Glossary

AAA/Aaa: top rating for bonds for the highest quality awarded by the main rating agencies: S & P Global and Moody’s Abnormal return: the difference between an asset’s realised return and the return one would expect from an asset of the same risk ABS: Australian Bureau of Statistics ACCI Westpac Survey of Business Expectations: a quarterly survey of trading conditions and future intentions of Australia’s leading manufacturing firms ACT: Australian Capital Territory Accreting loan: a loan with a principal amount that grows over time Accrued interest: the accumulation of interest between two interest payment dates Administration charge: covers the cost associated with marketing, issuance, management and administration of QTC’s products and services Advance: a drawdown or loan from QTC Aggregate risk: total exposure of a financial institution to any single client for both spot and forward contracts. Amortising loan: a loan with a principal amount that reduces over time Appreciation: an increase in a currency’s value which occurs under a floating exchange rate regime. If the A$ was worth US$0.50 and is now worth US$0.54 it has appreciated against the US$ (equally the US$ has depreciated against the A$) Annual effective interest rate: the rate of return on an investment where interest is compounded once a year Annuity: an investment that pays out a constant amount at each interest payment date Arbitrage: the process of simultaneously buying and selling the same instrument at different prices, thereby producing a risk-free profit ANZ job ads: measures the number of jobs advertised in the major daily newspapers and internet sites covering the capital cities each month Assets: tangible items of value, such as factories, financial instruments and intangibles such as goodwill Asset management: the process of selecting a portfolio of investments that is expected to deliver an acceptable return for a given level of risk AUD: Australian dollar

Balance of payments: a summary record of a country’s net international economic transactions including trade, services, capital movements and transfers Balance sheet: an accounting statement of a company’s assets and liabilities, provided for the benefit of shareholders and regulators. It gives a snapshot, at a specific point in time, of the assets that the company holds and how the assets have been financed Basis points: one hundredth of one per cent – 0.01% Benchmark: an instrument or portfolio of instruments against which the performance of a similar investment or borrowing can be measured. For example, the QTC Cash Fund is measured against a benchmark comprised of short-term bank bills Bid/offer spread: the difference between the price at which a market maker is willing to buy and sell a particular instrument Billion: one thousand million Bond: a financial instrument whereby the borrower agrees to pay the investor a rate of interest for a fixed period of time. A typical bond will involve regular interest payments and a return of principal at maturity Book interest: compounded daily by applying the Book Rate to the Book Value (excluding the administration charge) Book rate: percentage rate used to calculate Book Interest. It is derived from the current market rates at the time of a loan advance or a deposit to an offset account. Where there has been more than one loan advance of offset deposit in an account, or if a debt transfer into an existing account has occurred, it is the weighted average of the applicable book rates Book rate review of debt: the purpose of the book rate review is to regularly adjust the Book Rate so the Book Value is extinguished at the same time as the Market Value of Debt. The reviewed Book Rate is the rate required to repay the outstanding Book Value debt balance with the Expected Term Book value: the value of a borrowing from a debt pool account or deposit in an offset account for accounting purposes Broker: an intermediary who matches up buyers and sellers in a particular market, for which they charge a fee (or brokerage) Brokerage: the commission or fee changed by a broker Budget: an itemised forecast of a company’s incomes and expenditure for a given future period Building approvals: the number of new homes and alterations/additions larger than $10,000 approved by the local authority or council

Capital guarantee: a form of protection whereby an investor is assured of not losing any of their original investment in an asset or asset portfolio Cash Fund: the Capital Guaranteed Cash Fund offers Queensland public sector organisations the opportunity to invest surplus funds in the short-term money market. The fund is run on a similar basis to a cash management account, with clients’ deposits pooled together to take advantage of the more attractive interest rates and economies of scale available for larger investments with floating rate exposure Cash Fund daily rate (%): the daily rate (not adjusted for administration) is the effective daily rate of interest applied to an investment in QTC’s Cash Fund. Eg, a daily rate of 0.011976 means that approximately $0.012 of interest has been earned on a balance of $100 Compound interest: periodic interest is automatically reinvested so that interest is earned on the original investment plus accumulated interest Commercial bills: unsecured short-term discount debt securities Confirmation: after conducting a transaction over the telephone, the parties to the deal send to each other written confirmation giving full details of the transaction Convertibles: securities that are convertible to ordinary shares at the holder’s option sometime in the future Coupon/coupon payment: the regular interest payment during the term of a debt CP (commercial paper): this is a short-term instrument that delivers a single interest payment at maturity. CP is usually issued with a term to maturity of less than one year CIB: capital indexed bond CPI (consumer price index): a quarterly survey of the retail price of a bundle of goods and services designed to represent the average consumption bundle Credit rating: measures a borrower’s creditworthiness and provides an international framework for comparing the credit quality of issuers and rated debt securities. Rating agencies allocate three kinds of ratings: issuer credit ratings, long-term debt and short-term debt. Issuer credit ratings are among the most widely watched. They measure the creditworthiness of the borrower including its capacity and willingness to meet financial obligations. CSP-Portfolio Linked Loan (CSP-PLL): a loan for clients with large borrowing requirements of $100 million or more. The CSP-PLL uses specific financing instruments to meet clients’ unique funding profiles Current account balance: total exports of goods and services less total imports of goods and services, plus total income into the country less total payments out of the country

