SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549

FORM 18-K/A

For Foreign Governments and Political Subdivisions Thereof AMENDMENT NO. 4 to ANNUAL REPORT of QUEENSLAND TREASURY CORPORATION (registrant)

a Statutory Corporation of THE STATE OF QUEENSLAND, AUSTRALIA (coregistrant) (names of registrants)

Date of end of last fiscal year: June 30, 2013

SECURITIES REGISTERED (As of the close of the fiscal year)

Amounts as to Names of which registration exchanges on Title of Issue is effective which registered Global A$ Bonds A$1,169,002,000 None (1) Medium-Term Notes US$- None (1)

(1) This Form 18-K/A is being filed voluntarily by the registrant and coregistrant.

Names and address of persons authorized to receive notices and communications on behalf of the registrants from the Securities and Exchange Commission:

Philip Noble Mark Gray Chief Executive Under Treasurer of the State of Queensland Queensland Treasury Corporation Executive Building Level 6, 123 Albert Street 100 George Street Brisbane, Queensland 4000 Brisbane, Queensland 4000 Australia Australia

EXPLANATORY NOTE

The undersigned registrants hereby amend the Annual Report filed on Form 18-K for the above-noted fiscal year by attaching hereto as Exhibit (c)(ix) Queensland Treasury Corporation Annual Report for the Year Ended June 30, 2014, Exhibit (c)(x) the Queensland Government Document Entitled “The Strongest & Smartest Choice: Queensland’s Plan for Secure Finances and a Strong Economy” and as Exhibit (g)(iii) the consents of Mr. Philip Noble, Chief Executive, Queensland Treasury Corporation; Mr. Gerard Bradley, Chairman, Queensland Treasury Corporation; and, Mr. Andrew Greaves, as Auditor-General, State of Queensland. SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this annual report to be signed on its behalf by the undersigned, thereunto duly authorized, at Brisbane, Australia on the 8th day of October, 2014.

QUEENSLAND TREASURY CORPORATION

By: /s/ Philip Noble Name: Philip Noble Title: Chief Executive SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this annual report to be signed on its behalf by the undersigned, thereunto duly authorized, at Brisbane, Australia on the 8th day of October, 2014.

GOVERNMENT OF QUEENSLAND

By: /s/ Alex Beavers on behalf of Name: The Honourable Tim Nicholls MP Title: Treasurer and Minister for Trade INDEX TO EXHIBITS

Exhibit (c)(ix) - Queensland Treasury Corporation Annual Report for the Year Ended June 30, 2014. Exhibit (c)(x) - The Queensland Government Document Entitled “The Strongest & Smartest Choice: Queensland’s Plan for Secure Finances and a Strong Economy”.

Exhibit (g)(iii) - Consents. EXHIBIT (c)(ix)

Queensland Treasury Corporation Annual Report for the Year Ended June 30, 2014

VISION

Securing Queensland’s financial success

MISSION

To deliver optimal financial outcomes through sound funding and financial risk management

VALUES

We are focused on our clients

We are passionate about Queensland

We value and respect our people

We are collaborative and seek continuous improvement

Above all else, we value integrity As the Queensland Government’s central financing authority, Queensland Treasury Corporation (QTC) plays a pivotal role in securing the State’s financial success. With a focus on whole-of-State outcomes, QTC provides a range of financial services to the State and its public sector entities, including local governments. These services include debt funding and management, cash management facilities, financial risk management advisory services, and specialist public finance education.

DEBT FUNDING AND MANAGEMENT

QTC borrows funds in the domestic and global markets in the most cost-effective manner and in a way that minimises liquidity risk and refinancing risk. QTC achieves significant economies of CONTENTS scale and scope by issuing, managing and administering the State’s debt funding. Queensland Treasury Corporation 1 QTC works closely with Queensland’s public sector entities, Letter of Compliance 2 including local governments, to assist them to effectively manage their financial transactions, minimise their financial risk and Key Performance Highlights 3 achieve the best financial solutions for their organisation and the State. Five-Year Business Summary 4

Chairman’s & Chief Executive’s Report 6 CASH MANAGEMENT FACILITIES QTC assists the State’s public sector entities to make the best Corporate Performance Report 8 use of their surplus cash balances within a conservative risk Corporate Governance 11 management framework. It offers overnight and fixed-term facilities and a managed short-term fund. Investor Report 16

FINANCIAL RISK MANAGEMENT ADVISORY Financial Statements 20 SERVICES Appendices 61

QTC offers a range of financial risk management advisory services to clients, including:

support to ensure financial risks are identified and effectively managed

advice on financial and commercial considerations

expertise in financial transactions and structures

project management support to deliver key fiscal outcomes, and

collaboration with the financial markets and private sector institutions.

SPECIALIST PUBLIC FINANCE EDUCATION QTC offers a range of education and training courses that complements its products and advisory services and allows it to share its specialist financial, commercial, treasury management and risk management expertise with clients. Courses are developed and delivered by QTC’s experienced professionals and industry experts.

QUEENSLAND TREASURY CORPORATION ANNUAL REPORT 2013–14 1

23 September 2014

The Honourable Tim Nicholls MP Treasurer and Minister for Trade GPO Box 611 Brisbane Qld 4001

Dear Treasurer

I am pleased to present the Annual Report 2013-14 and financial statements for Queensland Treasury Corporation.

I certify that this Annual Report complies with:

the prescribed requirements of the Financial Accountability Act 2009 and the Financial and Performance Management Standard 2009, and

the requirements set out in the Annual Report requirements for Queensland Government agencies.

A checklist outlining the annual reporting requirements will be available on our website immediately following the tabling of this report in Parliament.

Sincerely

Gerard Bradley

Chairman

LEVEL 6, 123 ALBERT STREET, BRISBANE QUEENSLAND AUSTRALIA 4000 GPO BOX 1096, BRISBANE QUEENSLAND AUSTRALIA 4001 T: 07 3842 4600 F: 07 3221 4122 QTC.COM.AU

2 QUEENSLAND TREASURY CORPORATION ANNUAL REPORT 2013–14

Key performance highlights

Raised $11.1 billion to meet the State’s funding requirements, issuing two new benchmark-sized floating rate notes to complement existing fixed rate benchmark bonds

Declared a dividend of $120 million to Government

Generated savings for the State and clients of $152 million through portfolio management, funding strategy execution and debt management advice

Managed QTC’s Capital Guaranteed Cash Fund, which outperformed its benchmark, the UBS Australian Bank Bill Index, by 0.80 percentage points, and was ranked first in the CPG Research & Advisory Pty Ltd performance report

Completed 122 significant advisory assignments for clients, helping them meet their individual objectives in relation to the Government’s reform agenda, as well as improve their business-as-usual outcomes

Trained more than 700 employees from 50 public sector organisations through QTC’s targeted and tailored education program

Maintained a mature, strong and well-understood risk management culture and firmly established enterprise-wide risk management program as the foundations for all corporate activities

Appointed to conduct the pre-work and preliminary due diligence activities for the Government’s proposed assets transactions initiative

Seconded specialist staff to the Government’s Projects Queensland office to deliver key infrastructure for the State

Continued the implementation of an integrated suite of HR programs to enhance the agility, capability, capacity and engagement of QTC’s workforce

QUEENSLAND TREASURY CORPORATION ANNUAL REPORT 2013–14 3

Five-year business summary

FINANCIAL FINANCIAL FINANCIAL FINANCIAL FINANCIAL YEAR YEAR YEAR YEAR YEAR 2009-10 2010-11 2011-12 2012-13 2013-14

FINANCIAL

CAPITAL MARKETS OPERATIONS

OPERATING STATEMENT ($000)

Interest from onlendings 4 062 092 3 107 472 7 799 422 2 743 084 6 376 784

Interest from other investments 1 216 538 1 187 360 1 628 002 786 825 537 661

Other Income 110 344 96 426 107 233 123 871 132 628

Interest on borrowings 4 901 512 4 071 085 9 204 636 3 156 860 6 641 909

Interest on deposits 195 413 189 027 178 982 169 696 172 946

Profit before income tax 243 510 66 831 54 965 238 795 133 685

Income tax expense 34 074 20 874 8 056 15 911 14 465

Profit for the year 209 436 45 957 46 909 222 884 119 220

BALANCE SHEET ($000)

Total assets 74 385 172 79 576 098 90 196 362 100 439 101 100 798 745

Total liabilities 73 839 889 79 134 858 89 708 213 99 728 068 100 088 492

Net assets 545 283 441 240 488 149 711 033 710 253

CLIENT

SAVINGS FOR CLIENTS ($M)

Savings due to portfolio management and -18.8 10.3 6.3 319.6 151.7 debt management advice and execution

LOANS TO CLIENTS

Loans ($000) 55 113 222 59 452 522 72 289 635 79 118 832 85 609 405

Number of onlending clients 275 238 205 188 174

PERFORMANCE AGAINST BENCHMARK (% PA)

Floating Rate Debt Pool 0.21 0.21 0.21 0.22 0.14

3 Year Debt Pool -0.07 0.02 -0.06 0.22 -0.10

6 Year Debt Pool -0.08 0 -0.10 0.42 -0.20

9 Year Debt Pool -0.07 -0.01 -0.10 0.37 -0.22

12 Year Debt Pool -0.08 -0.02 -0.13 0.35 -0.18

15 Year Debt Pool -0.05 -0.01 -0.11 0.37 -0.2

MANAGED FUNDS

Deposits ($000) 4 660 960 5 562 013 5 077 143 6 127 695 5 477 942

Number of depositors 207 194 190 193 187

PERFORMANCE AGAINST BENCHMARK (% PA)

Cash Fund 0.36 0.50 0.59 0.86 0.80

4 QUEENSLAND TREASURY CORPORATION ANNUAL REPORT 2013–14

FINANCIAL FINANCIAL FINANCIAL FINANCIAL FINANCIAL YEAR YEAR YEAR YEAR YEAR 2009-10 2010-11 2011-12 2012-13 2013-14

FINANCIAL MARKETS

Debt outstanding# ($000) 68 885 406 73 224 097 84 268 842 93 274 588 94 026 880

QTC AUD bonds (includes global bonds & FRNs) on issue at face value ($000) 61 424 032 65 688 324 73 184 241 80 026 930 80 603 375

QTC BOND RATES (% AT 30 JUNE)

Guaranteed by the Australian and Queensland governments

14 June 2011 4.60 - - - -

16 April 2012 4.67 4.80 - - -

14 August 2013 4.86 4.88 3.08 2.71 2.52

14 October 2015 5.17 5.10 3.19 2.81 2.79

14 September 2017 5.36 5.27 3.56 3.33 3.13

14 June 2019 5.48 5.46 3.76 3.75 3.43

14 June 2021 5.59 5.59 3.92 4.16 2.52

Guaranteed by the Queensland Government only

23 April 2012 - 4.89 - - -

21 August 2013 - 5.02 3.17 2.71 -

21 November 2014 5.26 5.18 3.27 2.70 2.53

21 October 2015 - 5.30 3.54 2.97 2.60

21 April 2016 5.49 5.34 3.68 3.18 2.65

21 September 2017 - - - 3.57 2.95

21 February 2018 - 5.56 4.05 3.67 3.03

21 June 2019 - - - 4.02 3.28

21 February 2020 5.77 5.74 4.34 4.20 3.38

21 June 2021 - - 4.47 4.47 3.62

21 July 2022 - 5.85 4.54 4.64 3.75

21 July 2023 - - - 4.83 3.91

22 July 2024 - 5.93 4.70 4.90 3.97

14 March 2033 5.79 6.03 4.70 5.32 4.09

QTC CAPITAL-INDEXED BOND RATES (% AT 30 JUNE)

August 2030 3.39 3.26 2.56 2.93 2.01

AVERAGE BASIS POINT MARGIN OF QTC AUD BONDS

Guaranteed+ by both Australian and Queensland governments

Commonwealth bonds 40 29 82 39 11

Swap -13 -23 -9 -2 -14

Guaranteed+ by the Queensland Government only

Commonwealth bonds 64 49 122 69 31

Swap 11 -4 38 27 2

CORPORATE

Number of employees (full-time equivalent) 170 186 213 224 217

Administration expenses ($000) 34 519 42 523 68 674 57 159 64 095

+ Following the Australian Government’s announcement on 25 March 2009 to offer a temporary guarantee to the states for AUD issuance, QTC applied on 17 September 2009 to take up the guarantee on all AUD benchmark bond lines for maturities ranging from 2011 to 2021. The guarantee offer expired on 31 December 2010.

# QTC holds its own stock and these holdings have been excluded from the debt outstanding figures.

QUEENSLAND TREASURY CORPORATION ANNUAL REPORT 2013–14 5

Chairman’s and Chief Executive’s report

As conditions settled in the global financial markets, lowering OPERATING RESULT POSITIVE uncertainty and volatility to post-crisis lows, and the Queensland Government continued the implementation of its primary fiscal For the 2013-14 year, QTC recorded an operating profit after tax objectives, Queensland Treasury Corporation (QTC) successfully from its capital markets operations of $119.2 million (2012-13: funded the State’s borrowing program, contributed to many of the $222.9 million) primarily due to fair value accounting gains State’s priority projects, and provided significant whole-of-State associated with the management of QTC’s funding task and benefits. balance sheet. QTC borrows in advance of requirements to ensure public sector entities have ready access to funding when required, to reduce FUNDING OBJECTIVES MET the risk associated with refinancing maturing loans, and for Buoyed by lower levels of volatility in the financial markets and the liquidity management purposes. As a consequence of market State’s progress towards fiscal reform, 2013-14 saw QTC bond changes, realised and unrealised accounting gains or losses may spreads compress to pre-financial crisis levels for short- and mid- be recorded during the year which, depending on whether these curve bonds, with a number of new investors attracted to QTC transactions are held to maturity, may be reversed in subsequent bonds. accounting periods. QTC raised $11.1 billion to fund its borrowing program with the Separate from QTC’s capital markets operations, the long-term launch of a new 2025 benchmark bond in April 2014, and two assets operations recorded a profit of $3,128.0 million (2012-13: benchmark-sized floating rate notes with maturities in 2016 and $990.3 million). This segment comprises the investments that 2017, and driven by investor demand. This was supplemented fund the State’s defined benefit superannuation and other long- with short-term issuance, which was maintained with an average term employee obligations. of $5 billion on issue throughout the year. Managed by QIC, these obligations were transferred to QTC by On the cash management side, QTC’s Capital Guaranteed Cash the Queensland Government under an administrative Fund outperformed its benchmark, the UBS Bank Bill Index, by arrangement in 2008; in return, QTC issued the State with fixed- 0.80 percentage points and was ranked first in the CPG rate notes that provide a fixed rate of return. While QTC bears the Research & Advisory Pty Ltd performance report, providing QTC’s fluctuations in the value and returns on the asset portfolio, there is clients with strong returns. no cash flow effect for QTC. Any losses incurred by this segment have no impact on QTC’s capital markets activities or its ability to QTC’s long-standing commitment to openness and transparency meet its obligations. continued, with its investor relationship program delivered in partnership with the domestic and global banks of its Fixed Income Distribution Group to enhance existing market relationships and attract new investors.

6 QUEENSLAND TREASURY CORPORATION ANNUAL REPORT 2013–14 WHOLE-OF STATE CONTRIBUTION PRIORITISED TWO BOARD MEMBERS FAREWELLED

QTC supported the Government’s central agencies with their QTC farewelled two Board members—Neville Ide, whose implementation of its fiscal reform agenda, with the: resignation was effective 1 July 2014, and Gillian Brown, whose resignation was effective 21 August 2014—with best wishes and completion of the first stage of the Government’s proposed sincere thanks for their significant contributions to QTC over the asset transactions, which are subject to a mandate from years. Queensland voters at the 2015 election

secondment of staff to enable Treasury’s Projects Queensland office to deliver some of the State’s most significant LOOKING AHEAD infrastructure projects, and In 2014-15, with its talented and committed staff, QTC will make enhancement of the financial and risk management capabilities the most of the global opportunities for bond issuance to cost- of Government agencies through a range of education and effectively fund Queensland’s infrastructure requirements; training initiatives. maintain its operational focus on improving efficiency and ensuring prudent risk management; and continue its partnership with Government to deliver fiscal reform and secure the State’s CLIENT ADVISORY INCREASED financial success.

In the year under review, QTC prioritised the delivery of its collaborative, value-adding assignments for the State’s public sector, increasing the breadth of assignments and agencies. Assignments helped deliver cost-effective social housing and public schools; assess EOIs for several major developments; plan G P BRADLEY for the introduction of the NDIS; and support councils to deliver financially sustainable services to their communities. Chairman The positive outcomes generated by these activities saw a continuing lift in clients’ sentiment towards QTC and perception of its ability to add value through advisory work. P C NOBLE

Chief Executive

QUEENSLAND TREASURY CORPORATION ANNUAL REPORT 2013–14 7

Corporate performance report

FUNDING THE STATE FINANCIAL ADVICE FOR THE STATE’S PUBLIC SECTOR In 2013-14, QTC raised $11.1 billion to fund the State’s borrowing program. The borrowing program was reduced by $1 billion In the year under review, QTC completed a broad range of following the Government’s mid-year fiscal and economic update financial advisory assignments to assist clients and the State in in December 2013, as a result of better operating performance in addressing financial risk management issues and delivering the general government sector, lower borrowing requirements meaningful whole-of-State outcomes that contribute to the across Government, and the deployment of surplus liquidity. achievement of the Government’s fiscal priorities and objectives, including: The majority of term debt funding was raised through public issuance using a variety of methods including syndicated primary the Logan Renewal Initiative for the Department of Housing transactions, taps and online tenders. For the first time since and Public Works, to assist with the cost-effective delivery of 2011, QTC issued floating rate notes (two maturities) in response social housing throughout south- east Queensland to investor demand. the development of new funding arrangements for the QTC’s Australian dollar benchmark bonds remained the Department of Environment and Heritage Protection and the cornerstone of its funding activities and in April, QTC lengthened Department of Natural Resources and Mines to secure mine the profile of its curve by issuing a new benchmark bond line rehabilitation maturing in 2025. This line was issued with 144A capability and, the development of a financial model to assist Queensland as a result, a number of US-based investors participated in the Treasury and Trade with the introduction of the National primary transaction. Disability Insurance Scheme

In the period under review, QTC delivered a lower borrowing cost the representation of the interests of the State’s energy sector for the State, as bond spreads narrowed significantly; contracting, through the provision of detailed submissions to the review of on average over the year, by 0.40 percentage points against the National Energy Rules, to inform and influence the Australian Government bonds and 0.30 percentage points to the Australian Energy Regulator’s determination, the outcomes of benchmark swap rate. which will result in a significant reduction in refinancing risk for In addition to providing its clients with a lower cost of funds, QTC the State, and also used its financial markets expertise to reduce transaction the completion of 30 credit reviews of Government-owned costs by further aligning debt issuance with client drawdowns, and corporations and local governments for Queensland Treasury to provide quality assurance of the risk analysis and pricing for and Trade and other shareholding departments to support their public private partnerships. funding determinations. QTC continued to offer a range of products that enabled clients to In addition, QTC provided significant support for the Projects maximise the value of their surplus funds. This past year, QTC’s Queensland initiative within Queensland Treasury and Trade, with Capital Guaranteed Cash Fund outperformed its benchmark, the the secondment of 14 specialist staff. QTC employees within UBS Australian Bank Bill Index, by 0.80 percentage points and Projects Queensland are leading the evaluation and procurement was ranked number one in the CPG Research & Advisory Pty Ltd of some of the State’s most important infrastructure and service performance report. delivery initiatives to achieve value-for-money outcomes, deliver projects within tight time frames, and enable an appropriate transfer of risk to the private sector.

8 QUEENSLAND TREASURY CORPORATION ANNUAL REPORT 2013–14 QTC was also appointed to conduct the pre-work and preliminary Significant progress was also made towards the improvement of due diligence activities for the Government’s proposed assets our tools and applications for managing market risk, credit risk transactions initiative; the ‘Strong Choices Draft Plan’, which and collateral for derivative transactions. This included initiatives proposes to sell some assets, lease others and introduce an to centralise market risk data to ensure data consistency across innovative option of private sector participation. While the reports and improved visibility of business logic, which has further Government will seek a mandate from Queensland voters at its increased QTC’s capability to measure market risk. next election before any divestment occurs, the completion of this work will help ensure that transactions are able to be completed in QTC’s managed its portfolio market risk exposures, including a timely manner, should the Government be given the mandate to interest rate, foreign exchange and counterparty risk, within proceed. Board-approved risk parameters. It also managed its financial markets risks in line with industry best practice and Basel QTC’s role in equipping clients with specialist financial knowledge Committee recommendations. In line with its internal and external and capabilities was expanded during the year, with the policies, QTC continues to hold a portfolio of diverse, liquid development and implementation of a range of new financial financial securities to meet the State’s liquidity requirements. education courses tailored to meet the strategic needs of clients and support the Government’s renewal and contestability In the year under review, significant priority was placed on the initiatives. identification and implementation of opportunities to improve the efficiency and effectiveness of operations. In 2013-14, more than 700 employees from more than 50 of its client organisations participated in QTC’s targeted and tailored Planning is also underway for the longer-term strategy to ensure education program. QTC is now working with the Public Service sustainability in our products, processes and systems, with a Commission’s Commission of Audit (CoA) Implementation Team particular focus on the opportunities available in the changing to develop and implement a financial skills training strategy for the technology environment. To support this, QTC restructured its Queensland Government workforce, as recommended by the information technology team to better enable it to respond to CoA. QTC’s corporate requirements, and established a division to ensure that all change initiatives align with QTC’s strategic and corporate direction and to provide support for the successful CORPORATE RISK MANAGEMENT AND implementation of change projects. EFFICIENCY

QTC’s mature, strong and well-understood risk management culture is supported by its firmly established enterprise-wide risk management program, and provides the foundation for all corporate activities.

In the year under review, QTC implemented an assurance framework for internal controls, identifying the organisation’s most important internal controls across all functions. The framework provides for periodic assurance from management—as well as independent assurance providers, such as internal audit—that each control is operating effectively.

QUEENSLAND TREASURY CORPORATION ANNUAL REPORT 2013–14 9 TARGETING AN AGILE, RESULTS-FOCUSED WORKFORCE

The focus on entrenching a high-performance culture within the QTC continued its practice of regularly reviewing and updating its organisation continued, centred on activities to enhance the policies and procedures to comply with changes in the legislative agility, capability, capacity and engagement of QTC’s workforce. and regulatory environment and to ensure employees have With a KPI to ensure a positive trend, staff engagement rose to access to avenues through which to raise concerns, including an 60 per cent, an increase of eight percentage points on last year internal grievance process. QTC employees are employed under and three percentage points above target. The result was individual employment agreements, which adhere to the legislated supported by leaders championing the organisational agenda and provisions of the Fair Work Act 2009. by all employees participating in action workshops to remove barriers and develop solutions.

Workforce profile FY 2013-14

A number of initiatives to support the achievement of a high Full-time equivalent staff 217 performance culture were delivered, including: Permanent retention rate 85.96% A Talent, Succession and Promotions framework was Permanent separation rate 14.25% introduced with the objective of retaining, developing and most effectively deploying key talent. Succession planning focused Permanent average tenure 6.67 years

on developing strong talent pipelines for key leadership and business-critical roles.

A Leadership Development Program was delivered, enhancing leaders’ skills in conducting high-performance conversations and coaching. In parallel, accountability and responsibility was pushed down through the organisation through a review of HR policies, to enable greater delegation, and empowerment in decision making, for our leaders.

A cross-organisation learning and development council was established to guide the delivery of technical and transferable skill training.

QTC’s inaugural employee recognition program—the Chief Executive’s Awards—was launched.

A new remuneration framework, along with updated position descriptions, was implemented to foster high performance. The new framework is more transparent, easier to understand and more effective in driving robust performance conversations.

Strategic workforce planning was undertaken to forecast future demand for resourcing and capability mix across the business.

10 QUEENSLAND TREASURY CORPORATION ANNUAL REPORT 2013–14

Corporate governance

QTC is committed to maintaining high standards of corporate governance to support its strong market reputation and ensure that organisational goals are met and risks are monitored and appropriately addressed. QTC’s corporate governance practices are continually reviewed and updated in line with industry guidelines and standards.

