VICTORIA

Report

of the

STATE TRANSPORT AUTHORITY

No. 43

for the

Year ended 30 June 1988

Ordered by the Legislative Assembly to be printed

MELBOURNE JEAN GORDON GOVERNMENT PRINTER

1989

V! liNE

State Transport Authority

Annual Report

Year ended 30 June 1988

VICTORIA 1988

PRESE"ilED 10 BOTil HOL'SES OF PARLLUJE,\'T PCRSL'ANT TO SECTION 8 (6) OF Tlll:' ANNCAL REPORTING ACT /983

The Honourable Jim Kennan, MP Minister for Transport

Dear Minister,

In accordance with Section 9 of the Annual Reporting Act 1983, the Report of the operations of the State Transport Authority for the year ended 30 June 1988 is submitted together with the financial statements for that year and of its financial position as at 30 June 1988.

Yours truly, JOHN B. KING Chairman

STATE TRANSPORT AUTHORITY

CONTENTS

Financial Statements

Board Members 4

Corporate Management Group Members 4

Workshops Management Board Members 4

Interim Standing Committee on Consultation Procedures 4

Regional Managers 5

Main Corporate Addresses 5

Regional Offices 5

Workshops Addresses 5

Organisation Chart 6

Chairman's Remarks 7

Managing Director's Report 8

Freight Services 9

Passenger Services 11

Workshops 14

Industrial Relations 15

Finance 16

Transport Operations 18

Management Information Services 22

Corporate Planning 23

Superannuation 25

Expansion of Audit Function 25

Occupational Health and Safety 25

The Future 26

Statement of Operations 28

Balance Sheet 29

Statement of Sources and Applications of Funds 30

2

Note I - Significant Accounting Policies Note 2- Revenue Note 3 - Operating expenses Note 4 Abnormal items Note 5 - Finance charges Note 6- Extraordinarv items Note 7- Prior year adjustment Note 8 Stores Note 9 - Debtors Note 10 - Investment in V /Line Industries Pty Ltd Note 11 - Fixed assets Note 12 Leases

(I ) Leased assets (2) Deferred Profit/Loss on sale of assets (3) Lease liabilities

Note 13 Inter-Authority account MT A Note 14 - Deferred debtors Note 15 - Deferred expenses Note 16- Creditors, accruals and provisions Note 17- Employee benefits

(I) Employee leave entitlements (2) Provision for superannuation pensions

Note 18- Borrowings (I) Liability (2) Discount on loans

Note 19 - Currency exchange variations Note 20 - Advances from State Government Note 21 - Contributed Capital Note 22 Asset Revaluation Reserve Note 23 - Value of assets and liabilities vested in MTA Note 24 Capital Commitments Note 25 - Transactions with the Public Account Note 26 - Operating leases

Certification of Financial Statements

Auditor-General's Report

Additional Statutory Information

VjLine Industries Pty Ltd- Financial Statements

Supplementary Information

3

32 35 37 37 38 38 39 39 39 39 41 43 43 44 44 46 46 46 46 47 47 48 49 49 49 50 51 51 51 52 52 52 53

54

55

56

64

72

Notes to and forming part of the accounts

THE BOARD

CORPORATE MANAGEMENT GROUP

WORKSHOPS MANAGEMENT BOARD

Interim Standing Committee on Consultation Procedures

J.B. KING K.M. FITZMAURICE L. DEAN J.A. HEARSCH K. IRVIN C.J. JORDAN L.T. MILES S.J. PICKERING G. WEAVEN T.P. BOURKE

-Chairman - Managing Director -Member -Member -Member -Member -Member -Member -Member -Member

K.M. FITZMAURICE -Managing Director J.A. HEARSCH -Chief General Manager,

R.D. TERRELL E.A. A TKINSON

P.H. WADE J.C. BRENAN L.J. HARPER T.R. MULLIGAN R. WIGGINS B.G. SHAW G.P. DEUTSCH

A.M. HURSE

D.H. JONES

J.B. KING K.M. FITZMAURICE J. BARRY W. EDDY R. BAILLIE J. HALL J.A HEARSCH R.D. TERRELL D. VANDERHYDE A. SCOTT

B. KLEMM W. ALBON A.COLE L.J. HARPER A.M. HURSE F. HUSSEY G. NICHOLSON B.G. SHAW R.D. TERRELL F. WAGNER

4

Transport Operations -Chief General Manager, Workshops -General Manager, Management

Information Services - General Manager, Finance

General Manager, Corporate Strategy - General Manager, Passenger Services - General Manager, Freight Services - General Manager, Corporate Resources

General Manager, Industrial Relations - Group Manager, Engineering and

Development - Group Manager, Operations and

Maintenance - Group Manager, Corporate

Communications

-Chairman - Deputy Chairman -Member -Member -Member -Member -Member -Member -Member -Member

-Chairman -Member -Member -Member -Member

Member -Member -Member -Member -Member

S. RODGERS M. CALDWELL D. DAVIES F. MORTON P. WILLIS* *acting

- South Western -Western -Northern - North Eastern -Eastern

HEAD OFFICE - 589 Collins Street, Melbourne, Vie. 3000 Telephone: (03) 619 !Ill Fax: (03) 619 4143- Telex: V/Line AA33801

V /LINE INDUSTRIES - 589 Collins Street, PTY L TD Melbourne, Vie. 3000

Telephone: (03) 619 !Ill Fax: (03) 619 4143 Telex: VjLine AA33801

SOUTH WESTERN - Geelong State Offices, MLC House, 199 Moorabool Street, Geelong, Vie. 3220 Telephone: (052) 26 6600

WESTERN Ballarat Railway Station, Lydiard Street, Ballarat, Vie. 3350 Telephone: (053) 37 8555

NORTHERN Bendigo Railway Station, Railway Place, Bendigo, Vie. 3550 Telephone (054) 40 2777

NORTH EASTERN - Astra House, Hovell Street, Wodonga, Vie. 3690 Telephone: (060) 55 8118

EASTERN Cnr. Livingston and Hotham Streets, Traralgon, Vie. 3844 Telephone: (051) 71 1913

HEAD OFFICE - 60 Market Street, Melbourne, Vie. 3000 Telephone: (03) 619 0000 Fax: (03) 619 0155- Telex: VjLine AA33801

NEWPORT -Champion Road, Newport, Vie. 3015 Telephone: (03) 393 9000

BALLARAT - Creswiek Road, Ballarat, Vie. 3550 Telephone: (053) 32 1744

BENDIGO Bob Street, Bendigo, Vie. 3550 Telephone: (054) 43 0684

ELECTRICAL - McLister Street, Spotswood, Vie. 3015 WORKSHOPS Telephone: (03) 393 9000

5

REGIONAL MANAGERS

MAIN CORPORATE ADDRESSES

REGIONAL OFFICES

WORKSHOPS

0\

I I I

MINISTER FOR TRANSPORT

The Hon. J. Kennan

I STATE TRANSPORT AUTHORITY BOARD

J.B.King (Chairman) K.M.Fitzmaurice

T.P.Bourke L.Dean

J.A.Hearsch K.lrvin

C.J.Jordan LT.Miles

S.J.Pickering G.Weaven

I MANAGING DIRECTOR

K.M. Fitzmaurice

I

I

""

WORKSHOPS MANAGEMENT BOARD

J.B.King (Chairman) K.M .Fitzmaurice

J.Barry W.Eddy

L.D.Balllie J.P.Hall

J.A.Hearsch R.D.TerreU

D.Vanderhyde A. &:on

I I

no ~~ ~;J;> ~~

J

~ ~ 0 z

GENERAL MANAGER Finance Division

GENERAL MANAGER Corporate Stra.legy

Division

GENERAL MANAGER Corporale Resources

Division

GENERAL MANAGER Passenger Services

Division

GENERAL MANAGER Freight Services

DNision

CHIEF GENERAL MANAGER

Transport Opera lion Division

J.A.Hearsch •

CHIEF GENERAL MANAGER

Workshops Division

PHWade'

GROUP MANAGER Corporate

Communications

D.H.Jones •

J.C.Brenan •

GENERAL MANAGER Management

Information Services

E.A.Ad<inson •

R.Wiggins • LJ.Harpor •

GENERAL MANAGER Industrial Relations

Division

B.G.Shaw•

T.R.Muffigan •

I GROUP MANAGER

Priority Projects Control

F.A.Wagner

I GROUP MANAGER

Engi.-ring and Development

G.P.Deutsch •

I

R.D.Terrell'

I GROUP MANAGER

Operations Co-ordinatiol'

A.M.Hu""' •

• Denotes member of Corporate Group

V /Line has continued to perform beyond expectations during the past 12 months, bringing a justifiable sense of pride to those in the Authority.

Without the dedication of staff in all areas, the progress made in improving V /Line's standards of service and efficiency would not have been possible.

V /Line's charter is clear, as is the realisation that the authority has to be competitive and market-sensitive ... no longer is it sufficient for us to merely keep our trains, road coaches and other infrastructure in working order.

In line with what the public expects of V /Line, our employees are more professional and dedicated than ever in delivering services within the guidelines laid down by the State Government.

The year has not been without its challenges. not the least of which has been the need for financial restraint.

Industrial problems and a poor grain harvest took their toll on V ;Line's revenue. In spite of those factors, both the passenger and freight divisions continued to improve their levels of cost recovery.

This year saw the release of the State Transport Authority Plan (STAP), a document setting out five possible options for V /Line's operations to take us into the next century.

While the document has created considerable union concern and media interest, it should be remembered that STAP was created by a team of independent consultants, and contains no recommendations.

STAP looks at VjLine's future in the context of the transport industry as a whole, and its purpose is merely to consider how V /Line would cope over the long term with a variety of different government transport policies.

Comments have been invited from unions, the public and business, and the State Government will subsequently review STAP in the light of those recommendations.

As a Government statutory authority, V /Line is very much in the public eye, and therefore often in the firing line for criticism.

While some of that criticism is understandable, V /Line's growth in popularity with both passengers and freight customers cannot be ignored. Proof of that is the significant rise in passenger patronage in the past 12 months and the ongoing success of such freight services as Fast Track and Superfreighter.

This is, however, no time for V /Line to rest on its laurels. The task ahead remains a difficult one, and only by working together as a professional team can V /Line continue its journey towards being a genuinely viable public transport system.

JOHN B. KING Chairman

7

CHAIRMAN'S REMARKS

MANAGING DIRECTOR'S REPORT

Operating Results

The 1987-88 year was one of solid achievement for V/Line. It saw our passenger services increase patronage for the

seventh year in succession, and our domestic container freight segment increase its revenue by 38 per cent.

The introduction of new technologies, services and initiatives for freight customers and passengers, greater productivity, higher cost recovery and most importantly, a significant real reduction in our deficit are among the 1987-88 highlights.

The directions set several years ago involving structural change have continued, with satisfactory outcomes in terms of both productivity and operating improvement.

The statutory operating revenue for the year was $576.3 million, compared with $611.6 million for the previous year. After eliminating Government supplements, the revenue from operations for the year was $282.0 million. This represents an increase of$31.4 million or 12.5 per cent on the previous year's figure of $250.6 million.

The revenue result is considered most satisfactory as it was achieved despite some $7.8 million having been lost from industrial disputes and the requirement to conform to Government policy to limit passenger fare increases to the level of increases in the Consumer Price Index.

Passenger patronage has continued to improve, while income from passenger fares has increased from $42.6 million in 1986-87 to $45.3 million, a rise of 6.3 per cent. Total freight revenue, including parcels and mails, was increased by $1.5 million to $176.2 million. This result was adversely affected by industrial action and a downturn in grain production.

VfLine's operating expenses for the year were $607.1 million, a decrease of $16.6 million or 2. 7 per cent on those for the previous year of $623.7 million.

A reduction of $13.8 million or 5.0 per cent was achieved in V /Line's major expense item, labor cost.

This was a most creditable performance as the cost of national wage case decisions, including the second tier 4 per cent wage increase awarded to all V /Line employees in the first half of the year, is reflected in the figures.

This improvement has resulted mainly from tight controls and the Government-supported Transfer, Redeployment and Redundancy Scheme. Employee separations during the year totalled 954, of which 487 have left the service through the scheme.

There was a significant increase in depreciation charges which were up by $9 .I million on those for the previous year to $29.6 million.

The transfer of all the liabilities for the Authority's borrowings (with the exception of three leases) to VicFin was completed during the year under the Government's Debt Centralisation Legislation.

8

V /Line's net deficit for the year was $45.6 million compared with $126.6 million in the previous year. After elimination of the effects of various Government subsidies and finance charges (which have subsequently become the responsibility of VicFin) as well as abnormal and extraordinary items, the net deficit from operations was $325.1 million. This represents a decrease of $48.0 million or 12.9 per cent on last year's net cost of operations of $373.1 million.

Total capital investment on physical works during 1987-88 was $99.2 million. Investment on trackwork totalled more than $26 million whilst the upgrading of locomotives and carriage maintenance facilities required $15.7 million and $9.3 million respectively. Management Information Systems were updated and implemented at a cost of $8.4 million.

Other major areas of investment were the purchase of plant and equipment, signals and communications and the rail-only bridge over the Murray River at Echuca.

V /Line Freight had a successful year in 1987-88, with a revenue of $176.2 million. This result was a small increase on 1986-87, and only 6.2 per cent under the $187.9 million budget targeted.

This was achieved despite reduced haulage resulting from a poor grain harvest and constrained and in some cases, declining road rates, as well as lost opportunities through industrial action.

Revision of service specifications for all major traffics continues, in order to obtain the best possible output from our investment in infrastructure and rolling stock.

The objective is to provide an efficient freight transport alternative that fully covers its costs.

Grain is V/Line's major freight item, and represents about 34 per cent of freight revenue. The below average grain harvest in 1987-88 resulted in revenue being three per cent under budget.

Improved block train services to the ports of Geelong and Portland for export grain were facilitated by the development of the new grain network.

The Victorian grain transport network is now substantially completed and is an efficient system comparable with any in the world.

Block trains were introduced for domestic grain to metropolitan sidings and the Grain Elevators Board at Sunshine, further contributing to operating efficiencies for grain transport.

Future grain revenue remains under threat following the Royal Commission into Grain Storage, Handling and Transportation, which has recommended deregulation of grain transport. There is increased pressure for more road permits and road permit applications are expected to increase in 1988-89.

9

Net deficit

Capital Investment

FREIGHT SERVICES

Rural and extractive industry

Fast Track

Heavy Industries

Fertiliser traffic was 28 per cent over budget for the year, and the declining trend in tonnage on rail has been arrested. Successful agreements with two manufacturers have more than offset the loss of tonnage as a result of rail service rationalizations and cheaper road backloaders within Victoria.

Petroleum revenue of $10.4 million was up 12 per cent on last year. Agreement was reached with oil companies to consolidate loadings to major inland terminals from the Shell Refinery at Corio. Lo'adings to these ports were previously split between Corio and the Newport Paisley area.

This revised operation has resulted in improved operating efficiencies and lower unit costs, benefitting both V /Line and its customers.

