Appendices - 70

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Queensland Treasury Corporation (QTC) fulfils a unique role in Queensland as the State’s corporate

treasury services provider. QTC has a dual responsibility for the State’s debt funding and financial

risk management.

QTC works closely with its public sector clients to assist them to minimise risk in their financial

transactions and achieve the best financial solutions for their organisations and the State.

In its funding role, QTC borrows funds in both domestic and international markets by issuing a

variety of debt instruments. The funds raised are then lent to Queensland’s public sector clients.

With responsibility for virtually all of the State’s debt raisings, QTC is able to capture significant

economies of scale and scope in the issuance, management and administration of debt.

As the State’s corporate treasury services provider, QTC does not formulate Government policy, but

works within the policy frameworks developed by Queensland Treasury and the State Government.

In this context, QTC’s role is to implement the operational functions of a corporate treasury.

APPENDICESAPPENDIX A: QUEENSLAND TREASURY CORPORATION-KEY FUNCTIONS

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QTC encourages its government public sector clients to use its expertise as an extension of

their own resources. QTC provides clients with access to the scope and scale of the economies

it can deliver by:

providing access to uniform corporate treasury skills and resources to ensure that their risks

are identified and managed consistently

seeking to add value by ensuring that all clients benefit in the raising and management

of their debt

acting as a central repository of knowledge and expertise on financial structures and transactions

(and the associated risks and benefits)

providing Queensland Treasury with advice on matters of financial and commercial policy

implementation and risk relating to the State and its entities

working as a conduit between government and the private sector to ensure that the best possible

solutions are obtained, and

focusing on creating value for Queensland through the provision of low-cost finance and flexibility

in managing risks.

To fulfil its role, QTC is committed to teamwork, innovation and developing strong relationships

with its clients.

Founded in 1988, QTC is a corporation sole, constituted by the Under Treasurer in accordance with

the Queensland Treasury Corporation Act 1988.

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The Treasurer of Queensland, on behalf of the State Government, guarantees:

QTC’s obligations under the debt securities issued by QTC from time to time, and

QTC’s payment obligations to counterparties under derivative transactions governed by ISDA

agreements.

In respect to all domestic securities issued by QTC, section 32 of the Queensland Treasury Corporation

Act 1988 provides a statutory guarantee of QTC’s obligations to stockholders:

Section 33 of the Queensland Treasury Corporation Act empowers the Treasurer to guarantee due

payment of moneys and due performance of obligations in accordance with financial arrangements

or other arrangements entered into by QTC. Such discretionary guarantees have been granted by the

Treasurer and continue to operate in support of QTC’s offshore debt facilities.

All payments by the State Government under these guarantees are appropriated under section 34

of the Queensland Treasury Corporation Act, meaning they can be paid from the State’s Consolidated

Fund without any further legislative approval.

All profits made by QTC accrue to the benefit of the Consolidated Fund of the State of Queensland

and any losses of QTC are also the responsibility of the Consolidated Fund.

APPENDIX B: QUEENSLAND STATE GOVERNMENT GUARANTEE

Section 32The due repayment of principal on inscribed stock issued in accordance with this Act and, where payable, the due payment of interest relating to the inscribed stock are guaranteed by the Treasurer, on behalf of the Government.

APPENDIX C: AUSTRALIAN GOVERNMENT GUARANTEE

Voluntary guarantee over State Government borrowings

The 2008-09 Global Financial Crisis had a very adverse effect on the state government bond market

threatening the capacity of state governments to deliver critical infrastructure projects.

In response to this, on 25 March 2009, the Australian Government announced that it would provide

a time limited, voluntary guarantee over Australian State and Territory government borrowing.

The guarantee was available for both existing and new issuances of securities over a range of

maturities, but did not extend to issuances denominated in foreign currencies.

The Queensland Government, on 16 June 2009, announced that it would take up the Australian

Government’s offer of the guarantee on all existing AUD denominated benchmark bond lines

(global and domestic) issued by QTC with a maturity date of between 12 months and 180 months

(1-15 years).

