Report by Chair of the Budget and Management Committee

Transcription

1 2014/CSOM/027 Agenda Item: 7 Report by Chair of the Budget and Management Committee Purpose: Consideration Submitted by: BMC Chair Concluding Senior Officials Meeting Beijing, China 5-6 November 2014

2 Executive Summary This report provides an update to Senior Officials on the inter-sessional work of the Budget and Management Committee since its second meeting held on July 2014 and provides a summary of the key outcomes achieved in Actions Required of SOM Senior Officials to: Recommend for AMM s approval the 2015 Administrative Account budget and the corresponding level of Members Contributions in 2015 (paragraph 3); Approve the Protocol on the Management of APEC Project Funding for implementation starting from 2015 (paragraph 5); Approve the investment policy statement and note the subsequent actions by the Secretariat (paragraph 8); and Note this report by the BMC Chair.

3 Report by the Chair of the Budget and Management Committee to the Concluding Senior Officials Meeting Beijing, China 5-6 November 2014 Mr Chairman, This report updates Senior Officials on the inter-sessional work of the Budget and Management Committee (BMC) since its second meeting held on July 2014 in the APEC Secretariat and provides a summary of the key outcomes achieved in I. Budget and Financial Management 2015 Secretariat s Budget and Members Contributions 2. Senior Officials endorsed the 2015 Administrative Account budget (Annex A) and the corresponding level of the 2015 Members Contributions (Annex B) in SOM3 held in Beijing in August The endorsed 2015 budget at S$5,888,500, which includes an ad hoc budget item for the recruitment of Fixed-term Executive Director next year, represents a reduction of 1.9% compared with the approved 2014 budget (S$6,002,100). This reduction is mainly due to the lower travel cost in view of the hosting location in The proposed rates of the 2015 Members Contributions in a mix of Singapore Dollars (for Administrative Account) and US Dollars (for Operational Account) were drawn up in accordance with the principles endorsed by Senior Officials at SOM2 in 2009 governing the computation of membership contributions from economies. 3. BMC invited and Senior Officials agreed in SOM3 to recommend to AMM the approval of the 2015 Administrative Account budget and Members Contributions. Voluntary Contributions for APEC Project Funding 4. Noting the depletion of APEC project funding mainly in the untied funds in the Trade and Investment Liberalisation Special Account (TILF) and the APEC Support Fund (ASF) General Fund, and the very limited number of projects being funded in 2014, Senior Officials approved, on BMC s recommendation, in SOM3, 2014 a modus operandi for coordinating voluntary contributions from member economies (Annex C) for implementation with effect from 1 January In addition, subsequent to the BMC2 meeting in July 2014, the Secretariat has prepared a document summarising other views and ideas from member economies regarding how APEC project funding should be managed. BMC has considered inter-sessionally and endorsed this document titled Protocol on the Management of APEC Project Funding (Annex D). BMC invites Senior Officials to approve it in CSOM for its implementation together with the modus operandi starting from Financial Realignment Phase 2 6. BMC recommended and Senior Officials approved in SOM3, 2014 the recommendations under the consultancy study by the PricewaterhouseCoopers Management Consulting (Singapore) Pte Ltd, sponsored by the US-APEC Technical Assistance to Advance Regional Integration (US-ATAARI), for phase 2 of the financial realignment exercise embarked on by BMC in BMC has refined and endorsed inter-sessionally the investment policy statement proposed by the consultant (Annex E), on the understanding that the Secretariat does not have an existing policy regarding fund management. As per the suggestion of a member economy, the Secretariat will assess the overall investment strategy and bring up this investment policy statement, after closing the accounts for each financial year, for BMC to review and approve inter-sessionally its implementation on an annual basis.