Opportunities for new business were pursued during the year and increased tonnages achieved on the North Eastern corridor. Some potential exists to increase this tonnage further, and negotiations to this end continue with the industry.

The growth of Fast Track has been steady and it is now established as a more reliable and efficient service for the General Freight and Parcels Sector.

Although Fast Track was 6 per cent under budget for the year, results show an 10 per cent increase in revenue from the previous year. In the second half of 1987-88, small parcels traffic was up 26 per cent on the same period last year, and this augurs well for the future.

The multi-modal approach to Fast Track, which reduced operating costs and improved service, has dramatically improved revenue and cost recovery results, although much further improvement is necessary.

Our aggressive marketing and sales activities were, however, affected to some extent by industrial disruptions in this market segment.

V /Line's Heavy Industries sector achieved 83 per cent of budget, with iron and steel being 11 per cent under budget.

Revenue for Heavy Industries was reduced by industrial action at V /Line's Dynon terminal, disputes in the paper industry, and loss of traffic due to technical and industrial problems at Port Kembla, which led BHP to import more steel direct to plants to meet production needs.

Our block train operations for slab steel to Westernport have operated well.

The new cement block train operations were introduced to provide an efficient service to Blue Circle's new facility at Somerton and Australian Cement's upgraded Arden Street North Melbourne depot. This will result in significant revenue increases for V/Line in the longer term.

10

Motor vehicle revenue is showing signs of improvement in line with vehicle industry trends, and we are maintaining our share of the market. Results show an increase of 7 per cent over 1986-87 results, and revenue is 4 per cent over budget.

This sector is a major opportunity for rail, and the strategies for growth initiated earlier are proving to be soundly based, with revenue being 5 per cent above budget. The Containers segment showed the greatest growth in 1987-88, with revenue of $10.4 million. This result is 21 per cent over budget and 38 per cent higher than revenue for 1986-87.

Superfreighters, the capital to capital high speed container trains are now a proven success, operating daily to Sydney and Adelaide with trains of increased size and excellent occupancy rates.

Brisbane is now serviced directly by Superfreighters three times a week, and the frequency is expected to increase in 1988-89.

Superfreighter television advertisements continued throughout 1987-88, leading to increased awareness of this service and increased revenue.

In 1987-88, V /Line continued its program of providing and upgrading passenger services to better match market needs.

Comprehensive market research programs and community liaison have resulted in a better understanding of the composition and needs of the travel market. Services have been revised, introduced or maintained according to marketplace requirements.

The provision of more customer-oriented services has been achieved by better use of existing resources, and the acquisition of additional resources where justified. V/Line has also continued to upgrade and improve its ancillary facilities, and move towards being more efficient, effective and competitive in its overall passenger task in transport and travel.

Patronage on V /Line services is at its highest level since 1955-56. V/Line carried more passengers in 1987-88 in every market segment of the business: commuter, regional and interstate when compared with 1986-87.

During 1987-88, we carried 5.5 million passengers, an increase of 4.9 per cent on the previous year. This has been the seventh year in succession that patronage on V /Line passenger services has increased. In the past six years, patronage has risen by 55 per cent.

Because more people are travelling with V /Line, substantial growth has also occurred in our catering and retail activities.

11

Shipping Industry, Fotwarding Agents and Containers

PASSENGER SERVICES

Commuter trains and road coaches

Regional trains and coaches

The financial position of the retail component of Trading and Catering has improved to the point where retail activities now make a profit, while our on-train catering has also made significant improvements in cost recovery.

As part of the program of upgrading ancillary passenger facilities, Tracks Cafe was opened at Spencer Street Station late in 1987. Tracks offers bistro-style meals in pleasant surroundings, and is fully licensed.

A major upgrading of the bookstall and kiosk adjacent to Spencer Street's No. I Platform was also undertaken, and the product range in both areas has been altered to better match the needs of our customers.

Menus on interstate trains have been changed, and Japanese versions made available.

Improvements to passenger facilities through our Passenger Customer Services Department have been made. Special Telephone Typewriter (TTY) phones, which allow communication with people with speech and hearing impediments via a keyboard, were introduced. These phones were installed at V /Line Access, Reservations, Spencer Street Station and other major stations.

Additional wheelchairs and wheelchair ramps were also provided at metropolitan and country stations.

V /Line Access, the telephone information service for existing and potential customers, continued to be a popular and well-patronised facility, receiving a total of 476,287 calls- an increase of nine per cent on 1986-87.

Commuter patronage increased to 3.1 million in 1987-88. At the same time, revenue rose by 12.7 per cent to $10.7 million.

Because of better use of carriage resources, additional carriages were provided on Kyneton and Bacchus Marsh services from August to cater for increased patronage.

To cater for the rise in the number of V/Line commuters, additional car parking space was provided at North Geelong, Lara and Kyneton.

An upgrade ofWoodend and Traralgon Stations was also completed during 1987-88, while a major upgrading of Geelong Station began.

Significant progress was made in this area, with patronage continuing to grow. In 1987-88, the numbers of regional passengers carried increased to 1.9 million, a rise of 7 per cent. Revenue increased accordingly to $22.0 million.

Rail services on the Bendigo corridor were revamped to better reflect market demands, and a late afternoon service was introduced for the benefit of day-return travellers from BendigojCastlemaine to Melbourne.

The coach network linking Northern Victoria with Bendigo was revised, and three new V /Line liveried road coaches introduced.

12

Passenger capacity was increased on Swan Hill services to cater for rising patronage, and an additional coach service was introduced between Albury and Melbourne. This service, utilising available resources, was brought in to satisfy evident demand.

An upgrade of Mildura and Echuca Stations was completed during 1987-88, while improvements to modal interchange facilities at Bairnsdale were also undertaken.

In line with community preference, alcohol-free carriages were introduced on all V /Line Regional compulsory booked services.

V /Line continued to make inroads into this highly competitive market during the year, due to its improving standards, pricing initiatives, product differentiation and additional service features.

Interstate patronage has increased to almost 0.6 million in 1987/88. However, nett revenue from interstate services decreased from $13.1 million to $12.6 million. The lower net revenue reflects lower average revenue per passenger.

Improvements to interstate services have included: • Video and FM music using individual headsets in first-class

sitting carriages on The Overland • Alcohol-free, no-smoking carriages introduced on the Adelaide

and Sydney services • Double-decker luxury coaches introduced on regular route

services (This marketing initiative resulted in increased patronage of 20 per cent on the Day link service and 29 per cent on Speedlink)

• MotoRail service introduced on the InterCapital Daylight service from Melbourne to Sydney

• Improved MotoRail waiting facilities provided at Spencer Street Station

• A $30 standby fare to Sydney on The InterCapital Daylight introduced to attract new business and sell spare seats (This venture has resulted in an increase in patronage and revenue)

• A Caper fare promotion on the Adelaide corridor in February/March resulted in patronage increases of 14 per cent on The Overland and 39 per cent on Daylink compared with the same period in 1986-87

Many initiatives have been taken during the year by management in relation to the subsidised road coach network.

A revamped Apollo Bay to Geelong service with the connections to and from Melbourne by V /Line train was introduced, while a luxury coach in V /Line livery also operates on the route. Patronage on this service has increased by 30 per cent since its introduction in October 1987.

13

Interstate trains and coaches

Government­subsidised road coaches

Package tours

V /Line Travel

WORKSHOPS

The local bus system on the Bellarine Peninsula underwent a transformation in October 1987. All the Peninsula services were integrated into the one comprehensive network - Bellarine Transit. This integration, together with an increased frequency of service and a simplified fare structure has led to a patronage increase of 19 per cent.

A study of local public transport services in Ballarat resulted in services being developed to better meet the needs of Ballarat residents. The Ballarat Transit services have shown significant patronage increases.

In May 1988, a service was introduced linking Victoria's three largest regional centres - Geelong, Ballarat and Bendigo. This service combined previous Bendigo-Ballarat and Ballarat-Geelong services.

In February, 1988, a new town bus service was introduced in Cobra m. The service is being jointly funded by V /Line and the Shire of Cobra m.

In 1987-88, V/Line continued to develop and sell travel packages and tours which have been well received by the market.

New Aussie Made Holidays package tours were developed, and brochures made available in several languages.

A special rail-based package tour was developed and marketed around the Adelaide Grand Prix, while a range of tours was introduced to tap the lucrative Expo '88 market.

The 1987-88 year also saw the introduction of SunTrak, which uses rail travel one way and air travel the other between Melbourne and Mildura.

Tours sold grossed $6.9 million, from which V/Line earned $1.7 million.

Significant developments this year included affiliation with the Australian Federation of Travel Agents and accreditation with the International Association of Travel Agents, enabling international air tickets to be stocked and issued direct to the customer.

V /Line Travel was also linked for the first time to the Apollo Computer Reservation System, the largest of its kind in the world.

During the year, the centre received an Outstanding Achievement Award from Sitmar Cruises.

Sales generated totalled $3.0 million, up 25.3 per cent on the previous financial year.

The policy of the Workshops Board visiting the engineering workshops regularly was continued in 1987-88, and there has been a marked improvement in the general appearance, productivity and housekeeping of all works. These visits have led to increasingly searching questions of management, with many productivity improvements being requested.

14

Quality has remained the prime target throughout the 1987-88 financial year, and this means all aspects of quality -including delivery to clients. There is a clear recognition within the division that a constant high standard of workmanship is required for the Workshops to survive in the marketplace.

The Division has also managed to achieve its difficult budget target. Extraordinary measures were taken to reduce operating expenditure.

The most significant item tackled during the year has been the finalisation of the Workshops Business Strategy.

This strategy re-shapes V/Line's workshops into a co-ordinated specialist group, designed to meet the more exacting requirements of both V /Line and the rail division of the Metropolitan Transit Authority into the 1990s.

Discussions took place on this issue in the community, with Members of Parliament, with working parties under the auspices of the Trades Hall Council, and with working parties at all levels of the Workshops organisation.

The Workshops Business Strategy was approved by Cabinet for capital expenditure of $15.1 million on 7 December, 1987. Work has progressed with detail working parties in finalising plant layouts, and significant progress has been made.

The key to the Strategy is work which is due to commence at Newport in the latter half of 1988. Recommendations for placement of the first construction contract have been made, with the second recommendation due in September, 1988. Physical work has commenced in a number of locations and work is advancing on a broad front.

A significant number of studies were undertaken during the year to pinpoint problem areas and to improve productivity. At the Electrical Workshops, a 10-week study carried out by shop floor personnel has set a target of productivity improvement between 25 per cent and 30 per cent in various sections. This, together with additional factory space to be built during 1988-89, will be needed to cater for additional workloads anticipated for the Rail Division of the Metropolitan Transit Authority.

Commercial work, i.e. work other than normal rail maintenance, was budgeted at $6.6 million, and $10.3 million in work was obtained and completed during the year. Productivity has improved in commercial work, which has been carried out at Bendigo, Ballarat and Newport.

The Division will face a significant restructuring operation during 1988-89 as the investments planned in the Workshops Business Strategy are made.

This will require the co-operation of all levels of staff for it to be implemented effectively.

A good deal of time during the year was taken up with negotiations on the 2nd Tier National Wage Concept.

These negotiations caused Management, unions and supporting Industrial Relations personnel to divert their attention from the major Change Projects program.

15

INDUSTRIAL RELATIONS

FINANCE

Systems Development

Apart from the many hours of negotiation, there were 21 hearings in the Arbitration Commission, considerable industrial disputation, disruption to services in the Metropolitan area and subsequently, some loss of public confidence in V/Line as its operations became affected.

Consultative procedures have been developed aimed at arranging consultation in the workplace involving line-managers and employees, to minimize the need for peak level consultation.

Close involvement with the major Change Projects program has continued in 1987-88, particularly the Guard/Conductor Project, the Review of Driver Training, Shunting Operations Phase 3, and Rolling Stock Control Operations.

As with the Two Persons Crewing Project, no time has been lost on any of these projects through industrial disputes. This is a credit to both V /Line staff and the unions involved, as the issues are difficult ones.

During 1987/88 the review of the Finance Division's organisation structure progressed with the clear identification of the four major functional responsibilities:

Accounting Treasury Budget Financial Systems Planning and Implementation

The responsibilities of these groups will continue to be refined during 1988/89 with further rationalisation of numbers as more systems are computerised.

As the centre of expertise for financial matters, the Finance Division has a responsibility to provide other Divisions with improved financial services and information. In order to fulfil! this obligation, the Division increased its participation in the analysis of existing systems and procedures during 1987/88.

Apart from maintaining its existing services, the Finance Division made achievements in the following areas during 1987/88:

During the year the implementation of the Personnel Payroll System was completed and personnel now have their salaries and wages paid direct to accounts with finance organisations.

Attention was also given to the development of a computerised Accounts Receivable system. Implementation has been partially completed and it is expected that the task will be finalised before December 1988. This system will be fully integrated with the Freight Business System which is being implemented in stages. The new Accounts Receivable package will also provide for much better control of debtors and cash collections.

Early in July 1988 an online Inventory, Purchases and Payables system was implemented. This system has substantial benefits for the Authority including a much greater ability to identify and control stock levels, integrate supplier accounts and co-ordinate purchases.

16

Investigation is also proceeding into a better method of accounting for parcels and ticket sales. In regard to ticket sales, ticket issuing machines have been installed at Spencer Street Station for some time. Additional machines have now been installed at Ballarat, Geelong and Bendigo Stations. These machines provide for much quicker processing of revenue data and provide information for management decision making purposes.

Work has commenced in the development of the Corporate Finance System. This system which will be fully integrated with the various sub-systems which have been, or are in the course of being developed, wiii facilitate the provision of up to date business information for managers at all levels in V /Line.

A review of purchasing responsibilities was undertaken and included reassessment of contracting arrangements for private buses, diesel fuel and uniforms. This review has led to a decision to restructure the purchasing function increasing the emphasis on economic rationale and co-ordination of purchasing activities.

In the budgeting field steps were taken to reinforce the responsibility /accountability of managers. Further changes were made to reassign costs to the responsible line managers and the new Personnel Payroll System (P.P.S.) was used to construct the Authority's labour budgets for 1988/89. Further steps are being taken during 1988/89 to improve the quality and timeliness of management reporting.

Cash management was reviewed with the establishment of the Treasury Group and action was taken to develop procedures which provide for better forecasting and control. Additional emphasis will be placed on revenue generation during 1988/89 through a comprehensive examination of all fees and charges falling within the Authority's responsibilities. The classification of revenue items also came under scrutiny during the year and as a result a more comprehensive classification policy has been implemented.

A review of the Authority's accounting policies related to fixed assets was carried out by a consulting firm and the recommendations have been forwarded for the information of the Department of Management and Budget.

A further responsibility undertaken during the year was to review clerical and administrative procedures and systems in operation throughout the Authority. This project has led to significant changes to work practices and procedures and, at the same time, has generated large expenditure reductions. The project is an ongoing one and, in all, some I ,800 positions will be reviewed for their effectiveness.

In 1989 the Finance Division will take further initiatives to improve the Authority's financial operations. Reviews of overhead and budgeting will be carried out and attention will be given to the introduction of a transfer pricing system for work performed within the Workshops Division.