Debt service payment: regular payment used to repay the outstanding debt within the expected loan term Deposit: the placement or investment of funds in the Working Capital Facility or Capital Guaranteed Cash Fund Depreciation: a decrease in a currency’s value which occurs under a floating exchange rate regime. If the A$ was worth US$0.54 and is now worth US$0.50 it has depreciated against the US$ (equally the US$ has appreciated against the A$) Derivative: an instrument whose value is derived from the value of another instrument such as a stock or currency Devaluation: where a currency’s value is reduced due to direct action by a Government. Predominantly occurs under a fixed exchange rate regime Distribution group: a group of financial intermediaries who market and make prices in QTC’s debt instruments Downsizing: the process of reducing the workforce of an organisation. Usually involves laying off a significant number of employees Drawdown: another term for borrowing funds Duration: a measure of the present value weighted average maturity of a bond. Quoted in years, duration can be used to measure the sensitivity of the present value of a bond to changes in market interest rates

ECB: European Central Bank Economic indicators: published data that provides information on the current state of the economy. As such, they may give clues about the future direction of an economy, sending signals to which consumers, governments, companies and financial markets react Economies of scale: reductions in the cost of producing a unit of a product that occur as the scale of the output increases Economies of scope: decreases in average total cost made possible by increasing the number of total products produced Equity securities: securities that represent a share of the ownership of the firm. The security represents a residual claim on the cash flows of the firm Establishment fee: payment made by a borrower to a lender for arranging a loan Euro: the EU’s single currency introduced in 1999 and is now the official currency for the Eurozone Euroland/Eurozone: the Eurozone is now a monetary union of 19 of the 28 European Union member states and has adopted the Euro as their common currency. The Eurozone includes Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, and Spain. Exchange rate: the price of a national currency relative to others Exchange rate risk: the potential for a change in the value of an instrument due to changes in foreign exchange rates Exercise an option: the process by which the buyer of the option contract puts into effect the right to buy or sell the underlying instrument Exercise price: the price, in a option contract, at which an asset may be bought or sold Expected loan term: the estimated time required to repay the market value of the debt outstanding at the current borrowing rate, provided the debt service payment remains constant

Face value: the value that appears on the face of a document recording an entitlement, generally a certificate or a bond. For debt instruments, it is typically the amount to be repaid at maturity Fair value bond yield: a level of bond yields which is consistent with economic fundamentals or the expected path of cash rates over the term of the bond FHOGS: First Home Owners Grant scheme Financing decision: the determination of how funds should be raised to finance a project or asset acquisition Fixed/floating interest rate swap: an agreement between two parties to swap their interest rate obligations over a specific period of time. One party will make payments to the other based on a fixed rate of interest, while the other party will make interest payments against a floating rate of interest Fixed rate loan: a loan that attracts a fixed rate of interest until maturity Floating rate loan: a loan whose rate of interest changes periodically over time FRN: Floating rate note Forward contract: see futures contract. Forward contracts can usually be customised with regard to their size and future date Forward exchange rate: the exchange rate, determined today, at which a foreign exchange transaction can be entered into for settlement at some future date Forward interest rate: the interest rate, determined today, at which a borrowing or investment can be entered into for settlement at some future date. Also known as a forward rate agreement Fund: a pool of money that is invested with a fund manager who then manages that money using a range of investment criteria Fund manager: an institution or individual involved in the investment of funds either on their own account or on behalf of others. QTC acts as a fund manager when managing the QTC Cash Fund Futures contract: a contractual agreement whereby a buyer and seller agree to enter into a transaction at some future date based on a price determined today. Futures contracts are standardised with regard to future date and the size of the contract