QTC AND ITS BOARDS Board appointments

QTC was established by the Queensland Treasury Corporation The Board comprises directors who are appointed by the Act 1988 (the QTC Act) as a corporation sole (ie, a corporation Governor-in-Council, pursuant to section 10(2) of the QTC Act, that consists solely of a nominated office holder). The Under with consideration given to each Board member’s qualifications, Treasurer of Queensland is QTC’s nominated office holder. experience, skills, strategic ability and commitment to contribute QTC has delegated its powers to its two boards: to QTC’s performance and achievement of its corporate the Queensland Treasury Corporation Capital Markets Board objectives. QTC’s Board is entirely constituted of non-executive (the Board), which was established in 1991 and manages all of directors. QTC’s operations except those relating to certain superannuation and other long-term assets, and Conflict of interest the Long Term Asset Advisory Board, which was established in July 2008 and advises in relation to certain superannuation and Board members are required to monitor and disclose any actual other long-term assets that were transferred to QTC from or potential conflicts of interest. Unless the Board determines Queensland Treasury on 1 July 2008. otherwise, a conflicted Board member may not receive any Board papers, attend any meetings or take part in any decisions relating to declared interests. QTC Capital Markets Board QTC and the Capital Markets Board have agreed the terms and Performance and remuneration administrative arrangements for the exercise of the powers that have been delegated to the Board by QTC (as the corporation To ensure continuous improvement and to enhance overall sole). effectiveness, the Board conducts an annual assessment of its performance as a whole. Board members’ remuneration is The Board operates in accordance with its charter, which sets out determined by the Governor in Council (details are disclosed in its commitment to various corporate governance principles and QTC’s financial statements). standards, the roles and responsibilities of the Board and its members (based on its delegated powers), and the conduct of meetings. The charter provides that the role and functions of the Board committees Board include: The Board has established three committees, each with its own overseeing QTC’s operations, including its control and terms of reference, to assist it in overseeing and governing accountability systems various QTC activities. developing and monitoring QTC’s strategic and corporate plans, operational policy and yearly budget Accounts and Audit Committee monitoring and measuring financial and operational The Accounts and Audit Committee has responsibility for the: performance adequacy and effectiveness of internal controls, including for monitoring and measuring organisational and staff performance the prevention of fraud integrity of financial statements monitoring key risks and risk management processes, and adequacy and effectiveness of compliance monitoring, and

ensuring that QTC’s compliance is appropriate for an audit effectiveness. organisation of its type. The Accounts and Audit Committee must have at least three The Board holds monthly meetings (except in January) and may, members and meet at least four times a year. whenever necessary, hold additional meetings.

QUEENSLAND TREASURY CORPORATION ANNUAL REPORT 2013–14 11 During the year the Accounts and Audit Committee recommended LONG TERM ASSET ADVISORY BOARD the adoption of the half year and annual financial statements, reviewed external and internal audit reports and the progress in The Long Term Asset Advisory Board (LTAAB) was established in implementing the recommendations from those reports, and July 2008, following the transfer of certain superannuation and reviewed the Queensland Audit Office’s Client Service Plan and other long-term assets from Treasury to QTC (primarily for QTC’s Internal Audit Plan. reasons relating to market volatility). As required by the Audit Committee Guidelines: Improving The LTAAB has power delegated from QTC to: Accountability and Performance issued by Queensland Treasury, manage the sufficiency of the funding of the long-term assets QTC’s Accounts and Audit Committee has observed its terms of reference and has had due regard to the Audit Committee set investment objectives and strategies for the long-term Guidelines. assets

set the appropriate investment structure for the long-term Human Resources Committee assets, and

The Human Resources Committee has responsibility for: monitor investment performance of the long-term assets.

the appropriateness of any new or amended human resources The LTAAB holds meetings at least four times per year and held policy five in the year under review.

the framework for, and review of, employee remuneration and The LTAAB members are appointed by the Governor in Council, performance, and pursuant to section 10(2) of the QTC Act.

employment terms and conditions. The members of LTAAB are: The Human Resources Committee must have at least two members and meet at least four times a year. The Human Name Position Resources Committee has observed its terms of reference. Under Treasurer Chairperson

Chief Executive, QSuper Member

Chief Executive, QTC Member

Funding and Markets Committee State Actuary Member

In February 2014, the Funding & Markets Committee reviewed its Assistant Under Treasurer Member Terms of Reference. The amendments reflect the refocus of the Assistant Under Treasurer Member Committee away from an operational review of funding and pool Deputy Under Treasurer Member performance towards a focus on assisting the Board to consider the performance and risk management of QTC’s funding and The LTAAB has observed its terms of reference. markets activities. The core responsibilities of the Committee is to assist the Board by making recommendations about the policy to enhance the performance and management of risk in the areas of funding accessibility (including liquidity), and pool performance and to support QTC’s risk appetite with a focus on effectiveness and performance. The Committee must have at least three members and meet at least four times a year. The Funding and Markets Committee has observed its terms of reference.

Accounts Funding Human & Audit & Markets Resources Board Committee Committee Committee

Meetings held 11 6 4 4

Gerard Bradley 11 - 3 4

Alex Beavers 8 - - 2

Stephen Bizzell 11 6 3 -

Gillian Brown* 11 - 4 -

Tonianne Dwyer 11 - - 4

Neville Ide** 10 6 4 -

Bill Shields 11 6 - -

*Gillian Brown resigned from the QTC Board on 20 August 2014. **Neville Ide resigned from the QTC Board on 30 June 2014.

12 QUEENSLAND TREASURY CORPORATION ANNUAL REPORT 2013–14 AUDITORS RISK MANAGEMENT In accordance with the provisions of the Auditor-General Act QTC manages its risks within an enterprise-wide risk 2009, the Queensland Audit Office is the external auditor for QTC. management framework (EwRM). The framework supports the The Queensland Audit Office has the responsibility for providing achievement of QTC’s corporate strategies and objectives by Queensland’s Parliament with assurances as to the adequacy of providing assurance that QTC’s risks are being appropriately and QTC’s discharge of its financial and administrative obligations. effectively identified and managed, using a consistent and well- understood approach for evaluating and reporting risks. QTC has an independent Internal Audit function that was outsourced to KPMG for the 2013-2014 financial year, and is As part of this framework, QTC periodically identifies its key or outsourced to Ernst and Young for the 2014-2015 financial year. significant risks, which are reported to its Risk Management Team Internal Audit reports to the Accounts and Audit Committee. and to the Board through structured reporting processes. Internal audit is conducted under an Internal Audit Charter that is consistent with the relevant audit and ethical standards. The role QTC’s Chief Risk Officer is responsible for embedding QTC’s risk of internal audit is to support QTC’s corporate governance management policy and program in its business processes, to framework by providing the Board (through the Accounts and ensure a consistent organisation-wide approach to risk mitigation Audit Committee) with: and an enhanced individual employee understanding of EwRM and what it means in their day-to-day work. assurance that QTC has effective, efficient and economical internal controls in place to support the achievement of its objectives, including the management of risk, and STRATEGY AND STRUCTURE

advice with respect to QTC’s internal controls and business Our operating model links the strategy, culture, processes, processes. people, leadership and systems of our organisation and outlines the key business processes we use to create value for our clients. Internal Audit is responsible for:

developing an annual audit plan, based on the assessment of QTC’s organisational structure supports its operating model and financial and business risks (based on QTC’s approved achievement of the organisation’s strategies creating alignment significant risks and internal workshops) aligned with QTC’s throughout the organisation, linking appropriate staff expertise strategic goals and objectives, and approved by the Accounts and accountabilities to the client value-creation process. and Audit Committee

providing regular audit reports and periodic program MANAGEMENT TEAM management reports to the management team and the Accounts and Audit Committee, and The responsibility for the day-to-day operation and administration of QTC is delegated by the Board to the Chief Executive and the working constructively with QTC’s management team to Executive Management Team. The Chief Executive is appointed challenge and improve established and proposed practices and by the Board. Executives are appointed by the Chief Executive. to put forward ideas for process improvement. As with the Board, all Executive Management Team appointments In the year under review, KPMG completed its internal audits in are made on the basis of qualifications, experience, skills, accordance with the approved annual audit plan. strategic ability, and commitment to contribute to QTC’s performance and achievement of its corporate objectives. QTC has had due regard to Treasury’s Audit Committee guidelines, in establishing and supervising its outsourced internal audit function and, together with the Accounts and Audit QTC’s Executive Management Team 2013-14 Committee, in overseeing and monitoring the internal audit Philip Noble Chief Executive function. Steven Tagg Chief Operating Officer In the 2013-14 financial year, the Queensland Audit Office (QAO) Executive General Manager, Corporate audited controls and conducted some substantive testing of Services QTC’s systems used to complete the half year and full year Sandie Angus Acting Executive General Manager, Business annual financial statements. The QAO raised five low-rated issues Services (from December 2013)

that have been considered by the Accounts and Audit Committee, John Frazer Executive General Manager, Business and addressed. Services (to December 2013)

Rupert Haywood Executive General Manager, Client Services Richard Jackson Executive General Manager, Funding and Markets

QUEENSLAND TREASURY CORPORATION ANNUAL REPORT 2013–14 13

QTC BOARD MEMBERS 2013-14

GERARD BRADLEY ALEXANDER BEAVERS BComm, Dip Adv Acc , FCA, FCPA, FAICD, FAIM BComm, Dip Ec

Chairman Deputy Chairman

Appointed 1 September 2009 Appointed 10 May 2012 with tenure to 30 June 2015 with tenure to 30 June 2016

Board Committees Board Committees

Member, Human Resources Committee Member, Human Resources Committee

Member, Funding and Markets Committee Alex Beavers was appointed Queensland’s Deputy Under Treasurer in June 2009. Prior to this appointment, he was Deputy Director-General, Prior to his appointment as QTC’s Chairman, Mr Bradley was the Under Policy, in the Department of the Premier and Cabinet, with responsibility Treasurer and Under Secretary of the Queensland Treasury Department, a for leading the Government’s policy coordination processes and managing position he held from 1998 to 2012. He was also a QTC Board member policy advice preparation for the Premier. from 2000-2007. Mr Beavers has also previously held the role of Assistant Under Treasurer Mr Bradley has extensive experience in public sector finance gained in with responsibility for Queensland’s fiscal strategy and taxation policy, as both the Queensland and South Australian treasury departments. He was well as other senior roles within Queensland Treasury over the past 15 Under Treasurer of the South Australian Department of Treasury and years. Finance from 1996 to 1998, and of Queensland’s Treasury Department from 1995 to 1996. Mr Bradley held various positions in Queensland Treasury from 1976 to 1995, with responsibility for the preparation and management of the State Budget and the fiscal and economic development of Queensland. He is currently a Director and Chairman of Queensland Treasury Holdings Pty Ltd and related companies, and a Director of Echo Entertainment Group Ltd.

STEPHEN BIZZELL GILLIAN BROWN

BCom, MAICD LLB (Hons), Grad Dip Applied Finance and Investment, SIA Appointed in February 2013 with tenure to 30 June 2015 Appointed 1 July 2004; resigned 20 August 2014

Board Committees Board Committees

Member, Accounts and Audit Committee Chair, Funding and Markets Committee

Member, Funding and Markets Committee Gillian Brown has more than 25 years’ experience as a specialist finance lawyer and has gained extensive corporate, financing and major project Stephen Bizzell is an experienced company director with skills in experience. She is a partner of Minter Ellison Lawyers in Queensland, accounting, finance, risk management and commercial management. Mr heading the finance practice, and is a past Chairman of that firm. Ms Bizzell has more than 20 years’ corporate, finance and public company Brown’s principal areas of practice include corporate finance, investment management experience in the resources, energy and financial services and financial services, financial markets, project and infrastructure finance, sectors with public companies in Australia and Canada. He was a co- and property finance. founder and, for 12 years, executive director of coal seam gas company Arrow Energy Ltd and is Chairman of boutique corporate advisory and Ms Brown has advised government bodies on a number of project and funds management group Bizzell Capital Partners Pty Ltd. transactional arrangements and has an in-depth knowledge of the mechanics of government and its objectives. Ms Brown is a director of the Mr Bizzell currently holds company directorships on a number of ASX Australian Rail Track Corporation Limited. listed boards including Armour Energy Ltd, Diversa Limited, Laneway Resources Ltd, Renascour Resources Ltd, Stanmore Coal Ltd, and Titan Energy Services Ltd.

14 QUEENSLAND TREASURY CORPORATION ANNUAL REPORT 2013–14

QTC BOARD MEMBERS 2013-14 CONTINUED

TONIANNE DWYER NEVILLE IDE B Juris (Hons), B Laws (Hons), GAICD BBus, MCom, FCPA, FAICD

Appointed 14 February 2013 Appointed 1 July 2011; with tenure to 30 June 2015 resigned 30 June 2014

Board Committees Board Committees

Chair, Human Resources Committee Member, Accounts and Audit Committee

Tonianne Dwyer is a lawyer by profession with a career of more than 25 Member, Funding and Markets Committee years in international investment and finance in both executive management and board positions. Neville Ide has more than 30 years’ experience in the financial services industry, predominantly banking and insurance; his most recent executive She has held senior roles with Harnbros Bank Limited and Societe position was as Suncorp Metway Group’s Treasurer. He has extensive Generale and was an Executive Director of Quintain Estates & commercial experience in liquidity management, debt funding, capital Development PLC. management and balance sheet structuring. Ms Dwyer’s executive experience covers a broad range of sectors, including real estate investment and development, financial services, From 2010, Mr Ide has served on a number of boards and provided health and aged care, education, research and development, and media, financial risk management advisory services. He is also a non-executive including a role with the finance division of the UK Department of Health. director of RACQ Insurance Ltd, Queensland Motorways Pty Limited, She has extensive experience of financing social infrastructure and of Queensland Police Credit Union Ltd and Public Trust Office Investment leading teams on public private partnership bids. Her operational Board. experience includes UK, Europe and Wall Street. Ms Dwyer currently holds directorships on DEXUS Property Group, DEXUS Wholesale Property Fund, Cardno Limited and Metcash Ltd and is appointed to the Senate of the University of Queensland.

BILL SHIELDS BEcon (Hons), MEc, MAICD

Appointed 1 July 2004 with tenure to 30 June 2015

Board Committees

Chair Accounts and Audit Committee Bill Shields has extensive experience in the banking and finance industry, as well as government policy advice, specialising in economics. His career responsibilities have included economic and financial market research in Australia and overseas, and the provision of analytical and strategic advice on the Australian financial system and monetary policy, Australia’s exchange rate arrangements and international financial developments, as well as oversight of energy markets in Australia, New Zealand and Singapore. Mr Shields was previously Chief Economist and Executive Director of Macquarie Bank Limited (1987–2001), and he has also held positions with the Reserve Bank of Australia (1983–1985), the International Monetary Fund (1973–75 and 1977–83), and the Australian Treasury. He was a Visiting Professor at the Macquarie Graduate School of Management of Macquarie University from 2001-09 and has recently taught at the Australian Catholic University in Brisbane. He is currently a director of the Sydney Anglican Schools Corporation and is Chair of its Education and Strategic Development Committee.

QUEENSLAND TREASURY CORPORATION ANNUAL REPORT 2013–14 15

Investor report

QTC has an intrinsic link with the State of Queensland, as all of its obligations with regard to debt securities and derivatives are unconditionally guaranteed by the Treasurer of Queensland on behalf of the State Government.

Since 1988, QTC has funded the Queensland Government’s public sector capital works programs and remains an important part of Queensland’s economic growth story. QTC continues to maintain a high-quality asset portfolio of public sector loans and investments, with a loan portfolio covering 174 Government clients – all underpinned by Queensland’s AA+/Aa1 credit rating.

YEAR IN REVIEW While AUD benchmark bonds remain the cornerstone of QTC’s funding program, QTC also issued two benchmark-sized floating In December 2013, QTC revised its original $12.1 billion 2013-14 rate notes maturing in 2016 and 2017 respectively in response to estimated borrowing program down to $11.1 billion as a result of investor demand for floating rate note instruments at the shorter better operating performance in the general government sector, end of the curve. These were the first floating rate instruments lower borrowing requirements across government and the QTC had issued since 2011, and by year-end, aggregate deployment of surplus liquidity. The target borrowing program was outstandings were valued at more than $4 billion. achieved by 30 June 2014, with funds borrowed from global markets used to refinance maturing debt, as well as meet the new To complement its term debt issuance, QTC also maintained funding requirements of QTC’s clients–Queensland Government approximately $5 billion of commercial paper outstandings public sector entities–for their additional capital expenditure throughout the year under its Domestic Treasury-Note and US requirements. and Euro Commercial Paper programs.

In the Australian fixed income sector, QTC outperformed its peers In August, more than $4 billion of QTC term debt matured in both with a significant narrowing of bond spreads over the year. On the benchmark bond program and QTC’s Australian Government average, spreads contracted by 0.40 percentage points compared Guaranteed bonds. to Australian Government bonds and 0.30 percentage points to the benchmark swap rate. QTC’s Fixed Income Distribution Group (FIDG) comprising fourteen global and domestic banks act as QTC’s intermediaries To lengthen QTC’s debt maturity profile, and provide investors in debt capital markets by supporting secondary market activity, with a maturity in each calendar year out to 2025, QTC issued $1 as well as primary market issuance. As in previous years, QTC billion of a new AUD denominated benchmark bond maturing in continued to work closely with its FIDG members to broaden its July 2025. A further $1 billion was tapped via syndication a month global investor base to support liquidity across its benchmark following the primary issuance. Investors viewed both of these lines. Turnover of benchmark bonds during the year increased public issues favourably, evidenced by the diversity of investor from the previous period. type and geographic distribution. Having US Rule 144A capability imbedded into QTC’s AUD domestic benchmark bond program QTC values its diverse, global investor base, estimating that continues to see an increased participation from the US market in almost half of its investors are domiciled in offshore jurisdictions. primary market issuances. To help market participants stay up-to-date with QTC’s funding activities, investors can now subscribe to receive quarterly funding updates, market announcements for all public issues, as well as relevant market information about Queensland and QTC.

16 QUEENSLAND TREASURY CORPORATION ANNUAL REPORT 2013–14 CREDIT RATINGS NON-BENCHMARK PUBLICLY ISSUED AUD BONDS In 2013-14, Queensland/QTC maintained its Aa1/P1/ Negative QTC issued two benchmark-sized floating rate notes maturing in and AA+/A-1+/Stable credit ratings from Moody’s Investors’ 2016 and 2017.

Service and Standard & Poor’s respectively. In June 2014, both rating agencies affirmed their ratings following the 2014-15 FRN Maturity BBSW + Date issued Amount issued Queensland State Budget release. margin at launch (AUD)

2016 19 September 3mBBSW 19 September $ 1.2 billion QTC’s credit ratings (as at 30 June 2014) 2016 + 8bp 2013

2017 06 March 3mBBSW 6 March $ 1.0 billion Long-term Short-term Outlook 2017 + 9bp 2014

LOCAL CURRENCY

Moody’s Aa1 P1 Negative Non-benchmark publicly issued AUD bonds,

Standard & Poor’s AA+ A-1+ Stable outstandings by maturity as at 30 June 2014

FOREIGN CURRENCY

Moody’s Aa1 P1 Negative

Standard & Poor’s AA+ A-1+ Stable

AUSTRALIAN GOVERNMENT GUARANTEED

Moody’s Aaa N/A Stable

Standard & Poor’s AAA N/A Stable

AUD BENCHMARK BONDS QTC continued to build its AUD yield curve during the year by issuing a new benchmark bond with US Rule 144A capability maturing in 2025.

Bond Maturity Coupon Date issued Amount issued at launch (AUD)

Q2025 21 July 2025 4.75% 2 April 2014 $1.0 billion

QTC AUD benchmark bonds, outstandings by maturity, as at 30 June 2014 * Australian Government Guaranteed Note: The 20 August 2030 Capital Index Bond outstandings do not include indexation of $171.3 million. The 19 Sep 2016, 06 Mar 2017 and 19 Nov 2018 FRNs all carry 144A capability.

ABOUT THE AUSTRALIAN GOVERNMENT GUARANTEE In 2009 QTC accepted the offer of a guarantee from the Australian Government (in addition to the guarantee provided by the Queensland Government) as a result of the global economic and financial crisis. All remaining benchmark bond lines under this guarantee will remain covered until maturity or retirement. These bonds are rated Aaa/AAA by Moody’s Investors Service and Standard & Poor’s respectively. The Guarantee was closed to new issuance after 31 December 2010. Through its Fixed Income Distribution Group, QTC offers investors the opportunity to switch Australian Government Guaranteed AUD bonds into equivalent AUD benchmark bonds. During the year, investors chose to switch $5 billion into QTC’s AUD benchmark bonds.

QUEENSLAND TREASURY CORPORATION ANNUAL REPORT 2013–14 17 LIQUIDITY

QTC is the largest sub-sovereign Australian fixed income issuer.

QTC’s AUD benchmark bonds are its principal source of funding.

QTC provides investors with a choice of 12 benchmark bonds, ranging in maturity from 2014 to 2025.

QTC works closely with its Fixed Income Distribution Group to actively support secondary market activity in its bonds.

Issuance is executed on a tap, tender, reverse enquiry, and/or syndication basis, depending on market conditions.

FUTURE FUNDING REQUIREMENTS STRONG GLOBAL PARTNERSHIPS Following the release of Queensland’s 2014-15 State Budget on DEDICATED DISTRIBUTION GROUP 3 June 2014, QTC announced its estimated 2014-15 borrowing program to be $13 billion: $8 billion term debt and approximately QTC has dedicated dealer panels to ensure investors have choice and reliable access to trade in QTC’s debt securities. $5 billion of short-term debt (primarily commercial paper).

QTC’s Fixed Income Distribution Group is committed to QTC expects to fund its term debt issuance by supporting liquidity providing investors with two-way bond pricing in the secondary in its benchmark bonds, which will continue to remain QTC’s market, as well as supporting primary issuance activities. principal source of funding. QTC will consider further issuance of floating rate notes, and issuance will be targeted to smooth the QTC’s Fixed Income Distribution Group* comprises: benchmark bond maturity profile. ANZ Banking Group Limited Investors will again be offered the opportunity to switch Australian Bank of America Merrill Lynch Government Guaranteed bonds into QTC’s AUD benchmark bonds guaranteed by the State of Queensland. Barclays (withdrew 30 June 2014) As part of the Queensland State Budget release, the Government BNP Paribas announced a ‘Strong Choices Draft Plan’ of asset transactions – Citi including sale, long-term leases and private sector participation. Commonwealth Bank of Australia The final plan is expected to be announced in September 2014 and the Government has indicated that this plan will form part of Deutsche Bank its policy agenda for the next State Government election expected HSBC in early 2015. The Government has made it clear that no assets JP Morgan will be sold or leased prior to a mandate being obtained at the election. National Australia Bank Limited As a result, QTC’s 2014-15 borrowing program does not take into Nomura International plc account any proceeds from potential asset transactions. QTC will RBC Capital Markets continue to keep the market informed on any outcomes relating to the proposed asset transactions and impact on its funding TD Securities requirements. UBS Investment Bank Westpac Banking Corporation QTC’s 2014-15 term debt indicative borrowing program

*Actual dealer entities may vary depending on the facility and AUD M*

location of the dealer. See Appendix D for contact details. New money

State (includes General Government and 3,800 Government owned corporations)

Local Government and other entities# 900

Total new money 4,700

Net term debt refinancing 3,300

Total term debt requirement 8,000

*Numbers are rounded to the nearest $100 million. #Other entities include: retail water entities, universities, grammar schools and water boards. Note: Funding activity may vary depending upon actual client requirements, the State’s fiscal position and financial market conditions.