4 8. BMC invites Senior Officials to approve the investment policy statement and note the subsequent actions by the Secretariat. Subject to CSOM s approval, this financial realignment exercise will be completed and the Secretariat will continue to follow up all recommendations agreed in this exercise. II. Project Management Project Selection 9. BMC agreed to pilot a new system of selecting projects for funding. The aim of the new system is to promote greater transparency and consistency in project prioritisation and ranking, and to ensure stronger alignment between the priorities of working groups/sub-fora and priorities that are determined at committee level. The main feature of the new system is that member economies, at both the committee and working group/sub-fora level, will use scoring templates to allocate points to each concept note against a standard set of agreed assessment criteria. 10. A limited pilot of the new system was undertaken during project approval session 1, It confirmed that the new system can provide a better approach to project selection. BMC agreed to expand the pilot for use by all economies at the working group, sub-fora and committee level during Project Session 1, 2015 to further test its feasibility and impact. Based on the outcomes of this expanded pilot, the new system could be permanently adopted. Project Approval Sessions 11. BMC agreed to undertake two project approval sessions in 2014 as a pilot, instead of the usual three. The aim of the pilot was to see whether a reduction in project approval sessions led to an increase in member engagement in the project process. It was noted that reducing the number of sessions should not result in a reduction in the number of project concept notes submitted by member economies for consideration. 12. The outcomes of the pilot were an increase in member engagement in ranking and prioritising project concept notes, and an increase in the number of days available to project overseers to work with the Secretariat on project quality issues. The number of project concept notes submitted in the pilot was higher than the number submitted across three sessions in On the basis that the pilot met its intended aims, BMC agreed to continue with two project approval sessions from Project approval session 1, 2014 was completed in June The selection process was undertaken in accordance with the ranking and prioritisation system for APEC projects approved by BMC in A total of 125 Concept Notes were submitted for funding and 27 standard projects were approved for funding at a total cost of US$3.1 million. 14. Project approval session 2, 2014 commenced in July A total of 99 Concept Notes were submitted for funding and BMC has approved in-principle 44 standard projects for funding at a total cost of US$6.4 million. The process of developing the concept notes into project proposals for final BMC approval will be completed by December III. Chair and Vice-Chair in Indonesia will hand over the chairmanship of BMC to China, with the Philippines taking up the position of Vice-Chair, in Indonesia BMC Chair 2014 October 2014

5 Page 1 of 3 Annex A Proposed 2015 Budget for Administrative Account/Asset Replacement Fund Approved Proposed Y-o-Y 2014 Budget 2015 Budget Change (S$) (S$) (%) (1) TRAINING/SEMINARS 1.1 Course fees, registration fees and related items 18,900 19,300 2% (2) PUBLISHING/COMMUNICATIONS 2.1 Publishing Publication of APEC Literature (e.g APEC Brochure) 37,800 33, Publication of APEC Committee Reports 15,800 16,100 53,600 49,400-8% 2.2 Communications Website Redevelopment and Electronic Publishing 67,100 91, Support for media and outreach programs 53,100 64, External Hosting for Publications 2,700 2, Host Economy Communications Training - 45, , ,700 66% 2.3 Salaries and Bonus 714, ,400-3% Total for Publishing/Communications expenditure 890, ,500 6% (3) LIBRARY 3.1 Subscriptions (e.g. newspapers,journals,etc) 4,000 4, General reference books/encyclopedia 1,400 1, Databases (electronic information) 24,400 24,900 29,800 30,300 2% (4) PUBLIC RELATIONS 4.1 Official functions/receptions 58,300 4, Exhibitions/APEC Promotional items 7,000 3,200 65,300 7,600-88% (5) MEETING SUPPORT 5.1 Meetings at the Secretariat 1, % (6) EQUIPMENT 6.1 Office Furniture and Equipment 25,000 44, Computer 5,000 5, Motor Vehicle ,000 49,000 63% (7) TRAVEL 7.1 Executive Director SOM & Related Meetings, AMM, AELM 49,100 45, Ministerials, FMP and WGs 109,800 91, Outreach 29,400 29, , ,400-12%

