FGV Annual Report 2016

FELDA GLOBAL VENTURES HOLDINGS BERHAD 144 FINANCIAL REPORT FGV'S TREASURY MANAGEMENT CENTRE The TMC enables FGV to enjoy the advantages of scale and centrally manage the Group's funds and asset to meet the working capital and trade financing requirements of the individual units within the Group.The TMC deploys three (3) key products: Group Asset Management, Group Funding Management and Group Forex Management. Through Group Asset Management, funds from the Group's companies are deposited into the TMC and deployed to other units within the organisation. These activities are typically done to maintain the liquidity of the Group and its business units, which have typical working capital requirements of between 90 and 120 days. As an intermediary between the Group and the banks, the TMC is authorised to borrow from external banks on behalf of the Group should internal funds be insufficient. As part of the Group's Standard of Procedures (SOP), transactions between the Group's business units and the TMC are done at least with a 5-basis point (bps) advantage to the business unit. E.g. internal borrowings from the TMC are done at the best market rate minus 5bps, while deposits are placed at the best market rate plus 5bps. In respect to Group Funding Management, FGV Cap acts as the Group's representative in dealing with external banks and secures banking facilities on behalf of the Group. As the TMC represents the entire Group, it enjoys better terms than an individual Group company would on the basis of its larger balance sheet and better credit rating. These banking facilities are subsequently made available to the rest of the Group through the TMC acting as an intermediary resulting in substantially greater cost savings. Thereby, should an FGV unit need external financing— e.g. for term loans—it is mandated to do so through the facilities secured by the TMC. FGV governs the operations of the TMC through a set of stringent treasury policies to eliminate conflicts of interest in carrying out its transactions. Some of the key policies are: • All transactions are to be undertaken at an arm's-length from the Group with rates benchmarked electronically via data terminals to ensure that the Group obtains the best rate when placing deposits and or borrowing from the external banking market. The TMC is also required to always select the highest available rate when placing deposits and the lowest possible rate when borrowing • All banking transactions are conducted through the SWIFT system, which provides secure, standard and reliable information about transactions to all counterparties • TMC is presently working on deploying a counterparties screening programme to further enhance its compliance with Malaysia's Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (AMLA) to ensure that recipients of monies have not been blacklisted • The TMC deploys the FIS Integrity Treasury Management System, which completely segregates the various treasury duties both physically and operationally. Under this system, dealing and settlement are conducted by different parties occupying different areas of the office, while a middle office with no access to the dealing or settlement platforms overlook the entire system FGV's TMC has been hailed as a leading example of treasury management in Malaysia and has been benchmarked by a number of leading organisations in the country. It has also been invited to make representations overseas to share and discuss operational issues and successes with other key international conglomerates. The Group's treasury activities are managed by a MIDA-approved Treasury Management Centre (TMC), FGV Capital Sdn Bhd (FGV Cap), which functions as an intermediary between the business units within the Group and the external banking system. As a special status company, the TMC is accorded flexibility by Bank Negara Malaysia to perform specific monetary activities including forex transactions not accorded to regular companies.