18 QUEENSLAND TREASURY CORPORATION ANNUAL REPORT 2013–14 ACCESS TO FUNDING Overview of funding facilities as at 30 June 2014

Size On issue Facility Maturities Currencies ($M) (AUD M)

Domestic T-Note Unlimited 7–365 days AUD 2,164

Short-term Euro CP USD10,000 1–364 days Multi-currency 1,573

US CP USD10,000 1–270 days USD 752

12 benchmark lines: 2014–2025 AUD 64,928

4 AGG* lines: 2015–2021 AUD 8,916

AUD Bond Unlimited Preferred line: 2033 AUD 800

Capital Indexed Bond: 2030 AUD 834

Long-term 3 floating rate notes: 2014, 2016, 2017 AUD 4,422

2 AGG* lines 2015 &2017 Global AUD Bond AUD20,000 AUD 703 (transferrable to domestic bonds)

Multi-currency Euro MTN USD10,000 Any maturity subject to market regulations Multi-currency 1,101

Multi-currency US MTN USD10,000 9 months – 30 years Multi-currency 0

* Australian Government Guaranteed

FUNDING PRINCIPLES INFORMATION FOR INSTITUTIONAL INVESTORS

CONSERVATIVE: Balanced debt maturity profile supported by Core to its key funding principles, QTC is committed to being liquid reserves open and transparent with investors and its partners in the financial markets. PRUDENT: Disciplined approach to financial risk management Through its website, QTC provides a range of information for investors on its various funding facilities and annual borrowing TRANSPARENT: Comprehensive, regular market updates program. The website also hosts an analysts’ centre with COMMITTED: Valued long-term investor and intermediary information and links about Australia and Queensland to help relationships investors gain a better understanding of:

the different levels of government in Australia

AUSTRALIAN GOVERNMENT FISCAL SUPPORT the forms of fiscal support the Australian Government provides to the states and territories Australia is one of only eight countries globally rated AAA/ Aaa/AAA with a stable outlook from all three major credit ratings relevant governance practices, legislation and polices agencies. financial data and budget information, and The Australian Government provides explicit financial support to economic and trade data. all Australian states and territories in the form of:

the payment of grants under the principle of the Horizontal Fiscal Equalisation scheme, which seeks to reduce the A digital version of QTC’s investor booklet is available for iPad revenue-raising and cost disparities between the Australian users from the iTunes store. states and territories QTC also offers investors the ability to subscribe to quarterly National Disaster Relief and Recovery Arrangements, which funding updates in English, Japanese, as well as Modern Chinese provides reimbursement for eligible costs for natural disasters, and Traditional Chinese. and

the offer of a time-limited, voluntary guarantee over Australian state and territory borrowings from July 2009 to December Website: qtc.qld.gov.au/qtc/public/web/investors 2010. Quarterly investor updates: Subscribe from the institutional investor section of the website

Analysts’ centre: qtc.qld.gov.au/qtc/public/web/investors/ analystcentre

Invest in QTC for iPad users: itunes.apple.com/au/app/ queensland-treasurycorporation/id539372974?mt=8&uo=4

Bloomberg ticker: qtc Note: Investors with a US-based iTunes account do not have access to the Invest in QTC iPad application.

QUEENSLAND TREASURY CORPORATION ANNUAL REPORT 2013–14 19

Financial Statements

FOR THE YEAR ENDED 30 JUNE 2014

CONTENTS

Statement of comprehensive income 21

Balance sheet 22

Statement of changes in equity 23

Statement of cash flows 24

Notes to and forming part of the Financial Statements 25

Certificate of the Queensland Treasury Corporation 57

Independent auditor’s report 58

Management report 60

20 QUEENSLAND TREASURY CORPORATION ANNUAL REPORT 2013–14

STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2014

2014 2013 NOTE $000 $000

CAPITAL MARKETS OPERATIONS

Net interest income

Interest income 4 6 914 445 3 529 909

Interest expense 4 (6 814 855) (3 326 556)

99 590 203 353

Other income

Fees 5 67 164 69 112

Lease income 49 983 48 321

Amortisation of cross border lease deferred income 14 322 6 438

Gain on sale of property, plant and equipment 1 159 -

132 628 123 871

Expenses

Administration expenses 6 (64 095) (57 159)

Depreciation on leased assets (33 292) (31 808)

Loss on sale of property, plant and equipment - (9)

Other expenses - 26

(97 387) (88 950)

Share of associate’s net (loss)/profit (140) 521

Loss on transfer of associate (1 006) -

(1 146) 521

Profit from capital markets operations before income tax 133 685 238 795

Income tax expense 7 (14 465) (15 911)

Profit from capital markets operations after income tax 119 220 222 884

LONG TERM ASSETS

Net return from investments in long term assets

Net change in fair value of unit trusts 5 386 325 3 370 042

Interest on fixed rate notes (2 166 897) (2 302 032)

Management fees (91 471) (77 662)

Profit from long term assets 3 127 957 990 348

Total net profit for the year after tax 3 247 177 1 213 232

Total comprehensive income attributable to the owner 3 247 177 1 213 232

Total comprehensive income derived from:

Capital markets operations 3 119 220 222 884

Long term assets 3 3 127 957 990 348

Total comprehensive income 3 247 177 1 213 232

The notes on pages 25 to 56 are an integral part of these financial statements. Note: Throughout these financial statements the capital markets operations and the long term assets operations have been disclosed separately to distinguish between QTC’s main central treasury management role and its additional responsibilities following the transfer of the State’s superannuation and other long-term assets (refer notes 1 and 3).

QUEENSLAND TREASURY CORPORATION ANNUAL REPORT 2013–14 21

BALANCE SHEET AS AT 30 JUNE 2014

2014 2013 NOTE $000 $000

ASSETS

Capital markets operations

Cash 546 197

Receivables 8 4 384 3 568

Financial assets at fair value through profit or loss 9 14 698 901 20 194 045

Derivative financial assets 10 252 543 788 461

Onlendings 11 85 609 405 79 118 832

Property, plant and equipment 12 227 714 326 270

Investments accounted for using the equity method 29 - 1 407

Intangible assets 13 2 118 4 189

Deferred tax asset 7 3 134 2 132

100 798 745 100 439 101

Long term assets

Financial assets at fair value through profit or loss 9 33 431 249 29 767 721

33 431 249 29 767 721

Total Assets 134 229 994 130 206 822

LIABILITIES

Capital markets operations

Payables 14 148 167 27 218

Derivative financial liabilities 10 344 827 167 726

Financial liabilities at fair value through profit or loss

- Interest bearing liabilities 15 94 026 880 93 274 588

- Deposits 15 5 477 942 6 127 695

Other liabilities 16 90 676 130 841

100 088 492 99 728 068

Long term assets

Financial liabilities at amortised cost 17 31 983 174 31 447 603

31 983 174 31 447 603

Total Liabilities 132 071 666 131 175 671

Net Assets 2 158 328 (968 849)

EQUITY

Capital markets operations

Retained surplus 710 253 711 033

710 253 711 033

Long term assets

Retained surplus/(deficit) 1 448 075 (1 679 882)

1 448 075 (1 679 882)

Total Equity 2 158 328 (968 849)

The notes on pages 25 to 56 are an integral part of these financial statements.

22 QUEENSLAND TREASURY CORPORATION ANNUAL REPORT 2013–14

STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2014

CAPITAL MARKETS LONG TERM NOTE OPERATIONS ASSETS

RETAINED RETAINED TOTAL SURPLUS SURPLUS EQUITY $000 $000 $000

Balance at 1 July 2012 488 149 (2 670 230) (2 182 081)

Profit for the year 222 884 990 348 1 213 232

Balance at 30 June 2013 711 033 (1 679 882) (968 849)

Balance at 1 July 2013 711 033 (1 679 882) (968 849)

Profit for the year 119 220 3 127 957 3 247 177

Transactions with owners in their capacity as owners: Dividends provided for or paid 31 (120 000) - (120 000)

Balance at 30 June 2014 710 253 1 448 075 2 158 328

The notes on pages 25 to 56 are an integral part of these financial statements.

QUEENSLAND TREASURY CORPORATION ANNUAL REPORT 2013–14 23

STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2014

2014 2013 NOTE $000 $000

CAPITAL MARKETS OPERATIONS

Cash flows from operating activities

Interest received from onlendings 4 181 238 3 995 758

Interest received from investments 807 729 988 338

Interest received - other 50 089 49 961

Fees received 66 934 68 975

GST paid to suppliers (9 050) (14 175)

GST refunds from ATO 10 048 17 021

GST paid to ATO (6 355) (6 236)

GST received from clients 6 357 6 250

Interest paid on interest-bearing liabilities (4 442 515) (4 006 685)

Interest paid on deposits (172 857) (169 177)

Administration expenses paid (60 090) (48 104)

Income tax paid (15 635) (8 588)

Net cash provided by operating activities 18 415 893 873 338

Cash flows from investing activities

Proceeds from sale of investments 35 689 977 40 610 160

Payments for investments (30 471 584) (43 718 896)

Net onlendings (4 212 638) (8 081 846)

Payments for property, plant and equipment (11 245) (74 150)

Payments for intangibles (252) (1 166)

Proceeds from sale of property, plant and equipment 4 595 13

Dividend received 261 491

Net cash provided by / (used in) investing activities 999 114 (11 265 394)

Cash flows from financing activities

Proceeds from interest-bearing liabilities 55 621 832 58 192 475

Repayment of interest-bearing liabilities (56 386 648) (48 850 999)

Net deposits (649 842) 1 050 034

Net cash (used in) / provided by financing activities (1 414 658) 10 391 510

Net increase / (decrease) in cash held 349 (546)

Cash at 1 July 197 743

Net cash at 30 June 546 197

LONG TERM ASSETS

No external cashflow is generated from the long term assets (refer notes 1 and 3).

The notes on pages 25 to 56 are an integral part of these financial statements.

24 QUEENSLAND TREASURY CORPORATION ANNUAL REPORT 2013–14

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014

CONTENTS 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 1 General information 25 (a) Basis of preparation 2 Summary of significant accounting policies 25 These general purpose financial statements for the year ended

3 Segment reporting 28 30 June 2014 have been prepared in accordance with the requirements of the Financial Accountability Act 2009 and Australian 4 Interest income and interest expense Accounting Standards adopted by the Australian Accounting from capital markets operations 29 Standards Board.

5 Fees 31 Compliance with International Financial Reporting Standards: QTC’s financial statements comply with International Financial 6 Administration expenses 31 Reporting Standards (IFRS) as issued by the International Accounting 7 Income tax expense 32 Standards Board. While QTC is designated as a not-for-profit entity, the Corporation has elected to comply with the requirements of 8 Receivables 32 International Financial Reporting Standards as if it is a for-profit entity. 9 Financial assets at fair value through profit or loss 33 New accounting standards: A number of new and amended accounting standards were mandatory from 1 July 2013. The affected 10 Derivative financial assets and derivative financial liabilities 34 policies and standards including the impact on the financial 11 Onlendings 34 statements are as follows:

12 Property, plant and equipment 35 Principles of Consolidation - new standards AASB 10 Consolidated Financial Statements and AASB 11 Joint Arrangements. AASB 10 13 Intangible assets 36 changes the definition of control based on the entity’s exposure to

14 Payables 36 the rights and variability of returns through its power to direct the activities of an investee. AASB 11 requires joint ventures to be 15 Financial liabilities at fair value through profit or loss 37 classified based on the contractual rights and obligations and where

16 Other liabilities 39 each party has rights to the net assets of the arrangement to be accounted for using the equity method. QTC has reviewed its 17 Financial liabilities at amortised cost 39 investments in other entities and no adjustments to the carrying

18 Notes to the statement of cash flows 40 amounts in the financial statements were required.

Revised AASB 119 Employee Benefits - AASB 119 has changed 19 Financial risk management 41 the way employee benefits are measured now requiring these to be 20 Fair value hierarchy 48 based on when the amount is expected to be settled. Previously this was based on when the amount was due. The impact of this 21 Concentrations of borrowings and deposits 49 change is immaterial.

22 Contingent liabilities 50 AASB 13 Fair Value Measurement which is applicable for the first 23 Leases 50 time this year establishes a single source of guidance for fair value measurement and disclosures about fair value. Other than 24 Commitments 51 additional disclosures, the application of AASB 13 does not have

25 Funding facilities 51 any material impact on the amounts recognised in the financial statements. 26 Related party transactions 52 AASB 2011-4 Amendments to Australian Accounting Standards to 27 Key management personnel 52 Remove Individual Key Management Personnel Disclosure Requirements has removed the specific requirements for reporting 28 Auditor’s remuneration 54 individual key management personnel disclosures.

29 Investment in joint venture entity 55 AASB 7 Financial Instruments: Disclosures regarding the right to 30 Investments in companies 56 offset and related arrangements (such as collateral requirements) for financial instruments under an enforceable master netting 31 Dividends 56 arrangement or similar arrangements. This has added new financial

32 Events subsequent to balance date 56 risk management disclosures (refer note 19). Standards and interpretations not yet adopted: Certain new accounting standards have been published that are not mandatory for the current reporting period. The Corporation’s assessment of the 1 GENERAL INFORMATION impact of material changes from these standards and interpretations Queensland Treasury Corporation (QTC) is constituted under the are set out below. Queensland Treasury Corporation Act 1988 (the Act), with the Under Effective for annual periods beginning on or after 1 January 2017: Treasurer designated as the Corporation Sole under section 5 (2) of the Act. AASB 9 Financial Instruments will replace AASB 139 Financial Instruments: Recognition and measurement. The new standard QTC is the State’s central financing authority and corporate treasury specifies new recognition and measurement requirements for services provider, with responsibility for providing debt funding, liability management, cash management and financial risk management financial assets within the scope of AASB 139. The amendments advice to public sector clients. These services, which form part of require financial assets to be measured at fair value through profit QTC’s Capital Markets Operations segment, are undertaken on a or loss unless they meet the criteria for amortised cost cost-recovery basis with QTC lending at an interest rate based on its measurement. For financial liabilities, AASB 9 has largely adopted cost of funds and with the benefits/costs of liability and asset the recognition and measurement criteria currently contained in management being passed on to its clients being Queensland public AASB 139. One key difference is in relation to the recognition of sector entities. However QTC’s Capital Markets Operations can “own credit” movements for liabilities measured at fair value. Under generate a profit largely reflecting the interest earned from the the revised standard, any change in fair value attributable to an investment of its equity. In undertaking its Capital Markets activities, entity’s own credit risk is to be shown in other comprehensive QTC maintains adequate capital to manage its risks. income, not as part of profit or loss. An exemption applies to entities which have offsetting risk profiles which allows QTC to measure QTC holds a portfolio of assets which were transferred to QTC by the both financial assets and financial liabilities at fair value through State Government. These assets are the investments of QTC’s Long Term Assets segment and are held to fund superannuation and other profit or loss. Therefore this is not expected to change the current long-term obligations of the State such as insurance and long service practice of measuring changes in fair value movements of financial instruments through profit or loss. leave. In return, QTC has issued to the State fixed rate notes which has resulted in the State receiving a fixed rate of return on the notes, Other than as noted above, the adoption of various Australian while QTC bears the impact of fluctuations in the value and returns on Accounting Standards and Interpretations on issue but not yet the asset portfolio (refer note 3). effective is not expected to have a material impact on the financial The Long Term Asset Advisory Board is responsible for the oversight statements of the Corporation. However, the pronouncements may of the Long Term Assets which do not form part of QTC’s day-to-day result in changes to how information is currently disclosed. Capital Markets Operations. The Long Term Assets are held in unit Basis of measurement: The financial statements are prepared on trusts managed by QIC Limited (QIC). the basis of fair value measurement of assets and liabilities except where otherwise stated. Functional and presentation currency: These financial statements are presented in Australian dollars, which is QTC’s functional currency.

QUEENSLAND TREASURY CORPORATION ANNUAL REPORT 2013–14 25 Classification of assets and liabilities: The balance sheet is Onlendings: Onlendings, with the exception of loans to cooperative presented on a liquidity basis. Assets and liabilities are presented in housing societies, are included in the balance sheet at market or fair decreasing order of liquidity and are not distinguished between current value which is the redemption value. Loans to cooperative housing and non-current. societies are based on the balance of each housing society’s loans to its members adjusted where necessary for a specific provision for (b) Investment in joint venture entity impairment (refer note 2 (t)). QTC’s investment in Local Government Infrastructure Services Pty Ltd (LGIS) was accounted for using the equity method in the financial Derivative financial instruments: QTC uses derivative financial instruments to hedge its exposure to interest rate, foreign currency statements. Under the equity method, the share of the profits or and credit risks as part of asset and liability management activities. In losses of the joint venture is recognised in the statement of comprehensive income, and the share of movement in equity is addition they may be used to deliver long term floating rate or long recognised in the balance sheet. Investments in joint venture entities term fixed rate exposure. In accordance with its treasury policy, QTC does not hold or issue derivative financial instruments for speculative are carried at the equity accounted amount adjusted for the realisable purposes. value where the asset is held for sale (refer note 29). At 1 July 2014, QTC transferred its shares in LGIS to Local Government Association All derivatives are carried as assets when fair value is positive and as of Queensland for nominal consideration. QTC has written down its liabilities when fair value is negative. investment in LGIS at 30 June 2014 to reflect the assets recoverable Financial assets at fair value through profit or loss: Financial value at that date. assets at fair value through profit or loss include financial assets held for Capital Markets Operations and investments held in unit trusts (c) Investments in other companies (Long Term Assets). Investments in other companies are accounted for at cost (refer note 30). The principal activity of QTC’s main investment company, Financial assets – Capital Markets Operations Financial assets Queensland Treasury Holdings Pty Ltd (QTH), is to act as a corporate – Capital Markets Operations, include investments in money market vehicle through which the Queensland Government undertakes deposits, discount securities, semi-government bonds and floating activities of strategic importance to the State. rate notes. Unrealised gains and losses are brought to account in the statement of comprehensive income. Queensland Treasury and Trade holds a 60 per cent beneficial interest in QTH. The remaining 40 per cent is held by QTC for and on Investments in unit trusts – Long Term Assets Investments in behalf of the Under Treasurer as Corporation Sole of QTC. unit trusts consist of investments held and managed by QIC and include cash, Australian equities, international equities and other QTC does not apply the equity method to its investment in QTH as it diversified products (refer note 9). These investments are does not have power over the entity, exposure or rights to variable measured at market value based on the hard close unit price returns or power to affect those returns. quoted by QIC adjusted for fees outstanding on the account and net of any GST recoverable. (d) Foreign currency Foreign currency transactions are initially translated into Australian Financial liabilities at fair value through profit or loss: Financial dollars at the rate of exchange applying at the date of the transaction. liabilities at fair value through profit or loss include interest-bearing At balance date, amounts payable to and by QTC in foreign liabilities and deposits. Unrealised gains and losses are brought to currencies have been valued using current exchange rates after account in the statement of comprehensive income. taking into account interest rates and accrued interest. Interest-bearing liabilities Interest-bearing liabilities mainly consist Exchange gains/losses are brought to account in the statement of of Australian and overseas bonds. Australian bonds include QTC’s comprehensive income. domestic, capital indexed and public bonds. Overseas bonds include global bonds and Eurobonds. Global bonds are Australian (e) Cash dollar denominated bonds issued overseas.

Cash assets include only those funds held at bank and do not include Deposits Client deposits are accepted to either the Working Capital money market deposits. Facility (11AM Fund) or the QTC Cash Fund. Income derived from (f) Financial assets and financial liabilities the investment of these deposits accrues to depositors daily. The amount shown in the balance sheet represents the market value of Recognition and derecognition: Financial assets and financial deposits held at balance date. liabilities are recognised in the balance sheet when QTC becomes Collateral held and securities which are sold under agreements to party to the contractual provisions of the financial instrument which is repurchase are disclosed as deposits. the settlement date of the transaction. A financial asset is derecognised when the contractual rights to the Financial liabilities at amortised cost: Financial liabilities at cash flows from the financial assets expire or are transferred and no amortised cost consist of fixed rate notes issued to the State longer controlled by QTC. Government in exchange for a portfolio of assets (Long Term Assets). A financial liability is removed from the balance sheet when the The fixed rate notes are initially recognised at par value, which obligation specified in the contract is discharged, cancelled or expires. equated to the fair value of the financial assets acquired. Deposits and withdrawals can be made from the notes based on changes in the Measurement: Financial assets and liabilities at fair value through State Government’s long-term liabilities. The notes have a term of 50 profit or loss are measured at fair value by reference to quoted market years. Interest on the fixed rate notes is capitalised monthly and the exit prices when available. If quoted market prices are not available, rate is reviewed annually. then fair values are estimated on the basis of pricing models or other recognised valuation techniques with consideration for the effect of (g) Collateral counterparty credit. QTC enters into a range of transactions with counterparties which require the lodgement of collateral subject to agreed market Fair value is the amount for which an asset could be exchanged or thresholds. Where these thresholds are exceeded, QTC may be liability settled between knowledgeable, willing parties in an arm’s required to either pledge assets to, or be entitled to receive pledged length transaction. assets from, the counterparty to secure these transactions. The QTC uses mid-market rates as the basis for establishing fair values of assets pledged or received are primarily in the form of cash. quoted financial instruments with offsetting risk positions. In general, the risk characteristics of funds borrowed, together with the financial (h) Settlement date accounting derivatives used to manage interest rate and foreign currency risks, Purchases and sales of financial assets and liabilities at fair value closely match those of funds onlent. In all other cases, the bid-offer through profit or loss are recognised on settlement date. QTC spread is applied where material. accounts for any change in the fair value of the asset to be received or the liability issued during the period between the trade date and Financial liabilities at amortised cost are measured using the effective settlement date in the same way as it accounts for the acquired asset interest method. The effective interest method is a method of or liability. calculating the amortised cost of a financial instrument and allocating the interest income or interest expense over the relevant period. In (i) Offsetting financial instruments this way, interest is recognised in the statement of comprehensive QTC offsets financial assets and liabilities where there is a legally income in the period in which it accrues. enforceable right to set-off, and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously Classification: Financial instruments on initial recognition are (refer note 19). classified into the following categories:

• Onlendings (j) Repurchase agreements Securities sold under agreements to repurchase at an agreed price • Derivative financial instruments are retained within the financial assets at fair value through profit or • Financial assets at fair value through profit or loss loss category while the obligation to repurchase is disclosed as a deposit. • Financial liabilities at fair value through profit or loss, and

• Financial liabilities at amortised cost. (k) Lease arrangements Leases in which a significant portion of the risks and rewards of QTC’s accounting policies for significant financial assets and financial ownership are retained by the lessor are classified as operating liabilities are listed below. leases. Operating leases, in which QTC is the lessee, are expensed on a straight line basis over the term of the lease. Leases where QTC has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the lease inception based on the present value of the minimum lease payments. The finance cost is charged to profit or loss over the lease period (refer note 23).