Guarantee application

On 18 September 2009, the Reserve Bank of Australia (RBA) approved QTC’s application for the

Australian Government Guarantee to be applied to selected AUD Domestic Benchmark bonds.

On 11 December 2009, the RBA approved QTC’s application for the Australian Government

Guarantee to be applied to selected AUD global benchmark bonds.

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The following select QTC bond lines have RBA issued guarantee-eligibility certificates:

As at 23 December 2009, Standard & Poor’s and Moody’s Investors Service assigned AAA/Aaa

ratings respectively to the guaranteed bonds.

In February 2010, the Australian Government announced that it would withdraw its guarantee

scheme effective 1 January 2011.

All benchmark bond lines guaranteed by the Australian Government will remain covered by this

guarantee until maturity or retirement.

The Australian Government Guarantee remains in place until bonds mature or are bought back by

QTC and cancelled. The Guarantee was closed to new issuance post 31 December 2010.

Domestic bond lines

6.00% 14 Sep 2017

6.25% 14 Jun 2019

6.00% 14 Jun 2021

Global bond lines

6.00% 14 Sep 2017

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APPENDIX D: AUSTRALIA’S FEDERALISM AND FISCAL SYSTEM

FederalismThe Commonwealth of Australia (‘Australian Government’ or the ‘Commonwealth’) was formed

as a federal union on 1 January 1901, when the six British colonies of New South Wales, Victoria,

Queensland, South Australia, Western Australia and Tasmania were united as states in a federation.

In addition to the six states, Australia has two territories — Northern Territory and the Australian

Capital Territory — the latter hosting the nation’s capital of Canberra.

PowersAustralian Government

The Australian Parliament has power to legislate on specific matters of national interest, such as

defence, external affairs, overseas and interstate trade and commerce, currency and banking.

The Australian Government also has primary responsibility for overall economic management in

Australia. For example, they have responsibility for monetary policy, national budget policy, fiscal

policy, exchange rates and external policy.

State Government

The state parliaments retain powers over all matters other than those granted to the Australian

Government under the Constitution.

State powers include control over education, public health, police and justice, transport, roads and

railways, industry, mining and agriculture, public works, ports, forestry, electricity, gas, and water

supply and irrigation.

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Appendices - 77

Tax sharing arrangementsAustralian Government

Since World War II, the Australian Government has acted as the sole income taxing authority,

and annual general revenue grants have been paid by the Australian Government to the states.

The Australian Government also has exclusive constitutional power to impose excise duty, customs

duty, and goods and services tax (GST). The states receive all revenue raised by the GST under the

Australian Government’s Horizontal Fiscal Equalisation Scheme. The scheme has the objective of

equalising each state and territory governments’ fiscal capacity to provide public services and

infrastructure to the same standard.

State Government

The states impose payroll taxes, stamp duties and land taxes. Local governments impose taxes

based on the rateable value of real property.

The states have the right to change any tax rates associated with their areas of taxation,

for which they are responsible.

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The funding facilities listed are

supplemented with public issues

and private placements.

* AGG – Australian Government

Guaranteed

APPENDIX E: FUNDING FACILITIES

Facility Size $M Governing Law Maturities Currencies On issue PlacementShort-term AUD M

Domestic T-NoteUnlimited Queensland 7-365 days AUD 5,056

Reverse enquiry through Dealer Panel

Euro CP USD10,000English and Queensland

1-364 days Multi-currency 754Continuously offered through Dealer Panel

US CP USD10,000New York and Queensland

1-270 days USD 46Continuously offered through Dealer Panel

Long-term AUD M

12 benchmark lines: 2017-2026, 2028, 2033

AUD 68,740Reverse enquiry or public issues through Distribution Group

AUD Bond Unlimited Queensland 3 AGG* lines: 2017-2021 AUD 5,524Traded in the secondary market through the Distribution Group