6 Proposed 2015 Budget for Administrative Account/Asset Replacement Fund Page 2 of 3 Approved Proposed Y-o-Y 2014 Budget 2015 Budget Change 7.2 Professional and Support Staff SOM & Related Meetings, AMM, AELM 646, , Ministerials, FMP and WGs 232, , Outreach 43, , , ,800-18% Total for Travel expenditure 1,110, ,200-17% (8) PERSONNEL 8.1 Recruitment costs for support staff 5,700 10, Insurance 55,200 56, Recruitment cost for FTED - 108,400 60, , % (9) RESEARCH AND ANALYSIS 9.1 SCE independent accessment of fora 224, ,100-37% (10) ADMINISTRATIVE SUPPORT 10.1 Communications Fax charges 2,100 1, Telephone 40,200 35,000 42,300 36,500-14% 10.2 Professional Fees Audit fee 25,000 25, Legal & Professional fees 8,500 8,700 33,500 34,200 2% 10.3 Maintenance/Insurance of Vehicles Insurance 8,500 5, Vehicle running expenses 17,100 9,000 25,600 14,500-43% 10.4 Stationery Photocopying charges and paper 8,800 8, Printed stationery and others 12,400 12,600 21,200 20,600-3% 10.5 Postage and courier charges 15,500 15,000-3% 10.6 Office and Building maintenance Office supplies 1,900 1, Office maintenance 20,600 20, Utilities 175, , Insurance 8,500 7, Building maintenance 123, , Security charges 67,000 68, , ,900 5% 10.7 Others Local transport, overtime meals, etc. 9,800 8, Bank Charges 2,100 2, Other Expenses 1,300 1, Staff Welfare 10,300 10,500 23,500 22,500-4%

7 Proposed 2015 Budget for Administrative Account/Asset Replacement Fund Page 3 of 3 Approved Proposed Y-o-Y 2014 Budget 2015 Budget Change 10.8 Salaries and Bonus Fixed-Term Executive Director 519, , Administration 1,023,100 1,213, Project Management 724, ,800 2,267,800 2,391,500 5% Total for Administrative Support expenditure 2,826,100 2,949,700 4% (11) INFORMATION TECHNOLOGY 11.1 Operational Costs Telecommunications lines and service charges 66,000 67, Maintenance of Hardware 43,700 24, Maintenance of Software 164, , Others 1,100 1, , ,900-16% 11.2 Development Costs New Projects 30,700 42, Upgrading 77, ,000 42,100-61% 11.3 Miscellaneous Expenses Computer accessories, CD Rom, etc 7,300 7,300 0% 11.4 Salaries and Bonus 353, ,000 5% Total for IT expenditure 744, ,300-12% TOTAL Contributions to Administrative Account (AA)(S$) 6,002,100 5,888,500-2% Add Provision for Asset Replacement Fund (ARF)(S$) * 163, ,400-16% Total AA/ARF Contributions Required (S$) 6,165,200 6,025,900-2% Computation in US$ terms TOTAL Contributions to Administrative Account (AA)(US$) 4,001,400 3,925,700 Add Provision for Asset Replacement Fund (ARF)(US$) 108,800 91,600 Total AA/ARF Contributions Required (US$) 4,110,200 4,017,300 Total Contributions to the Operational Account (US$) 889, ,700 Total Members' Contribution 5,000,000 5,000,000 * Details of the proposed provision for ARF is at Appendix