17

Policies and Procedures

TRANSPORT OPERATIONS

Freight operations

Passenger operations

A review is also to be made of the financial aspects of Passenger Services operations with attention being given to identifying changes required to reporting structures, product costing and financial performance of business segments.

The Transport Operations Division (TOD), by far the largest Division in V /Line, had an operating expenditure in 1987-88 of$286 million. Of that, $183 million (64 per cent) represented labor costs (while Capital Programme expenditure totalled $76 million).

Staff numbers decreased by 545 over the twelve month period of which 261 persons separated under the provisions of the Transfer, Redeployment and Redundancy Scheme and 284 separated by natural attrition.

A further 314 staff were transferred to other Divisions as a result of major restructuring within T.O.D. The restructuring included the transfer of the Reservation Bureau to Passenger Services Division and the transfer of Melbourne Freight Terminal to the Freight Services Division. Central Region was amalgamated with Head Office areas and the Personnel and Administrative Services Group was also restructured.

During the year, new performance standards for Interstate and Intrastate freight traffic were established in conjunction with the Freight Services Division and in line with Railways of Australia standards.

A review of Superfreighter services during the year resulted in additional services and increased capacity with extra services operating between Melbourne and Brisbane. Liner trains were introduced between Melbourne and Sydney and have been successful in meeting Shipping Industry demands.

Further development of the Operations Co-ordination System (OCS) was the main thrust of Systems Development during 1987-88. OCS is intended to improve the quality of operational and rolling stock control management decisions, and in so doing provide an enhanced standard of customer service.

Three sections of track were closed to traffic in the past twelve months, namely; Bairnsdale to Orbost, Cowwarr-Maffra and Welshpool-Yarram. During the past year, the opportunity has been taken to remove surplus siding facilities on lightly trafficked lines, while a programme of yard rationalisation is under way at other locations where the extent of remaining track is greater than the traffic requires.

Ninety per cent of all trains ran on time during 1987-88, compared with 89 per cent the previous year. This improved performance is due to the following factors:-• Extensive use of high-powered N class locomotives on passenger

services.

18

• Continuous monitoring of train running performance to reduce avoidable delays.

• Close oversight of any major infrastructure works to minimise service disruptions.

Upgrading of passenger facilities andjor landscaping of station surrounds has been carried out at Echuca, Woodend, Kyneton, Dimboola and Redcliffs.

The Guard/Conductor Review is being implemented in order to reduce manning levels and operating costs and to provide greater revenue protection, while improving customer service through the elimination of the traditional role of "Guard" on V /Line passenger trains and the provision of a multi-skilled Guard/Conductor position.

Another project successfully completed in the past year was the Train Control Review. Under this project, five regional centres were disestablished and relocated to Transport House. This resulted in improved management and control of train operations.

With the completion of the Light Line Review, specific light lines with high operating costs and low revenue return were closed after consultation with users, local councils and affected unions.

To date, V/Line has received a nett benefit of approximately $5.5 million from dismantling of the closed lines, and a further $2 million from scrapped wagons.

Stage three of the Shunting Operations Review began in 1987-88, and has resulted in the closure of the Melbourne yard hump and the restructure of supervisory and clerical grades with a significant reduction in shunting operation costs.

Rationalisation and restructuring proposals for shunting yards at Tottenham, Dandenong, Ballarat and Geelong yards have been prepared for union negotiation and working party discussion.

The project to restructure and streamline passenger operations at Spencer Street station was remobilised in February. Its aim is to upgrade customer service levels and improve current management and operational practices. Full employee involvement is being sought through working parties to develop customer relations and associated skills training programmes.

Construction of the Dudley Street Carriage Maintenance Depot is now about 70 per cent complete, representing a capital outlay of $20.0 million against a final cost of $29.0 million. Further country facilities at Geelong and Traralgon are also in the design phase and will involve a capital outlay of $2.2 million.

The review of all existing wagon maintenance facilities, equipment, maintenance policies and work practices proceeded under the Wagon Maintenance Review as part of the programme to reduce wagon related maintenance costs and to enhance wagon availability and reliability.

The upgrading and modification of infrastructure and rolling stock to eliminate grain handling inefficiencies continued under the CANAC Implementation Project with the upgrading of light lines, introduction and extension of crossing loops and receival points and the disestablishment of redundant crossing loops.

19

Change projects

Capital programme

This work will increase V /Line's capacity to move grain to 4 million tonnes per year and thus provides the potential to lower grain haulage costs while maximising train crew productivity.

Funding has been sought for the design and implementation of an improved, simulator-based driver training scheme which will reduce the training period from four to two years and thus realise significant cost savings.

The current system-wide safeworking system is being reviewed under two complementary projects which will replace the present system with a tokenless safeworking system. The Train Orders project will introduce verbal train orders issued by a central train controller for operation on low to medium density lines, thus reducing manpower and maintenance costs.

Upgrading of the locomotive fleet continued with delivery of the last of 25 N Class locomotives and delivery of 4 G Class locomotives during the financial year. This facilitated further withdrawal ofT and Y class locomotives as well as older B and S class locomotives.

Seven new G Class locomotives have now been ordered to complement the 11 already under construction at Clyde Engineering's Somerton Plant. This will bring the total of G Class locomotives to 33.

Evaluation of programmable logic controllers (PLC's) fitted to an N Class three-car passenger set for trial showed a 30 per cent reduction in fuel consumption and a likely 50 per cent reduction in maintenance costs. This programme will now continue to cover the entire N car fleet.

During the year further enhancement of the Integrated Services Digital Communications Network (ISDN) took place with the addition of the Telephone Information Management System (TIMS) which enables comprehensive analysis of network utilisation and costs.

Several resignalling projects were undertaken including Melton-Bacchus Marsh, Ballan-Warrenheip and Bunyip-Yarragon, and trials commenced of a new level crossing performance monitoring device which will enable train crews to detect faults as soon as they occur.

Major bridge reconstruction/upgrading included:-• The completion of the Glenelg River Bridge at Dartmoor on the

Heywood-Mt. Gambier line, permitting the operation of heavier locomotives, and replacing the old timber bridge which was in poor condition.

• A new bridge at Lollipop Creek at Werribee, which will reduce the risk to V /Line of disruption to rail services by track flooding.

• Continuation of construction of the Echuca Bridge (80 per cent completed) and upgrading of bridges on the Echuca-Deniliquin line (completed) and Barnes-Moulamein line. When completed, heavier locomotives and wagons will be able to operate on these lines.

20

Other significant projects which were completed during the year or were in progress at year end included:-• LaTrobe Valley Freightgate at Morwell-opened in February, 1988 • Sale of 67 Spencer Street- sale by tender was successfully

completed and projects to relocate the Communications Centre, communications technicians, archives and plan storage, telephonists and building carpenters were all progressing at year's end

• A major study of the future development of South Dynon Container Terminal was completed and detailed studies of the first stages of development were in progress

• Design, manufacture and installation of automatic end of train detection devices, with the first installation being at Inverleigh.

• The major 'Catch-up' programme of track upgrading which commenced in 1984-85 has continued. More than $9 million has been spent during 1987-88, making a total expenditure of more than $36 million to date on crossing work renewal, siding re-conditioning, tie renewal, ballast cleaning and welding. These works have taken place in all regions.

• Track upgrading programmes have been completed on the Shepparton-Dookie, Manangatang-Robinvale and Yarrawonga-Oaklands lines.

The Operations Research and Planning Department, which is part of the Operations and Maintenance Group has also been involved in the following tasks:-• Evaluation of upgrading grain outload facilities (in conjunction

with GEB). • Input to North Eastern, Melbourne-Adelaide Corridor study and

CANAC project. • Review of locomotive fleet size and retirement rate.

As well as providing design and project management services for the capital programmes mentioned earlier and to support operations, the Engineering and Development Group has continued to investigate subjects such as: • A continuing review of locomotive scheduled loads for the entire

State. This review, using computer based techniques, incorporates up-to-date accurate information and ensures optimum loading for all locomotives on all routes.

• The undertaking of more field tests on train stopping distances and brake block wear rates. These trials were aimed at reducing V/Line's braking costs and improving train performance.

The 1987-88 year saw the very successful introduction of the first stage of the Computer Aided Design and Drafting system to the group's operations. This major initiative will be phased in during the next two financial years, and will significantly improve and update our engineering capabilities.

In addition, a wide range of scientific and technical advice, analysis and testing for V/Line and the MTA (Rail Division), together with commercial work for 'non-rail' clients has continued to be provided by the Scientific Services Department.

21

Operations research

Engineering and development

MANAGEMENT INFORMATION SERVICES

Equal Employment Opportunity

The following targets identified in the 1986-87 annual report have now been achieved: • The Computer Aided Drafting computer for the Property area

was installed in September, 1987 and systems have been developed to record the Authority's property plans on the computer.

• Wages and salary payments for all personnel within the Authority were being processed on the new Payroll System (PPS) by October, 1987, six months ahead of schedule.

• Development of the second of the three major Operations Co-ordination systems, Train Monitoring was completed by June, 1988. Development of the third, Rolling Stock Control, is scheduled for early 1989.

• The pilot Wagon Maintenance control system at Bendigo Workshops was installed as an operational tool during the year.

• The first stage of the new Freight Business System was installed in October, 1987 and has been progressively enhanced since.

• The Purchasing (Accounts Payable) and Inventory Control systems were fully implemented by 11 July, 1988.

• An Information Systems Strategic Plan (ISSP) is in its final stages of production to be completed by the end of July 1988 and published in August 1988.

• The development of the Corporate Finance System has been rescheduled to commence in September 1988, to fit user workloads.

In addition to those targets identified in the annual report, the following successes were also achieved. • The second stage of the Land Information System (Leasing) was

installed in June, 1988. • The second stages of the FBS System including container pricing

door-to-door service, beer pricing, and new consignment note production has been installed and further developments scheduled for the remainder of 1988. A new Accounts Receivable system was selected and implemented.

• Computer Aided Drafting and Design is being extended to the Engineering areas of the Authority.

• Upgrades of computing power and new versions of computer software have been introduced and are being supported at a reduced cost.

• Major advances in the monitoring and control of the use of computing resources have been introduced

All of these developments have had a major impact on the Authority's performance and achievement of objectives and has generally lifted the skill level of its employees.

V /Line is not currently covered by Equal Employment Opportunity legislation. (The Equal Employment Opportunity­Statutory Authorities Bill is due to become an Act within the Spring 1988 Session of Parliament). However, we have already started to fulfil many of our obligations as prescribed by the draft legislation. Responsibility for the development and implementation ofthe EEO program has been conferred on an EEO Officer who was employed in August, 1987.

22

Although planning is still being undertaken for the conduct of a full EEO survey to establish our workforce data base, we have been able to use figures on the numbers and occupational distribution of women in the organisation to start designing EEO information packages and Affirmative Action programs for women.

Our two main objectives in relation to women are: • To increase the number of women recruited into non-traditional

occupations in the organisation, and • To devise strategies to assist women in analysing their career

paths and making the most of their potential within (and without) the organisation.

The other major section of V /Line's EEO Action Plan is to review ST A Policy and Procedures. New policies in relation to Equal Employment Opportunity and Sexual Harassment have also been developed.

A policy to appoint Harassment Conciliators under the general guidance of the EEO Officer has been approved and is also in the process of implementation.

During I 987-88 the updating of V /Line's Corporate Plan proceeded parallel to the preparation of a more broad ranging study of V /Line's future to the year 2000.

This study, the State Transport Authority Plan (STAP), was conducted by an independent project team, including union representation, under the leadership of Dr. P. Greig.

Whereas V /Line's Corporate Plan addresses initiatives to be pursued over the next five years within the framework of existing Government Policy, ST AP considers a long term outlook under alternative policy settings.

The independent study team's draft final report was released for comment on 16 June, 1988.

Successive Corporate Plans over the last three years have incorporated two key assumptions. Firstly, that V/Line is a multi-modal organisation and that services would be supplied using the most cost effective mode appropriate for the purpose.

Secondly that government support, in the form of mechanism for the management of staffing levels and funding for investment, would be forthcoming for modernisation of operations in accordance with the statutory objective of operating freight service at a profit.

Specifically it has been assumed that government would be in a position to fund investment initiatives which generate commercial rates of return.

In the three years ending June, 1988 these two key planning assumptions have proved to be valid.

V /Line has been able to close lightly trafficked lines in favour of integrated road rail operations without loss of traffic, and road vehicles have been used selectively for both passenger and freight services where necessary to meet market requirements.

23

CORPORATE PLANNING

Investment Appraisal

Rail Business Analysis

Modernisation has allowed us to reduce full operating costs by more than $110 million per annum and, with a staff reduction from 14,279 as at June 1985 to 10,750 at the close of 1987-88, productivity improvement has been running ahead of the timetable set out in the Corporate Plan.

During 1987-88, further plan initiatives during the period to June 1992 (relative to actual results in 1986-87) provided for:-• A 20 per cent increase in freight volume, concentrated in bulk

traffics and intermodal container business. • A further 17 per cent increase in passenger patronage. • A further reduction in full operating costs of around 23 per cent

or $105 million per annum. • Under these initiatives V /Line's deficit would be approximately

halved and V /Line would come close to achieving the Government's cost recovery objectives for both passenger and freight services.

• However, during 1987-88 it became apparent that Government was facing serious capital funding constraints.

• Sufficient funds were available in 1987-88 to support V /Line's strategic investment initiatives, but the outlook for 1988-89 and future years is less encouraging, and modification of the timeframe within which the abovementioned improvements can be achieved will be neccessary.

During 1987-88 all capital expenditure proposals involving expenditure in excess of $100,000 were subject to detailed appraisal to ensure that asset replacement and amenities expenditure proposals were cost effective and to ensure that investment programs were directed towards those areas of the business which would ultimately meet Government cost recovery requirements. Priority is given to projects with fast payback periods with high rates of return. Projects with payback periods of five years or less are now the norm.

Since the Rail Business Analysis system was installed some 4 years ago, it has been subject to progressive upgrade within V/Line.

In addition, the costing system has now been adopted by Australian National and the State Rail Authority of New South Wales and established on a nationwide basis to conduct analysis associated with the work of the Rail Industrial Council- a national body studying the long-term position for the rail industry in Australia.

Within V /Line, the model has the ability to produce reports on the financial performance of any individual traffic, corridor or service and routinely produces monthly business reports by customer.

A further upgrade program was initiated in early 1988 with a view to improving costing accuracy and, more importantly, to facilitate more general use of the system for marketing, service planning and budgeting purposes without recourse to specialist staff.

24

The Victorian Parliament passed two important laws covering superannuation benefits for employees of the Authority. The first, the State Superannuation Act 1988, provided improved benefits for employees who are members of the existing State Superannuation Fund, as well as providing them with the opportunity to elect to transfer to the new fund, called the Transport Superannuation Fund, created by the second act (the Transport Superannuation Act 1988).

All employees of the Authority now have superannuation benefits, even if they choose not to contribute, as the Transport Superannuation Fund provides generous non-contributory benefits. Both Funds also provide excellent resignation benefits which will progressively facilitate employee mobility.

