in a set period.

Injury categories included are lost time injuries, medical treatment injuries, and restricted work injuries.

Quarterly

VPCM reportable security regulation breaches

Number of VPCM reportable security regulation breaches during the period.

Quarterly

Reportable environmental regulation breaches

Number of VPCM reportable environmental regulation breaches during the period.

Quarterly

Strategic Objective 2 – Commercial focusVPCMOperatingProfit VPCMwillachieveanoperatingprofit. Quarterly

VPCM Return on Capital Employed (ROCE)

Adjustednetoperatingprofitaftertaxdividedbytheaveragetotal capital employed at the end of the period.

Quarterly

VPCM Debtor Management VPCM will maintain strict trading terms with its customers and maintain no outstanding debts receivable greater than 60 days.

Quarterly

VPCM gearing ratio Total adjusted borrowings divided by equity at the end of the period.

Quarterly

VPCM interest cover ratio Freefundsfromoperationsdividedbynetfinancecharge. Quarterly

VPCM leverage ratio AmeasureofVPCM’sabilitytomeetitsdebtfinancingobligations calculated as: Total adjusted borrowing divided by(freefundsfromoperationsplusnetfinancechargespluscapitalised lease interest).

Quarterly

Board approval of annual risk attestation

Board approval of the annual risk attestation for inclusion in the VPCM Annual Report.

Annually

Board approval of Critical Infrastructure Annual Statement of Assurance

Board approval of submission of annual Statement of Assurance to the Minister for Ports.

Annually

Strategic Objective 3 – Customer focus

Customer Reputation The reputation of VPCM with customers will be calculated from customer survey data to be collected annually.

Annually

Paymentoffinancialpenalties The Port Operations Service Deed between VPCM and Port of Melbourne includes provision for payment of penalties for non-compliance in delivery of services to the Port of Melbourne.

Annually


Key Performance Indicators (KPIs)

Definitions Reporting frequency

Strategic Objective 4 – Productivity focusPercentage of critical VPCM marine and navigational system availability – Dynamic Under Keel Clearance (DUKC)

Percentage availability of the DUKC during the period. Quarterly

Percentage of critical VPCM marine and navigational system availability – VTS System

Percentage availability of the VTS during the period. Quarterly

Trade volume The volume of cargo transhipped through VPCM facilities. Annually

Strategic Objective 5 – People, culture & community focusEmployee engagement and alignment

VPCM employee engagement and alignment with the corporate goals.

Annually

Community Reputation VPCM reputation in the community. Annually

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Victorian Ports Corporation (Melbourne)

Street addressLevel 5, 530 Collins StreetMelbourne Victoria 3000

Australia

Postal addressGPO Box 261

Melbourne VIC 3001Australia

Tel: +61 3 8347 8300 Fax: +61 3 8347 8301

www.vicports.vic.gov.au