8 Annex A - Appendix TABLE 1: Consolidated Asset Replacement Provision Information Technology $107,666 Administration $29,756 Total $137,423 Less Rounding Adjustment ($23) Total ARF Proposed in 2015 AA Budget $137,400 Notes 1 Straight line allocation of historical cost. No further allocation will be made upon the end of the replacement cycle of the respective asset. 2 For breakdown by individual asset items of respective corporate units, please refer to Table 2 and Table 3 below. 3 ARF provisions are indexed with inflation of 2%. 2.00% TABLE 2: Asset Replacement Provisions - Information Technology 2015 Desktops and Laptops 1 $17,666 Servers 2 $59,201 Infrastructure Equipment 3 $28,688 Total $105,555 Total (inflation adjusted) $107,666 Replacement cycle 1 Laptop - 3 years; Destops and Monitors - 4 years 2 Servers - 6 Years. This will be adjusted to 5 years starting from 2015, given the warranty of most servers are up to 5 years and the cost for additional coverage afterwards is high. 3 Infrastructure Equipment - 8 Years. This include routers, network switches, wireless access points, etc. TABLE 3: Asset Replacement Provisions - Administration 2015 Motor Vehicles 1 ED's Car $0 Office Van $7,190 Office Equipment 2 Telecommunication Systems $3,125 Ceiling Mounted Screen $2,184 Projector $1,617 Microphone System $2,837 Furniture & Fixtures Carpeting 3 $4,400 Conference Room Chairs 4 $1,820 Office Chairs 5 $6,000 Total $29,173 Total (inflation adjusted) $29,756 Replacement cycle 1 Motor Vehicles - 6 Years 2 Telecommunications Equipment/Systems - 8 Years; Office/Audio/Video Equipment - 6 Years 3 Carpeting - 5 Years 4 Conference Room Chairs - 10 Years 5 Office Chairs - 8 Years

9 Proposed 2015 Members Contributions Annex B Economy 2015 Members Contributions Total Members' Percent Contributions Contributions Contributions Share to Administrative to Operational Account Account (US$) (%) (S$) (US$) [a] [b] [b]% x total [c] = [c] [a] - ([c]/1.5) = [d] 1 Japan 901, ,084, ,900 2 United States of America 901, ,084, ,900 3 Canada 453, ,600 88,600 4 China 387, ,400 76,100 5 Australia 335, ,700 65,900 6 Republic of Korea 298, ,500 59,000 7 Chinese Taipei 236, ,000 46,000 8 Russia 202, ,400 39,700 9 Mexico 201, ,200 39, Hong Kong, China 137, ,700 26, New Zealand 137, ,700 26, Singapore 137, ,700 26, Brunei 75, ,400 14, Chile 75, ,400 14, Indonesia 75, ,400 14, Malaysia 75, ,400 14, Papua New Guinea 75, ,400 14, Peru 75, ,400 14, Philippines 75, ,400 14, Thailand 75, ,400 14, Viet Nam 75, ,400 14,700 Total 5,000, ,025, ,700

10 Annex C Page 1 of 2 Modus Operandi for Coordinating Voluntary Contributions from Member Economies for APEC Projects 1. Objective One of the core objectives of APEC is capacity building, which is achieved mainly through the implementation of APEC projects. The objective of coordinating voluntary contributions from member economies is to address the challenges of APEC project funding identified, particularly the shortfall of untied funds, even for project applications of high priority to APEC, in the Trade and Investment Liberalisation and Facilitation Special Account (TILF) and APEC Support Fund (ASF) General Fund. 2. Broad Framework APEC member economies have different capacities to provide financial contributions for APEC projects, and making voluntary contribution is an internal decision of an economy. Nonetheless, given the substantial need for more funding, particularly untied funding for APEC projects, all economies are encouraged to make voluntary contributions to TILF and ASF General Fund, with a view to reaching an aspirational target for voluntary project funding per year collaboratively. To this end, starting from 2015, the Secretariat will compute the value of the aspirational target for voluntary project funding annually in January of the year for endorsement at BMC1 and approval by SOM. Subject to SOM s approval, the Secretariat will send letters to the Senior Officials of all economies to appeal for voluntary contributions for APEC projects to meet the aspirational target of the year. The Secretariat will provide an updated position of the voluntary funding vis-à-vis the aspirational target of the year to BMC2 for further report to SOM. 3. Aspirational Target for Voluntary Project Funding The greatest shortfall of APEC project funding is in the two untied funds, i.e. TILF and ASF General Fund. After reviewing the aspirational target of 2014 (US$6.3 million), which has been met as at end June 2014 but comprises only US$1.8 million for untied funds, it is recommended to refine and simplify the formula approved in CSOM, 2013 (Annex C to 2013/CSOM/002) by setting a target only for untied funds, as follows (a) The baseline level of annual aspirational target for untied funds is pitched at the average level of voluntary contributions from economies to TILF and ASF General Fund per year starting from 1997 and up to end 2013, i.e. US$3.7 million per year. Level of total untied funds (TILF + ASF General Fund)