Since establishment of the function in 1984, most of the reviews undertaken by the Authority's internal audit unit have concentrated on the reliability and integrity of information, the safeguarding and verification of assets, and the adequacy of- and compliance with -policies, plans, procedures and other requirements.

With significantly increased management emphasis on efficiency of resource usage and organisational effectiveness, the audit function is being developed as an expanded service to management, and to perform broad scope reviews which will address issues of economy, efficiency and effectiveness. Benefits that arise from such reviews include identification of criteria for measuring the achievement of organisational objectives, identification of areas of potential cost reduction or containment, or revenue enhancement, and a full assessment of management information and control systems.

It is expected that these broad scope reviews will result in improved management effectiveness .and enhanced organisational performance.

The Authority's Occupational Health and Safety (OHS) programme has made further progress during the year with nearly all V /Line's work locations being subdivided by geography and/or functional responsibility into Designated Work Groups (DWG) for the purpose of establishing the OHS framework required by the Victorian Occupational Health and Safety Act 1985.

The Authority has been endeavouring to secure a fair WorkCare levy. Developments during the year which impacted on our efforts were an amendment to the Accident Compensation regulations, operating from I September, which classified all activities allied to rail transport at the highest levy rate applicable under the relevant legislation.

V /Line's Work Care premiums are currently some $8.45 million per annum. The rating of all V /Line employees, including administration staff at the highest level, involves premiums that are excessive when related to risk. An appeal has been lodged with the Accident Compensation Commission.

25

SUPER­ANNUATION

EXPANSION OF AUDIT fuNCTION

OCCUPATIONAL HEALTH AND SAFETY

THE FuTURE The 1987-88 financial year has been eventful, and certainly one where the rewards for planning and hard work have shown clear dividends.

The process of positive change within V /Line will continue, just as we will continue to address the deficit problem. This will occur within a framework of providing the best possible service to our customers in both the passenger and freight areas.

These aims for the future can be achieved only with the goodwill and hard work of V/Line employees at all levels. We are confident that the necessary broad support exists, and look forward to continued progress towards our objectives.

26

K.M. FITZMAURICE Managing Director

STATE TRANSPORT AUTHORITY

FINANCIAL STATEMENTS

OF THE

STATE TRANSPORT AUTHORITY

YEAR ENDED 30 JUNE 1988

27

FINANCIAL STATEMENTS

STATEMENT FOR THE YEAR ENDED 30 JUNE 1988

OF Note 1988 1987 $000 $000

OPERATIONS Revenue 2 576,256 611,621 Less operating expenses 3 607,129 623,677

Operating deficit before abnormal items 30,873 12,056

Abnormal items 4 26,626 34,825

Operating deficit before finance charges 57,499 46,881

Finance charges 5 21,021 60,304

Operating deficit before extraordinary items 78,520 107,185

Extraordinary items 6 (32,881) 19,401

NET DEFICIT FOR THE YEAR 45,639 126,586

Accumulated deficit at 1 July 2,092,982 1,972,265 Prior year adjustment 7 29,820 (5,869)

2,122,802 1,966,396

Accumulated deficit at 30 June 2,168,441 2,092,982

The notes on pages 32 to 53 form part ofthese accounts.

28

AS AT 30 JUNE 1988 Note 1988 1987 BALANCE $000 $000 Current assets SHEET

Stores 8 29,977 23,277 Debtors 9 35,233 35,470 Prepayments and other current

assets 1,040 4,549 Investments 10 2,876 1,833

Total current assets 69,126 65,129

Non-current assets Fixed assets 11 854,747 818,610 Leased assets 12(1) 218,140 219,570 Inter-authority account 13 151,764 141,825 Deferred debtors 14 9,757 11,516

Total non-current assets 1,234,408 1,191,521

Deferred expenses 15 3,723 33,891 ---

TOTAL ASSETS AND DEFERRED EXPENSES 1,307,257 1,290,541

Current liabilities Bank overdraft 2,489 3,081 Creditors, accruals and

provisions 16 86,798 85,862 Employee benefits 17 136,324 130,698 Lease liabilities 12(3) 8,940 11,441

--·--Total current liabilities 234,551 231,082

Non-current liabilities Creditors, accruals and

provisions 16 3,631 9,474 Employee benefits 17 1,552,748 1,498,091 Borrowings 18(1) 51,038 Lease liabilities 12(3) 147,405 229,567

Total non-current liabilities 1,703,784 1,788,170

Deferred revenue 12(2)(a) 8,043 43,968

Equity Contributed capital 21 I, 751,265 1,542,248 Asset revaluation reserve 22 4.172 4,172 Value of assets and liabilities

vested in Metropolitan Transit Authority 23 (226,ll7) (226,117)

Accumulated deficit (2,168,441) (2,092,982)

Total Equity (639,121) (772,679)

TOTAL EQUITY, LIABILITIES AND DEFERRED REVENUE 1,307,257 I ,290,541

The notes on pages 32 to 53 form part of these accounts.

29

STATEMENT OF FOR THE YEAR ENDED 30 JUNE 1988 1988 1987

SOURCES AND $000 $000 Sources of funds

APPLICATIONS Funds from operations -Inflow of funds 257,339 240,983

OF FuNDS Proceeds from sale of fixed assets -(Note 2(d)) 21,031 4378

Subsidies received from State Government - (Note 25) 294,212 360,994

Outflow of funds (565,349) (599,399)

Net inflow of funds (Note (a)) 7,233 6,956 Reduction in assets

Current assets Debtors, prepayments and other

current assets 3,746 Non-current assets

Fixed assets - (Note 11) 15,342 7,322 Inter-authority account 654 Deferred debtors 1,759 832

Increase in liabilities Current liabilities

Creditors and accruals 4,433 Non-current liabilities

Borrowings 31,332 Contribution from State Government -

(Note (b)) 209,017 571,186

TOTAL SOURCES OF FUNDS 242,184 617,628

AQQlications of funds Increase in Assets

Current assets Stores 6,700 1,420 Debtors, prepayments and other

current assets 2,104 Non-current assets

Expenditure on capital works -(Note 11) 99,191 102,017

Inter-authority account 6,008 Reduction in liabilities

Current liabilities Bank overdraft 592 527 Creditors and accruals 718

Non-current liabilities Repayment of borrowings

-(Note 18(1)) 51,038 493,753 Repayment of lease liabilities

- (Note 12(3)) 84,663 11,081

TOTAL APPLICATIONS OF FUNDS 242,184 617,628

The notes on pages 32 to 53 form part of these accounts. 30

Note: (a) Reconciliation of net inflow of funds with the net deficit for the year.

1988 1987 $000 $000

Net inflow of funds 7,233 6,956 Items not involving movements of cash

Depreciation of fixed assets -(Note 11) (34,668) (28, 197)

Amortisation of leased assets -(Note 12) (6,970) (5,280)

Discount on loan written off (1,464) Amortisation of currency exchange loss (24,244) Increase in employee benefits - (Note

17) (52,953) (76,268) Indexation of loans (451) Amortisation of deferred profit on sale

of assets- (Note l2(2)(a)) 35,925 5,266 Amortisation of deferred loss on sale of

assets (Note l2(2)(b)) (348) (343) Decrease in provision for claims

(Note 16) 9,340 161 Write back of provision for diminution

the value of investment - {Note l 0) 1,043 Write off of railways lines dismantled

in previous years and replaced by upgraded lines - (Note ll) (620)

Expenditure capitalised in previous years now written off- (Note 11) (3,621) (2,722)

--··--··--Net deficit for the year 45,639 126,586

(b) Contribution from State Government - (Note 21)

Contribution from State Government for Capital Works

Payments into the Public Account Amount received for Capital

Development Program Advances from VicFin to meet

principal repayment of loans and leases

Other funds Principal repayments of loans

transferred to VicFin in 1986/87 Centralisation of borrowing Centralisation of lease liability

1988 1987 $000 $000

97,041 (18,800)

1,776

11,141 170

(2,903) 51,640 68,952

209,017

103,000 (5,190)

2,147

4,934 147

466,148

571,186

The notes on pages 32 to 53 form part of these accounts.

31

Notes to and forming part of the Accounts

The accounts of the State Transport Authority (The Authority) have been prepared in accordance with the Annual Reporting Act 1983 and the Annual Reporting (Business Undertakings) Regulations 1988.

Note 1 -_fugf1ifi£(:lnt accounting policies

(I) Basis of accounting The accounts have been prepared on an accrual basis under the historical cost convention.

(2) Fixed assets Fixed assets (excluding land) held at 30 June 1985 are valued at Board valuation. Work in progress and assets acquired and constructed since 30 June 1985 are valued at historical cost.

(3) Leasehold Improvements Expenditure on leasehold improvements is capitalised and is amortised over the period of the lease.

(4) Depreciation Depreciation is charged on fixed assets (other than track and land) on a straight line basis at annual rates based on the estimated useful life of each type of asset. Depreciation is charged on fixed assets in the month following acquisition or being placed into service. Depreciation is not charged on track, the policy being to maintain track at a level required for operations. This policy was reviewed during the year and is considered to be still applicable.

(5) Stores Stores consist of materials and supplies held for construction, maintenance and operations and are valued at the lower of average cost or net realisable value. Work in progress for manufactured stores is valued at cost. Catering stock is valued at cost.

(6) ~easing The leasing agreements held by the Authority are of a financial nature and have been capitalised in line with current accounting practice. Leased assets are amortised over their remaining useful life. Profits realised or losses incurred on sale of assets associated with leasing agreements are treated as deferred revenue or expenditure and are amortised over the terms of the lease. During the year, the lease expressed in U.S. Dollars was transferred to VicFin in accordance with the Transport (Amendment) Act 1986 and replaced with Contributed Capital provided by the State Government (Note 21). The transfer was effected at a weighted average forward contract rate of exchange at the date of transfer. The deferred unamortised profit realised on sale of assets associated with the lease has been written back to the Statement of operations as an extraordinary item (Note 6).

32

The rolling stock subject to the lease has been subleased to the Authority by VicFin at no consideration. The leased assets are reflected in the financial statements at the same value as prior to their transfer to VicFin.

(7) C11rrency exchange variations Foreign currency transactions are converted to Australian dollars at the rate of exchange prevailing at the date of the transactions. As from I July 1987 the Authority adopted the Australian Accounting Standard AAS20 Part A, and consequently:­(a) Currency exchange gains or losses realised or incurred

during the financial year are treated as revenue or expenditure in the year, and

(b) The deferred unamortised loss at the beginning of the year has been transferred to the statement of operations as a prior year adjustment- (Note 7).

This represents a change in accounting policy and the net effect of this change has been to charge the statement of operations (i.e. accumulated deficit) with a prior year adjustment of $29.820 million and a net gain of $3.507 million instead of an amortisation charge of $3.105 million and a charge of $23.208 million as extraordinary items had the new policy not been implemented.

(8) Centralisation of debts The Transport (Amendment) Act 1986 required all indebtedness of the Authority for money borrowed or financial accommodation obtained be extinguished and deemed to represent equity in the Authority held by the Government of Victoria. During the year, the loan expressed in foreign currency (Dutch Guilders) and the finance lease expressed in foreign currency (US Dollars) have been transferred to VicFin under the Transport (Amendment) Act 1986 at a weighted average forward contract rate of exchange at the date of transfer. All remaining leases will be transferred to VicFin during the financial year 1988/89.

(9) _!:!l!Ployee leave entitlements The Authority recognises and provides for: (a) Long service leave entitlements for employees with

service of 3 years or more. (b) Retiring gratuity entitlements for employees who are

not members of the State Superannuation Board scheme and have more than 3 years adult service.

(c) Accrued annual leave, annual leave loading and public holidays.

(d) Accrued leave as a result of the 38 hour week agreement.

No accrual is made for sick leave it being treated as an expense when payment is made.

(I 0) ~uperannuation liabilitv The Authority maintains a provision for the employer portion of superannuation benefits payable to retired and

33

existing employees under the State Superannuation Board scheme. Employees who were not contributors of the State Superannuation Board scheme at I September 1987 became members of the new Transport Superannuation Fund which commenced operation on I July 1988, and the liability for the employer portion of the additional superannuation benefits payable to these employees ($34.126 million) has been provided for.

( 11) Self insurance The Authority carries its own insurance risk except in special circumstances. All claims for damages or workers compensation outside the Workcare scheme are included as a provision in the financial statements at estimated value of claims at balance date. No fund is maintained to meet potential claims. However, the Authority pays a premium ($0.428 million) to the Transport Accident Commission to cover train related accidents.

(12) Revenue recognition Revenue is recognised and taken to account when the service to which the revenue relates is provided.

( 13) Rounding All figures in the financial statements have been rounded to the nearest thousand dollars.

(14) Exemptions The Authority has applied for and obtained exemptions from compliance with the Annual Reporting (Business Undertakings) Regulations 1988 with respect to the following: (a) Non consolidation of the Accounts of V /Line Industries

Pty. Ltd. with that of the Authority. (b) The renaming of the profit and loss account ''Statement

of Operations". (c) The inclusion in the financial statements of the leased

assets (freight wagons) in relation to the US dollar lease assigned to VicFin under the Transport (Amendment) Act 1986 (Note 12(1)).

The Treasurer has granted under Section 15(1 )(a) of the Annual Reporting Act 1983 an extension of six weeks after the statutory reporting deadline specified in the Act within which the Authority has to submit its annual report to the Minister for Transport.

(15) ~omparative figures Wherever the Authority has adopted a change of accounting policy or presentation of the financial statements, the comparative figures have been altered where possible to provide comparison with the current year. Changes of accounting policies or presentation of financial statements are highlighted in the relevant notes.

34

(l6) Vesting of assets Assets and liabilities were vested in the MT A at agreed values under various vesting orders approved by the Minister for Transport and published in the Government Gazette. The remaining assets and liabilities relating to the MT A Rail Division (excluding employee benefits) were transferred on a vesting order at agreed values as at 30 June 1987. The benefits of employees assigned to the MT A Rail Division have not been vested as the employees are legally the employees of this Authority.

Note 2 - Revenue

From Operations: Passenger services- (Note (a)) Freight services including parcels and mails -(Note (b)) Property rentals Trading and catering services

Other Revenue: Agency works (including intersystem

charges) Interest received Amortisation of deferred profit on sale of

assets under leasing agreements (Note 12(2))

Dividend received from V /Line Industries Pty.Ltd.