26 QUEENSLAND TREASURY CORPORATION ANNUAL REPORT 2013–14 (l) Lease income (t) Impairment Lease income from operating leases where QTC is the lessor is The carrying values of non-financial assets are reviewed at each recognised as income on a straight line basis over the lease term. reporting date or where there is an indication of impairment. Where an asset is no longer expected to provide substantial service potential or (m) Cross border leases – income recognition there are significant reductions in the capabilities, functions or The portion of the cross border lease income received which is intended use, the asset is written down to its recoverable amount. For regarded as an advisory fee for the transaction is recognised on the purpose of impairment testing, assets are grouped by the lowest receipt. The balance of income received is deferred and amortised level of cash-generating unit applicable with impairment losses over the term of each lease. recorded in the statement of comprehensive income. (n) Interest income and interest expense (u) Income tax The recognition of investment income and borrowing costs includes QTC is exempt from the payment of income tax under section 50-25 net realised gains/losses from the sale of investments (interest of the Income Tax Assessment Act 1997 (as amended). income) and the preredemption of borrowings (interest expense) QTC makes a payment in lieu of income tax to the Queensland together with the net unrealised gains/losses arising from holding Government’s Consolidated Fund. The calculation of the income tax investments and certain onlendings (interest income) and net liability is based on the income of certain activities controlled by QTC’s unrealised gains/losses from borrowings (interest expense). These unrealised gains/losses are a result of revaluing to market daily. Capital Markets Operations. No income tax is payable on the Long Term Assets. The majority of onlendings are provided to clients on a pooled basis. Interest costs are allocated to clients based on the daily movement in In calculating the payment in lieu of income tax expense, tax effect accounting principles are adopted for income received and expenses the market value of the pool. paid in relation to the management and administration of clients’ (o) Fee income borrowings and deposits as well as for advisory services and Management fee income represent income earned from the structured finance transactions. For all other QTC operations on which management of QTC’s onlendings and deposits and is recognised on a payment in lieu of income tax is made, tax effect accounting an accrual basis when the service has been provided. Asset and principles are not applied. liability management fee income integral to the yield of an originated Deferred income tax is provided in full, using the liability method, on financial instrument is recognised proportionately over the period the all temporary differences arising between the tax bases of assets and product is provided. liabilities and their carrying amounts in the financial statements. (p) Net change in fair value of investments in unit trusts Deferred income tax liabilities are recognised for all taxable temporary Changes in the net market value of investments are recognised in the differences arising from prepayments of expenditure of QTC. Deferred period in which they occur. The net market value is based on the income tax assets are recognised for deductible temporary differences closing unit redemption price and includes both realised and arising from lease incentives, accruals of expenditure, employee unrealised movements, net of allowances for costs expected to be benefits and depreciation charged on property, plant and equipment. incurred in realising these investments. Distributions are reinvested QTC’s controlled and jointly controlled entities are defined as State into the trusts. and Territory bodies under section 24AO of the Income Tax Assessment Act 1936 and as a consequence, are exempt from (q) Profits/losses Commonwealth tax under section 24AM of this Act. Unless otherwise determined by the Governor in Council, the Queensland Treasury Corporation Act 1988 requires that all profits (v) Employee benefits shall accrue to the benefit of the State Consolidated Fund and all A liability is recognised for benefits accruing to employees in respect losses shall be the responsibility of the State Consolidated Fund. of salaries, annual leave, long service leave and short-term incentives based on the amount expected to be paid where there is a present or (r) Property, plant and equipment constructive obligation to pay this amount as a result of past service Property, plant and equipment are measured at cost less accumulated and the obligation is capable of being measured reliably. These are depreciation and accumulated impairment losses. Costs are measured on an undiscounted basis where the amounts are expected recognised where asset values exceed $5,000 and include to be paid within the next 12 months. For amounts where the payment expenditure that is directly attributable to the acquisition of the asset. date is expected to exceed 12 months such as long service leave, Depreciation is calculated on a straight line basis over the estimated future pay increases are projected and then discounted using a high useful life of the assets. Where depreciation relates to plant and quality bond rate. equipment held to generate lease revenue, depreciation expenditure has been classified separately in the statement of comprehensive Salaries, short-term incentives, annual and long service leave unpaid income as depreciation on leased assets. at reporting date are recognised as a liability and include related on- costs such as payroll tax, worker’s compensation premiums and Depreciation rates for each class of asset are as follows: employer superannuation contributions. As sick leave is non-vesting,

ASSET CLASS DEPRECIATION RATE this is recognised as and when this leave is taken.

Land 0%

(w) Rounding Information technology & office equipment 6 – 40% Amounts have been rounded to the nearest thousand dollars except Plant and machinery 10 – 30% for note 25, which is rounded to the nearest million dollars, and notes The assets’ residual values, useful lives and depreciation methods are 27 and 28, which are in whole dollars. reviewed and adjusted, if appropriate, at each financial year end. (x) Comparative figures Derecognition: An item of property, plant and equipment is Where necessary, comparative figures have been adjusted to conform derecognised upon disposal or when no further future economic with changes in presentation in the current year. benefits are expected from its use. Any gain or loss arising on derecognition of the asset (calculated as the difference between the (y) Judgements and assumptions net disposal proceeds and the carrying amount of the asset) is The preparation of the financial statements requires the use of included in the statement of comprehensive income in the year the accounting estimates. The areas involving a higher degree of asset is derecognised. judgement or complexity, or areas where assumptions or estimates may be significant to the financial statements are shown below: (s) Intangible assets Fair value of financial assets and financial liabilities: Financial Software: Acquired computer software licences are capitalised on the assets and financial liabilities at fair value through profit or loss are basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised over their estimated useful lives measured at fair value by reference to quoted market prices where which are between two and five years. available. The fair value of financial instruments that are not traded in Costs associated with the development of internally generated an active market is determined by reference to market quotes for software are capitalised only when the designated project is similar instruments or by use of valuation techniques. Judgement may technically and commercially feasible and is expected to generate be needed in selecting valuation methods or assumptions where an future economic benefits to QTC. The expenditure capitalised active market quote is not available. comprises all directly attributable costs including some labour costs. Estimates and underlying assumptions are reviewed on an ongoing All other costs associated with the development of software are basis. Revisions to accounting estimates are recognised in the period expensed as incurred. Following initial recognition of the development in which the estimate is revised and in any future period affected. expenditure as an asset, the asset is carried at cost less accumulated amortisation and impairment losses. Amortisation of the asset begins when the development is complete and the asset is available for use. Computer software development costs recognised as assets are amortised on a straight-line basis over the period of expected benefit, which is usually between three and five years.

QUEENSLAND TREASURY CORPORATION ANNUAL REPORT 2013–14 27

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014

3 SEGMENT REPORTING

An operating segment is identified where QTC engages in a business activity where separate financial information is evaluated regularly by the chief operating decision makers in deciding how to allocate resources. Revenue and expenses directly associated with each business segment are included to determine their result. The accounting policies for each operating segment are applied consistently. The results from QTC’s operating segments are shown below:

SEGMENT REVENUE AND EXPENSES FOR THE YEAR ENDED 30 JUNE 2014 FOR THE YEAR ENDED 30 JUNE 2013

Capital markets Long term Capital markets Long term operations assets Total operations assets Total $000 $000 $000 $000 $000 $000

Income

Interest income 6 914 445 - 6 914 445 3 529 909 - 3 529 909

Net change in fair value of unit trusts - 5 386 325 5 386 325 - 3 370 042 3 370 042

Other income 132 628 - 132 628 123 871 - 123 871

Total income 7 047 073 5 386 325 12 433 398 3 653 780 3 370 042 7 023 822

Expenses

Interest expense 6 814 855 2 166 897 8 981 752 3 326 556 2 302 032 5 628 588

Depreciation on leased assets 33 292 - 33 292 31 808 - 31 808

Management fees - 91 471 91 471 - 77 662 77 662

Other expenses 64 095 - 64 095 57 142 - 57 142

Total expenses 6 912 242 2 258 368 9 170 610 3 415 506 2 379 694 5 795 200

Net (loss)/ profit from associate (1 146) - (1 146) 521 - 521

Profit before income tax 133 685 3 127 957 3 261 642 238 795 990 348 1 229 143

Income tax expense 14 465 - 14 465 15 911 - 15 911

Profit for the year 119 220 3 127 957 3 247 177 222 884 990 348 1 213 232

SEGMENT ASSETS AND LIABILITIES 30 JUNE 2014 30 JUNE 2013

Capital markets Long term Capital markets Long term operations assets Total operations assets Total $000 $000 $000 $000 $000 $000

Assets

Onlendings 85 609 405 - 85 609 405 79 118 832 - 79 118 832

Financial assets at FVPL (1) 14 698 901 33 431 249 48 130 150 20 194 045 29 767 721 49 961 766

Other assets 490 439 - 490 439 1 126 224 - 1 126 224

Total assets 100 798 745 33 431 249 134 229 994 100 439 101 29 767 721 130 206 822

Liabilities

Financial liabilities at FVPL (1) 99 504 822 - 99 504 822 99 402 283 - 99 402 283

Financial liabilities at amortised cost - 31 983 174 31 983 174 - 31 447 603 31 447 603

Other liabilities 583 670 - 583 670 325 785 - 325 785

Total liabilities 100 088 492 31 983 174 132 071 666 99 728 068 31 447 603 131 175 671

Net assets 710 253 1 448 075 2 158 328 711 033 (1 679 882) (968 849)

(1) Includes non-derivative financial instruments at fair value through profit or loss

SEGMENT EQUITY 30 JUNE 2014 30 JUNE 2013

Capital markets Long term Capital markets Long term operations assets Total operations assets Total $000 $000 $000 $000 $000 $000

Equity 1 July 711 033 (1 679 882) (968 849) 488 149 (2 670 230) (2 182 081)

Profit after tax 119 220 3 127 957 3 247 177 222 884 990 348 1 213 232

Dividends provided for (120 000) - (120 000) - - -

Equity 30 June 710 253 1 448 075 2 158 328 711 033 (1 679 882) (968 849)

28 QUEENSLAND TREASURY CORPORATION ANNUAL REPORT 2013–14

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014

4 INTEREST INCOME AND INTEREST EXPENSE FROM CAPITAL MARKETS OPERATIONS

FOR THE YEAR ENDED 30 JUNE 2014

NET UNREALISED NET REALISED TOTAL INTEREST GAIN/LOSS GAIN/LOSS INTEREST $000 $000 $000 $000

Interest income from financial assets

Money market deposits 33 028 2 - 33 030

Discount securities 132 225 (1 057) 867 132 035

Commonwealth and state securities 47 410 35 525 2 755 85 690

Floating rate notes 147 548 (38) 8 718 156 228

Term deposits 23 870 (136) - 23 734

Other investments 66 303 3 172 1 784 71 259

Onlendings * 4 175 727 2 201 057 - 6 376 784

Interest income from derivatives

Forward rate agreements - (47 674) 76 326 28 652

Cross currency swaps 11 838 (4 808) - 7 030

Credit default swaps 3 - - 3

Total interest income 4 637 952 2 186 043 90 450 6 914 445

Interest expense from financial liabilities

Treasury notes 50 561 62 57 50 680

Commercial paper 14 399 (10 471) - 3 928

AUD Bonds 3 392 511 1 987 895 686 977 6 067 383

Floating rate notes 58 017 3 195 22 61 234

Global AUD Bonds 31 556 (24 966) 28 612 35 202

Medium-term notes 55 748 49 054 - 104 802

Deposits 173 093 (147) - 172 946

Interest expense from derivatives

Interest rate swaps (5 847) 196 264 - 190 417

Cross currency swaps 37 119 (77 093) - (39 974)

Futures contracts - - 46 986 46 986

Foreign exchange contracts - 87 063 - 87 063

Other

Registration and issue costs 6 339 - - 6 339

Commissions on futures 1 493 - - 1 493

Commonwealth Government Guarantee Fee 26 356 - - 26 356

Total interest expense 3 841 345 2 210 856 762 654 6 814 855

* The majority of onlendings are provided to clients on a pooled fund basis. Interest costs are allocated to clients based on the daily movement in the market value of the pooled fund. In periods of falling interest rates, the market value of the funding pool will rise leading to higher interest income from onlendings. During the year ended 30 June 2014, interest rates fell across all terms, resulting in higher interest income compared to the prior year when long term interest rates rose and short term interest rates fell.

QUEENSLAND TREASURY CORPORATION ANNUAL REPORT 2013–14 29

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014

4 INTEREST INCOME AND INTEREST EXPENSE FROM CAPITAL MARKETS OPERATIONS CONTINUED

FOR THE YEAR ENDED 30 JUNE 2013

NET UNREALISED NET REALISED TOTAL INTEREST GAIN/LOSS GAIN/LOSS INTEREST $000 $000 $000 $000

Interest income from financial assets

Money market deposits 25 199 1 - 25 200

Discount securities 176 159 75 3 649 179 883

Commonwealth and state securities 198 725 (130 415) 94 417 162 727

Floating rate notes 186 691 50 134 8 030 244 855

Term deposits 58 878 (1 091) - 57 787

Other investments 61 512 27 286 1 223 90 021

Onlendings 3 908 008 (1 164 924) - 2 743 084

Interest income from derivatives

Forward rate agreements - (75 561) 125 104 49 543

Cross currency swaps 15 862 (39 386) - (23 524)

Credit default swaps 136 197 - 333

Total interest income 4 631 170 (1 333 684) 232 423 3 529 909

Interest expense from financial liabilities

Treasury notes 71 167 (1 498) 8 69 677

Commercial paper 10 855 532 545 - 543 400

AUD Bonds 3 579 052 (1 206 732) 828 012 3 200 332

Floating rate notes 11 809 126 - 11 935

Global AUD Bonds 56 413 (12 009) 11 429 55 833

Medium-term notes 49 832 (26 740) (990) 22 102

Deposits 169 685 11 - 169 696

Interest expense from derivatives

Interest rate swaps (56 658) (3 358) - (60 016)

Cross currency swaps 44 567 (98 997) - (54 430)

Futures contracts - - (227 061) (227 061)

Foreign exchange contracts - (452 436) 889 (451 547)

Other

Registration and issue costs 8 339 - - 8 339

Commissions on futures 1 490 - - 1 490

Commonwealth Government Guarantee Fee 36 806 - - 36 806

Total interest expense 3 983 357 (1 269 088) 612 287 3 326 556

30 QUEENSLAND TREASURY CORPORATION ANNUAL REPORT 2013–14

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014

5 FEES

2014 2013 $000 $000

Fees – management (1) 65 088 67 366

Fees – professional & other services 2 076 1 746

67 164 69 112

(1) Management fees represent income earned from the management of QTC’s onlendings and deposits. A further amount of $6.604 million (2013 $7.958 million), derived from fees on certain managed funds and pools is included under interest income as it forms part of the interest rate applied.

6 ADMINISTRATION EXPENSES

2014 2013 $000 $000

Salaries and related costs 37 352 33 113

Superannuation contributions 3 649 3 389

Contractors 2 280 2 313

Consultants’ fees (i) 3 676 2 099

Outsourced services 2 236 2 131

Depreciation on property, plant and equipment 1 904 2 209

Amortisation on intangible assets 2 167 2 059

Computer charges 2 489 2 563

Property charges 3 650 3 574

External audit fees 414 369

Internal audit fees 486 479

Staff training and development 649 417

Investor and market relations program 450 542

Telephone, postage, printing and stationery 388 474

Other administration expenses 2 305 1 428

64 095 57 159

(i) Consultants’ fees

Professional, technical and legal 1 508 753

Information technology 1 372 482

Finance and accounting 231 258

Human resource management 284 232

Other 281 374

3 676 2 099

QUEENSLAND TREASURY CORPORATION ANNUAL REPORT 2013–14 31

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014

7 INCOME TAX EXPENSE

2014 2013 $000 $000

Current tax 15 467 15 635

Deferred tax (1 002) 276

Total income tax expense recognised in the current year 14 465 15 911

Deferred income tax included in income tax expense comprises:

(Increase)/decrease in deferred tax assets (1 002) 306

Decrease in deferred tax liabilities - (30)

(1 002) 276

Numerical reconciliation between income tax expense and pre-tax accounting profit

Profit for the year 3 261 642 1 229 143

Less profit from non-taxable pools:

Capital markets operations (86 886) (185 788)

Long term assets (3 127 957) (990 348)

Operating profit from taxable pools 46 799 53 007

Tax at the Australian tax rate of 30% on taxable pools 14 040 15 902

Effect of non-deductible items:

Share of loss/ (profit) from non-taxable entity 42 (156)

Write down of investment in non-taxable entity 302 -

Other 81 165

Income tax expense 14 465 15 911

Income tax assets and liabilities at 30 June relates to the following:

Deferred tax assets

Accruals 72 64

Employee benefits 2 076 2 023

Property, plant and equipment 67 12

Provisions 919 33

3 134 2 132

Current tax liability – income tax payable 15 467 15 635

Tax liabilities 15 467 15 635

8 RECEIVABLES

2014 2013 $000 $000

GST receivable - 643

Sundry debtors 3 178 1 372

Prepayments 1 079 1 309

Operating lease receivables 127 244

4 384 3 568

32 QUEENSLAND TREASURY CORPORATION ANNUAL REPORT 2013–14

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014

9 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

2014 2013 CAPITAL MARKETS OPERATIONS $000 $000

Money market deposits 2 674 416 1 717 477

Discount securities 4 738 190 7 743 703

Commonwealth and state securities (1) 1 151 874 3 642 350

Floating rate notes 4 105 618 4 314 169

Term deposits 729 476 552 625

Other investments 1 299 327 2 223 721

14 698 901 20 194 045

(1) QTC maintains holdings of its own stocks. These holdings are netted off and therefore excluded from financial assets and financial liabilities at

fair value through profit or loss. The total includes investments made to manage:

deposits of $5,477.942 million (2013 $6,127.695 million)

surpluses of $710.253 million (2013 $711.033 million), and

cross border lease deferred income of $37.946 million (2013 $52.267 million). The remaining investments are used to facilitate management of liquidity and interest rate risk or result from QTC borrowing in advance of requirements to manage financing/refinancing risk. As at 30 June 2014, $5,083.1 million (2013 $8,354.4 million) of financial assets will mature after more than 12 months.

2014 2013 LONG TERM ASSETS $000 $000

INVESTMENTS IN UNIT TRUSTS AND OTHER HOLDINGS – QIC:

Movement during the year:

Opening balance 29 767 721 29 182 448

Net withdrawals (1 722 797) (2 784 769)

Net change in fair value of unit trusts 5 386 325 3 370 042

Closing balance 33 431 249 29 767 721

Comprised of the following asset classes:

Growth assets

Equities 4 967 124 5 360 520

Diversified alternatives and other 6 134 448 4 764 906

Unlisted assets

Infrastructure 8 199 928 6 242 689

Private equities 1 903 027 1 487 340

Real estate 1 938 863 1 489 033

Defensive assets

Fixed interest 584 281 893 420

Cash 9 703 578 9 529 813

33 431 249 29 767 721

Prior year comparatives have been restated to reflect the revised asset classes.

QUEENSLAND TREASURY CORPORATION ANNUAL REPORT 2013–14 33

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014

10 DERIVATIVE FINANCIAL ASSETS AND DERIVATIVE FINANCIAL LIABILITIES

2014 2013 $000 $000

DERIVATIVE FINANCIAL ASSETS

Interest rate swaps 32 701 149 229

Cross currency swaps 180 966 136 217

Forward rate agreements 38 704 86 378

Foreign exchange contracts 172 416 637

252 543 788 461

DERIVATIVE FINANCIAL LIABILITIES

Interest rate swaps 167 855 51 266

Cross currency swaps 112 149 116 402

Foreign exchange contracts 64 823 58

344 827 167 726

Net derivatives (92 284) 620 735

As at 30 June 2014, $590.4 million (2013 $89.3 million) of these derivatives have maturity dates exceeding 12 months.

11 ONLENDINGS

2014 2013 $000 $000

Government departments and agencies 42 933 073 38 258 994

Government owned corporations 19 053 525 18 667 584

Local governments 7 478 377 6 632 514

Statutory bodies 15 680 569 14 979 661

QTC related entities 157 520 321 179

Other bodies 306 341 258 900

85 609 405 79 118 832

As at 30 June 2014, $84,531.6 million (2013 $77,520.0 million) of repayments are expected to be received after more than 12 months.

34 QUEENSLAND TREASURY CORPORATION ANNUAL REPORT 2013–14

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014

12 PROPERTY, PLANT AND EQUIPMENT

Reconciliations of the carrying amounts for each class of property, plant and equipment are set out below:

INFORMATION LAND & TECHNOLOGY AND PLANT AND BUILDINGS (1) OFFICE EQUIPMENT MACHINERY (2) TOTAL DESCRIPTION $000 $000 $000 $000

GROSS CARRYING AMOUNT

Balance at 1 July 2012 32 682 11 089 322 953 366 724

Acquisitions - 5 700 40 413 46 113

Disposals - (7 108) - (7 108)

Work in progress 28 063 - - 28 063

Balance at 30 June 2013 60 745 9 681 363 366 433 792

Balance at 1 July 2013 60 745 9 681 363 366 433 792

Acquisitions 10 580 575 245 11 400

Disposals (71 325) (54) (8 813) (80 192)

Work in progress - - - -

Balance at 30 June 2014 - 10 202 354 798 365 000

ACCUMULATED DEPRECIATION

Balance at 1 July 2012 - 7 670 72 923 80 593

Disposals - (7 086) - (7 086)

Depreciation expense - 2 206 31 809 34 015

Balance at 30 June 2013 - 2 790 104 732 107 522

Balance at 1 July 2013 - 2 790 104 732 107 522

Disposals - (54) (5 378) (5 432)

Depreciation expense - 1 904 33 292 35 196

Balance at 30 June 2014 - 4 640 132 646 137 286

Net book value 30 June 2013 60 745 6 891 258 634 326 270

Net book value 30 June 2014 - 5 562 222 152 227 714

(1) Land and buildings included land purchased and costs incurred to construct a bus depot which is subject to a 25 year leasing arrangement. During the year, QTC derecognised land and buildings with a carrying value of $71.325 million which now forms part of a finance lease arrangement. (2) Plant and machinery consists mainly of buses and ferries which QTC leases to public sector entities under a whole-of-Government

lease facility.

QUEENSLAND TREASURY CORPORATION ANNUAL REPORT 2013–14 35

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014

13 INTANGIBLE ASSETS

2014 2013 $000 $000

GROSS CARRYING AMOUNT

Balance at 1 July 9 098 8 128

Acquisitions 97 1 141

Disposals (103) (171)

Balance at 30 June 9 092 9 098

ACCUMULATED DEPRECIATION

Balance at 1 July 4 909 3 018

Disposals (103) (171)

Amortisation 2 168 2 062

Balance at 30 June 6 974 4 909

Net book value 30 June (1) 2 118 4 189

(1) The amount of fully depreciated software at balance date totalled $2.679 million (2013 $2.607 million).

14 PAYABLES

2014 2013 $000 $000

Administration expenses 11 858 10 868

Dividends payable 120 000 -

Tax payable 15 467 15 635

GST payable 357 -

Other creditors 485 715

148 167 27 218

36 QUEENSLAND TREASURY CORPORATION ANNUAL REPORT 2013–14

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014

15 FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS

2014 2013 $000 $000

INTEREST-BEARING LIABILITIES – CAPITAL MARKETS OPERATIONS

Short-term

Treasury notes 2 152 166 1 237 105

Commercial paper 2 223 522 4 013 185

4 375 688 5 250 290

Long-term

AUD Bonds 83 123 358 85 167 737

Floating rate notes 4 433 159 350 884

Global AUD Bonds (1) 766 982 1 263 077

Medium-term notes 1 104 502 1 056 418

Other 223 191 186 182

89 651 192 88 024 298

Total interest-bearing liabilities 94 026 880 93 274 588

(1) Consists of AUD denominated bonds which are borrowed in the United States and Euro markets.

Derivatives are used to hedge offshore borrowings resulting in no net exposure to any foreign currency. Details of QTC’s exposure to foreign currencies and the derivatives used to hedge this exposure are disclosed in note 19 (a)(i). QTC borrowings are guaranteed by the Queensland Government under the Queensland Treasury Corporation Act 1988. As at 30 June 2014, $78,451.9 million (2013 $78,662.2 million) of debt securities are expected to be settled after more than 12 months.

QUEENSLAND TREASURY CORPORATION ANNUAL REPORT 2013–14 37

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014

15 FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS CONTINUED

The difference between the carrying amount of financial liabilities and the amount contractually required to be paid at maturity to the holder of the obligation is set out in the following table:

REPAYMENT FAIR VALUE AT MATURITY DIFFERENCE AS AT 30 JUNE 2014 $000 $000 $000

INTEREST-BEARING LIABILITIES – CAPITAL MARKETS OPERATIONS

Short-term

Treasury notes 2 152 166 2 164 000 (11 834)

Commercial paper 2 223 522 2 224 995 (1 473)

4 375 688 4 388 995 (13 307)

Long-term

AUD Bonds 83 123 358 74 954 343 8 169 015

Floating rate notes 4 433 159 4 422 000 11 159

Global AUD Bonds 766 982 702 972 64 010

Medium-term notes 1 104 502 1 008 477 96 025

Other 223 191 216 606 6 585

89 651 192 81 304 398 8 346 794

Total interest-bearing liabilities 94 026 880 85 693 393 8 333 487

REPAYMENT FAIR VALUE AT MATURITY DIFFERENCE AS AT 30 JUNE 2013 $000 $000 $000

INTEREST-BEARING LIABILITIES – CAPITAL MARKETS OPERATIONS

Short-term

Treasury notes 1 237 105 1 243 000 (5 895)

Commercial paper 4 013 185 4 015 203 (2 018)

5 250 290 5 258 203 (7 913)

Long-term

AUD Bonds 85 167 737 78 280 328 6 887 409

Floating rate notes 350 884 350 000 884

Global AUD Bonds 1 263 077 1 169 002 94 075

Medium-term notes 1 056 418 943 111 113 307

Other 186 182 179 210 6 972

88 024 298 80 921 651 7 102 647

Total interest-bearing liabilities 93 274 588 86 179 854 7 094 734

38 QUEENSLAND TREASURY CORPORATION ANNUAL REPORT 2013–14

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014

15 FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS CONTINUED

2014 2013 $000 $000

CLIENT DEPOSITS – CAPITAL MARKETS OPERATIONS

Local governments 1 801 076 1 930 247

Statutory bodies 1 729 109 1 479 541

Government owned corporations 594 740 768 996

Government departments and agencies 61 806 64 007

QTC related entities 68 817 57 270

Other depositors 201 170 201 336

4 456 718 4 501 397

Collateral held 73 196 552 721

Repurchase agreements 948 028 1 073 577

1 021 224 1 626 298

Total deposits 5 477 942 6 127 695

16 OTHER LIABILITIES

2014 2013 $000 $000

Cross border lease deferred income 37 946 52 267

Whole of Government Debt Pool net position 43 318 67 533

Employee benefits 6 347 6 239

Other 3 065 4 802

90 676 130 841

17 FINANCIAL LIABILITIES AT AMORTISED COST

2014 2013 $000 $000

FIXED RATE NOTES – LONG TERM ASSETS

State Government 31 983 174 31 447 603

The Board considers that the carrying value of financial liabilities recorded at amortised cost in the financial statements approximates their fair value. For the purposes of the fair value hierarchy, the fixed rate notes are categorised as level 3 (refer note 20).