11 2014/CSOM/XXX Annex C Page 2 of 2 (b) The aspirational target is coordinated in a three-year horizon on a rolling basis, i.e. US$11 million in three years. This multi-year target allows for inter-year flexibility and may differ based on the surplus above or deficit below the baseline level of US$3.7 million in the previous year. (c) The formula for computing the aspirational target in January annually is: US$11 million (minus) (add) (over) Surplus above the baseline level of US$3.7 million in the previous year OR Deficit below the baseline level of US$3.7 million in the previous year Three years = Aspirational target for voluntary untied project funding of the year For illustrative purposes, if the formula is applied this year, the aspirational target of 2014 will start with US$3.7 million. Assuming the level of total voluntary contributions to untied funds this year remains at US$1.8 million, the deficit below the aspirational target of this year will be: US$3.7 million - US$1.8 million = US$1.9 million. Hence, the aspirational target of 2015 from economies to TILF and ASF General Fund would be: (US$11 million + US$1.9 million)/3 = US$4.3 million. (d) To tie in with the three-year planning horizon, and as approved in CSOM, 2013, the value of projects to be approved under TILF and ASF General Fund per year will be capped at 1/3 of the funding available as at the end of the previous years, having deducted funds required for multi-year projects (unless the funding available in the respective funds is at or below US$1.5 million). This will ensure that the available funding for APEC projects, including the balances remained in the respective accounts and any new voluntary contributions from economies, will be smoothed out in three years. 4. Others In addition to the voluntary untied funding, member economies will continue to allocate their annual contributions to the Operational Account 1 (OA) after meeting the Administrative Account 2 budget requirements, as approved by BMC and endorsed by SOM in Measures to enhance the sustainability and predictability of the project funding in OA are proposed separately under the Financial Realignment of the APEC Secretariat Phase 2 (2014/BMC2/011). Voluntary contributions from member economies to selected areas under ASF sub-funds, if any, will continue to be welcomed. These tied funds, however, will not be counted as meeting the above aspirational target for untied funds. Similarly, the cap on the value of projects to be approved per year will not be applied to the tied funds. Member economies also acknowledge the additional funding of the Effectiveness Grant provided by Australia for APEC s project management work; the in-kind contributions of Singapore to support the operation of the APEC Secretariat in Singapore; and the in-kind contributions of the United States under the project of US-APEC Technical Assistance to Advance Regional Integration (US-ATAARI) to strengthen the capacity of the Secretariat and support the capacity building efforts of economies. - End - 1 To be renamed as General Project Account. 2 To be renamed as Secretariat Account.