Other- (Note (c)) Proceeds from sale of fixed assets -

(Note (d)) Net gain on currency exchange variations

-(Note 12(3) and Note 18(1))

Total Revenue generated by V /Line

From State Government - (Note 25) Recurrent appropriations

Revenue supplement Special appropriations

Superannuation pensions Government subsidies for Transfer,

Redeployment and Redundancy Scheme

Government subsidies for pre Workcare Workers Compensation

Fringe Benefits Tax Government subsidies for finance charges

Total Revenue

1988 $000

45,343

176,161 5,829

12,034

239,367

4,717 1,678

3,674

248 7,822

21,031

3,507

42,677

282,044

168,800

70,841

21,731

7.300 1,050

24,490

294,212

576,256

35

1987 $000

42,635

174,726 4,272

10,991

232,624

4,844 1,861

5,266

1,654

4,378

18,003

250,627

167,546

66,262

40,763

12,300 1,357

72,766

360,994

611,621

1988 1987 $000 $000

Note:-

(a)

{b)

(c)

(d)

Included in the revenue for passenger services were compensations received from:

Education Department for student travel concessions 214 200

Department of Community Services for: Pensioner fare concessions 3,032 2,572 Pensioner free holiday travel 5,234 5,228

8,480 8,000

Included in the revenue for freight services was a subsidy received from the State Government to compensate the authority for the loss of revenue resulting from freight rate concessions granted to certain freight customers. 5,000 5,000

The increase in other revenue is a result of a change in the accounting policy of the Authority (which is progressively being implemented) whereby certain items of revenue which were previously credited against operating expenses are now being reported as revenue. This policy which complies with the Australian Accounting Standards will be fully implemented from I July 1988. Comparative figures in this instance have not been amended to reflect comparison.

Profitj(loss) on disposal of fixed assets Proceeds from sale of fixed assets 21,031 4,378 Written down value of fixed assets

sold- (Note ll) (15,342) (7,322)

Protitf(loss) on disposal 5,689 (2,944)

Proceeds from sale of fixed assets are now treated as revenue in accordance with the requirements of Australian Accounting Standard AASI5. This represents a change of accounting policy from previous years whereby only the profit or loss on disposals of fixed assets was shown in the statement of operations. The effect on this change has been to increase both the revenue and operating expenses for the year by $15.3 million. Comparative figures for 1987 have been amended to provide comparison.

36

Note 3 ---:: Operatingexpenses 1988 1987 $000 $000

Labour 260,039 273,791 Labour "on cost" (see Note below) 140,547 159,683 Services and supplies 110,108 101,001 Diesel oil 25,282 24,397 W orkcare and pre-W orkcare Workers

Compensation 16,720 20,499 Reduction in provision for claims against

the Authority (9,340) (160) Payments to private bus companies 12,296 10,771 Written down value of fixed assets sold

-(Note 2(d) and Note 11)) 15,342 7,322 Amortisation of deferred loss on sale of

assets under leasing agreement - (Note 12(2)(b)) 348 343

Depreciation of fixed assets- (Note 11) 29,585 20,499 Amortisation of leased assets - (Note

12(1 )) 5,632 5,280 Audit fees 162 114 Fees paid to board members 61 54 Bad debts 347 83

Total operating expenses 607,129 623,677

Note:- Labour "on cost" Payroll tax 16,753 17,153 Superannuation pension paid 70,841 66,262 Increase in superannuation pension

liability 47,251 81,000 lncrease/(decrease) in employee leave

entitlements 5,702 (4,732) -·---

Total Labour "on cost" 140,547 159,683

Note 4 - Abnormal items Transfer, Redeployment and Redundancy

Scheme expenditure 15,964 23,990 Increase in depreciation charge resulting

from review of fixed assets lives-(note 11) 7,698

Decrease in freight revenue resulting from incorrect accounting treatment in 1985/86 415

Write off of railway lines dismantled in previous years and replaced by upgraded lines - (Note 11) 620

Under-depreciation of fixed assets in previous years- (Note I I) 5,083

Under-amortisation ofleased assets in previous years - (Note 12) 1,338

Expenditure incorrectly capitalised in previous years - (Note I 1) 3,621 2,722

26,626 34,825

37

~ote 5 - Finance charges 1988 1987 $000 $000

Leasing charges 16,267 22,956 Interest on borrowings 4,287 33,558 Discount on loans 1,395 Indexation of loan 451 Interest on loans from State Government (38) Bank charges 467 374 Amortisation of foreign currency exchange

variations 4,840

21,021 63,536 Less capitalisation of finance charges on

capital projects 3,232

21,021 60,304

Note~~=- Extraordinary items 1988 1987 $000 $000

Realised loss on currency exchange on loan transferred to VicFin - (Note 19(a)) 19,401

Losses incurred by Victour Properties Pty. Ltd. in operating Mt. Buffalo Chalet between l January 1985 (the date when the responsibility for its operation was transferred to the company) and 31 December 1985 (the date when the company assumed responsibility for the operation and accounting systems of the Chalet). 413

Deferred profit on sale of assets under leasing agreement now transferred to VicFin -(Note 1(6) and Note l2(2)(a)) (32,251)

Write back of provision for diminution in the value of the investments in V /Line Industries Pty. Ltd. made in previous years- (Note 10) {1,043)

(32,881) 19,401

38

Note 7 Prior year adjustment 1988 1987 $000 $000

Unamortised deferred loss on currency exchange variation written back to statement of operations in accordance with Australian Accounting Standard AAS20 (Note 1 (7) and Note 19) 29,820

Under amortisation of deferred profit on sale of assets under leasing agreement to 30 June 1986 as a result of change in requirement of Australian Accounting Standard AAS 17. (Note 12(2)(a)) (5,869)

29,820 (5,869)

Note 8- Stores 1988 1987 $000 $000

Stores and materials 23,938 17,273 Manufacturing work in progress 5,576 5,570 Catering service stock 463 434

29,977 23,277

Note 9 - Debtors -------1988 1987 $000 $000

Trade debtors 21,585 20,743 Accruals and others 14,484 15,605

36,069 36,348 Less estimated doubtful debts 836 878

---35,233 35,470

Note 10- Investment in V(Line Industries Pty. Ltd. 1988 1987 $000 $000

Shares at cost 1 I Debentures at cost (secured by a floating

charge over the assets of the company) 2,875 2,875

2,876 2,876 Less provision for diminution in the

value of the investment 1,043 1,043

1,833 1,833 Write back of provision - (Note 6) 1,043

2,876 1,833 ----

39

V /Line Industries Pty. Ltd. is a wholly owned subsidiary of the Authority. However, the accounts of that company have not been consolidated with the Authority's accounts for the following reasons: (a) the balance date of the company (31 December) does not

align with that of the Authority, and (b) because of the size of the company consolidation would not

materially alter the results of the Authority. The Treasurer has granted an exemption under the Annual Reporting Act 1983 from the requirement to consolidate the accounts of this company. The principal activities of the company during the year ended 31 December 1987 were:-

Pipeline transportation Retail shop

The company made a profit of $0.248 million ( 1986 - loss $0.036 million) during the financial year ended 31 December 1987 after accounting for:

Share of income from the pipeline operation Less expenses

Share of loss of the Rail fan Shop

Total profitj(loss)

1987 1986 $000 $000

765 508

506 538

257 (32)

(9) (4)

248 (36)

The company declared a dividend of $0.248 million ( 1986 - Nil) for the year. The shares in V/Line Industries Pty. Ltd. were sold subsequent to 30 June 1988, and the full value ofthe debentures has been paid to the Authority. Consequently, the provision for diminution in the value of the investment made in previous years has been written back to the statement of operations as an extraordinary item - Note 6. Audited financial statements ofV/Line Industries Pty. Ltd. prepared in accordance with Schedule 7 of the Companies (Victoria) Code have been reproduced in the Annual Report of the Authority.

40

Note 11 - Fixed Assets Cost Accum- 1988 1987

or ulated Written Written Valu- Depreci- Down Down ation ation Value Value $000 $000 $000 $000

Balance at 1 July 864,599 (45,989) 818,610 786,570 Capital expenditure

during the year 99,191 99,191 102,017 Revaluation of fixed

assets 4,172 Depreciation charged to

Operating Expenses (Note 3) - (29,585) (29,585) (20,499)

Depreciation charged to abnormal items -(Note 4) (5,083) (5,083) (7,698)

Disposal of fixed assets -(Note 2(d)) (19,060) 3,718 (15,342) (7,322)

Assets previously transferred to MT A (8, 132)

Write-off of railway lines dismantled in previous years and replaced by upgraded lines- (Note 4) (620) (620)

Written down value of assets vested in MT A (27,776)

Transfer of capital improvements on leased locomotives to leased assets - (Note 12(1 )) (8,803) (8,803)

Expenditure capitalised in previous years now written off-(Note 4) {3,621) (3,621) (2,722)

Balance at 30 June 931,686 (76,939) 854,747 818,610

41

Fixed Assets comprise:-Deprec- Accum- 1988 1987

Cost/ iation ulated Written Written Valu- this deprec- down down ation year iation value value

Class of assets $000 $000 $000 $000 $000

Infrastructure (including track) At Board valuation 188,869 (2,523) (I 0,880) 177,989 200,811 At cost 179,859 (1,362) (1 ,467) 178,392 20,087

Rolling stock At Board valuation 67,075 (6,015) (18,737) 48,338 54,363 At cost 156,091 (10,806) (14,389) 141,702 57,240

Plant and machinery At Board valuation 30,181 (3,731) (12,988) 17,193 21,757 At cost 13,497 (1,038) (1,156) 12,341 994

Land At Cost 6,290 6,290 6,250

Buildings At Board valuation 68,238 (3,534) (9,501) 58,737 70,468 At cost 27,480 (861) (1,182) 26,298 8,026

Work in progress At cost 167,191 167,191 369,570

Other At Board valuation 3,045 (699) (2,029) 1,016 2,002 At cost 17,980 (3,771) (3,965) 14,015 1,972

Leasehold Improvements At Cost 5,890 (328) (645) 5,245 5,070

931,686 (34,668) (76,939) 854,747 818,610

Note: The Authority is committed to a complete revaluation of its land holdings. However, the scale of any overall exercise to revalue such assets would require extensive use of external resources and would incur considerable expenditure. The Authority is progressively selling surplus land and houses pursuant to the Government's asset disposal policies. As the stock of land and building declines, an overall revaluation exercise will become more feasible. Consideration is being given to surveying one Section of line during 1988/89 to assess the feasibility of a complete revaluation.

42

Note 12- Leases l. Leased assets

Accum- 1988 1987 Capital- ulated Una- Una-

ised Amort- mortised mortised Cost isation Value Value $000 $000 $000 $000

Balance at I July 251,730 (32, 160) 219,570 228,113 Improvements (Note 11) 8,803 8,803 Amortisation for the year:

Charged in Authority's accounts (Note: (a) below) (6,970) (6,970) (5,280)

Charged to MT A (Note 13) (3,263) (3,263) (3,263)

Balance at 30 June 260,533 (42,393) 218,140 219,570

Note: (a) The amortisation for the year has been charged to the statement of operations as follows:

Operating expenses -(Note 3) Abnormal expenses -(Note 4)

Leased assets comprise:-

Suburban Carriages Country Carriages Locomotives Freight wagons

1988 1987 $000 $000

5.632 5,280

1,338

6,970 5,280

Accum- 1988 1987 Capital- ulated Una- Una-

ised Amort- mortised mortised Cost isation Value Value $000 $000 $000 $000

123,644 (20,623) 103,021 106,885 32,680 (5,2 I 9) 27,461 28,429 34,028 (5,419) 28,609 22,424 70,181 (11,132) 59,049 61,832

260,533 (42,393) 218,140 219,570

Note: (b) The lease relating to the freight wagons has been assigned to VicFin under the Transport (Amendment) Act 1986. The Authority has subsequently entered into a sub-lease agreement with VicFin whereby the Authority utilises the freight wagons free of charge. The amortised value of the leased assets at the date of centralisation has been retained and reflected in these accounts on the premise that the assets will revert to the Authority at the end of the sub-lease.

43

2. Deferred profit/loss on sale of assets

(a) Profit 1988 1987 $000 $000

Unamortised profit at I July 43,968 55,103 Amortisation for year- (Note 2) (3,674) (5,266) Under-amortisation to 30 June 1986

adjusted against accumulated deficit -(Note 7) (5,869)

40,294 43,968 Unamortised profit written back on

centralisation of lease - (Note 6) (32,251)

Unamortised profit at 30 June 8,043 43,968

During the year, the lease expressed in US dollars was transferred to VicFin under the Transport (Amendment) Act 1986. The unamortised profit on the sale of assets under that lease has been fully amortised during the year as an extraordinary item- (Note 1(6) and Note 6).

(b) Loss 1988 1987 $000 $000

Unamortised loss at 1 July 4,071 80 Loss for the year 4,334 Amortisation for year- (Note 3) (348) (343)

Unamortised loss at 30 June- (Note 15) 3,723 4,071

3. Lease liabilities 1988 1987 $000 $000

Liability at 1 J u1y 241,008 257,295 Principal repayments (11 ,602) (11,081) Reduction in liability resulting from

change in currency exchange rate -(Note 2) (4,109) (5,206)

Liability transferred to VicFin -(Note 21) (68,952)

Liability at 30 June 156,345 241,008

44

This liability comprises:-

Non 1988 1987 Current Current Total Total

$000 $000 $000 $000 Liability in Australian

dollars 8,940 147,405 156,345 162,905 Liability in US dollars

Nil (1987-$US 59.150 million) converted to Australian Dollars at the rate of exchange at balance date 78,103

Outstanding liabilities 8,940 147,405 156,345 241,008

Imputed interest payable thereon 192,950 263,591

Outstanding commitment 349,295 504,599

Current commitment Repayable within one year 37,311 44,282

Non Current commitment

Repayable between one year and two years 31,857 45,780

Repayable between two years and five years 96,158 132,740

Repayable after five years 183,969 281,797

311,984 460,317

Total outstanding commitment 349,295 504,599

The imputed interest is based on interest rates applicable at balance date. During the year the lease expressed in US dollars has been transferred to VicFin and replaced with Contributed Capital provided by State Government in accordance with the Transport (Amendment) Act 1986.

45

Note 13- Inter-Authority account- MTA

1988 1987 $000 $000

The Inter-Authority account comprises of various charges to the MTA as follows:-Employee benefits (Note 17) 80,485 73,155 Provision for claims and workers

compensation 3,585 3,585 Depreciation of fixed assets 33,140 33,140 Amortisation of leased assets- (Note 12) 16, 038 12,775

133,248 122,655 Other 18,516 19,170

151,764 141,825

Note 14- Deferred debtors 1988 1987 $000 $000

Purchase of railway houses by employees 9,757 11,516

Debts associated with the sale of railway houses to employees are repayable over a period of up to 30 years.