GDP (Gross Domestic Product): the total monetary value of all goods and services produced within a country. GDP does not include income from overseas investments and earnings GDP-Fixed Rate Loan (GDP-FRL): a borrowing product which has a fixed interest period of up to 10 years and therefore fixed debt service payment. If the loan term is longer than 10 years, the interest rate can be fixed for a nominated period and then reset for another period at the expiry of the initial fixed rate. GDP-Variable Rate Loan (GDP-VRL): a borrowing product in which the interest rate charged on the outstanding balance varies as market interest rates change. GOC: Government Owned Corporation GNP (Gross National Product): an economic statistic that includes GDP, plus any income earned by residents from overseas investments, minus income earned within the domestic economy by overseas residents. Goodwill: the excess price paid for a company over the value of its assets GST: Goods and Services Tax, currently 10% in Australia

Hedging: the process of reducing or removing the price risk associated with a particular exposure. Hedging is typically achieved by entering into a derivative transaction whereby the gain (loss) on the underlying position is offset by the loss (gain) on the derivative position. Most hedging activity relates to removing the risk associated with changing interest or foreign exchange rates

IMF (International Monetary Fund): A specialised agency that provides funds to member countries with balance of payment problems under certain conditions of need and strict policy commitments Implied forwards: interest rates for future borrowings or investments based on a financial theory that assumes interest rates will move such that over any time horizon there will be no difference in the cost of borrowing/investing between different borrowing terms. Eg, the cost of borrowing through floating rate debt over a five-year horizon will equate to the current five-year fixed interest rate Index: a composite of values designed to measure change in a market or economy Inflation: percentage change in the CPI. Headline inflation includes all categories of goods/services in the CPI, whereas core (underlying) inflation excludes some categories Inflation risk: the risk associated with the return from an investment not being offset by the loss in purchasing power caused by inflation Interest rate: the cost, often annual, paid by a borrower to a lender over a period of time. It is intended to compensate a lender for the sacrifice of losing immediate use of money, for the inflationary erosion of its buying power over the life of the loan and for the risk involved in lending Interest rate risk: uncertainty about the future value of an asset or firm that arises from uncertainty about future interest rates Interest rate swap: an agreement between two parties to swap their interest payments. It usually involves one party exchanging a stream of fixed cash flows for a stream of floating cash flows ISM (Institute of Supply Management Purchasing Managers’ Index): is a monthly composite index based on surveys of 300 purchasing managers representing 20 industries nationwide (US) regarding manufacturing activities. Issue price: the price at which a new security is issued in the primary market IWT: interest withholding tax

Lagging indicator: economic indicators that follow a change in the economic cycle Leading indicator: economic indicators that precede a change in the economic cycle and consequently are used to predict changes in the economic cycle Liability management: the process of selecting a portfolio of borrowings that is expected to deliver an acceptable interest cost for a given level of risk Liquid: markets or instruments are described as being liquid, and having depth, if there are enough buyers and sellers to absorb sudden shifts in supply and demand without price distortions

Market value: the price at which an instrument can be purchased or sold in the current market Market value cost of funds: the change in the market value of debt, expressed at a percentage, over a given period of time Market value interest: the real cost of borrowing or the actual earnings on funds deposited over a defined period. It includes both realised and unrealised gains and losses Market value realisation: an adjustment made to the Book Debt outstanding at the time a principal repayment is made. This ensures that the Book Value and the Market Value will remain aligned to extinguish at the same time Maturity: the length of time between the issue of a security and the date on which it becomes payable in full. Most bonds are issued with a fixed maturity date. Those without one are known as perpetuals Maximum approved term: maximum term over which a client can borrow funds Monetary policy: the setting of the official cash rate form the central bank designed to influence the rate of economic growth and inflation to ensure targets are met. ‘Easing’ means interest rates are lowered, ‘tightening’ means they are raised and ‘neutral’ means they are unchanged MTN: Medium term note

NAB Business Survey: includes NAB Business Conditions, which is a monthly/quarterly survey of trading conditions/profitability and employment reported by respondents for the surveyed businesses; and the NAB Business confidence, which is a monthly/quarterly survey of expectations of future conditions in their industry and/or the economy as a whole Net present value: a project or investments contribution to net wealth. The amount produced in today’s dollars after discounting future cash flows and deducting all initial costs associated with the investment NSW: New South Wales NSWTC: New South Wales Treasury Corporation NT: Northern Territory

Official cash rate: the rate at which the Reserve Bank will transact with authorised dealers on an overnight basis. See also monetary policy Option: the right (but not the obligation) to buy or sell an asset at a pre-agreed price at, or sometimes before, a fixed date in the future Overdraft: a limit placed on a client’s account by a bank. The bank will advance funds up to this limit. Overdrafts are usually granted to finance a client’s short-term requirements Overnight borrowing rate: this rate is applied daily to the principal on a simple interest basis. Interest is capitalised on the 10th (or next working day) of the month after it is charged