12 Annex D Page 1 of 3 Protocol on the Management of APEC Project Funding In addition to the modus operandi for coordinating voluntary contributions approved by Senior Officials at SOM3 held on August 2014 in Beijing, China (Annex G to 2014/SOM3/038), BMC considers it appropriate to lay down further the protocol on the management of APEC project funding for SOM s approval, with a view to providing clear guidance for member economies and the Secretariat on ensuring sustainability and efficient use of the project funds. Details of the protocol are set out below. 1. Encourage further untied contributions from member economies to TILF and ASF General Fund In line with the objective of the modus operandi for coordinating voluntary contributions to address the shortfall of untied project funding, member economies are encouraged to contribute to TILF and ASF General Fund to first meet the aspirational target for untied project funding each year before considering making tied contributions to ASF sub-funds. This would provide reassurance and demonstrate the commitment of member economies to responding to the challenges faced by sub-fora and working groups of not being able to receive funding for projects which directly align with APEC agreed priorities of the year, even at priority one. 2. Encourage contributors to consider channelling their unutilised tied contribution in ASF sub-funds to ASF General Fund and/or TILF where funding sources allow for this As endorsed by BMC2 and approved by SOM3 in 2013, when the funding level in an ASF subfund has been depleted to US$100,000 or below without any pledges for new contributions, the Secretariat will seek the agreement of the contributors to reallocate the balance left in the subfund to ASF General Fund and cease the sub-fund (Annex F to 2013/SOM3/016). Further to this, contributors are also encouraged to regularly review and consider re-dedicating their tied funds to the untied APEC project accounts where funding sources allow for this. To facilitate the process, the Secretariat will send letters to the Senior Officials of the respective donor economies 1 in the first quarter of each year to inform them of the value of any unutilised funds in ASF sub-funds and invite them to consider channelling the tied funds to ASF General Fund and/or TILF, provided that they have the flexibility in reallocating their contribution. If they have such flexibility and a positive indication is given, other existing contributors (if any) to the sub-fund will be consulted on this. After a consensus is reached by all the contributors concerned, the re-dedication will be effected by the Secretariat upon the end of the project sessions of the year. The resultant changes to the funding availability in the relevant funds will also be reported to BMC. 3. Encourage the implementation of more self-funded projects which go along with APEC priorities as confirmed and endorsed by their respective working groups/sub-fora APEC has a long established practice of allowing fully self-funded projects be implemented at any time as endorsed by their respective working groups/sub-fora. Member economies are encouraged to implement more self-funded projects under this existing mechanism, in addition to making voluntary contributions for APEC projects. Those implementing self-funded projects are also strongly encouraged to provide cover sheets and subsequent completion reports to be included in the APEC Project Database by the Secretariat. This will help capture the breadth of work being done to advance APEC priorities, whether funded through APEC or self-funded. Member economies will continue to review and provide comments on the self-funded projects through the working groups/sub-fora to ensure that they align with APEC priorities. 1 If an ASF sub-fund comprises a pool of contributions from more than one donor, the source(s) of the unutilised funding in the sub-fund will be attributed to the biggest donor(s) among them.