;t:iote 15 - Deferred expenses 1988 1987 $000 $000

Unamortised deferred loss on sale of assets associated with leases- (Note 12(2)(b)) 3,723 4,071

Unamortised currency exchange loss on loans and leases - (Note 19) 29,820

3,723 33,891

!:i<:>Je 16- Creditors, accruals and Qrovisions Non-

Current current 1988 1987 $000 $000 $000 $000

Trade creditors and accruals 75,756 75,756 67,392 Accrued finance charges 3,356 3,356 7,287 Provision for claims and

compensation 7.686 3,631 11,317 20,657

86,798 3,631 90,429 95,336

46

Note 17- Emplo~ee benefits I. Employee leave entitlements

Non- 1988 1987 Current current Total Total

$000 $000 $000 $000 V/Line Provision for long

service leave 6,600 67,134 73,734 68,251 Provision for retiring

gratuity 184 8,400 8,584 8,484 Accrued annual leave 26,056 12,268 38,324 37,297 Accrued leave as a

result of the 38 hour week agreement 4,464 4,464 5,372

37,304 87,802 125,106 119,404

MT A Rail Division Provision for long

service leave 2,887 38,888 41,775 40,338 Provision for retiring

gratuity 4,726 Accrued annual leave 12,894 18,832 31,726 32,726 Accrued leave as a

result of the 38 hour week agreement 5,739 5,739 5,595

21,520 57,720 79,240 83,385

Total employee leave entitlements 58,824 145,522 204,346 202,789

Employee leave entitlements are not funded by the Authority until such time as the entitlements are taken. The current liability is based on past experience. The estimated legal liability ofthe Authority at balance date is $180.161 million (1987 -$1 7 4.18 5 million). The legal liability represents the amount the Authority is required to pay to employees under the terms of employment. The movement in liability relating to employees assigned to the MT A Rail Division has been charged to the MT A -(Note 13).

47

2. Provision for superannuation pensions

V/Line Liability relating

to retired employees

Provision relating to existing employees

MTA Rail Division Liability relating

to retired employees

Provision relating to existing employees

Total provision for superannuation pensions

Total employee benefits

Non- 1988 1987 Current Current Total Total

$000 $000 $000 $000

72,000 737,000 809,000 762,000

384,251 384,251 384,000

72,000 1,121,251 1,193,251 1,146,000

5,500 82,500 88,000 85,000

203,475 203,475 195,000

5,500 285,975 291,475 280,000

77,500 1,407,226 1,484,726 1,426,000

136,324 1,552,748 1,689,072 1,628,7~9

The provision for superannuation pensions is based on an actuarial assessment of the liability as determined by the Government Statist and Actuary. The State Government reimburses the State Superannuation Board on behalf of the Authority the employer portion of pensions paid to retired employees. The current liability is based on an assessment provided by the Government Statist and Actuary. The liability for pensioners who retired prior to the formation of the Authority on 1 July 1983 has been treated as the liability of V /Line. The 1987 figures have been adjusted accordingly to provide comparison with the current year. The movement in liabilities relating to employees (and pensioners) assigned to the MTA Rail Division has been charged to the MTA - (Note 13).

48

Note 18 - Borrowings

1. Liability 1988 1987 $000 $000

Liability at I July 51,038 512,566 Borrowings made during the year 34,329 Increase in liability due to indexation 451 Increase in liability resulting from

change in currency exchange rate -(Note 2) 602 8,159

Principal repayments (27,509) Write back of discount on loans

transferred to VicFin (10,810) Loans transferred to VicFin -

(Note 2l) (51,640) (466,148)

Liability at 30 June 51,038

Non Current liability Repayable after five years 51,038

Note: During the year the Dutch Guilder loan has been transferred to VicFin and replaced with Contributed Capital by State Government in accordance with the Transport (Amendment) Act 1986.

2. Discount on loans

Unamortised discount at 1 July Discount on loans for year

Amortisation for year Discount transferred to VicFin

Unamortised discount at 30 June

49

1988 $000

1987 $000

9,279 2,995

12,274 (1,464)

(10,810)

Note 19 -Currency eJ(c;hange variations 1988 1987 $000 $000

(a) Loan in Japanese Yen Unamortised loss at I July 18,2I8 Loss on conversion at I2

January 1987 2,475

20,693 Amortisation to 12

January 1987 (1,292) Amount written off as

extraordinary item due to debt centralisation - (Note 6) (19,401)

Unamortised loss at 30 June

(b) Loan in Dutch Guilders Unamortised loss at I July 17,250 13, 7I8 Loss on conversion at

balance date 5,684

I7,250 I9,402 Amortisation for year (2, I 52) Prior year adjustment - (Note 7) (17,250)

Unamortised loss 30 June 17,250

(c) Lease in US Dollars Unamortised loss at I July 12,570 I9, 173 Gain on conversion

at balance date (5,206)

12,570 13,967 Amortisation for year (I ,397) Prior year adjustment- (Note 7) (12,570)

Unamortised loss at 30 June 12,570

Total unamortised loss at 30 June classified as deferred expenses -(Note I5) 29,820

50

Note 20- Advances from State Government

Balance at 1 July Less amount transferred to contributed

capital due to debt centralisation -(Note 21)

Balance at 30 June

Note 21 - Contributed Capital

Balance at 1 July Transfer from advances from State

Government (Note 20) Transfer from loans from State Government Transfer from borrowings (Note 18(1 )) Transfer from lease liabilities - (Note

12(3)) Contribution from State Government for

capital works and principal repayments of loans transferred to VicFin in 1986/87 (Note 25)

Payments into the Public Account - (Note 25)

Amount received for Capital development program

Advances from VicFin to meet principal repayment of loans and leases

Other funds provided by State Government Principal repayments of loans transferred to

VicFin in 1986/87.

Balance at 30 June

1988 $000

1988 $000

1,542,248

51,640

68,952

97,041

(18,800)

1,776

11,141 170

(2,903)

1987 $000

756,794

756,794

1987 $000

187,982

756,794 26,286

466,148

103,000

(5,190)

2,147

4,934 147

1,751,265 1,542,248

All loans and advances from State Government have been centralised under the Transport (Amendment) Act 1986 and reclassified as Contributed Capital at book value.

Note 22- Asset Revaluation Reserve During the financial year 1986/87, certain assets reclaimed from closed lines were revalued and utilised on new capital works projects. The amount of the revaluation has been credited to the Asset Revaluation Reserve

51

Note 23 Value of assets and liabilities vested in MTA

Balance at I July Net value of assets and liabilities vested

during the year Adjustment to values of assets vested in

previous years

1988 $000

(226, 117)

1987 $000

(245,709)

23,390

(3, 798)

Balance at 30 June (226, 117) (226, 117)

Assets and liabilities were vested in the MT A at agreed values under various vesting orders approved by the Minister for Transport and published in the Government Gazette. The remaining assets and liabilities relating to the MT A Rail Division (excluding employee benefits) were transferred on a vesting order at agreed values as at 30 June 1987.

Note 24 - Capital Commitments As at 30 June 1988, the Authority has entered into contracts for the supply of components and capital equipment at an estimated value of $35 million (1987-$37 million).

Note 25 - Transactions with the Public Account 1988 1987 $000 $000

Operating revenue 1. Freight subsidies 5,000 5,000

Non operating revenue 2. Special appropriations -

Superannuation pensions 70,841 66,262 3. Revenue supplement 168,800 167,546 4. Government subsidies for Transfer,

Redeployment and Redundancy Scheme 21,731 40,763 5. Government subsidies for pre Workcare

Workers Compensation 7,300 12,300 6. Fringe Benefit Tax 1,050 1,357 7. Government subsidies for finance

charges 24,490 72,766

294,212 360,994

Capital Works 8. Monies appropriated for capital works 94.138 103,000 9. Monies appropriated for principal

repayments of loans transferred to VicFin in 1986/87 2,903

I 0. Monies paid into the public account (18,800) (5, 190)

78,241 97,810

TOTAL 377,453 463.804

52

l. Freight subsidies represents funds provided by the State Government to compensate the Authority for the loss of revenue resulting from freight rate concessions granted to certain freight customers. Funds received for that purpose have been treated as freight revenue.

2. Special appropriations represents funds provided by the State Government to finance the employer portion of pensions paid during the year to retired employees.

3. Revenue supplement represents funds provided by the State Government to finance the budgeted shortfall between the Authority's operating expenditure and revenue.

4. Government subsidies for Transfer, Redeployment and Redundancy Scheme represents funds provided by the State Government under Program 684 to finance the amount payable to employees who have separated under the scheme. Drawdown by the Authority during the year to meet the cost of the scheme amounted to $21.731 million ( 1987 -$40.763 million).

5. Government subsidies for pre Workcare Workers Compensation represents the amount drawndown by the Authority under program 726 to finance payments in respect of workers compensation prior to the introduction of Workcare.

6. Fringe Benefit Tax represents the payment made by the State Government on behalf of the Authority in relation to the Authority's liability for fringe benefit tax.

7. Government subsidies for finance charges represents funds provided by the State Government to finance the Authority's leasing and interest charges.

8. Monies appropriated for Capital Works represents funds provided by State Government to finance capital works projects.

9. Monies appropriated for principal repayments represents advances made by the State Government for the principal repayments of loans which were transferred to VicFin in 1986/87 in accordance with the Transport (Amendment) Act 1986.

I 0. Monies paid into the Public Account represents the net proceeds from asset sales paid into the public account in accordance with the requirements of the Transport Act 1983.

Note 26- Operating leases As at 30 June 1988, the Authority has outstanding lease commitments totalling $107.447 million (1987 $114.847 million) payable as follows:-

Payable within one year Payable between one year and two years Payable between two years and five years Payable after five years

1988 $000 7,335 7,268

21.263 71,581

1987 $000 7,414 7,336

21,564 78,533

107,447 114,847

53

CERTIFICATION OF FINANCIAL STATEMENTS

We certify that the financial statements of the State Transport Authority set out in this Annual Report have been prepared in accordance with Section 11 of the Annual Reporting Act 1983, and the Annual Reporting (Business Undertakings) Regulations 1 988.

In our opinion the financial statements present fairly the financial transactions during the financial year and the financial position of the State Transport Authority at 30 June 1988.

At the date of signing this certification we are not aware of any circumstances which would render any of the particulars included in the statements to be misleading or inaccurate.

John B. KING Chairman

K.M. FITZMAURICE Managing Director

P.H. WADE General Manager Finance

DATED AT MELBOURNE ON 31 OCTOBER 1988

54

The accompanying financial statements comprising balance sheet, statement of operations, statement of sources and applications of funds and notes to the financial statements of the State Transport Authority have been audited as required by the Annual Reporting Act 1983 and in accordance with Australian Auditing Standards.

As indicated in note 1(4) to the accounts, track recorded at $289.6 million and included as part of infrastructure in the balance sheet is not subject to depreciation. This practice is a departure from the Annual Reporting (Business Undertakings) Regulations 1988 and, in my opinion, depreciation, which allocates the cost of an asset over its useful life, should be provided on track and be included as an expense in the statement of operations.

The Authority has the exclusive use of designated areas of crown land, the value of which has not been recorded as an asset in the balance sheet. As the Authority accepts substantially all the risks and benefits incidental to ownership of the land, it is my opinion that all crown land used exclusively by the Authority should be valued and recorded as an asset in the balance sheet of the Authority.

In my opinion, except for the effect of the matters referred to above, the financial statements comply, in all material respects, with the requirements of the Annual Reporting Act 1983 and present fairly the state of the affairs of the State Transport Authority as at 30 June 1988 and the results of its operations for the year ended on that date in accordance with Australian

AUDITOR­GENERAL'S REPORT

Accounting Standards. £ / "' / .... Q /..l.. 7---::e

MELBOURNE C.A. BARAGWANATH 31/l 0/1988 Auditor-General

55

ADDITIONAL STATUTORY INFORMATION

• The State Transport Authority was established pursuant to Section 13 of the Transport Act 1983.

• The relevant Minister is the Minister for Transport (Hon. Jim Kennan QC, MP).

• The functions and objects of the Authority are as follows: Section 14 of the Act states that the functions of the State

Transport Authority are: • to provide, manage and operate transport services and facilities

for passengers and freight; • to arrange with the Metropolitan Transit Authority, transport

operators or other persons and bodies for the provision of transport services and facilities;

• to operate as employing authority for all officers engaged in the provision of railway and railway ancillary services in the State of Victoria;

• to co-ordinate transport services; • to develop new modes of transport; • to investigate and to promote and undertake research into any

matter related to the performance of its functions, powers of duties;

• to provide, manage and operate tourist and recreational facilities; and

• to compete for work on the open market. In the exercise of these functions the State Transport

Authority shall have regard to the achievement of the following objects: • to make use of available transport resources in ways which are

most beneficial to the community; • to operate within Government policy and other parameters

determined by the Victorian Transport Directorate; • to develop integrated freight handling systems and improve and

develop standards of services for freight; • to effectively market integrated freight services and country

passenger services and increase the use of these services; • to improve standards of integrated accessible transport service

and comfort for country passengers; • to improve and develop transport facilities: • to improve productivity; • to manage and operate freight services at a profit so as to phase

out freight subsidies and to provide funds for capital works; • to establish, manage and operate without cross subsidisation

through the Workshops Management Board, efficient reliable and technologically up to date workshops with a heavy engineering capacity and compete for work outside the Authority;

• to achieve a rapid, reliable, efficient, courteous and effective level of service;

• to provide a competitive and efficient public freight and passenger transport alternative to private transport;

• to establish and maintain a satisfying work environment which ensure the broadest range of opportunity for career development and job enrichment;

56

• to achieve an efficient and dynamic organisation by implementing appropriate technological and other changes through a process of consultation beginning at the contemplative stage;

• to delegate decision making to appropriate levels in the Authority;

• to maintain harmonious relations between management, staff and employee organisations through processes of effective consultation and participation in decision making;

• to develop and train all personnel to carry out their duties and responsibilities effectively and efficiently to interact with the public in a helpful and courteous manner and to enhance their workskills;

• to maintain a high level of motivation, performance, team work and safe working practices and develop a sense of commitment to the organisation with employment conditions in keeping with community standards;

• to facilitate accountability at all levels within the Authority by maintaining suitable information and reporting systems;

• to effectively manage its assets, including real estate, to protect future options and to provide for the planning, design, construction and management of new infrastructure and facilities as required;

• to minimise interference to the commumty arising from the construction and maintenance activities of the Authority;

• to identify the transport needs of disadvantaged groups, particularly the disabled and implement appropriate services within the level of funds specifically provided for this purpose by Government;

• to provide mechanisms and full information to enable effective and timely participation by the community in decision making about facilities and services; and

• to encourage and facilitate cycling as an access mode for public transport.

The range of activities undertaken by the Authority are: • Provision of rail and ancillary services for freight and passengers. ~ Provision of contract and road freight services. • Provision of contract passenger road coach services. • Operation of Engineering Workshops. • Co-ordination of commercial road coach and urban bus services

in Victoria outside the metropolitan area. • The persons or sections of the community served by the

Authority are all those persons or bodies requiring any of the above services.

• The names of Board members of the Authority are set out on page 4 of the report.

• The names of the members of the Corporate Management Group of the Authority are set out on page 4 of this report.

57

• A brief description of the areas of the responsibilities of these officers are as follows:

FREIGHT SERVICES DIVISION T.R. Mulligan, General Manager. To identify, evaluate, specify and pursue opportunities to

improve the effectiveness and efficiency of a market-based freight and parcels transport service in Victoria and between Victoria and other States.

Pursue market-based policies directed towards achieving: • cost recovery as determined by V /Line and the Government; • return on investment as determined by V /Line and the

Government: • co-ordination and integration of transport modes to provide

total physical distribution systems; and • integrated national freight marketing.

PASSENGER SERVICES DIVISION L.J. Harper, General Manager. To identify, specify, evaluate and pursue opportunities to

improve the effectiveness and efficiency of a market-based passenger transport system in Victoria and between Victoria and other States.