QUEENSLAND TREASURY CORPORATION ANNUAL REPORT 2013–14 39

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014

18 NOTES TO THE STATEMENT OF CASH FLOWS

(a) Reconciliation of profit after tax to net cash provided by operating activities – capital markets operations

2014 2013 $000 $000

Profit for the year 119 220 222 884

NON-CASH FLOWS IN OPERATING SURPLUS

Interest-bearing liabilities - net unrealised loss/(gain) 2 123 944 (1 309 368)

Interest-bearing liabilities - net unrealised exchange loss 87 063 5 664

Deposits - net unrealised (gain)/loss (147) 11

Onlendings net unrealised (gain)/loss (2 201 057) 1 255 992

Financial assets at fair value through profit or loss – net unrealised loss 17 879 284 430

Financial assets at fair value through profit or loss – net unrealised exchange gain (2 865) (73 985)

Depreciation of property, plant and equipment 35 196 34 018

Amortisation of intangibles 2 168 2 059

Net (gain)/loss on sale of property, plant and equipment (1 159) 9

Doubtful debts writeback cooperative housing societies - (26)

Net loss /(gain) from investment accounted for using the equity method 1 146 (521)

CHANGES IN ASSETS AND LIABILITIES

Decrease in financial assets at fair value through profit or loss - net accrued interest 27 247 43 878

Decrease/(increase) in financial assets at fair value through profit or loss - net discount/premium 227 806 (51 160)

(Increase)/decrease in deferred tax asset (1 002) 306

Decrease /(increase) in onlendings - net accrued interest 5 512 (3 317)

Decrease in receivables 1 448 5 661

Decrease/(increase) in prepayments 230 (208)

Increase in interest-bearing liabilities - net accrued interest 64 173 107 526

(Decrease)/increase in interest-bearing liabilities - net discount/premium (51 571) 305 558

Increase in deposits - net accrued interest 236 507

(Decrease)/ increase in payables (39 406) 36 403

Decrease in deferred tax liability - (30)

(Decrease)/increase in income tax payable (168) 7 047

Net cash provided by operating activities 415 893 873 338

(b) Cash flows presented on a net basis Cash flows arising from the following activities are presented on a net basis in the statement of cash flows:

loan advances to and redemptions from clients receipt and withdrawal of client deposits, and money market and other deposits.

(c) Long term assets No external cashflow is generated from the Long Term Assets as deposits and withdrawals from the fixed rate notes result in a corresponding change to the investments held. Interest on the fixed rate notes is capitalised. Earnings, market movement and fees on the investment are recognised in the valuation of the investment (refer notes 2 (f) and 3).

40 QUEENSLAND TREASURY CORPORATION ANNUAL REPORT 2013–14

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014

19 FINANCIAL RISK MANAGEMENT

CAPITAL MARKETS OPERATIONS QTC’s activities expose it to a variety of financial risks including market risk (interest rate, currency and price risks), credit risk and liquidity risk. QTC’s financial risk management focuses on minimising financial risk exposures and managing volatility, and seeks to mitigate potential adverse effects of financial risks on the financial performance of QTC and its clients. To assist in managing financial risk, QTC uses derivative financial instruments such as foreign exchange contracts, interest rate swaps and futures contracts to manage certain risk exposures. QTC ensures that in undertaking its capital markets activities it has adequate capital to manage its risks. While QTC’s capital is not subject to regulatory oversight, QTC operates under self-imposed capital requirements based on prudential statements published by APRA and utilises a capital adequacy approach based on Basel II: International Convergence of Capital Measurements and Capital Standards and applies these principles in its day to day management of capital. Capital requirements are calculated for credit risk, market risk and operational risk with stress testing applied. Capital requirements are then applied against QTC’s Tier 1 and Tier 2 capital held. Capital usage is calculated daily and monitored against approved limits with reports presented monthly to the Board. All financial risk management activities are conducted within Board approved policies, as set out in the Financial Markets Risk Policy. The Board approves policies for overall risk management, as well as specifically for managing market risk, liquidity risk and credit risk. New financial instruments must be approved by the QTC Board. Robust systems are in place for managing financial risk, and compliance with financial risk policies is monitored daily. The financial risk management process, including daily measurement and monitoring of market risk, liquidity risk, credit risk and portfolio performance and limit reviews, are performed by teams separate from the teams transacting and is subject to review by the Risk Management Team (comprising senior management), the Funding and Markets Committee (comprised of Board members) and the Board. All breaches of the Financial Markets Risk Policy together with the corrective action proposed or taken are required to be immediately reported to the Chief Executive and then to the next Funding and Markets Committee meeting and the next Board meeting.

(a) Market risk QTC’s borrowing and investment activities, including borrowing in advance of requirements to ensure Queensland public sector entities have ready access to funding when required and also to reduce the risk associated with refinancing maturing loans, exposes QTC to market risk. As a consequence of market changes, there are residual risk positions which may result in realised and unrealised accounting gains or losses being recorded during the year. Depending on whether these transactions are held to maturity, the unrealised gains or losses may be reversed in subsequent accounting periods. QTC uses a Board approved Value-at-Risk (VaR) framework to manage QTC’s exposure to market risk complemented by other measures such as defined stress tests and PVBP (change in the present value for a one basis point movement). The VaR risk measure estimates the potential mark-to-market loss over a given holding period at a 99 per cent confidence level. QTC uses the historical simulation approach to calculate VaR using 18 months of market data with a holding period of 10 business days. QTC’s investments on behalf of its clients are held in the QTC Cash Fund. Movement in credit spreads will impact on the value of the assets held in the Cash Fund resulting in unrealised mark-to-market accounting gains or losses. QTC generally holds these assets to maturity and therefore QTC does not pass on the mark-to-market impact of credit margin changes, either positive or negative, in the returns to Cash Fund participants.

(i) Foreign exchange risk QTC has funding facilities that allow for borrowing in foreign currencies. At times, QTC’s Cash Fund invests in foreign currency assets. QTC enters into both forward exchange contracts and cross currency swaps to hedge the exposure of foreign currency borrowings and offshore investments from fluctuations in exchange rates. The following table summarises the hedging effect that cross currency swaps and forward exchange contracts have had on face value offshore borrowings and investments stated in Australian dollars:

OFFSHORE BORROWINGS INVESTMENTS DERIVATIVE CONTRACTS NET EXPOSURE

2014 2013 2014 2013 2014 2013 2014 2013 $000 $000 $000 $000 $000 $000 $000 $000

USD (1 639 017) (4 015 203) 104 217 278 899 1 534 800 3 736 304 - -

NZD (737 554) (653 660) - - 737 554 653 660 - -

GBP (253 328) - 27 142 - 226 186 - - -

YEN (157 320) (163 899) - - 157 320 163 899 - -

CHF (131 251) (125 552) - - 131 251 125 552 - -

EUR - - 58 036 108 518 (58 036) (108 518) - -

QUEENSLAND TREASURY CORPORATION ANNUAL REPORT 2013–14 41

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014

19 FINANCIAL RISK MANAGEMENT CONTINUED

(a) Market risk continued

(ii) Interest rate risk In managing interest rate risk on behalf of clients, the onlending portfolios are managed against duration benchmarks. Duration is a direct measure of the interest rate sensitivity of a financial instrument or a portfolio of financial instruments and quantifies the change in value of a financial instrument or portfolio due to interest rate movements. All costs or benefits of managing client debt portfolios are passed on to the client meaning that QTC is effectively immunised from interest rate risk with respect to these portfolios. QTC’s interest rate risk, which results from borrowing in advance and investing surplus funds in high credit quality, highly liquid assets, is managed with consideration given to duration risk, yield curve risk, basis risk and VaR. To manage the risk of non-parallel yield curve movements, QTC manages portfolio cash flows in a series of time periods so that the net interest rate risk in each time period can be measured. QTC enters into interest rate swaps, forward rate agreements and futures contracts to assist in the management of interest rate risk. In QTC’s Funding and Liquidity portfolios, interest rate swaps may be utilised to change the interest rate exposure of medium to long term fixed rate borrowings into that of a floating rate borrowing. Also, at times, floating to fixed swaps may be undertaken to generate a fixed rate term funding profile. QTC is exposed to basis risk when interest rate swaps are used in the Funding and Liquidity portfolios. Basis risk represents a mark-to-market exposure due to movements between the swap curve and QTC’s yield curve.

VaR IMPACT The VaR at 30 June was as follows:

2014 2013

Interest rate risk VaR $6m $22m

The above VaR calculation does not include the potential mark-to-market impact of changes in credit spreads on the value of assets held in the QTC Cash Fund and the Cross Border Lease portfolio. At 30 June 2014, QTC had an exposure of approximately $0.8 million per basis point to changes in credit spreads of assets held in the QTC Cash Fund. (b) Liquidity and financing risks QTC has a robust internal framework whereby extensive liquidity scenario analysis and forecasting is undertaken to understand assumption sensitivities to ensure there is appropriate forward looking visibility of the State’s liquidity position. QTC debt is a Level 1 (prudentially required) asset for Australian banks under Basel III reforms with a 0% capital risk weighting. In normal and difficult market circumstances, QTC debt is likely to be in high demand. The ability to issue debt is considered a potential source of liquidity. QTC holds appropriate liquidity (allowing for suitable haircuts of liquid assets) to meet minimum liquidity requirements as estimated today and as forecast into the future. QTC measures the minimum liquidity requirement to comfortably meet the following four scenarios simultaneously:

Going Concern – progressively pre-fund term maturities 6 months from maturity Market Disruption - 90 days survival horizon (severe market circumstances) Name Crisis – 30 days survival horizon (extreme market circumstances) Standard & Poor’s Liquidity Ratio – maintain a ratio greater than 80% Further to this QTC holds liquid assets to support Queensland Public Sector (QPS) deposits and the State’s Long Term Assets. QTC considers these liquid assets as potential sources of liquidity in a liquidity crisis. To ensure liquidity is accessible as required, QTC holds a minimum of 5 working days’ net cash requirements in 11AM cash to fund the net cash flows from assets and liabilities on QTC’s balance sheet (included in money market deposits as per note 9). QTC maintains its AUD benchmark bond facility as its core medium to long-term funding facility and its domestic treasury note facility, euro-commercial paper facility and US commercial paper facility as its core short-term funding facilities. In addition, QTC has in place Euro and US medium-term note facilities to take advantage of funding opportunities in offshore markets. These facilities ensure that QTC is readily able to access the domestic and international financial markets. QTC’s range of funding facilities is detailed in note 25. The table on the following page sets out the contractual cashflows relating to assets and liabilities held by QTC at balance date. With the exception of deposits and payables, the maturity analysis for liabilities has been calculated based on the contractual cash flows relating to the repayment of the principal (face value) and interest amounts over the contractual terms. Deposits on account of the Cash Fund and Working Capital Facility (11AM Fund) are repayable at call while deposits held as security for stock lending and repurchase agreements are repayable when the security is lodged with QTC. With the exception of cash and receivables, the maturity analysis for assets has been calculated based on the contractual cash flows relating to the repayment of the principal (face value) and interest amounts over the contractual terms. In relation to client onlendings, certain loans are interest only with no fixed repayment date for the principal component (ie. loans are made based on the quality of the client’s business and its financial strength). For the purposes of completing the maturity analysis, the principal component of these loans has been included in the more than five year time band with no interest payment assumed in this time band.

42 QUEENSLAND TREASURY CORPORATION ANNUAL REPORT 2013–14

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014

19 FINANCIAL RISK MANAGEMENT CONTINUED

(b) Liquidity and financing risks continued

3 MONTHS 3 – 6 6 – 12 1 – 5 MORE THAN FAIR CONTRACTUAL MATURITIES OR LESS MONTHS MONTHS YEARS 5 YEARS TOTAL VALUE AS AT 30 JUNE 2014 $000 $000 $000 $000 $000 $000 $000

FINANCIAL ASSETS

Cash 546 - - - - 546 546

Receivables 4 384 - - - - 4 384 4 384

Onlendings # 1 360 947 1 338 062 2 692 737 19 566 983 78 295 529 103 254 258 85 609 405

Money market deposits 2 674 416 - - - - 2 674 416 2 674 416

Discount securities 4 261 500 500 000 - - - 4 761 500 4 738 190

Commonwealth and semi-government securities (42 234) 19 359 58 334 617 213 724 015 1 376 687 1 151 874

Floating rate notes 158 876 192 194 470 053 3 575 871 - 4 396 994 4 105 618

Term deposits 733 066 - - - - 733 066 729 476

Other investments 410 078 133 267 211 841 530 638 74 588 1 360 412 1 299 327

Total monetary assets 9 561 579 2 182 882 3 432 965 24 290 705 79 094 132 118 562 263 100 313 236

FINANCIAL LIABILITIES

Payables (132 700) (15 467) - - - (148 167) (148 167)

Deposits (5 461 658) (20 273) - - - (5 481 931) (5 477 942)

Treasury notes (1 314 000) (850 000) - - - (2 164 000) (2 152 166)

Commercial paper (2 125 640) (100 001) - - - (2 225 641) (2 223 522)

AUD Bonds (1 112 388) (3 604 705) (1 980 643) (46 776 900) (45 408 695) (98 883 331) (83 123 358)

Floating rate notes (178 244) (533) (1 068) (4 278 121) - (4 457 966) (4 433 159)

Global AUD Bonds (12 377) (8 712) (21 089) (773 569) - (815 747) (766 982)

Medium-term notes (27 917) (2 084) (27 731) (873 896) (419 635) (1 351 263) (1 104 502)

Other interest bearing liabilities (12 331) (11 779) (28 001) (185 151) - (237 262) (223 191)

Total monetary liabilities (10 377 255) (4 613 554) (2 058 532) (52 887 637) (45 828 330) (115 765 308) (99 652 989)

DERIVATIVES

Interest rate swaps (9 735) 489 (19 570) (91 777) (19 966) (140 559) (135 154)

Cross currency swaps (473 915) (4 268) (45 713) 693 579 (329 898) (160 215) 68 817

Forward rate agreements (280 000) (314 276) (72 365) 747 750 - 81 109 38 704

Foreign exchange contracts (69 139) - - - - (69 139) (64 651)

Net derivatives (832 789) (318 055) (137 648) 1 349 552 (349 864) (288 804) (92 484)

Net monetary assets/(liabilities) (1 648 465) (2 748 727) 1 236 785 (27 247 380) 32 915 938 2 508 151 567 963

Cumulative (1 648 465) (4 397 192) (3 160 407) (30 407 787) 2 508 151

QUEENSLAND TREASURY CORPORATION ANNUAL REPORT 2013–14 43

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014

19 FINANCIAL RISK MANAGEMENT CONTINUED

3 MONTHS 3 – 6 6 – 12 1 – 5 MORE THAN FAIR CONTRACTUAL MATURITIES OR LESS MONTHS MONTHS YEARS 5 YEARS TOTAL VALUE AS AT 30 JUNE 2013 $000 $000 $000 $000 $000 $000 $000

FINANCIAL ASSETS

Cash 197 - - - - 197 197

Receivables 3 568 - - - - 3 568 3 568

Onlendings # 1 602 981 1 405 425 2 810 851 19 574 610 74 318 643 99 712 510 79 118 832

Money market deposits 1 717 479 - - - - 1 717 479 1 717 477

Discount securities 6 560 300 1 225 000 - - - 7 785 300 7 743 703

Commonwealth and semi-government securities 84 953 63 326 118 814 1 937 821 2 155 984 4 360 898 3 642 350

Floating rate notes 460 780 319 505 234 992 3 661 988 - 4 677 265 4 314 169

Term deposits 253 816 304 941 - - - 558 757 552 625

Other investments 302 670 150 129 226 646 1 693 286 - 2 372 731 2 223 721

Total monetary assets 10 986 744 3 468 326 3 391 303 26 867 705 76 474 627 121 188 705 99 316 642

FINANCIAL LIABILITIES

Payables (11 583) (15 635) - - - (27 218) (27 218)

Deposits (6 109 685) (20 305) - - - (6 129 990) (6 127 695)

Treasury notes (1 006 000) (237 000) - - - (1 243 000) (1 237 105)

Commercial paper (2 808 138) (1 207 065) - - - (4 015 203) (4 013 185)

AUD Bonds (5 528 519) (943 810) (2 102 146) (45 921 806) (50 548 588) (105 044 869) (85 167 737)

Floating rate notes (352 425) 9 17 9 - (352 390) (350 884)

Global AUD Bonds (374 694) (11 401) (24 539) (944 151) - (1 354 785) (1 263 077)

Medium-term notes (25 459) (2 172) (25 458) (842 728) (428 445) (1 324 262) (1 056 418)

Other interest bearing liabilities (18 071) (12 802) (21 036) (146 315) - (198 224) (186 182)

Total monetary liabilities (16 234 574) (2 450 181) (2 173 162) (47 854 991) (50 977 033) (119 689 941) (99 429 501)

DERIVATIVES

Interest rate swaps 32 505 (890) (16 463) (49 128) 210 392 176 416 97 963

Cross currency swaps (455 774) (4 395) (58 733) 625 695 (340 831) (234 038) 19 815

Forward rate agreements (282 378) (684 081) (142 928) 1 282 477 65 090 238 180 86 378

Foreign exchange contracts 276 463 123 591 - - - 400 054 416 579

Net derivatives (429 184) (565 775) (218 124) 1 859 044 (65 349) 580 612 620 735

Net monetary assets/(liabilities) (5 677 014) 452 370 1 000 017 (19 128 242) 25 432 245 2 079 376 507 876

Cumulative (5 677 014) (5 224 644) (4 224 627) (23 352 869) 2 079 376

# QTC’s onlendings to Government owned corporation clients are based on the quality of the business and financial strength of the client. Funds are therefore onlent on the basis of these businesses being going concerns and continuing to meet key credit metrics criteria such as debt to capital and interest coverage ratios. Accordingly, a significant portion of the onlendings portfolio has a loan maturity profile which is greater than five years with the interest rate risk of these loans being managed based on the client’s business risk such that the funding is structured on the underlying business profile. This results in QTC’s liability maturity profile being shorter than the asset maturity profile. Though not exposing QTC to interest rate risk, this approach does require QTC to undertake periodic refinancing of its liabilities.

44 QUEENSLAND TREASURY CORPORATION ANNUAL REPORT 2013–14

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014

19 FINANCIAL RISK MANAGEMENT CONTINUED

(c) Credit risk (i) Financial markets counterparties Credit risk is regularly assessed, measured and managed in strict accordance with QTC’s credit policy. Exposure to credit risk is managed through regular analysis of the ability of credit counterparties to meet payment obligations. Counterparty credit limits are changed based on QTC’s view of the capacity of the counterparty to meet its obligation.

Credit exposure is QTC’s estimate of the potential loss at balance date in relation to investments and derivative contracts in the event of non- performance by all counterparties. The credit exposure for non-derivative investments is calculated based on the market value of the exposure together with the VaR while exposure to derivative contracts is based only on VaR.

The following table represents QTC’s exposure to credit risk at 30 June:

CREDIT EXPOSURE

2014 2013 $000 $000

Investments 14 789 899 20 858 701

Derivatives

Interest rate swaps 480 003 1 025 761

Cross currency swaps 212 300 157 086

Foreign exchange contracts 36 294 600 218

QTC adopts a conservative approach to the management of credit risk with a strong bias to high credit quality counterparties. QTC maintains a ratings based approach in determining maximum credit exposures to counterparties which is supplemented by QTC’s credit risk team performing its own credit assessment of QTC’s capital markets counterparties. The country of domicile, the counterparty’s credit metrics, size of its funding programs, asset composition and quality of the underlying security are also significant considerations when determining limits. QTC has a significant concentration of credit risk to the banking sector and in particular, the domestic banking sector. This is difficult to avoid given the size of QTC’s investment portfolio and the requirement to invest with counterparties rated A- or better (88 per cent of exposures are AA- or better) and to invest in highly liquid securities. QTC also utilises collateral arrangements to limit its derivatives’ credit exposure (refer (iii) master netting arrangements). Counterparty exposure by rating for all investments and derivative contracts is listed below:

CREDIT EXPOSURE

2014 2013 2014 2013 RATING % % $000 $000

Long-term rating AAA 17 22 2 680 978 5 036 145

AA+ 4 3 593 640 607 315

AA - 3 23 547 670 257

AA- 67 64 10 421 762 14 503 213

A+ 8 4 1 192 850 1 014 792

A 2 1 282 754 292 571

A- 2 1 296 581 292 829

Short-term rating A-1+ - 1 26 384 127 008

A-2 - 1 - 97 636

(ii) Onlending counterparties Counterparties for onlendings, with the exception of some small exposures to private companies, cooperative housing societies and primary producer cooperatives, are Queensland Government sector entities and in some cases an explicit State Government guarantee exists. As a consequence, these exposures are not included in QTC’s total credit exposure.

QUEENSLAND TREASURY CORPORATION ANNUAL REPORT 2013–14 45

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014

19 FINANCIAL RISK MANAGEMENT CONTINUED

(c) Credit risk continued

(iii) Master netting arrangements QTC enters into all derivative transactions under International Swaps and Derivatives Association (ISDA) Master Agreements. QTC does not currently have any master netting arrangements where a default event has occurred, and has therefore presented all derivative financial instruments on a gross basis in the statement of financial position. QTC also has Credit Support Annexes (CSAs) in place with each ISDA, under which collateral is transferred every business day. This further reduces QTC’s credit exposure. The following table presents the financial instruments that are offset, or subject to enforceable master netting arrangements and other similar agreements but not offset. The column ‘net amount’ shows the impact on QTC’s balance sheet if all set-off rights were exercised.

GROSS AND NET AMOUNTS EFFECT OF COLLATERAL NET AMOUNT ON THE BALANCE SHEET AND NETTING $000 $000 $000

2014

Derivative assets

subject to master netting arrangements 213 838 (213 838) -

not subject to master netting arrangements 38 704 - 38 704

Derivative assets 252 543 (213 838) 38 704

Derivative liabilities

subject to master netting arrangements (344 827) 311 738 (33 089)

Derivative liabilities (344 827) 311 738 (33 089)

Net exposure (92 285) 97 900 5 615

2013 (1)

Derivative assets

subject to master netting arrangements 702 083 (696 275) 5 808

not subject to master netting arrangements 86 378 - 86 378

Derivative assets 788 461 (696 275) 92 186

Derivative liabilities

subject to master netting arrangements (167 726) 166 024 (1 702)

Derivative liabilities (167 726) 166 024 (1 702)

Net exposure 620 735 (530 251) 90 484

(1) QTC transitioned from credit-based to zero-threshold CSAs during the 2013 calendar year, further reducing credit exposure.