13 2014/CSOM/XXX Annex D Page 2 of 3 4. Enhance the co-funding of APEC-funded projects For projects receiving APEC funding, there are existing self-funding requirements only for those funded by TILF, but not by any other funds. To economise on the use of APEC project funds and avoid over-budgeting of the projects 2, and with reference to the approved ceiling applied to multiyear projects 3, the approved budget of a standard project applying for funds will be subject to a ceiling of US$150,000 for ASF General Fund or US$100,000 for TILF 4 (both not inclusive of any self-funding/co-funding portion of the project) with effect from 1 January This ceiling may be reviewed by BMC as and when circumstances change. Regardless of whether the APEC funding requested is above or below the ceiling, member economies are encouraged to co-fund the projects that they submit through financial contributions and/or in-kind contributions on a voluntary basis. 5. Encourage host economies to arrange free provision of venues for projects within the programs and layouts of bigger APEC events This idea is welcomed by the incoming host in 2015, the Philippines, and could be followed in the subsequent years if consent from the respective host economy is granted. Member economies are also encouraged to inform the host, via the Secretariat, well in advance of proposed workshops to assist the planning and budgeting needs of the respective host. 6. Encourage economies to organise back-to-back APEC-funded events of the same theme Organising APEC-funded events of the same theme say, for example, on SME in one city and in the same week could help reduce travel costs. Member economies are encouraged to enhance coordination at the working group/sub fora level in this regard when the concept notes and project proposals are being prepared or prioritised. 7. Promote the implementation of joint projects between working groups/sub-fora and with other appropriate organisations APEC can build on synergies by promoting the implementation of joint projects between working groups/sub-fora, for example, on issues on supply chains and connectivity which touch on a number of areas and the mandate of various working groups/sub-fora. Joint projects with other appropriate organisations, e.g. ABAC, PECC, etc., can also be considered by APEC on a caseby-case basis, although this is unlikely to be a major on-going source of saving or funding for projects. 8. Maximise sponsorship from sources other than member economies As an effort to maximise sponsorship to APEC, BMC endorsed and SOM approved in 2010 a set of revised Sponsorship Policy and Sponsorship Guidelines (Annex B to 2010/SOM3/017), which took effect from 1 January In line with BMC s decision in 2009 to reinforce the importance of the use of sponsorship, member economies are encouraged to explore and maximise appropriate forms of sponsorship from other sources in accordance with the approved guidelines. 2 The actual value of an APEC standard project funded by TILF/ASF General Fund is US$69,000 on average based on the data of projects expired in On the other hand, the average budget of a standard project approved under the two untied project funds increased from US$83,500 in 2009 to US$103,000 in 2012 and further rose to US$137,500 in As approved by BMC3 in 2010, the ceiling for the value of a multi-year project is US$500,000 for disbursement up to a maximum of five years. 4 The ceiling for TILF does not limit the size of TILF projects. If the total value of a project (including self-funding portion) exceeds US$125,000 for travel eligible economies and US$200,000 for nontravel eligible economies, it can be topped up by self-funding. For the avoidance of doubt, TILF contributors are required to provide self-funding for any project with a value in excess of the above amounts (US$125,000 and US$200,000 for travel eligible and non-travel eligible economies respectively). All funding criteria for TILF projects will follow the prevailing APEC Project Guidebook.

14 2014/CSOM/XXX Annex D Page 3 of 3 9. Reinforce the Secretariat through in-kind contributions Member economies will continue to consider making in-kind contributions, e.g. seconding additional staff/researchers, sending equipment to the Secretariat, etc., to reinforce the Secretariat on a case-by-case basis. - End -

15 Investment Policy Statement Annex E Investment Policy Statement I. Purpose & Scope The purpose of the following guidelines approved by the Budget and Management Committee (BMC) of APEC, are to: Establish the responsibilities, objectives, guidelines and eligible securities relating to any investments owned or controlled by the APEC Secretariat (organization). Identify criteria against which performance of the organization s investments will be measured. Communicate investment objectives to the Executive Director, Finance Director and other stakeholders that may have involvement. Serve as a document of reference for guidance in the monitoring and disposition of the organization s investments. Investment funds refer to committed and uncommitted reserves, however the source of such funds and their intended eventual application will determine their investment horizon and this is outlined below. II. Roles & Responsibilities The BMC will provide oversight in evaluating investment performance and decisions of the Executive Director. The BMC has ultimate fiduciary responsibility for the investment of funds and ensuring the appropriate policies are implemented and enforced. The allocation and timing of funds to be invested into securities will be at the discretion of the Executive Director, on the recommendation of the Finance Director. The Executive Director and the Finance Director are to exercise prudent and appropriate care. They will also be responsible for the recording and reporting of investment performance to the BMC and the SOM. III. Investment Principles & Objectives Investments of money not needed for immediate requirements of financing APEC projects and the Secretariat itself may be made by the Secretariat, having regard to the needs of the liquidity of funds. The Secretariat should adhere to prudent standards that will guarantee the preservation of principal sum invested. Returns from investments made by the Secretariat should attempt to offset the effects of inflation. Revenue derived from investments shall be credited as investment revenues of the Secretariat account or the APEC project accounts concerned to be used for the purposes of the respective funds. Investment losses, if any, must be accounted for in accordance with the Singapore Financial Reporting Standards and reported to the BMC as soon as possible following the established financial reporting procedure. Investment losses shall be borne by the respective funds from which the principal amounts were obtained and subject to audit by external auditors appointed by the BMC. Investments of the Secretariat will not have a holding period of more than 9 months to allow for liquidity to fund APEC projects and the Secretariat s contingent expenditure as and when the need arises. 1