Pursue marketing policies directed towards achieving: • cost recovery as determined by V /Line and the Government; • return on investment as determined by V /Line and the

Government; and • co-ordination and integration of rail, road and other modes of

passenger services. MANAGEMENT INFORMATION SERVICES DIVISION E. Atkinson, General Manager. To ensure provision oflnformation systems and services

which directly contribute to achievement of the Authority's objectives. Through discussion and involvement with the Business Divisions ensure that the systems and services are applied in the most productive way to improve the effectiveness and efficiency of the organisation. To ensure that the new technologies are introduced in a co-ordinated and controlled manner.

TRANSPORT OPERATIONS DIVISION J .A. Hearsch, Chief General Manager To ensure the provision of safe and reliable public transport

and related services which meet agreed requirements of the Freight and Passenger Services Divisions to pre-determined standards of quality, cost and efficiency.

Responsibilities include the provision of engineering, scientific and technical support services, and the planning and implementation of improvements and alterations to vehicles, infrastructure, plant and physical facilities operated and maintained by the Division.

58

CORPORATE RESOURCES DIVISION R. Wiggins General Manager To ensure the provision to V /Line of effective, prompt and

reliable administrative, personnel, internal auditing, legal, property and communication services and to develop and monitor policies and procedures which ensure that agreed numbers of suitable people are employed and which create physical, economic and emotional work environment which maximise the return to the organisation and its employees.

FINANCE DIVISION P.H. Wade, General Manager To record and control the Authority's receipts and

expenditure and ensure that the accounting records are maintained in accordance with statutory requirements and professional standards.

To evaluate and report on financial performance with respect to corporate and government objectives and to participate in the financial planning process of the Authority and provide advice in financial matters.

CORPORATE STRATEGY J.C. Brenan, General Manager In consultation with other divisions to develop and

maintain a five-year Corporate Plan which is an effective working document for the organisation as a whole and which constitutes a logical, accepted and consolidated basis for future V /Line activities.

To ensure that investment and dis-investment proposals are adequately assessed and monitor the strategic performance of the organisation as a whole in line with directions established in the Corporate Plan.

WORKSHOPS DIVISION R.D. Terrell, Chief General Manager To undertake major maintenance and repair of rolling stock

and other equipment used in the operation of the Authority's systems, and to manufacture other items of equipment in the most cost effective manner.

The administration and management of the Authority's railway workshops is the responsibility of the Workshops Management Board. The Board is appointed by the Minister and may regulate it own procedure.

INDUSTRIAL RELATIONS DIVISION B.G. Shaw, General Manager To ensure that timely and satisfactory Industrial Relations

programmes and procedures are available to V /Line. GENERAL INFORMATION

• The addresses and telephone numbers of the principal office and regional offices of the Authority are set out on page 5 of the report.

• The office of V /Line Industries Pty Ltd is situated at 589 Collins Street, Melbourne 3000. Telephone (03) 619 1111.

59

• The types of publications and other information with respect to the functions and activities of the Authority published during the financial year were as follows:

- V /Line Update - A regular news-sheet of internal information. - V /line News - A bi-monthly corporate magazine. -Weekly Notice- A weekly booklet of operational and staff

notices. • Schedule of rates, charges and conditions for the carriage of

freight and parcels. • Timetables for country and interstate services as required. • Publications of the Authority and information regarding the

Authority can be obtained by applying to the Manager, Public Relations, Corporate Communications Group, V /Line, 589 Collins street, Melbourne 3000. Telephone (03) 619 4150.

• Paragraph 3 of this Additional Statutory Information sets out the operating objects of the Authority. The Authority had regard to all of these objects in carrying out its functions during the financial year and the general text of the report highlights the achievement or partial achievement of a number of the objects.

• Product advertising, promotional, public relations and marketing activities were undertaken by the Authority during the financial year to develop community awareness of the Authority and the services it provides.

• There were no regulations made or administered by the Authority which were amended or revoked during the financial year.

• The Authority received 190 requests for information under the Freedom of Information Act during 1987/88. The following categorises how these requests were finalised.

Access granted 61 Access denied 7 Partial access 62 Transferred 22 Transferred in part l No documents existed 9 Dealt with outside the Act 5 Still being processed 30.6.88 lO Request withdrawn 2 Discreet document prepared 7 Available through another Act 3 Request deferred I

190

There were no applications received for decisions to be internally reviewed nor were there any appeals lodged with the Administrative Appeals Tribunal or the County Court of Victoria.

• In the matter of M.A. Hutchinson and others v. The Honourable James Kennan, MP, an Order was made declaring invalid a Determination of Policy of the Minister for Transport under Section 89 of the Transport Act, as it related to the carriage of bulk barley, bulk oats and bulk wheat. The Policy Determination

60

set out matters for the Road Traffic Authority to consider in granting permits, including consultation with the State Transport Authority. The decision had the effect of removing the Policy requirements from the matters which the Road Traffic Authority should consider in granting permits for the carriage of bulk barley, oats and wheat under Section 189 of the Transport Act. A new Determination of Policy has since been made by the Minister rectifying the cause of the invalidity of the previous determination.

• Staff figures expressed in categories used by the Australian Bureau of Statistics in its survey of Employment and Earnings are as follows:

Category

Railway Transport

Railway Transport Equipment

Electrical Machinery

Catering and Accommodation Services

TOTAL

30 June Addit-1987 ions

9236 512

1938 269

222 69

308 17

11704 867

Delet- Net 30 June ions decrease 1988

1064 -552 8684

556 -287 1651

143 - 74 148

58 - 41 267

1821 -954 10750

• Staffing policies - the staffing policies followed by the Authority are similar to those followed by most Victorian public sector authorities and instrumentalities.

That is, the Authority is an equal opportunity employer, with all recruitment, and most promotions (with the exception of certain weekly paid grades, and specialised grades, where selection is on senior suitable grounds), being based on merit/suitability. Consequently, promotion opportunities are advertised widely throughout the Authority and the resultant selections are subject to appeal, by unsuccessful applicants, to an independent appeal board.

• The time lost as a result of industrial accidents during the year amounted to 146,400 manhours.

• All officers and employees of the Authority required to complete a declaration of pecuniary interest during the year in respect of their offices of employment with the Authority have completed such declarations.

• There were changes to the Authority Board and the Workshops Management Board during the year. These were:

- R.J. Ingersoll, Resigned as Chairman ofS.T.A. Board 4/1/88 - D.P. Chamberlain, Retired from S.T.A. Board 7/11/87 - J.B. King, Appointed Chairman of S.T.A. Board 17/2/88

61

- T.P. Bourke, Appointed Member of S.T.A. Board 17/11/87 - R.J. Ingersoll, Resigned as Chairman of Workshops

Management Board 4/1/88 - J. Garro, Retired from Workshops Management Board

12/11/87 -B. Watson, Resigned from Workshops Management Board

24/7/87 - J.B. King, Appointed Chairman of Workshops Management

Board 7/3/88 - R. Baillie. Appointed Member of Workshops Management

Board 20/10/87 A. Scott. Appointed Member of Workshops Management Board 17/8/87.

• Changes to the Corporate Group of the Authority during the year were as follows:

- D.H. Jones. Appointed Group Manager Corporate Communications 21/9/87.

• Overseas tours for and on behalf of the Authority were undertaken as under:

- Mr A. Hurse, Group Manager, Operations Co-ordination, visited Europe and North America where he inspected, and discussed with staff and management, rail container terminals and their operation, in the United Kingdon, France, Canada and the United States of America. Locomotive maintenance facilities were also inspected at a number of locations in North America, and discussions held with staff and management at the places visited.

• Section 51 of the Transport Act 1983 sets out how Authority charges will be set.

• Future Proposals - Although overall funding for capital works is subject to annual budgeting review by Government Ministerial approval has been given for a large number of individual projects. Major elements of the currently approved investment program are listed below showing expenditure proposed for 1988-89:

Carriage Maintenance Facility Dudley Street Computer Mainframe Upgrade Grain Network Upgrade Track Maintenance Catchup Upgrade Country Works Depots and Mobile Gangs Echuca Bridge Reconstruction G Class Mainline Locomotives Locomotive Spare Parts Geelong Station Repair and Upgrade Refurbishment of Blue Harris Cars Passenger Information Display System South Dynon Terminal Upgrade Workshops Strategic Plan Train Crew Training Facilities and Simulator

62

M$ (Dec 1987) 6.1 2.4 5.9 8.3 1.0 2.0 17.4 2.0 1.0 3.4 1.3 5.7 5.3 2.9

• The following table reflects the Consolidated Fund Details reported in the State Program Budget Papers for 1988/89. Details of quantitative targets and the extent to which those targets were achieved are also provided.

STATE TRANSPORT AUTHORITY TABLE l

1987-88 1987-88

Category Indicator Actual

Achieve-Target ment

System Usage Freight tonnage carried li.IM 10.9M Passenger journeys (I) 5.5M 5.5M Passenger kilometres 787.7M 833.0M

$ $ Financial (2) Total recurrent expenditure (2) 463.5M 463.9M

Revenue-freight (3) 187.9M 176.1M Revenue-passenger ( 4) 57.9M 57.4M Revenue-corporate services l0.3M l3.3M Total revenue 256.1M 246.8M Total deficit (5) 207.4M 217.1M Capital expenditure 97.0M 97.0M

Service quality On time running ( 6) Passenger trains Commuter 90% 90%

Regional 90% 89% Interstate 90% 78%

Employees Total Employment (full-time equivalent-year avg.) 11,399 11,150

Productivity Expenditure/employee $40,661 $41,605 Revenue/employee $22,467 $22,134 Cost recovery ratio - pass. 43.3% 42.0% Cost recovery ratio - freight 77.0% 74.0% Cost recovery ratio Corp.

Services 27.6% 32.2% Total cost recovery ratio 61.7% 59.4%

NOTES I. Figures exclude private subsidised bus services, but include

V /Line contract services. 2. Includes all operating expenditure except depreciation of

fixed assets, amortisation of leased assets and non-cash provisions.

3. Includes parcels and mail. 4. Includes trading and catering. 5. Total Deficit includes all operating expenses and revenue but

excludes depreciation of fixed assets, amortisation of leased assets, profit realised on sale of assets and non-cash provisions.

6. Commuter- Peak less than 5 minutes late; all others less than I 0 minutes late.

63

V/LINE INDUSTRIES PTYLTD

FINANCIAL STATEMENTS

FOR THE

YEAR ENDED 31 DECEMBER 1987

64

GENERAL The Directors submit the Accounts for the year ended 31

December 1987 together with the reports on the activities for the period.

Commercial operation of the Altona Somerton Pipeline, supplying jet fuel to Tullamarine, continued throughout the year. The improved return of $765,429 ($506,590 previous year) reflects the increased pipeline throughput tariffs and volume.

A loss of $18,727 was again shown by the Rail Fan Shop partnership ($8, 774 in previous year). Accordingly, the staffing of the shop, which is situated on the Ground Floor of 589 Collins Street, Melbourne has again been restructured and reduced. A new Manager has been appointed and it is anticipated that the shop will show a small profit by the end of the current year. The need to close the shop has been considered and the performance will be closely monitored.

A shareholding has been acquired in a company, On Track Systems Pty. Ltd., established for the development of a Workshops Information System for V/Line. 2000 $1 shares have been acquired, which are subject to a further call of 50c per share and which represents 20% of the proposed capital of the Company. It is anticipated that in marketing the software enhancement which is developed, the company will return a reasonable dividend in the future.

STATUTORY & FINANCIAL I. The names of the Directors in office at the date of this report

are: K.M. Fitzmaurice, K.A.J. Cahill and RE. Bradford 2. The net profit of the company for the financial year after

provision of income tax was $248,965. 3. The principal activities of the company in the course of the

financial year were: (a) Pipeline transportation: (b) Retail shop

4. Dividends paid or declared since the end of the previous financial year were Nil. A dividend of $248,965 is recommended for payment out of the profits of the company.

5. Since the end of the previous financial year, no Director has received or become entitled to receive a benefit, other than (a) a benefit included in the aggregate amount of

emoluments received by directors shown in the accounts; or

(b) the fixed salary of a full-time employee of the Company

by reason of a contract made by the Company or a related corporation with the director or with the firm of which he is a member, or with a Company in which he has a substantial financial interest. This report is made in accordance with a resolution of the Board and is signed for and on behalf of the Directors at Melbourne this 3rd day of June 1988.

K.M. Fitzmaurice R.E. Bradford Director Director

65

DIRECTORS' REPORT

STATEMENT BY DIRECTORS

In the opinion of the Directors -(a) the profit and loss account of the Company is drawn up so

as to give a true and fair view of the profit or loss of the Company for the financial year;

(b) the balance sheet of the Company is drawn up so as to give a true and fair view of the state of affairs of the Company as at the end of the financial year;

(c) the accounts have been made out in accordance with applicable approved accounting standards; and

(d) at the date of this statement. there are reasonable grounds to believe that the Company will be able to pay its debts as and when they fall due. The Statement by Directors is hereby signed and dated in

accordance with a resolution of the Directors.

Dated this 3rd day of June 1988

K.M. Fitzmaurice Director

66

R.E. Bradford Director

We have audited the attached accounts contained on pages 3 to 9 in accordance with Australian Auditing Standards.