LONG TERM ASSETS The Long Term Assets are invested in unlisted unit trusts held with QIC. The trusts hold investments in a variety of financial instruments including derivatives, which expose these assets to credit risk, liquidity risk and market risk due to changes in interest rates, foreign exchange rates, property and equity prices. However, as these investments are long term in nature, market fluctuations are expected to even out over the term of the investment. The Long Term Asset Advisory Board (LTAAB) determines the investment objectives, risk profiles and strategy for the Long Term Assets within the framework provided by the Government. It is responsible for formulating a strategic asset allocation to achieve the objectives of the investments in line with the required risk profile. Risk management policies are established to identify and analyse the risks and to set appropriate risk limits and controls, as well as to monitor risks and adherence against these limits. QIC provides assistance to the LTAAB in discharging its responsibilities. QIC’s role includes recommending to the LTAAB, investment product objectives, risk profiles and strategic asset allocations to achieve objectives within the targets and risk controls set. As the lead investment manager, QIC is responsible for implementing the investment strategy. In addition, independent oversight of the investment advice and services provided by QIC, including periodic strategic reviews of QIC’s activities and performance, is provided by an external consultant. The LTAAB is responsible for setting the interest rate applicable on the fixed rate note liability of QTC. Since July 2012, LTAAB has been reducing risk in the Asset Portfolio. The revised asset classes feature reduced weights to listed equities, offset by increased weights to alternatives, global fixed interest and cash. The result was a reduction in expected return and volatility. In light of this strategy, the expected rate of return on the portfolio on which the interest rate on the fixed rate notes is set was revised from 7.5 per cent to 7.1 per cent, effective 1 July 2013. (a) Market risk The Long Term Assets expose QTC to market risk, including interest rate risk, foreign currency risk, property and equity price risk, resulting from its investments in unit trusts. Market risk is mitigated through a diversified portfolio of investments in unit trusts held with QIC in accordance with the investment strategy approved by the LTAAB (refer note 9). The investment strategy targets a widely diversified portfolio across a broad range of asset classes. QIC adheres to prudential controls contained in the Investment Management Agreement. Under this agreement, derivative products are not permitted to be used for speculative purposes but are used as hedging instruments against existing positions or for efficient trading and asset allocation purposes to assist in achieving the overall investment returns and volatility objectives of the portfolio.

46 QUEENSLAND TREASURY CORPORATION ANNUAL REPORT 2013–14

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014

19 FINANCIAL RISK MANAGEMENT CONTINUED

(a) Market risk continued

(i) Sensitivity analysis The market risk of the Long Term Assets comprises the risk that the unit price of the funds in which the assets are invested will change during the next reporting period (effectively price risk). A sensitivity analysis for the key types of market risk that apply to the investments of the funds has been undertaken by QIC. QIC has provided a range of reasonably possible changes in key risk variables including the ASX 200, the MSCI World ex Australia Equities Index, the RBA official cash rate and a large number of currencies. Based on these changes to key risk variables, and applying a range of valuation methodologies, a reasonably possible change in profit and equity on applicable investments held at 30 June is as follows:

2014 2014 2013 2013 CHANGE PROFIT/EQUITY CHANGE PROFIT/EQUITY

LOW HIGH DECREASE INCREASE LOW HIGH DECREASE INCREASE $000 $000 $000 $000

Equities -19% 21% (956 965) 1 042 900 -18% 20% (991 019) 1 058 644

Diversified alternatives -19% 20% (1 148 342) 1 214 763 -20% 21% (949 279) 999 907

Infrastructure -11% 11% (868 197) 877 636 -11% 11% (701 638) 714 615

Private equities -16% 17% (296 750) 325 170 -16% 16% (231 117) 239 624

Real estate -9% 9% (173 010) 183 288 -5% 6% (77 462) 95 851

Cash and fixed interest (1) -13% 12% (1 343 540) 1 227 686 -13% 12% (1 338 766) 1 250 336

(4 786 804) 4 871 443 (4 289 281) 4 358 977

(1) Cash and fixed interest includes exposure to interest rate and foreign currency sensitivity, including interest rate and inflation overlays on hedging instruments.

(b) Liquidity risk No external cashflows are generated from the Long Term Assets as deposits and withdrawals from the fixed rate notes result in a corresponding change in the investment held and do not expose QTC to liquidity risk arising from these daily movements. Interest on the fixed rate notes and distributions and fees on the Long Term Assets are capitalised. The fixed rate notes provided to the State Government in exchange for the Long Term Assets have a term of 50 years. Due to the long term nature of this arrangement, no liquidity risk has been identified.

QUEENSLAND TREASURY CORPORATION ANNUAL REPORT 2013–14 47

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014

20 FAIR VALUE HIERARCHY

Financial instruments measured at fair value have been classified in Classification of instruments into fair value hierarchy levels is accordance with the hierarchy described in AASB 13 Fair Value reviewed semi-annually and where there has been a significant Measurement. The fair value hierarchy is categorised into three levels change to the valuation inputs and a transfer is deemed to occur, this based on the observability of the inputs used. is effected at the end of the relevant reporting period. There were no Level 1 – quoted prices (unadjusted) in active markets that QTC can transfers between Level 1 and Level 2 during the year ended 30 June 2014. access at measurement date for identical assets and liabilities. The principal inputs to determine the valuation of financial instruments Level 2 – inputs other than quoted prices included within Level 1 that are discussed below: are observable for the asset or liability, either directly or indirectly. Interest rates – these are principally benchmark interest rates such Level 3 – inputs for the asset or liability that are not based on as interbank rates and quoted interest rates in the swap, bond and observable market data (unobservable inputs). futures markets. QTC applies mid-market pricing as a practical and All financial instruments at fair value through profit or loss are valued consistent expedient for fair value measurements within the bid-ask spread. by reference to either quoted market prices or observable inputs with no significant adjustments applied to instruments held and therefore Counterparty credit spreads – adjustments are made to market no financial instruments at fair value through profit or loss are prices for changes in the credit worthiness of the counterparty. classified under Level 3. Interest rate and foreign currency swaps – there are observable Financial instruments classified as Level 1 consist primarily of short- markets for both spot and forward contracts. term and tradable bank deposits and Commonwealth and semi- government bonds where an active market has been established. Cross currency swaps – these instruments are typically held to Financial instruments classified as Level 2 include non-actively traded maturity and valued using the original trading margin to the swap curve. corporate and semi-government bonds (including the QTC 2033 bond and the Capital Indexed bond), certain money market securities Investments in unit trusts (Long Term Assets) – Units in trust funds (commercial paper and promissory notes) and all derivatives. QTC’s are valued by QIC using fair value methodologies and adjusted for onlendings and client deposits are included under Level 2. fees outstanding. QIC reports the net asset value based on the hard close unit price at measurement date.

QUOTED PRICES OBSERVABLE INPUTS LEVEL 1 LEVEL 2 TOTAL AS AT 30 JUNE 2014 $000 $000 $000

CAPITAL MARKETS OPERATIONS

Financial assets

Onlendings - 85 609 405 85 609 405

Money market deposits 2 674 416 - 2 674 416

Discount securities 4 711 814 26 376 4 738 190

Commonwealth and state securities 1 151 874 - 1 151 874

Floating rate notes 4 103 789 1 829 4 105 618

Term deposits - 729 476 729 476

Other investments 327 315 972 012 1 299 327

Total financial assets 12 969 208 87 339 098 100 308 306

Financial liabilities

Treasury notes - 2 152 166 2 152 166

Commercial paper - 2 223 522 2 223 522

AUD Bonds 81 219 568 1 903 790 83 123 358

Floating rate notes - 4 433 159 4 433 159

Global AUD Bonds 766 982 - 766 982

Medium-term notes - 1 104 502 1 104 502

Client deposits - 4 456 718 4 456 718

Collateral held - 73 196 73 196

Repurchase agreements - 948 028 948 028

Other interest bearing liabilities - 223 191 223 191

Total financial liabilities 81 986 550 17 518 272 99 504 822

Derivative financial assets and liabilities

Interest rate swaps - (135 154) (135 154)

Cross currency swaps - 68 817 68 817

Forward rate agreements - 38 704 38 704

Foreign exchange contracts - (64 651) (64 651)

Total derivatives (net) - (92 284) (92 284)

LONG TERM ASSETS

Financial assets

Investments in unit trusts – QIC - 33 431 249 33 431 249

48 QUEENSLAND TREASURY CORPORATION ANNUAL REPORT 2013–14

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014

20 FAIR VALUE HIERARCHY CONTINUED

QUOTED PRICES OBSERVABLE INPUTS LEVEL 1 LEVEL 2 TOTAL AS AT 30 JUNE 2013 $000 $000 $000

CAPITAL MARKETS OPERATIONS

Financial assets

Onlendings - 79 118 832 79 118 832

Money market deposits 1 717 477 - 1 717 477

Discount securities 7 616 756 126 947 7 743 703

Commonwealth and state securities 3 642 350 - 3 642 350

Floating rate notes 4 312 641 1 528 4 314 169

Term deposits - 552 626 552 626

Other investments 125 102 2 098 619 2 223 721

Total financial assets 17 414 326 81 898 552 99 312 878

Financial liabilities

Treasury notes - 1 237 105 1 237 105

Commercial paper - 4 013 185 4 013 185

AUD Bonds 83 529 812 1 637 925 85 167 737

Global AUD Bonds 1 263 077 - 1 263 077

Medium-term notes - 1 056 418 1 056 418

Floating rate notes - 350 884 350 884

Client deposits - 4 501 397 4 501 397

Collateral held - 552 721 552 721

Repurchase agreements - 1 073 577 1 073 577

Other interest bearing liabilities - 186 182 186 182

Total financial liabilities 84 792 889 14 609 394 99 402 283

Derivative assets and derivative liabilities

Interest rate swaps - 97 963 97 963

Cross currency swaps - 19 815 19 815

Forward rate agreements - 86 378 86 378

Foreign exchange contracts - 416 579 416 579

Total derivatives (net) - 620 735 620 735

LONG TERM ASSETS

Financial assets

Investments in unit trusts - QIC - 29 767 721 29 767 721

21 CONCENTRATIONS OF BORROWINGS AND DEPOSITS

There are no material concentrations of borrowings as these funds are regular contact with these depositors and therefore has a good raised from diversified sources through various facilities disclosed knowledge of their forecast liquidity requirements. under funding facilities in note 25. Managed fund depositors are Deposits for stock lending and repurchase agreements are invested in principally Queensland Government sector entities. These deposits the Working Capital Facility (11AM Fund) which can be liquidated are invested in either QTC’s Cash Fund or Working Capital Facility daily at no cost. (11AM Fund) which have a large core of liquid investments. QTC maintains

QUEENSLAND TREASURY CORPORATION ANNUAL REPORT 2013–14 49

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014

22 CONTINGENT LIABILITIES The following contingent liabilities existed at balance date:

With regard to certain cross border lease transactions, QTC has assumed responsibility for a significant portion of the transaction risk. If certain events occur, QTC could be liable to make additional payments under the transactions. However external advice and history to date indicate the likelihood of these events occurring is remote. In addition, QTC has provided certain guarantees and indemnities to various participants in the cross border lease transactions. Expert external advisors consider, that unless exceptional and extreme circumstances arise, QTC will not be required to make a significant payment under these guarantees and indemnities.

QTC has provided guarantees relating to the trading activities of Ergon Energy, a Queensland Government owned corporation, to the value of $102 million (2013 $149 million) which are supported by a counter indemnity.

QTC has provided guarantees to the value of $345 million (2013 $192 million) to support the commercial activities of various Queensland public sector entities. In each case, a counter indemnity has been obtained by QTC from the appropriate public sector entity.

QTC can lend stock to support the liquidity of QTC bonds in the financial markets. At 30 June 2014 and 30 June 2013, no QTC inscribed stock was lent to other financial institutions.

23 LEASES

LEASE COMMITMENTS - QTC AS LESSEE Finance lease QTC has entered into the following commercial leases: QTC has entered into two leasing arrangements to lease bus depots to a public sector entity. The minimum lease term under both arrangements is 25 123 Albert Street, Brisbane, for a period of seven years, with an option to years with the second including an option to extend. surrender the lease on 1 April 2016 or 1 April 2018. Lease payments include a 4 per cent per annum escalation factor, and Finance charges include interest and fees associated with the leases. The leases are non-cancellable. 2 Cycas Lane, Eagle Farm, for a period of four years with an option to extend for an additional year. The initial four year term included a six Details of the minimum rental receivable under the finance leases are as month rent free period to be taken at the start of the lease. follows:

The future minimum rentals payable under non-cancellable operating leases 2014 2013 as at 30 June are as follows: $000 $000 Lease receivable 2014 2013 Not longer than 1 year 6 816 3 242 $000 $000

Leases payable Longer than 1 year but not longer than 5 years 34 158 14 141

Not longer than 1 year 3 430 3 314 Longer than 5 years 203 183 80 737

244 157 98 120 Longer than 1 year but not longer than 5 years * 2 855 6 285

6 285 9 599 Less amounts representing finance charges (126 591) (52 405) 117 566 45 715 * Excludes any payments due on early surrender of the lease.

The present values of finance lease receivables are as follows: LEASING ARRANGEMENTS – QTC AS LESSOR

Operating leases 2014 2013 $000 $000 QTC has entered into operating leases as lessor under the whole of Lease receivable government lease facility which consists mainly of buses and ferries. These Not longer than 1 year (1) 6 515 3 099 non-cancellable leases have remaining terms of between 1 and 10 years. Longer than 1 year but not longer than 5 years 27 845 11 284 Future minimum rentals receivable under non-cancellable operating leases Longer than 5 years 83 206 31 332 as at 30 June are as follows: 117 566 45 715

2014 2013 (1) A component of lease receivables is capitalised until 11 September 2014. $000 $000

Leases receivable

Not longer than 1 year 50 679 51 923

Longer than 1 year but not longer than 5 years 135 855 166 340

Longer than 5 years 14 802 34 829

201 336 253 092

50 QUEENSLAND TREASURY CORPORATION ANNUAL REPORT 2013–14

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014

24 COMMITMENTS

FORWARD STARTING FIXED RATE LOAN COMMITMENTS QTC has entered into fixed rate loan agreements with certain clients to lock in interest rates on all or part of future borrowing requirements.

QTC’s future borrowing commitments and the period in which funds are to be onlent are as follows:

2014 2013 $000 $000

Not longer than 1 year 690 000 1 143 782

Longer than 1 year but not longer than 5 years - 690 000

690 000 1 833 782

OTHER COMMITMENTS QTC entered into an arrangement to purchase and construct a bus depot that is leased to a public sector entity over a 25 year term. The lease commenced in 2013-14 and is for a 25 year term (refer note 23).

In the prior financial year, QTC’s commitments under this construction arrangement were as follows:

2014 2013 $000 $000

Not longer than 1 year - 9 289

- 9 289

25 FUNDING FACILITIES

FACE VALUE FACE VALUE ON ISSUE ON ISSUE SIZE AUD M AUD M FACILITY $M MATURITIES# CURRENCY 2014 2013

Short term

Domestic T-Notes Unlimited 7-365 days AUD 2 164 1 243

Euro CP USD10 000 1-364 days Multicurrency 1 573 2 004

US CP USD10 000 1-270 days USD 752 2 011

Long term

AUD Bond Unlimited 12 benchmark lines 2014-2025 AUD 64 928 60 999

4 AGG* lines 2015-2021 AUD 8 916 15 972

1 non-benchmark line 2033 AUD 800 725

Capital indexed bond 2030 AUD 834 811

Floating rate notes 2014-2017 AUD 4 422 350

Global AUD Bond AUD20 000 2 AGG* lines 2015-2017 AUD 703 1 169

Euro MTN USD10 000 Various Multicurrency 1 101 1 027

US MTN USD10 000 Various Multicurrency - -

*AGG – Australian Government Guarantee # maturities relate to current lines at 30 June 2014

QUEENSLAND TREASURY CORPORATION ANNUAL REPORT 2013–14 51

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014

26 RELATED PARTY TRANSACTIONS

A related party is one that controls, or is controlled by, or under common companies and other related parties at no charge. control with the entity. QTC may from time to time indirectly hold a small amount of investments in QTC Bonds via its investments in unit trusts managed by QIC. QTC does (a) Ultimate controlling entity not have direct legal ownership of these assets and therefore no adjustment The immediate controlling entity and ultimate controlling entity is the has been made in the financial statements. Under Treasurer of Queensland as the Corporation Sole of QTC. The nature and amount of any individually significant transactions with (b) Key management personnel principal related parties are disclosed below. Disclosures relating to key management personnel are set out in note 27. All loans to Queensland Treasury Holdings Pty Ltd (QTH) have been fully repaid at balance date. Details of loans held during the financial year are as (c) Investments in associates and other companies follows:

Details of investments in associates and other companies are set out in a loan to purchase the rights to licence fees receivable. The loan was fully notes 29 and 30. repaid during the year (2013 market value $153.705 million). Repayments (d) Transactions with related parties of $167.353 million (2013 $0.011 million) were made during the year. Interest and fees charged totalled $13.648 million (2013 $5.660 million). Transactions undertaken with related parties during the year include loans issued to public sector entities (refer note 11), the investment of cash QTC has interests in other government related entities through various surpluses (refer note 15), advisory, banking and company secretarial shareholdings. These entities hold deposits (refer note 15) and loans (refer services. These transactions were in the normal course of business and on note 11) with QTC that are provided on an arm’s length basis and are commercial terms and conditions. They exclude certain advisory and other subject to QTC’s normal terms and conditions. services provided to Queensland Treasury and Trade, its associated

27 KEY MANAGEMENT PERSONNEL

Key management personnel are defined as those persons having authority QTC seeks to attract and retain quality employees with a range of skills and and responsibility for planning, directing and controlling the activities of QTC, competencies critical to the ongoing success of QTC and the achievement being members of the Board and the Executive Management Team. of business strategy and objectives. QTC’s remuneration framework has been developed as part of an attraction and retention strategy and a (a) QTC’s Boards mechanism to drive superior organisational performance. Further, the QTC has designated its powers to its two boards, the Capital Markets Board framework ensures rigor in pay outcomes appropriate to the (financial and the Long Term Asset Advisory Board. Both boards are appointed by the institutions) market and environment in which QTC operates and contributes Governor-in-Council, pursuant to section 10(2) of the Queensland Treasury to employee engagement. Corporation Act 1988. The remuneration framework comprises both fixed and variable (b) Executive management remuneration (in the form of an annual short-term incentive (STI) opportunity) which are approved by the QTC Board annually. Executive management are those officers who are members of the Executive Management Team involved in the strategic direction, general Fixed remuneration management and control of the major activities of the business at an The fixed remuneration of each QTC employee is reviewed in July each year organisational level. and is benchmarked against remuneration data from the Financial (c) Remuneration principles Institutions Remuneration Group (FIRG). Fixed remuneration levels are set around the FIRG market median position, and experience, skills and Directors – Capital Markets Board performance are considered when determining the remuneration level of The process for reviewing Board remuneration requires any increase in the each employee. Board’s remuneration to be approved by the Treasurer and endorsed by Variable remuneration - short-term incentives Cabinet. Remuneration was last increased effective 1 July 2012. QTC’s variable remuneration framework provides an annual short-term Directors – Long Term Asset Advisory Board incentive opportunity for eligible employees, aligned to financial year No remuneration is payable to the directors of the Long Term Asset Advisory performance. Board. This opportunity is designed to differentiate and reward outstanding organisational, group and individual performance, and to align performance Executives and employees at these levels with incentive outcomes. It also aims to ensure market QTC employees (including executive management) are employed on competitiveness, with ‘target’ STI outcomes aligned to the conservative individual contracts and are appointed pursuant to the Queensland Treasury market position and approved at Board level each year. For the 2013-14 Corporation Act 1988. year, STI payments will be made to eligible staff in September.

52 QUEENSLAND TREASURY CORPORATION ANNUAL REPORT 2013–14

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014

27 KEY MANAGEMENT PERSONNEL CONTINUED

(d) Remuneration by category

2014 2013 $ $

CAPITAL MARKETS OPERATIONS

Directors

Short-term employment benefits (1) 373 543 364 395

Post-employment benefits (4) 17 690 19 095

Total 391 233 383 490

Executive management

Short-term employment benefits (2) 2 707 336 2 642 901

Long-term employment benefits (3) 54 777 -

Post-employment benefits (4) 99 355 90 900

Total 2 861 468 2 733 801

(1) Directors’ short-term benefits include board members’ fees, and in relation to the Chairman, also includes the provision of a car park.

(2) Executive management personnel’s short-term benefits include wages, annual leave taken, short-term incentives and non-monetary benefits such as car parks and motor vehicle benefits and for the prior financial year, long-service leave.

(3) Long-term employment benefits relates to long-service leave from 1 July 2013.

(4) Post-employment benefits include superannuation contributions made by the Corporation.

(i) Directors Details of the nature and amount of each major element of the remuneration are as follows:

SHORT-TERM POST-EMPLOYMENT EMPLOYMENT BENEFITS BENEFITS TOTAL

2014 2013 2014 2013 2014 2013 $ $ $ $ $ $

Gerard Bradley - Chairman 117 985 117 670 10 303 10 110 128 288 127 780

Alex Beavers - Deputy Chairman 41 425 41 431 - - 41 425 41 431

Stephen Bizzell (1) 44 273 15 480 - - 44 273 15 480

Gillian Brown 40 209 40 209 3 719 3 619 43 928 43 828

Tonianne Dwyer (1) 39 657 14 460 3 668 1 302 43 325 15 762

Neville Ide (2) 46 950 46 947 - - 46 950 46 947

Marian Micalizzi (3) - 22 577 - 2 032 - 24 609

Bill Shields 43 044 43 044 - - 43 044 43 044

Shauna Tomkins (3) - 22 577 - 2 032 - 24 609

Total 373 543 364 395 17 690 19 095 391 233 383 490

(1) Appointed 14 February 2013

(2) Resigned 30 June 2014

(3) Resigned 31 January 2013

QUEENSLAND TREASURY CORPORATION ANNUAL REPORT 2013–14 53

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014

27 KEY MANAGEMENT PERSONNEL CONTINUED

(ii) Executive management Details of the nature and amount of each major element of the remuneration of the executive management personnel are as follows:

POST- SHORT-TERM EMPLOYMENT LONG-TERM EMPLOYMENT BENEFITS (1) BENEFITS BENEFITS TOTAL

NON- BASE MONETARY $ $ $ $ $

30 JUNE 2014

Chief Executive 594 041 18 581 17 714 15 562 645 898

Chief Operating Officer 294 918 8 519 26 131 8 346 337 914

Executive General Manager, Funding & Markets 427 537 8 519 17 714 11 294 465 064

Executive General Manager, Client Services 285 879 8 519 17 714 7 826 319 938

Executive General Manager, Business Services (2) 119 219 7 370 7 619 7 826 142 034

Acting Executive General Manager, Business Services (3) 134 487 4 992 12 463 3 923 155 865

(1) Exclude at-risk performance payments

(2) To 4 December 2013

(3) Appointed on 4 December 2013

POST- SHORT-TERM EMPLOYMENT LONG-TERM EMPLOYMENT BENEFITS (1) BENEFITS BENEFITS TOTAL

30 JUNE 2013

Chief Executive 575 939 22 744 16 360 - 615 043

Chief Operating Officer 279 291 8 305 24 133 - 311 729

Executive General Manager, Funding & Markets 414 174 8 305 17 793 - 440 272

Executive General Manager, Client Services 265 713 8 305 16 227 - 290 245

Executive General Manager, Business Services 266 054 13 901 16 387 - 296 342

(1) Exclude at-risk performance payments

(iii) At-risk performance payments The aggregate at-risk performance payments to all key executive management personnel are as follows:

YEAR OF ASSESSMENT

2014 2013 $ $

Executive management 794 755 780 170

(e) Other transactions There were no loans to/from key management personnel during the financial year.