Portfolio: an investor’s collection, or holding, of financial instruments Prepayment: early payment of future debt service payment obligations Present value: the value today of a stream of future cash flows, based on an assumed rate of interest Principal: see face value Principal repayment: payment of principal made in addition to debt service payments Private sector credit: lines of credit (loans) provided to the private sector by financial intermediaries Promissory note: a note issued by a debtor agreeing to pay a certain amount at some time in the future Prospectus: document provided by the issuing company giving detailed terms and conditions of a new stock or debt offering Public issue: an issue of securities made to investors at large

Q1: first quarter of a year/financial year Q2: second quarter of a year/financial year Q3: third quarter of a year/financial year Q4: fourth quarter of a year/financial year QLD: Queensland QTC Working Capital Facility borrowing rate: overnight borrowing rate (not adjusted for administration). The rate is applied daily to the principal on a simple interest basis. Interest is capitalised on the 10th (or next working day) of the month after it is charged QTC GDP-Fixed Rate Loan (GDP-FRL) borrowing rate: a loan where the interest rate does not fluctuate during the loan term or part of the loan term. The interest rate is fixed on the day the funds are advanced. This provides the borrower with certainty around their future principal and interest repayments QTC-Variable Rate Loan (GDP-VRL) borrowing rate: a loan where the interest rate is anchored to a benchmark or index. The interest rate is not fixed but adjusted periodically by the lender based on prevailing market conditions. The adjustment period for the GDP Variable Rate loan is quarterly QTC Lease v Buy rates: estimated debt rate today (adjusted for administration) which could be used in a Lease v Buy Analysis. This rate is indicative only and depends on QTC’s pricing policy at the time QTC Working Capital Facility investment rate: overnight investment rate (not adjusted for administration). This rate is applied daily to the invested amount on a simple interest basis. Interest is capitalised on the 10th (or next working day) of the month after it is earned Quantitative analysis: involves the statistical study of historic returns, price volatility and price correlations of different assets to construct optimal portfolios. It relies heavily on mathematical models Quarter-on-quarter growth (qoq): a rate that compares the current reporting quarter with the same period a quarter earlier

RBA: Reserve Bank of Australia Recession: defined as two consecutive quarters of negative GDP growth Remaining loan term: the remainder of the initial loan term chosen by the client. This term will reduce by 0.25 of a year every quarter if no additional funds are advanced. If any additional funds are advanced or debt is transferred into an existing account, a weighted average term is calculated Risk: the degree of uncertainty about an event. This depends on the size and likelihood of possible future outcomes Risk management: the process of ensuring the level of risk associated with an asset or liability portfolio remains at an acceptable level Risk profile: the risk exposure of a firm. This may be business risk, financial risk or both Rollover: the periodic renewal of a loan, repriced at current market rates

SA: South Australia SAFA: South Australian Financing Authority Short end of the yield curve: a generic term relating to bonds that have terms to maturity of three years or less Spot exchange rate: the rate at which you can exchange one currency for another currency today for delivery in two working days’ time Spot interest rate: today’s interest rate for a loan written today Spot price: today’s price of an asset

TAS: Tasmania TASCORP: Tasmanian Treasury Corporation TCV: Treasury Corporation of Victoria Tech sector: the information, communication and technology sector of an economy The Fed: US Federal Reserve Trade balance: total export of goods/services less total import of goods/services Transaction costs: a charge applied at the time a nominated transaction occurs to recover costs incurred by QTC from transacting in the financial markets on the client’s behalf T-NOTE: Treasury note

US: United States of America

Vanilla: standard financial or derivative instruments without special features. Also referred to as plain vanilla VIC: Victoria

WA: Western Australia WATC: Western Australia Treasury Corporation Westpac Consumer Sentiment Index: an average of five component indices which in turn reflect the balance of favourable and unfavourable responses to five survey questions. These questions relate to to current buying conditions as well as the current state of, and prospects for, family finances and economic outlook Withdrawal: funds recalled from a Working Capital Facility or Investment Fund Working capital: the resource a company can use to finance day-to-day operations

Year-on-year (yoy) rate: a rate that compares the current reporting period with the same period a year earlier. Ditto quarter-on-quarter (qoq) and month-on-month (mom) Yield curve: the graphical representation of the relationship between the yield on bonds of the same credit quality but different maturities is known as a yield curve