In our opinion the accounts are properly drawn up in accordance with the provisions of the Companies (Victoria) Code and in accordance with applicable approved accounting standards and so as to give a true and fair view of: (i) the state of affairs of the company as at 31st December 1987

and of the profit (or loss) of the company for the year ended on that date:

( ii) the other matters required by Section 269 of that Code to be dealt with in the accounts:

20 Collins Street, Melbourne Date 9.6.88

Warnock Wharton & Bignell

67

AUDITOR'S REPORT TO THE MEMBERS

BALANCE AS AT 31 DECEMBER 1987

SHEET Note 1987 1986 $ $

Current assets Cash 657,063 335,253 Receivables 210,153 179,273 Inventories 7 56,927 73,972 Other 8 40,330 18,910

TOTAL CURRENT ASSETS 964,473 607,408

Investment Shares in On Track Systems P/L 4 1,000

Non-current Assets Property, Plant & Equipment 6 1,200,315 1,295,751

TOTAL ASSETS 2,165,788 1,903,159

Current Liabilities Creditors and borrowings 127,605 137,259

Less right of recovery from A.R.E (Retail) Pty. Ltd. 3 62,587 65,613

65,018 71,646

Provision for dividend 248,965

TOTAL CURRENT LIABILITIES 313,983 71,646

Non Current Liabilities Creditors and borrowings 5 2,880,012 2,859,720

TOTAL LIABILITIES 3,193,995 2,931,366

NET ASSETS (LIABILITIES) ( 1 ,028,207)( 1 ,028,207) ---

Shareholders' Equity Share Capital 1,000 LOOO Accumulated Losses ( 1 ,029,207)( 1 ,029,207)

TOTAL SHAREHOLDERS EQUITY (DEFICIENCY) ( l ,028,207)( 1 ,028,207)

68

FOR THE YEAR ENDED 31 DECEMBER 1987 Note

Operating (Profit) Loss A Income Tax attributable to operating profit or loss

Operating (Profit) Loss after Income Tax (Profit) loss on extraordinary items

Operating (profit) loss and extraordinary items after income tax Accumulated losses at the beginning of the financial year

Total available for appropriation (loss) Dividend provided for

Accumulated loss at the end of the financial year

1987 $

(248,965)

(248,965)

1986 $

36,750

36,750

(248,965) 36,750

1,029,207 992,457

(780,242)( 1 ,029,207) 248,965

1,029,207 1,029,207

A. Operating (Profit) Loss is after (crediting) charging: Share of income of joint venture 2 (765,429) Share of partnership loss 3 9,364 Interest on short term deposit (67,937) Auditor's Fees - Audit 2,000

- Other 450 (The auditors received no other benefit)

(505,590) 4,387

(47,852) 2,094

531

Interest paid to State Transport Authority 5 402,500 405,0 l 0 Depreciation and amortisation of fixed assets

Note 1 - Accounting Policies

6 127,524 141,106

The accounts of the company have been prepared in accordance with general historical accounting conventions and are in accordance with applicable approved accounting standards and with the new Schedule 7 to the companies (Victoria) Code as in operation on 1st October, 1986. Whereas tax effect accounting would have been applied, in a loss situation future tax benefits applicable to the accumulated loss are not brought to account. Future tax benefits not brought to account at 31st December were: 871,793 1,282,737

Note 2- Joint Venture The accounts of the company include a consolidation of its 25% interest in the Somerton Pipeline Installation. The share of tariff income for the year and expenses was Income Expenses

1,020,322 254,893

69

747,819 242,229

PROFIT AND Loss ACCOUNT

Notes to the Profit and Loss Statement

NOTES TO AND FORMING PART OF THE ACCOUNTS

Note 3- Partnership- Railfan Shop (a) The company's share of the financial results of the

RAILFAN SHOP has been consolidated with the accounts of this company (subject to note 3 (b)).

(b) All liabilities of the partnership have been included in the Balance Sheet on the basis of a joint and several liability, with a deduction for the amount contributable by the partner. It is the opinion of the Directors that this amount will be recoverable in the normal course of business.

Note 4 - Shares in On Track Systems Pty. Ltd. - at cost There is a contingent liability for uncalled capital of $1,000.

Note 5 - Creditors & Borrowings Debenture Loan The loan from the State Transport Authority is fully secured by a floating charge ove the company's undertaking, property and assets.

Note 6- Fixed Assets The fixed assets of the company comprise:

Written Deprec- Down

Cost iation Value (a) At 31st December 1987

Pipeline operations Equity in Fixed Assets of joint venture 3,087,599 1,888,692 1,198,907 Railfan shop operations Share of equipment 2,079 671 1,408

3,089,678 1.889.363 1,200,315

(b) At 31st December 1986 Pipeline operations Equity in Fixed Assets of 3,055 1,761, 1,294 joint venture .233 168 ,065 Railfan shop operations Share of equipment 1,935 249 1,686

3,057.168 1,761,417 1,295,751

Depreciation of fixed assets is based upon the straight-line method and is designed to reduce the value of each asset to its residual value at the end of its useful life. No depreciation has been allowed on buildings $7,721 or land improvements of $226,258.

Note 7 Stocks on hand and in transit The Railfan Shop's retail stocks are valued at the lower of cost or market value.

Note 8 Current Assets - Other 1987 1986

Prepayments 40,330 \8,910

70

Note 9 - Contingent Liabilities (a) The parties to the Joint Venture have a lease commitment

with the State Transport Authority of $97,000 per annum, subject to land valuation increases for the period ended 8th February 1999.

Note 10- Parent Company The Company is fully owned subsidiary of the State Transport Authority (ST A).

71

SUPPLEMENTARY INFORMATION

STATE TRANSPORT AUTHORITY

SUPPLEMENTARY INFORMATION

FOR THE

PERIOD ENDED 30 JUNE 1988

72

AT 30th JUNE 1988 Staff Employed 1988 1987

Male Female Total Male Female Total Management and

Administration 856 51 907 799 36 835 Supervisors 594 46 640 679 33 712 Clerical 1,108 352 1,460 1,244 394 1,638 Tradesmen 1,317 0 1,317 1,503 0 1,503 Station 449 14 463 477 14 491 Signalmen 254 2 256 293 0 293 Apprentices 346 13 359 371 6 377 Enginemen 907 0 907 1,028 0 L028 Driver (other) 510 0 510 323 0 323 Guards and

conductors 408 4 412 485 2 487 Skilled labourers 2,376 12 2,388 2,687 9 2,696 Unskilled

labourers 647 162 809 904 152 1,056 Other 253 69 322 217 48 265

-- --10,025 725 10,750 11,010 694 11,704

73

Analysis of FOR YEAR ENDED 30 JUNE 1988

Revenue, FREIGHT

Passenger 1988 1987

Journeys & Tonnes Tonnes Revenue Carried Revenue Carried

Tonnes ($000) (000) ($000) (000)

Carried Grains 60,429 3,267 60,842 3,102 Fertilizer Bulk 3,748 245 2,975 215 Mining and Quarry 4,589 854 3,844 761 Solid Fuel 6,301 353 5.952 345 Petroleum Products 10,370 473 9,285 426 Rice 1,001 89 1.519 122 Other Rural 1,187 45 2,651 121 Iron and Steel 11,207 796 11,651 837 Cement Bulk 6,432 579 7,130 633 Cement Bagged 193 14 399 34 Paper Products 4,171 175 4,867 226 Motor Vehicles 2,133 51 1,990 44 Motor Spares 1,080 33 712 39 Manufactured Products 1.361 75 2,370 145 Gypsum 1,738 81 1.988 95 Containers Shipping 18,209 1,269 17,703 1,213 Containers Others 10,411 926 7,539 647 Forwarding Agents 10,243 1.043 9,180 1,019 Produced Food 1,723 216 1,828 227 Beer 1,488 71 1,713 90 Empty Returns 285 49 352 51 Fast Track LCL 5.865 104 5,047 lOO Fast Track Wagonload 1,105 93 1,308 105 Other revenue 3,215 4,063

168,484 10,901 10,597

PASSENGER ANALYSIS Passenger Passenger

Revenue Journeys Revenue Journeys ($000) (000) ($000) (000)

Commuter 10,711 3.068 9,510 2,958 Regional 21,972 1,856 20,014 1,736 Intersystem 12.660 554 13, Ill 528

45,343 5,478 5,222

74

PARCELS & MAILS

Parcels Mails

TRADING & CATERING On-train Retail Trading Staff Canteens

PROPERTY RENTALS AGENCY WORKS INTEREST RECEIVED DIVIDEND RECEIVED PROCEEDS FROM SALE OF ASSETS MISCELLANEOUS REVENUE

TOTAL

AT 30 JUNE 1988

Lines Traffickable (a) plus Met lines shared (b)

Note (a) Lines closed for traffic during year

Station from Bairnsdale Maffra Welsh pool Murchison East Rush worth

Station to Orbost Cowwar Yarram Colbinabbin Stanhope

Route km 97.75 28.42 26.54 43.07 16.03

1988 1987 Revenue Revenue

($000) ($000) 7,584 7,682

93 136

7,677 7,818

3,705 3,181 7,135 6,647 I, 194 l, !63

12,034 I

5,829 4,272 4,717 4,844 1,678 1,861

248 21,031 4,378 15,003 6,920

282.044 250,627

Route km Track km 4910.25 5282.06

239.42 471.83

5149.67 5753.89

Track km Date Closed 97.75 21.8.87 28.42 31.8.87 26.54 26.10.87 43.07 10.12.87 16.03 10.12.87

11 I 211.81

Note (b) The Met controlled lines for which V/Line pays a share of costs. V /Line ceased services on the following Met lines during the year.

Station from Station to Route km Track km Date Ceased Ringwood Bayswater 5.02 10.04 7.87 Flinders Street Port Me lb. 4. 97 9. 94 12.10.87

75

Length of Railways & Tracks

Statement showing AS AT 3o JUNE 1988

Locomotives, Rail ROLLING sTocK

Motor Passenger Electric Locomotives

Vehicles Coaching .suburban ?' Main Lin.e . ' ' D1esel Electnc Locomotives

Road Motor Diesel Hydraulic Locomotives

Vehicles, Goods Rail Tractors

and Service Stock

COACHING STOCK Passenger Carriages, Mail,

Luggage, & Power Vans V/Line Joint Stock

Brake Vans

Total

Total

RAIL MOTOR PASSENGER VEHICLES Bogies

GOODS STOCK Bogies Fixed Wheel

PRIVATELY OWNED TANK WAGONS

SERVICE STOCK Bogies Fixed Wheel

CONTAINERS

SUMMARY Locomotives Rail Tractors Coaching Stock Bogies Fixed Wheel Privately Owned Tank Wagons Containers

Total

Total

(a) Exclude additional 315 permanently stored (b) Includes 13 1435 mm gauge (c) Includes 58 1435 mm gauge (d) Bogies exchanged as required

76

1988

2 275

4 49

330

289 82

371

125

14

4189

1987

10 274

4 49

337

304 82

386

147

16

4179 1330 (a) 3062

5519 7241

290 337

404 394 311 361

715 755

265 314

281(b) 288 49 49

51 O(c) 549 4593(d) 4573 1641 3423 290 337 265 314

Traffic Train Distance Passenger Goods

Total Train Kilometres

Assistant Distance Passenger Goods

Total Assistant Kilometres

Light Distance Passenger Goods

Total Light Kilometres

Total Traffic Kilometres (Incl. Assist and Light)

Departmental Distance Loco Light Ballast Instructional Inspection Casualty & Doubling Miscellaneous

Total Departmental Kilometres

Shunting

Total Locomotive Distance

Vehicle Distance Passenger

Goods Loaded Empty

Total Goods

Departmental Passenger Goods Loaded Goods Empty

Total Departmental

Total Vehicle Distance

Nett Tonne Kilometres (OOO's omined) Passenger Goods

Total N.T.K.

Gross Tonne Kilometres (OOO's omined) Passenger Goods Departmental

Total G.T.K.

Year Ending 30 June 1988

Steam Diesel Electric

14.268 6.805,711 0 6.590,121

14,268 13.395,832

264 523,309 0 3.265.466

264 3,788,775

415 461,644 66 1.801.616

481 2,263,260

I 5.013 I 9,447,867

6 175,026 0 398.962

156 3,852 0 3,926 0 55

40 21.179

202 603.000

130.864

15,223 20.181.731

Year Ending 30 June 1988

Statement of Train Locomotive and Vehicle Kilometres

Year Ending 30 June 1987

Electric Railmotor Total Steam Diesel Electric Railmotor Total Electric

0 225.371 7,045.350 14,840 6,567.493 459,767 465,122 7.507.222 0 0 6.590.121 0 7,086,106 205.674 0 7.291.780

0 225.371 13.635.4 71 14,840 13.653.599 665,441 465, 122 14,799.002

0 0 523.573 417 732,954 31,438 0 764,809 0 0 3.265,466 0 2,013,087 42,760 0 2,055,847

0 0 3,789.039 417 2,746,041 74,198 0 2,820,656

0 0 462,059 963 241,059 3,803 0 245,825 0 0 1,801,682 0 2,661,504 73,651 0 2.735, !55

0 0 2.263,741 963 2,902,563 77,454 0 2,980,980

0 225,371 19,688.251 16.220 19.302.203 817,093 465, 122 20,600,638

0 0 175,032 0 186,223 9,413 0 195,636 0 0 398,962 230 240,069 392 0 240,691 0 0 4.008 0 407 0 0 407 0 0 3.926 0 4,755 605 0 5.360 0 0 55 0 110 0 0 110 0 13,747 34.966 0 20.247 5,172 13.296 38.715

0 13.747 616,949 230 451,811 I 5.582 13,296 480,919

0 3,920 134.792 0 154.380 2,323 7,824 164,527

0 243,038 20.439,992 16,450 19,908,394 834.998 486,242 21,246,084

Year Ending 30 June 1987

Steam Diesel Electric Railmotor Total Steam Diesel Electric Railmotor Total Electric Electric

85,664 30.897,448 0 364.796 31.347,908 91,433 31.471,122 1.553,201 652,862 33,768,618

4,025 115.867,945 0 0 115.871,970 8, 726 116,334,822 2,185,478 0 118,529,026 0 45,676,650 0 0 45,676,650 2.381 55.866,986 2,203,669 0 58.073,036

4.025 161.544,595 0 0 161,548,620 11,107 172,201,808 4.389,147 0 176.602,062

0 35.827 0 16,550 52.377 0 102.573 15,093 1,270 118,936 0 1,459.961 0 0 1.459,961 447 828.771 1.021 0 830.239 0 1,358.011 0 0 1,358,011 791 721,461 472 0 722,724

0 2,853.799 0 16.550 2,870,349 1.238 1.652,805 16,586 1,270 1.671,899

89,689 195.295,842 0 381,346 195,766,877 103,778 205,325,735 5,958,934 654.132 212.042,579

44 96,092 0 0 96,136 94 55.508 972 0 56,574 0 3.378,108 0 0 3.378,108 0 3,475, 773 55,593 0 3,531,366

44 3.474.200 0 0 3,474.244 94 3.531,281 56.565 0 3,587,940

4.253 1.786.243 0 18.795 1.809.291 4.281 I .699,269 80.976 34,085 1,818,611 0 6,660.978 0 0 6.660.978 0 6.705,209 135.253 0 6,840,462 0 110,524 0 775 111.299 43 61.867 852 98 62,860

4.253 8,557.745 0 19.570 8.581.568 4.324 8.466.345 217.081 34,183 8.721,933

77

General To 30th JUNE 1988

Comparative Statement of Rolling Stock, Goods Tonnage, Passenger J oumeys, Revenue & Working Expenses

ROLLING STOCK REVENUE

Km of Railway

Passenger Wagons, Total Gross Nett No. Freight Passenger

Working Year

Open for Loco- Traffic Tonne Tonne Journeys (Tonnes Freight Rcntals Total Expenses

Traffic at motives Carriages Vans Km Km Km Passenger Carried) (000) etc. (000) End of

etc. (000) (000) (000) (000) (000) (000)

(000)

Year

1983/84 5,889 301 358 10,781 16,69:! 9, 19:!.396 3.414.142 4.415 I 0.485 151.799 68,099 :!19,898 498,759 1984/85 5.813 296 309 9,885 16,810 9,900,000 3.887.23:! 4, 751 I 1.87:! 18:!.:!58 88.097 270.355 565.485 1985/86 5.591 289 400 9,1:!7 15.609 8, 761.439 3.3 7 5.654 4,963 10.51:! 168.642 74.819 :!43.461 627.417 1986/8 7 5,257 288 402 8.843 14,799 8.721.933 3.587.940 5.~21 I 0.597 166.908 83.719 250,627 626.399 1987/88 5.150 281 385 6.963 13.635 8,581.568 3.474,244 5.478 10.901 168.484 113.560 282.044 607,126

78