Capital indexed bond: 2030 AUD 860Reverse enquiry through Distribution Group

3 floating rate notes: 2016, 2017 & 2018

AUD 6,655Reverse enquiry through Distribution Group

Global AUD Bond AUD20,000New York and Queensland

AGG* line: 2017 (transferable to domestic bonds)

AUD 185Traded in the secondary market through the Distribution Group

Multi-currencyEuro MTN

USD10,000English and Queensland

Any maturity subject to market regulations

Multi-currency 1,183Reverse enquiry through Dealer Panel

Multi-currencyUS MTN

USD10,000New York and Queensland

9 months—30 years Multi-currency 0Reverse enquiry through Dealer Panel

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APPENDIX F: GLOBAL AUD BONDS—KEY CHARACTERISTICS

TermsIssued in offshore markets with coupons and maturity dates identical to those of the AUD domestic bond.

IssuanceWhile QTC no longer issues global AUD bonds they are traded in the secondary market through the Distribution Group.

RegistrationSchedule B Shelf Registration Statement filed with the United States Securities and Exchange Commission.

Listing Luxembourg Stock Exchange.

Taxation All payments are exempt from Australian Interest Withholding Tax.

Settlements Settlement through DTC, Euroclear and Clearstream. Notes are book entry.

Transfer mechanism May be transferred into QTC’s equivalent domestic AUD AGG bonds at the holder’s election.

Fiscal agents Deutsche Bank AG

Corporate Trust and Agency Services1 Great Winchester StreetLondon EC 2N 2DBUnited Kingdom Ph: +44 207 545 8000

Deutsche Bank Trust Company Americas

60 Wall StreetNew York, NY United States of AmericaPh: +1 212 250 2500

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APPENDIX G: QUEENSLAND’S DOMESTIC PEERS’ CREDIT RATINGS

Australian state or territory Rating agency

STANDARD & POOR’S MOODY’S

Australian Capital Territory AAA/Negative/A-1+ Rating withdrawn 20 August 2005 (from Aaa)

New South Wales AAA/Negative/A-1+ Aaa/Stable/P-1

Northern Territory Not rated by S&P Aa2/Stable/--

Queensland AA+/Stable/A-1+ Aa1/Negative/P-1

South Australia AA/Stable/A-1+ Aa1/Stable/P-1

Tasmania AA+/Stable/A-1+ Aa2/Stable/P-1

Victoria AAA/Negative/A-1+ Aaa/Stable/P-1

Western Australia AA+/Negative/A-1+ Aa2/Stable/P-1

According to information provided by Standard & Poor’s and Moody’s as at 5 September 2016.

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APPENDIX H: QUEENSLAND’S INTERNATIONAL PEERS’ CREDIT RATINGS

Entity Comparable jurisdiction/area governed Credit rating (Assigned by Standard & Poor’s)

Queensland Federal State of Australia AA+/Stable

Alberta Province of Canada AA/Negative

Basel-City Canton of Switzerland AA+/Stable

British Columbia Province of Canada AAA/Stable

Burgenland State of Austria AA/Stable

Saxony-Anhalt State of Germany AA+/Stable

Styria State of Austria AA/Stable

Vaud Canton of Switzerland AAA/Stable

According to information provided by Standard & Poor’s as at 30 June 2016.

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APPENDIX I: QUEENSLAND’S COAL INDUSTRY

Queensland coal export values (nominal, AUDm) 2014-15 2015-16 Change (%)

Hard coking 14,050 11,129 -13.0

Semisoft/PCI 5,102 4,432 -5.0

Thermal 4,256 3,717 -3.8

Total 23,407 19,278 -9.6

Queensland coal export volumes (mt) 2014-15 2015-16 Change (%)

Hard coking 114.4 101.3 -2.3

Semisoft/PCI 48.7 46.6 5.0

Thermal 56.0 52.5 3.6

Total 219.1 200.4 0.9

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Queensland is Australia’s largest coal exporter. In 2015-16 Queensland was responsible for more than 90 per cent of Australia’s hard coking coal exports and more than a quarter of its thermal coal exports.