28 AUDITOR’S REMUNERATION

The external auditor (Auditor-General of Queensland) does not provide any consulting services to QTC. Details of amounts paid or payable to the auditor of QTC (GST exclusive) are shown below:

2014 2013 $ $

AUDIT SERVICES

Audit of QTC 375 000 375 000

54 QUEENSLAND TREASURY CORPORATION ANNUAL REPORT 2013–14

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014

29 INVESTMENT IN JOINT VENTURE ENTITY

ORDINARY SHARE INVESTMENT ENTITY PRINCIPAL ACTIVITIES OWNERSHIP INTEREST CARRYING AMOUNT

2014 2013 2014 2013

Local Government Infrastructure Provides assistance to Queensland 50%* 50% - 50% Services Pty Ltd local governments in relation to infrastructure procurement

*shares sold 1 July 2014

RESULTS OF JOINT VENTURE ENTITY

Summarised financial information of jointly controlled entity:

2014 2013 $000 $000

STATEMENT OF COMPREHENSIVE INCOME

Revenues 5 314 9 743

Expenses (5 594) (8 701)

(Loss)/profit for the year (280) 1 042

BALANCE SHEET

Current assets 2 680 13 253

Non-current assets 128 -

Total assets 2 808 13 253

Current liabilities 796 10 961

Total liabilities 796 10 961

Net assets 2 012 2 292

QTC’s share of the joint venture entity’s results and retained profits, including movements in the carrying amount of the investment consists of:

2014 2013 $000 $000

SHARE OF POST-ACQUISITION RETAINED PROFITS

Share of retained profits at 1 July 1 307 1 277

Share of net (loss)/profit (140) 521

Dividend received (261) (491)

Share of retained profits at 30 June 906 1 307

Write-down of carrying value of investment (1) (1 006) -

(Loss)/profit on investment (100) 1 307

MOVEMENTS IN CARRYING AMOUNT OF INVESTMENT

Carrying amount at 1 July 1 407 1 377

Share of net (loss)/profit (140) 521

Dividends received (261) (491)

Writedown of carrying value of investment (1) (1 006) -

Carrying amount at 30 June - 1 407

(1) QTC’s 50% equity holdings in LGIS was transferred to LGAQ on 1 July 2014 at nominal consideration. The investment value has been written down to its recoverable value at 30 June 2014.

QUEENSLAND TREASURY CORPORATION ANNUAL REPORT 2013–14 55

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014

30 INVESTMENTS IN COMPANIES

Investments in the following companies are held at cost:

BENEFICIAL VOTING BENEFICIAL VOTING INTEREST RIGHTS INTEREST RIGHTS NAME PRINCIPAL ACTIVITIES 2014 2014 2013 2013 % % % %

Queensland Treasury Holdings Holding company for a number of Pty Ltd (QTH) subsidiaries and strategic investments on 40 24 40 24 behalf of the State of Queensland

Queensland Lottery Corporation Holds the lottery licence and trade marks on 40 24 40 24 Pty Ltd (1) behalf of the State of Queensland

DBCT Holdings Pty Ltd (1) Owns & leases bulk coal port facilities in 40 24 40 24 North Queensland

Queensland Airport Holdings Owns the land for Mackay airport which it has 40 24 40 24 (Mackay) Pty Ltd (1) leased under a 99 year lease arrangement

Queensland Airport Holdings Owns the land for Cairns airport which it has 40 24 40 24 (Cairns) Pty Ltd (1) leased under a 99 year lease arrangement

Brisbane Port Holdings Pty Holds the land for Brisbane Ports which it has 40 24 40 24 Ltd (1) leased under a 99 year lease arrangement

City North Infrastructure Pty Manages the procurement of the Airport Link 40 24 20 12 Ltd (1, 2) and Northern Busway projects

Sunshine Locos Pty Ltd (3) Dormant 50 50 50 50

Network Infrastructure Pty Ltd (1) Dormant 40 24 40 24

(1) Beneficial interest and voting rights in the Company are held indirectly through QTC’s holdings in QTH.

(2) Remaining shares were cancelled on 1 July 2013 increasing the beneficial interest to 40 per cent and voting rights to 24 per cent.

(3) Sunshine Locos Pty Ltd has not been consolidated into these statements due to its immaterial and dormant status.

31 DIVIDENDS

QTC pays dividends to the Queensland Government from time to time. A dividend of $120.0 million was provided for during the year (2013 nil).

32 EVENTS SUBSEQUENT TO BALANCE DATE

There are no other matters or circumstances which have arisen since the end of the financial year that have significantly affected or may significantly affect the operations of QTC, the results of those operations or the state of affairs of QTC in future years.

56 QUEENSLAND TREASURY CORPORATION ANNUAL REPORT 2013–14

CERTIFICATE OF THE QUEENSLAND TREASURY CORPORATION

The foregoing general purpose financial statements have been prepared in accordance with the Financial Accountability Act 2009 and other prescribed requirements.

The Directors draw attention to note 2(a) to the financial statements, which includes a statement of compliance with International Financial Reporting Standards.

We certify that in our opinion:

(i) the prescribed requirements for establishing and keeping the accounts have been complied with in all material respects

(ii) the foregoing annual financial statements have been drawn up so as to present a true and fair view of Queensland Treasury Corporation’s assets and liabilities, financial position and financial performance for the year ended 30 June 2014, and

(iii) the management report includes a fair review of the information required under article 3(2)(c) of the Law of January 11, 2008 on transparency requirements for issuers of securities on the Luxembourg Stock Exchange.

Signed in accordance with a resolution of the directors.

G P BRADLEY P C NOBLE

Chairman Chief Executive

Brisbane 29 August 2014

QUEENSLAND TREASURY CORPORATION ANNUAL REPORT 2013–14 57

INDEPENDENT AUDITOR’S REPORT

To the Capital Markets Board of Queensland Treasury Corporation

REPORT ON THE FINANCIAL REPORT

I have audited the accompanying financial report of Queensland Treasury Corporation, which comprises the balance sheet as at 30 June 2014, the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information, and certificates given by the Chairman and Chief Executive.

The Board’s Responsibility for the Financial Report The Capital Markets Board (the Board), as delegated by the Corporation Sole, is responsible for the preparation of the financial report that gives a true and fair view in accordance with prescribed accounting requirements identified in the Financial Accountability Act 2009 and the Financial and Performance Management Standard 2009, including compliance with Australian Accounting Standards. The Board’s responsibility also includes such internal control as the Board determines is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In Note 2(a), the Board also states, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements comply with International Financial Reporting Standards.

Auditor’s Responsibility My responsibility is to express an opinion on the financial report based on the audit. The audit was conducted in accordance with the Auditor- General of Queensland Auditing Standards, which incorporate the Australian Auditing Standards. Those standards require compliance with relevant ethical requirements relating to audit engagements and that the audit is planned and performed to obtain reasonable assurance about whether the financial report is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of the financial report that gives a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control, other than in expressing an opinion on compliance with prescribed requirements. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Board, as well as evaluating the overall presentation of the financial report including any mandatory financial reporting requirements approved by the Treasurer for application in Queensland.

I believe that the audit evidence obtained is sufficient and appropriate to provide a basis for my audit opinion.

Independence The Auditor-General Act 2009 promotes the independence of the Auditor-General and all authorised auditors. The Auditor-General is the auditor of all Queensland public sector entities and can be removed only by Parliament.

The Auditor-General may conduct an audit in any way considered appropriate and is not subject to direction by any person about the way in which audit powers are to be exercised. The Auditor-General has for the purposes of conducting an audit, access to all documents and property and can report to Parliament matters which in the Auditor-General’s opinion are significant.

58 QUEENSLAND TREASURY CORPORATION ANNUAL REPORT 2013–14

Opinion In accordance with s.40 of the Auditor-General Act 2009 –

(a) I have received all the information and explanations which I have required; and

(b) in my opinion –

(i) the prescribed requirements in relation to the establishment and keeping of accounts have been complied with in all material respects; and

(ii) the financial report presents a true and fair view, in accordance with the prescribed accounting standards, of the transactions of the Queensland Treasury Corporation for the financial year 1 July 2013 to 30 June 2014 and of the financial position as at the end of that year; and

(iii) the financial report also complies with International Financial Reporting Standards as disclosed in Note 2(a).

OTHER MATTERS – ELECTRONIC PRESENTATION OF THE AUDITED FINANCIAL REPORT

Those viewing an electronic presentation of these financial statements should note that audit does not provide assurance on the integrity of the information presented electronically and does not provide an opinion on any information which may be hyperlinked to or from the financial statements. If users of the financial statements are concerned with the inherent risks arising from electronic presentation of information, they are advised to refer to the printed copy of the audited financial statements to confirm the accuracy of this electronically presented information.

A M GREAVES FCA FCPA

Auditor-General of Queensland Queensland Audit Office Brisbane

QUEENSLAND TREASURY CORPORATION ANNUAL REPORT 2013–14 59

MANAGEMENT REPORT FOR THE YEAR ENDED 30 JUNE 2014

REVIEW OF OPERATIONS

QTC made an operating profit after tax for the year ended 30 June 2014 of AUD3,247.2 million consisting of the following operating segment results:

Capital Markets Operations

During the period from 1 July 2013 to 30 June 2014, QTC continued in its ordinary course of business as the State of Queensland’s central financing authority and corporate treasury services provider. The operating profit after tax for the year ended 30 June 2014 for the Capital Markets Operations segment was AUD119.2 million.

Long Term Assets

QTC holds a portfolio of assets which were transferred to QTC by the State Government under an administrative arrangement. These assets are the investments of QTC’s Long Term Assets segment and were accumulated to fund superannuation and other long-term obligations of the State such as insurance and long service leave. In return, QTC issued to the State fixed rate notes which has resulted in the State receiving a fixed rate of return on the notes, while QTC bears the impact of fluctuations in the value and returns on the asset portfolio.

The operating profit after tax for the Long Term Assets segment was AUD3,128.0 million with all major asset classes of the portfolio delivering positive outcomes for the year.

PRINCIPAL RISKS AND UNCERTAINTIES

Financial market conditions were relatively benign in 2013-14. However, there is a risk that markets have become complacent about future risks and that the current environment, characterised by low volatility, will not persist. It is uncertain what may trigger a rise in volatility, when this might occur, and how substantial it might be. There is also uncertainty around policy settings returning to normal including when official interest rates are raised both globally and in Australia. It is possible actions by the Federal Reserve may be a catalyst for a rise in volatility which if it were to be the case, would make QTC’s funding task more difficult, at least relative to the past financial year. However, QTC has established a long track record of attracting investors and raising funds in a cost effective manner across a variety of market conditions and as such, any change in market conditions in this manner is not expected to materially impact on QTC’s performance or its ability to fund the State’s borrowing requirement in 2014-15.

60 QUEENSLAND TREASURY CORPORATION ANNUAL REPORT 2013–14

Appendices

CONTENTS

Appendix A: Loans to clients 62

Appendix B: Statutory and mandatory disclosures 66

Appendix C: Glossary 67

Appendix D: Contacts 68

QUEENSLAND TREASURY CORPORATION ANNUAL REPORT 2013–14 61

APPENDIX A LOANS TO CLIENTS

Total Debt Outstanding Total Debt Outstanding (Market Value) (Market Value) 30 June 2013 30 June 2014 Loans to clients $000 $000

BODIES WITHIN THE PUBLIC ACCOUNTS

CITEC 15 516 8 643

Department of Education Training and Employment 65 869 62 569

Department of National Parks Recreation Sport and Racing 859 204

Department of Science Information Technology Innovation and Arts 6 390 6 370

Department of State Development Infrastructure and Planning 100 928 90 290

Department of the Premier and Cabinet 13 253 11 759

Department of Transport and Main Roads – Main Roads 1 009 027 936 367

Department of Transport and Main Roads – Queensland Transport 102 749 105 208

Public Works – Department of Housing and Public Works 19 018 16 939

QFleet 179 684 129 362

Queensland Health 93 738 82 830

Queensland Treasury and Trade 36 651 962 41 482 531

Total 38 258 994 42 933 073

COOPERATIVE HOUSING SOCIETIES

Cooperative Housing Societies 1 138 1 027

Total 1 138 1 027

GOVERNMENT OWNED CORPORATIONS

CS Energy Ltd 892 400 925 178

ENERGEX Limited 6 347 474 6 706 288

Ergon Energy Corporation Limited 5 317 572 5 396 157

Eungella Water Pipeline Pty Ltd 26 305 25 028

Gladstone Ports Corporation 500 167 507 053

North Queensland Bulk Ports Corporation Limited 69 613 69 622

Port of Townsville Limited 62 194 89 088

Powerlink 4 364 233 4 422 729

Stanwell Corporation Limited 852 847 639 161

SunWater 234 780 273 221

Total 18 667 584 19 053 525

LOCAL GOVERNMENTS

Balonne Shire Council 4 328 4 196

Banana Shire Council 13 713 13 127

Barcaldine Regional Council 3 201 3 034

Barcoo Shire Council 128 103

Blackall Tambo Regional Council 4 819 2 420

Brisbane City Council 2 296 355 2 917 889

Bulloo Shire Council 4 131 5 572

Bundaberg Regional Council 64 136 59 268

Burdekin Shire Council 7 687 8 110

Cairns Regional Council 100 399 98 405

Carpentaria Shire Council 5 219 5 211

Cassowary Coast Regional Council 27 666 25 850

Central Highlands Regional Council 59 263 59 659

Charters Towers Regional Council 173 86

62 QUEENSLAND TREASURY CORPORATION ANNUAL REPORT 2013–14

APPENDIX A LOANS TO CLIENTS CONTINUED

Total Debt Outstanding Total Debt Outstanding (Market Value) (Market Value) 30 June 2013 30 June 2014 Loans to clients $000 $000

LOCAL GOVERNMENTS CONTINUED

Cloncurry Shire Council 15 207 15 405

Cook Shire Council 4 153 5 038

Diamantina Shire Council 1 499 1 156

Douglas Shire Council - 2 617

Etheridge Shire Council 1 924 1 402

Flinders Shire Council - 1 004

Fraser Coast Regional Council 127 679 122 701

Gladstone Regional Council 190 416 190 813

Gold Coast City Council 841 216 882 090

Gympie Regional Council 28 021 28 212

Ipswich City Council 428 649 456 713

Isaac Regional Council 42 590 42 502

Kowanyama Aboriginal Council - 2 019

Livingstone Shire Council - 84 695

Local Government Association of Queensland 5 320 7 246

Lockyer Valley Regional Council 28 731 36 070

Logan City Council 204 952 247 183

Longreach Regional Council 8 234 9 034

Mackay Regional Council 247 108 262 600

Maranoa Regional Council 19 333 23 476

Mareeba Shire Council - 6 523

McKinlay Shire Council 1 159 575

Moreton Bay Regional Council 418 364 446 535

Mount Isa City Council 28 564 33 869

Murweh Shire Council 4 707 4 040

Noosa Shire Council - 48 056

North Burnett Regional Council 4 274 3 843

Northern Peninsula Area Regional Council 1 926 2 405

Paroo Shire Council 2 584 6 075

Redland City Council 69 305 66 724

Richmond Shire Council 1 013 439

Rockhampton Regional Council 253 549 171 244

Scenic Rim Regional Council 11 514 15 556

South Burnett Regional Council 13 529 38 076

Southern Downs Regional Council 30 583 35 149

Sunshine Coast Regional Council 282 365 249 224

Tablelands Regional Council 8 978 6 375

Toowoomba Regional Council 165 199 172 533

Torres Shire Council 1 844 1 580

Torres Strait Island Regional Council 510 476

Townsville City Council 393 473 388 311

Western Downs Regional Council 69 126 74 854

Whitsunday Regional Council 80 294 77 635

Winton Shire Council 3 407 3 373

Total 6 632 514 7 478 377

QUEENSLAND TREASURY CORPORATION ANNUAL REPORT 2013–14 63

APPENDIX A LOANS TO CLIENTS CONTINUED

Total Debt Outstanding Total Debt Outstanding (Market Value) (Market Value) 30 June 2013 30 June 2014 Loans to clients $000 $000

STATUTORY BODIES

Grammar schools

Brisbane Girls’ Grammar School 19 541 31 724

Brisbane Grammar School 12 676 11 196

Ipswich Girls Grammar School 22 971 22 661

Ipswich Grammar School 2 454 1 216

Rockhampton Girls Grammar School 4 324 4 279

Rockhampton Grammar School 12 186 20 344

Toowoomba Grammar School 8 186 7 652

Townsville Grammar School 16 423 15 436

Queensland Water Entities

Queensland Bulk Water Supply Authority 10 020 790 10 530 999

Queensland Urban Utilities 537 963 599 418

Unitywater 322 516 412 397

River Improvement Trusts

Pioneer River Improvement Trust 38 -

Universities

Griffith University 49 946 36 451

James Cook University 49 682 82 958

Queensland University of Technology 77 633 80 689

Sunshine Coast University 15 537 14 171

University of Southern Queensland 13 460 12 181

Water Boards

Avondale Water Board 88 -

Fernlee Water Authority 940 946

Gladstone Area Water Board 222 895 240 074

Glamorgan Vale Water Board 40 -

Grevillea Water Pty Ltd 162 159

Kelsey Creek Water Board 454 225

Mount Isa Water Board 2 579 4 880

Pioneer Valley Water Board 1 075 611

Riversdale-Murray Valley Management Board 36 -

Water Supply Boards

Bollon South Water Authority 551 482

Bollon West Water Authority 1 457 1 362

Ingie Water Authority 337 305

Other Statutory Bodies

Economic Development Queensland 68 862 57 616

Mt Gravatt Showgrounds Trust 33 -

National Trust of Queensland 817 -

Queensland Rail Limited 3 340 998 3 351 674

Queensland Rural Adjustments Authority 5 174 3 555

South Bank Corporation 25 591 13 673

Stadiums Queensland 121 248 121 233

Total 14 979 661 15 680 569

64 QUEENSLAND TREASURY CORPORATION ANNUAL REPORT 2013–14

APPENDIX A LOANS TO CLIENTS CONTINUED

Total Debt Outstanding Total Debt Outstanding (Market Value) (Market Value) 30 June 2013 30 June 2014 Loans to clients $000 $000

SUNCORP-METWAY LTD

Suncorp Metway Facility 1 138 856

Total 1 138 856

QTC RELATED ENTITIES

DBCT Holdings Pty Ltd 167 474 157 520

Queensland Treasury Holdings P/L 153 705 -

Total 321 179 157 520

OTHER BODIES

Aviation Australia Pty Ltd 2 094 1 895

Aspire Schools Financing Services 192 376 229 229

State Schools 3 246 2 548

Royal National Agricultural Industry Association of Queensland 59 150 71 028

Total 256 866 304 699

GRAND TOTAL 79 119 074 85 609 647

QUEENSLAND TREASURY CORPORATION ANNUAL REPORT 2013–14 65

APPENDIX B STATUTORY AND MANDATORY DISCLOSURES

QTC is required to make various disclosures in its Annual Report. QTC is committed to: QTC is also required to make various disclosures on the observing high standards of integrity and fair-dealing in the Queensland Government’s Open Data website (qld.gov.au/data) conduct of its business, and in lieu of inclusion in its Annual Report. This Appendix sets out those mandatory disclosure statements that are not included acting with due care, diligence and skill. elsewhere in the report or made available on the Open Data website. QTC’s Compliance Policy requires that QTC and all employees comply with the letter and the spirit of all relevant laws and regulations, industry standards, and relevant government policies, INFORMATION SYSTEMS AND RECORD KEEPING as well as QTC’s own policies and procedures. During the year, QTC continued its compliance with the provisions of the Public Records Act 2002, and its implementation of the REMUNERATION: BOARD AND COMMITTEE Information Standard 40: Recordkeeping and Information Standard 31: Retention and Disposal of Public Records. For the year ending 30 June 2014, the remuneration and committee fees of the QTC Capital Market Board members QTC has continued its work with State Archives on the (excluding superannuation contributions and non-monetary development of a QTC-specific Local Retention and Disposal benefits) were as follows: Schedule, and provides training to staff in the appropriate

management of public records in all formats, including email. BOARD COMMITTEE

During the year, QTC’s record keeping systems and capabilities Chairperson $100,527 Chairperson $6,658 largely continued unchanged. QTC is investigating the Member $33,551 Member $5,152 procurement and implementation of an electronic document management system for implementation in the 2014-15 year. The total remuneration payments made to the members of the QTC Capital Market Board was $391,233 and the total on-costs (including travel, accommodation, and hiring of motor vehicles for PUBLIC SECTOR ETHICS ACT the members) was $45,961.

QTC provides the following information pursuant to obligations No payments in relation to remuneration or on-costs (including under section 23 of the Public Sector Ethics Act 1994 (Qld) to travel, accommodation, and hiring of motor vehicles for the report on action taken to comply with certain sections of the Act. members) were made to members of the Long Term Asset Advisory Board in the year ending 30 June 2014. QTC employees are required to comply with QTC’s Code of Conduct for employees, which aligns with the ethics principles and values in the Public Sector Ethics Act 1994, as well as the RELATED ENTITIES Code of Ethics and Code of Conduct established by the Australian Financial Markets Association of which QTC is a member. Both The related entities in Note 30 (except Sunshine Locos Pty Ltd) codes are available to employees via QTC’s intranet. Copies of are consolidated into Queensland Treasury’s financial report. these codes can be inspected by contacting QTC’s Human Resources Group (see Appendix D for contact details). Appropriate education and training about the code of conduct has been provided to QTC staff.

QTC’s corporate governance policies and practices ensure that QTC:

acts ethically, within appropriate law, policy and convention, and

addresses the systems and processes necessary for the proper direction and management of its business and affairs.

66 QUEENSLAND TREASURY CORPORATION ANNUAL REPORT 2013–14

APPENDIX C GLOSSARY

Australian Government Guarantee (AGG): Also known as the Distribution group: A group of financial intermediaries who Commonwealth Government Guarantee. In response to the global market and make prices in QTC’s debt instruments. financial crisis, on 25 March 2009, the Australian Government provided a time-limited, voluntary guarantee over existing and GOC: Government-owned corporation. new Australian state and territory government borrowing. On 16 June 2009, the Queensland Government took up the Issue price: The price at which a new security is issued in the guarantee on all existing QTC AUD denominated benchmark primary market. bond lines (global and domestic) with a maturity date of between Liquid: Markets or instruments are described as being liquid, 12 months and 180 months (1-15 years). The RBA approved and having depth, if there are enough buyers and sellers to QTC’s application on 11 December 2009. The AGG was absorb sudden shifts in supply and demand without price withdrawn for new borrowings after 31 December 2010. distortions. Basis point: One hundredth of one per cent (0.01%). Market value: The price at which an instrument can be Bond: A financial instrument where the borrower agrees to pay purchased or sold in the current market. the investor a rate of interest for a fixed period of time. A typical MTN (Medium-Term Note): A financial debt instrument that can bond will involve regular interest payments and a return of be structured to meet an investor’s requirements in regards to principal at maturity. interest rate basis, currency and maturity. MTNs usually have Commonwealth Government Guarantee (CGG): See Australian maturities between 9 months and 30 years. Government Guarantee above. QTC: Queensland Treasury Corporation. CP (commercial paper): A short-term money market instrument RBA: Reserve Bank of Australia. issued at a discount with the full face value repaid at maturity. CP can be issued in various currencies with a term to maturity of less T-Note (Treasury Note): A short-term money market instrument than one year. issued at a discount with the full face value repaid at maturity. T- Notes are issued in Australian dollars with a term to maturity of Credit rating: Measures a borrower’s creditworthiness and less than 1 year. 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. QTC has a strong rating from two rating agencies— Standard & Poor’s, and Moody’s.

QUEENSLAND TREASURY CORPORATION ANNUAL REPORT 2013–14 67

APPENDIX D CONTACTS

QUEENSLAND TREASURY CORPORATION

Level 6, 123 Albert Street Brisbane Queensland Australia GPO Box 1096 Brisbane Queensland Australia 4001 Telephone: +61 7 3842 4600 Facsimile: +61 7 3221 4122 Email: [email protected] Internet: www.qtc.com.au

Queensland Treasury Corporation’s annual and half-yearly reports (ISSN 1837-1256 print; ISSN 1837-1264 online) are available on QTC’s website at www.qtc.com.au/qtc/public/annual- reports. If you would like a copy of a report posted to you, please call QTC’s Corporate Affairs group on +61 7 3842 4685.

If you would like to comment on a report, please complete the online enquiry form located on our website.