16 Investment Policy Statement Annex E IV. Investment Strategy & Asset Allocation Funds will be deployed with a preservation of principle strategy which ensures that the Secretariat will always maintain funds to carry out operations and that there will be no erosion of funds (as a result of investment decisions). Asset allocation will only be permissible in fixed deposit and securities issued by the governments or related authorities of the 21 APEC member economies that have been rated AAA / Prime investment grade by reputed international credit rating agencies. Committed reserves can only be invested into fixed deposits with a maximum duration of three months or held in current accounts to avoid potential liquidity issues. Uncommitted reserves may be invested into fixed deposits and government issued securities, e.g. treasury bills, for a maximum duration of 9 months. On an annual basis, the Secretariat should evaluate the different investment options available based on critical parameters such as investment period, rate of return, etc. This evaluation, together with the Secretariat s liquidity requirements should be used to finalize the portion of the Secretariat s investable funds that are to be allocated to each of the investment options. Investment horizon guide for APEC funds Maximum Investment Holding Duration Secretariat Account Reserve Funds ASF Sub Funds General Project Fund ASF General Fund TILF Reserve Funds in Excess of the Target Threshold Reserve Funds Below the Threshold Uncommitted Funds set aside for beyond Current Year Uncommitted Funds for use during the Current Year Months The assumptions of the above investment timelines are based upon the generally accepted norm for project funding approval sessions that currently occur bi-annually; session I in June/July and session II in November/December. Decisions of permissible investment horizons are based on the principle of ensuring liquidity at the time of convening these sessions to facilitate project approvals and related fund commitments. Investments horizons are calculated using current year and future year project funding needs that are decided during these project approval sessions. Uncommitted funds for the current year may have a maximum investment horizon of no more than three months. However uncommitted funds that have been set aside for use in future year(s), the maximum investment horizon can be either nine months or the time until project approval session for the next year (whichever occurs sooner). The maximum investment horizon should be at the discretion of the Executive Director on the recommendation of the Finance Director. Of the uncommitted general project funds available in the General Project Fund, the quantum of funds set aside to approve projects in the current year should be based on the historical average of annual project funding granted 2

17 Investment Policy Statement Annex E from the fund. Any excess uncommitted funds in the General Project Fund should be set aside for use during the subsequent year(s) to fund projects. V. Spending & Liquidity Investments should be made with ample foresight of the funding requirements during the year based on inputs from the budget, asset replacement fund requirement, cash flow monitoring, etc. to avoid liquidity constraints. Such requirements should be clearly stated every quarter to provide guidance for investment decisions and asset allocation. VI. Unique Circumstances In case of any conflict of interest, the Finance Director should notify the Executive Director and funds should be exited from the investment as soon as possible. The Executive Director and the Finance Director should adhere to these guidelines at all times, in the event of unforeseen circumstances mitigating actions may be employed at the Executive Director s discretion, subject to the BMC s approval. VII. Standards of Review & Evaluation Inflation matching returns should be targeted over the course of the year; however it is acknowledged that this objective may not be always achievable. The overall effectiveness of the portfolio is to be monitored by the preservation of principle, availability of funds for the Secretariat s operations, APEC project approvals and the effectiveness in offsetting inflation. The performance of invested funds should be monitored on a quarterly basis to assist in evaluating the effectiveness of the investment strategy. The Executive Director, assisted by the Finance Director, will review and assess the overall investment strategy of the Secretariat annually. The outcome and proposed changes, if any, are to be communicated to the BMC. - End - 3