Note: 2015-16 is financial year to May (data only exists to May as at 30 June 2016). The annual change percentage is 11 months to May 2016 over the same period the year before.

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Coal royalty assumptions 2016-17

Budget

2017-18

Projection

2018-19

Projection

2019-20

Projection

Tonnages – crown export1 coal (Mt) 216 220 226 230

Exchange rate USD per AUD2 0.73 0.73 0.73 0.73

Year average coal prices3

Hard coking (USD) 88 92 101 109

Semisoft (USD) 70 72 77 81

Thermal (USD) 60 59 61 62

Year average oil prices

Brent (USD per barrel) 48 52 55 58

Sensitivity Type of revenue/

expense affected

Size of impact

(AUD)

1 percentage point variation in export coal volumes Royalties $15 million

1 percentage point variation in export coal prices Royalties $20 million

1 cent movement in the AUD-USD exchange rate Royalties $25 million

1 Excludes coal produced for domestic consumption and coal where royalties are not paid to the government, ie, private royalties. 2016-17 estimate for domestic coal volume is approximately 23Mt and private coal is 10Mt.2 Year average.3Price for highest quality coking and thermal coal. Lower quality coal can be sold below this price with indicative average prices for 2016–17 as follows: Hard coking US$83 and thermal US$56.Source: Queensland Government 2016-17 Budget.

Royalty assumptions and revenue risks:

APPENDIX J: KEY FISCAL RATIOS (AS AT 30 JUNE 2016)

General Government2015-16

Est. Actual

2016-17

Budget

2017-18

Projection

2018-19

Projection

2019-20

Projection

Gross debt (% of revenue) 71 71 69 70 68

Gross debt (% of GSP) 11 11 11 10 10

Interest expense (% of revenue) 4 3 3 3 3

Capital program/infrastructure expense

(% of total expense)8 10 12 11 11

Fiscal balance (% of revenue) -2 -4 -4 -4 -2

Total State2015-16

Est. Actual

2016-17

Budget

2017-18

Projection

2018-19

Projection

2019-20

Projection

Gross debt (% of revenue) 129 125 123 126 124

Gross debt (% of GSP) 23 22 21 20 20

Interest expense (% of revenue) 7 6 5 5 5

Capital program/infrastructure expense

(% of total expense)12 14 15 14 14

Fiscal balance (% of revenue) -3 -4 -4 -4 -2

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ABSAustralian Bureau of Statistics

ISDAInternational Swaps and Derivatives Association

QTCQueensland Treasury Corporation

ACTAustralian Capital Territory

IWT Interest withholding tax RBA Reserve Bank of Australia

AGGAustralian GovernmentGuarantee

LNG Liquefied natural gas RHS Right hand side

APRAAustralian Prudential Regulation Authority

MYEFOMid-Year Economic and Fiscal Outlook

SA South Australia

AUD Australian dollar MYFERMid-Year Fiscal and Economic Review

SAFASouth Australian Financing Authority

CGSCommonwealth Government Securities

MTN Medium-term note SGGState Government Guarantee (Queensland)

CP Commercial paper (mv) Market value T-Note Treasury note

CIB Capital indexed bond NSW New South Wales TAS Tasmania

CPI Consumer price index NSWTCNew South WalesTreasury Corporation

TASCORPTasmanian Public Finance Corporation

DTCThe Depository Trust Company

NT Northern Territory TCVTreasury Corporation of Victoria

(fv) Face value NTTCNorthern Territory Treasury Corporation

US United States of America

FRN Floating rate note QICQueensland Investment Corporation

VIC Victoria

GDP Gross Domestic Product QLD Queensland WA Western Australia

WATCWestern Australia Treasury Corporation

APPENDIX K: GLOSSARY