Telephone

Reception +61 7 3842 4600

Executive Office +61 7 3842 4611

Business Services +61 7 3842 4872

Client Services +61 7 3842 4901

Corporate Services +61 7 3842 4833

Funding & Markets +61 7 3842 4647

Strategic Alignment & Implementation +61 7 3842 4736

Stock Registry (Link Market Services Ltd) 1800 777 166

QTC is committed to providing accessible services to Queensland residents from culturally and linguistically diverse backgrounds. If you have difficulty understanding this report, please contact QTC’s Corporate Affairs group on +61 7 3842 4685 and we will arrange for an interpreter to assist you.

68 QUEENSLAND TREASURY CORPORATION ANNUAL REPORT 2013–14

APPENDIX D CONTACTS CONTINUED

DEALER PANELS AS AT 30 JUNE 2014

Note: actual dealer entities may vary depending on the facility and location of the dealer.

DOMESTIC AND GLOBAL AUD BOND Telephone PANEL MEMBERS Telephone

FACILITY DISTRIBUTION GROUP QTC Treasury Note Facility Dealer Panel

Australia and New Zealand Australia and New Zealand +61 2 8037 0360 Banking Group Ltd Banking Group Ltd

Domestic (Australia) +61 2 8037 0220 Commonwealth Bank of Australia Ltd +61 2 9117 0020

Global (London) +44 203 229 2070 (Sydney)

Bank of America Merrill Lynch Deutsche Bank AG (Sydney) +61 2 8258 2288

Domestic (Australia) +61 2 9226 5570 National Australia Bank Ltd (Sydney) +61 2 9295 1133

Global (London) +44 207 995 6750 Westpac Banking Corporation Ltd (Sydney) +61 2 8204 2744

BNP Paribas US Commercial Paper Facility Dealer Panel

Domestic (Australia) +61 2 9025 5011 Bank of America Merrill Lynch +1 646 855 6333

Global (London) +44 207 595 8231 Citigroup Global Markets Inc (New York) +1 212 723 6252

Citigroup Global Markets Australia Ltd Deutsche Bank Securities (New York) +1 212 250 7179

Domestic (Australia) +61 2 8225 6450 UBS Securities +1 203 719 7014

Global (London) +44 207 986 9521 Multicurrency Euro Commercial Paper Facility Dealer Panel

Commonwealth Bank of Australia Bank of America Merrill Lynch +44 207 996 8904

Domestic (Australia) +61 2 9117 0020 Barclays Bank Plc (London) +44 207 773 7863

Global (London) +44 207 329 6444 Citigroup International Plc (Hong Kong)3 +852 2501 2974

Deutsche Capital Markets Australia1 Commonwealth Bank of Australia +61 2 9117 0047

Domestic (Australia) +61 2 8258 1444 Deutsche Bank AG (Singapore) +65 6883 0808

Global (London) +44 207 547 1931 National Australia Bank Limited +852 2526 5892 (Hong Kong and London)

HSBC

Domestic (Australia) +61 2 9255 2059 UBS Ltd (London) +44 207 329 0203

Global (London) +44 207 991 7662 Multicurrency Euro Medium-Term Note Facility Dealer Panel4

JP Morgan Includes all Domestic and Global AUD Bond

Domestic (Australia) +61 2 9003 7988 Facility Distribution Group Multicurrency US Medium-Term Note Facility Dealer Panel Global (London) +44 207 742 1829

National Australia Bank Ltd Australia and New Zealand +1 212 801 9160 Banking Group Limited Domestic (Australia) +61 2 9295 1166 Bank of America Merrill Lynch +1 646 855 8032 Global (London) +44 207 796 4761 BNP Paribas +1 212 471 8240 Nomura International Plc Citigroup (New York) +1 212 723 6171 Domestic (Australia) +61 2 8062 8000 Commonwealth Bank of Australia +44 207 329 6444 Global (London) +44 207 103 6631 Daiwa Capital Markets Europe Limited +61 3 9916 1313 RBC Capital Markets Deutsche Bank Securities Inc (New York)3 +1 212 250 6801 Domestic (Australia) +61 2 9033 3222 HSBC +1 212 525 4688 Global (London) +44 207 029 0094 JP Morgan +1 212 834 4533 TD Securities National Australia Bank (New York) +1 212 916 9677 Domestic (Singapore) 1800 646 497 RBC Capital Markets (New York) +1 212 858 8343 Global (London) +44 207 628 4334 TD Securities +1 212 827 7199 UBS Investment Bank2 UBS Investment Bank +1 203 719 1830 Domestic (Australia) +61 2 9324 2222

Global (London) +44 207 567 3645

Westpac Banking Corporation 1 Lead Manager – United States 2 Domestic (Australia) +61 2 8204 2711 Lead Manager – Europe 3 Lead Arranger Global (London) +44 207 7621 7620 4 Lead Arranger – UBS Ltd (London)

QUEENSLAND TREASURY CORPORATION ANNUAL REPORT 2013–14 69

APPENDIX D CONTACTS CONTINUED

ISSUING AND PAYING AGENTS

Contact Telephone Facsimile Email

AUD Treasury Notes Help Desk 1300 362 257 +61 2 9256 0456 [email protected] Austraclear Services Ltd Sydney

AUD Domestic Bonds Markings/Transfers +61 2 8571 6488 +61 2 9287 0315 [email protected] Link Market Services Ltd

AUD Global Bonds Client Services 1 800 735 7777 +1 615 866 3887 [email protected] Deutsche Bank Trust Option #5 Company Americas

Euro Commercial Paper Client Services +44 207 545 8000 +44 207 547 6149 [email protected] Deutsche Bank AG, London

US Commercial Paper Client Services +1 866 770 0355 +1 732 578 2655 [email protected] Deutsche Bank Trust Company Americas

Euro Medium-Term Notes Client Services +44 207 545 8000 +44 207 547 6149 [email protected] Deutsche Bank AG, London

US Medium-Term Notes Client Services +1 866 797 2808 +1 212 461 4450 [email protected] Deutsche Bank Trust Company Americas

70 QUEENSLAND TREASURY CORPORATION ANNUAL REPORT 2013–14

QUEENSLAND TREASURY CORPORATION ANNUAL REPORT 2013–14 71

Level 6 123 Albert Street Brisbane GPO Box 1096 Brisbane Queensland Australia 4001 Telephone: +61 7 3842 4600 Facsimile: +61 7 3221 4122 www.qtc.com.au

© Queensland Treasury Corporation 2014 EXHIBIT (c)(x)

The Queensland Government Document Entitled “The Strongest & Smartest Choice: Queensland’s Plan for Secure Finances and a Strong Economy”.

FORWARD-LOOKING STATEMENTS

This exhibit contains forward-looking statements. Statements that are not historical facts, including statements about the State of Queensland’s (the “State” or “Queensland”) beliefs and expectations, are forward-looking statements. These statements are based on current plans, budgets, estimates and projections and therefore you should not place undue reliance on them. The words “believe”, “may”, “will”, “should”, “estimate”, “continue”, “anticipate”, “intend”, “expect” and similar words are intended to identify forward- looking statements. Forward-looking statements speak only as of the date they are made, and neither the Queensland Treasury Corporation nor the State undertake any obligation to update publicly any of them in light of new information or future events.

Forward-looking statements are based on current plans, estimates and projections and, therefore, undue reliance should not be placed on them. Although the Queensland Treasury Corporation and the State believe that the beliefs and expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such beliefs and expectations will prove to have been correct. Forward-looking statements involve inherent risks and uncertainties. We caution you that actual results may differ materially from those contained in any forward-looking statements.

A number of important factors could cause actual results to differ materially from those expressed in any forward-looking statement. Factors that could cause the actual outcomes to differ materially from those expressed or implied in forward-looking statements include:

• the international and Australian economies, and in particular the rates of growth (or contraction) of the State’s major

trading partners;

• the effects, both internationally and in Australia, of any further global financial crisis, any subsequent economic downturn, the ongoing economic, banking and sovereign debt crisis in Europe and any stalling of the protracted United States recovery;

• increases or decreases in international and Australian domestic interest rates;

• changes in the State’s domestic consumption;

• changes in the State’s labor force participation and productivity;

• downgrades in the credit ratings of the State and Australia;

• changes in the rate of inflation in the State;

• changes in environmental and other regulation; and

• changes in the distribution of revenue from the Commonwealth of Australia Government to the State.

FI NA L PLA N TH E STRO NG EST & SM A RTE ST C HO I CE Q UEE NS LA ND ’ S PL AN FO R S EC URE FI N AN CES AN D A S TR ON G ECO NO M Y N O ASSE TSALE S Great stat e. Great opportun ity. Queensl and G overnment

Content s Content s The Str ong Choices Process 3 Executve i Sum mar y 4 The Pr oblem 7 Queensl and’s debt and def i cit pr obl em 7 How did our debtget t o $80 bili l on? 9 D o ot her stat es have t he sam e pr oblm e ? 11 Why action is needed - het cost o fdoing nothing 13 Act i on pl an: Budget repair to date 16 What must be done now? 19 Ext e rnal Factor s: Implicatons i of the 2014- 15 Feder al Budget 21 St ron g Cho ices 22 The path to the final pl an 22 H o w we h ave listened 28 The Final Pan: l t he St r ongest and Sm ar test Choice 30 Sale and Lease - How They Difer f 32 Leasin g Expl ained 33 Consi derat i ons for Asset Transacti ons 36 Be n e ft i s and Risks 36 The Re s ult of Str ong Choices 39 Process and Evaluat ion 46 2 Fi nal Plan – The St r ongest & Smart est C hoice

The Str ong Choices Process The Str ong Choices Process Febr uary - Apri l 2014 Comm unity Leader Roundtables Comm unity Leader Engagement Fr om 13 April - 19 May 2014 Peopl e’s Budget Interacti ve Tool St ron g Cho ices C omm unity Forums St ron g Cho ices Shop ping Cent re nfI or m at i on B ooths Virtu a lT o wn Ha l ls Comm unit y E ngagement 3 June 2014 The Str ongest and Smartst e C hoice Draft Plan of Act i on Fr om 3 June - 15 August 2014 St ron g Cho ices feedback on spending pr ior ities The Str ongest and Smartst e C hoice Draft Plan of Act i on Sept ember - Oct ober 2014 Fi nal Str ong Choices Pl an of A cti on The Str ongest and Smartst e C hoice The Str ongest and Smartst e C hoice si Queensland’s plan for secure finances and a ts r ong econom y We are here Queensl and’s Plan f or Secure Finances and a St rong Econom y 3

Executve i Sum mary Queensl and’s utf ur e pr osper ity is being threat ened by State debt approachi ng $8 0 bi llion - the result of ten years of poor planning and waste by previous gover nment s. The cost of servici ng that debt i s $4 billi on in int er est every yar. e Wih t the Stat e’s popul ation forecast t o reach 7 mll i i on i n just over 20 years rf om now , Queensl and cannot afor f d to continue paying $4 bili l on in “dead money” that coul d other wise be spent bu ilding more chools s, hospitals, r oads and other vital infrast r uctur e f or a pr osper ous f ut ure. H owever , left unaddr essed, t he State’ s debt i s act ually set to increase -fr om $80 bi llion, or more t han $ 16,000 per per son, in 2014-15, to $121 bil lion, or more hant $21, 000, in 2022 - 23 - as expendit ure i n areas such as heal t h and education increase t o meet t he needs of he t grow i ng popul ation. In turn, the drai n o f“dead m oney” i nterest payment s wll i onl y increase. “Doing nothi ng i s not an opt ion. I f stong r and sm art hoic ces are not m ade t o bri ng t he Stat e debt under con trol now, the children and grandchi ldr en of today’ s Q ueenslander swill beforce d t o pay for the waste and ill discipli ne of pr evi ous gover nment s, and bear t he bur den of lost op port uni ties and econom i cinsecuriy. t ” Thi s G overnm ent came ot of fi ce com mtt i ed ot repai ring the St ate’s finances. Wit hi n t wo days of bei ng el ected, t he G overnment appoi nted an I ndependent Q ueensland Commissi on of Audit to i nvestigate het scal e of t he pobl r em and what needed t o be done. Whie l het Commissi on co nducted hatt r eview , het Gov ernment began t he f i rst stage of Bu dget repai , r f ocusi ng on rei ni ng i n expendiur t e and cutti ng w aste ni order to stabiise l t he debt . In Apri l 2013, t he C ommissi on del iver ed its Fi nal Repor t. It set t he par amet ers orf the second stage of budget repair, recom m ending that debt be r educed by betw een $25- 30bn, i n or der t o bol ster t he B udget against br oader st ruct ur al hallec nges acif ng A ustralia na d t o bui ld f utur e pr osper ity. At a sustai nable evell of $ 50-$55 bi llion, interest paym ents coul d be kept under cont r ol and debt w ould stabilise at a esponsi r ble evell com parable to other st ates. To achieve avis ngs of this scale, t he Q ueensland Gover nment hs a hreet choi ces. t I can; Si gnificantly increase t axes; Reduce servi ces;o r Sell or lease oms e assets. N one of t hese opt ions are easy or popular. However , t he G overnment bel ieves Q ueenslander s deserve to be ful ly i nfor m ed about t he St ate’ s f i nances, and the choices vailaa bl e t o pay of f t he debt and prot ect and boost econom i c pr osperity. On April 13, 2014, t he St r ong C hoices amc paign was launched to ensure Queensl anders could access het inf or maton i they needed t o have thei r say about reduci ng t he debt . A centrepiece of this cam pai gn w as Au s t r alia’s irfst interactve i ‘Peopl e’ sBudget ’ . Ultimat ely, m or et han 255, 000 people visited het Strong Choices we b s i te, and over 55, 000 Q ueensl ander ssubmitted heit r ow n Peopl e’s Budget online, ou tlini ng t hei r savi ng and spendi ng pr i orities. The publi c r esponse cl earl y show ed Q ueensl ander sreco gnise t he debt and i nterest probl em , an d suppor t a discipl ined, m etho dical pl an t o reduce t he $4 bili l on int erest dr ai ning f rom pub lic coffers. Ra i sng i taxes or redu ci ng servi ces were t he l east preferred opti ons f or achi eving savings of the m agn it ude r equir ed. After cutt i ng w aste and r educi ng the si ze of public service, and ift l i ng som e t axes and mi ning royalties t o tabilis s e het Budget t he G over nment r ecogni sed Queenslnder a s’ concer ns about f ur ther service eductr i ons or t ax i ncreases. When t he 2014 Feder al Budget for eshadowed mor e spendi ng cut s and some axt and l evy i ncreases, ti bcam e e i mperative to avoid measures t hat woul d exacerbate cost of li vi ng pr essures on everyday Q ueensl ander s. At the Stat e B udget on June 3, the Gover nm ent rel eased a Draf t Pl an pr oposi ng t o r educe t he $ 80 bili l on St ate debt thr ough a progr am of asset t ransactons i that w oul d r elease several Gover nm ent assets for lease, sale or privat e sect or participation. I nvi ting f eedback, the Gover nm ent then embar ked on anot her r ound of consul tat i on w it h Q ueensland business l eaders, communi ty spokespeople, i ndependent economi c anal ysts nda member s of t he pu blic to hear their view son the Plan. Duri ng t hat consultati on phase, i t became clear t hat wh ile Queensl ander srecogni sed t he t hr eat posed by the Stat e’s billi on- dollar interest payment s, and coul d see the potent ial Fi nal Plan – The St r ongest & Smart est C hoice 4

for furt her i nvestment if t he bu rden of those payment s coul d be lifted, t hey remined a elr uctant to lose a stake i n hese t publ i c ent erprises. I n r esponse t o Q ueensl ander s’ concer ns, the Governm ent has deci ded not t o sel l the asset s. The deci sion was made ot repl ace t hat aspect of the debt reduct i on st rat egy w ith an alternative that wi l allo w Queenslanders to retai n owner ship of t he assets, while still deliveri ng the best possi ble if nancial ou tcom es for the St ate. The Gover nm ent now prop oses ot offer assets previ ously intended for sal e or pr i vate nvesti ment for l ease only shoul d t he G overnm ent receive a mand ate at the nxt e Stat e el ecti on. By offeri ng t he assets for lease for a per i od of 50 year s, with an option t o ext end f or 49 year s houls d key lease conditions be met, the Stat e wll i ret ai n ow nership of the ssets a while allowing the pri vat e sector t o operat e, mai ntai n and expand t he assets over t he l ease ermt . Impor t antly, het Gover nm ent can receive the value of future l ease rental sas an upfr ont paym ent, m eaning that the Gover nm ent wi l have access ot these proceeds t o reduce t he $80 bi llion State debt and invest in vi tal i nfrastructure for Queensland’s future. U nder leasing arrangem ents, t he G over nment expect sit will still achieve a reducti on o f debt of at least $25 bi llion, t o a level of $55 bi l i on deem ed sustai nable by the ndependentI Q ueensland Commissi on of Audit. This woul d m ean Q ueensland’ s annual i nterest bill would dr op fr om $4 bill i on t o $2. 7 b illi on. A furt her $8. 6 bi l lion of l easing pr oceeds would be used t o est ablish t he St r ong C hoices F utur e I nvestment Pr ogr am, a sui t e of 11 new f unds designed to build more school s, hospitals, r oadsand other v ital infrast r ucture t o m eet the needs of Q ueensland’ s gr ow ing populat i on. I n addi tion, t he G overnm ent antci i pates t hat of feri ng t he assets for l ease wll i generat e an extr a $3. 4 billi on o n t op of t he $33.6 billi on originally forecast in the Draft Plan. Thi s upl ift results from changing to a lease ransactt i on st r ucture for t he el ectriciy t t ransmssi i on and distr i buti on businesses and t he change in book values from 2013 to 2014. Also, the estimat ed proceeds do not i nclude any el igi ble f unding from t he C omm onw ealth Asset R ecycl i ng I nitiative. This initiative, which is dollar and time limit ed, provides for a paym ent of 15% of t he t r ansacton i pr oceeds, which m ust b ei nvested in economical l y pr oductive nfrai structure. Accor di ngly, t he G over nment pl ans t o al locat e t his additional $3.4 billi on to the est abl ishment of the Cost of L iving F und, to suppor t all Q ueensl ander s as t he State economy transii t ons i n r esponse t o m odern chall enges. While the Str ong C hoices Futur e Invest ment Program will focus on inf rastructure needs, hist separat e F undw ill be dedi cated ot di recty l easi ng cost of living pr essures felt ni Queensland. N one of t hese pr oposals w ill be implem ented unt il the Government has taken this met hodi cal and discipli ned Plan t o t he next State electon. i Not everyone will agree w ih t every part of thi s Fi nal Pl an. But al l Queenslnde a rs will benef it from the str ong choices m ade no w to deliver f unding certainty int o t he f ut ure, so we can invest ni the vital servi ces and infrastruct ure needed or f a growing populaton. i Impact of asset transacti ons on t he St ate’ s debt 90 80 70 60 50 40 30 $ billi on $80bn D own $25 bill i on $55bn Tot a l St ate debt before asset transacti ons Tot a l St ate debt after transacti ons Impact of asset transacti ons on t he St ate’s i nterest bill 4. 5 4 3. 5 3 2. 5 1. 5 1 $ billi on $4bn Down $1. 3 bi llion $2. 7bn Tot a l int erestb fore e asset transacti ons Tot a l int erest after asset transactons i Queensl and’s Plan f or Secure Finances and a St rong Econom y 5

St ron gest and Sm artest Choice Sector Busi nesses Sr t ongest and Sm ar test Choice Por ts Gladstone Por ts C or poraton i Li mited Lease Por ts Port of Tow ns ville Limited with the Mt Isa Rail li ne L ease Water Distribut io n SunWat er I ndustrial Ppel i ines L ease Electricity Generation St anwell Corporation Limit ed Lease Electricity Generation CS Ener gy Limit ed L ease N on-core A sset s of the Gener ati on and Distr i buti on B usinesses There are a ange r of non-cor e business ctivitia es, such as oac l mines and ret ail el ectriciy t f uncti ons Lease Electricity transmssi i on Powerl i nk Lease Electricity distribut i on Ener gex Limited Lease Electricity distribut i on Ergon Li mited Lease Fi nal Plan – The St r ongest & Smart est C hoice 6

The Pr oblem Queensl and’s debt and def i cit pr obl em Queensl and’s deficit Si nce 2006- 07, Q ueensl and has spent more t han i t earned, accumulati ng B udget deficit s of $29 bi lli on bet ween 2006-07 and 2011-12. The previ ous Go v ernment’s last Budget updat e l ocked i n a further $13 billi on of deficits. No fiscal surpl us has been achi eved f or almost a decade. Char t 1: B udget De f icis t 2006- 07 t o 2014 -15 $ billi on 0 -1 -2 -3 -4 -5 -6 -7 -8 -9 2006- 07 2 008-09 2010- 11 2012-13 2014-15 When t he Budget i sin defici, t t he G over nment must bor row t o m ake up t he shorfal t l and cont inue to pay f or essential servi ces. T he cont inui ng defici ts were one of t he mai n reasons for the expected ncreasei i n debt t o $85 bili l on by 2014-15. “With grow th, com es gr ow ing pains. Those pains need t o be addressed, nfrastructi ur e needs ot be buil t to cater f or dem and, servi ces need to be del ivered and a successful business envir onm ent fost ered. T he onl y t hi ng hol ding us back, f r om the oppor tunity of tomorrow is the pr evious governm ent’s black lc oud of debt.” QLD TREASURER TIM NICH OLL S, SPE ECHTO C ED A,FE B201 4 “Feedback from QTC’s recent fi nancial m arket int eractons i indi cates hatt market par t ici pants consi der t he State’s fi scal posii t on t o be unsustai nable and ar e l ooki ng f or t he G overnment to deliver a credibl e st rat egy t o address t he State’ s l evel of debt and ongoing budget def icis t as a matt er of pr i ority. Prom pt act ion to develop, implem ent and com municat esuch a strategy is essent ial t o suppor t Q TC’s ongoi ng ability to ccess a f unds” INCOMINGGOVERNMENT BRIEF PREPARED BY QUEENSLANDTREASURY CORPORATION, MA RC H 2012 - QLD TREA SUR ER TIM NI CHOLLS , SPEEC H TO CE DA, FEB 2014 Queensl and C ommissi on of A udi t Fi nal Repor t - Febr uar y 2013 Volum e 1 - Executve i Sum mary and Recom mendat ions Fol low ing i ndependent advice romf Treasury, the Queensland Treasury Corpor ation, rat i ngs agencies Mo ody’s and St andar d & Poor ’ s, and t he I ndependent Qu eensl and C ommissi on of A udi t, t he G overnment deci ded i t could not af ford to wai t for good luck to ret ur n t he B udget to surpl us. Since t aking of fi ce, het Gover nm ent has int r oduced a range of measures to repair the Budget , which i s now on rack t ot ret ur n t o sur plus in 2015-16, the first in a decade. Bu t w ih t Queensland’ s populat on i of 4. 6 m illion proj ected ot increase t o 7 mll i i on i n just over 20 years romf now, the St ate needs mor e infrast r uctur e and essental i services ot reach tsi full potental i . Unl ess str ong act i on i s t aken, the proj ected gr owth i n expenses i n areas such as healt h and educati on will push the Budget back int o def i cit, with St ate b orrowings i ncreasi ng fr om $80 billi on, or m or e t han $16, 000 p er person, i n 2016 -17, t o $ 121 bi llion, or mor e than $21,000 per per son, in 2023-24. Queensl and’s Plan f or Secure Finances and a St rong Econom y 7

“The Stat e’s debt has reachedunpr ecedented level s. Together with it s publ ished orf ward estimat es showing an even great er volum e o f debt wi l be r equir ed, Queensl and i s now i n ‘ unchar ted waters’ wth i espectr t o t he vol ume of debt on issue and the resultant int erest bi ll.” INCOMINGGOVERNMENT BRIEF PREPARED BY QUEENSLANDTREASURY CORPORATION, MA RC H 2012 Queensl and’s debt When a gover nment com mits to spending more mon ey than it can raise ni revenue each year, t i must bor row from banks and other lender s, based in Aust ralia and overseas, ot cover the di fference. T his si caled l debt. B anks char ge gover nm ents interest on these loans, ust j as they do on a hom e l oan or credi t card, al t hough t he r ates may differ. Thi s financi al year, Queensland’ s debt w il l reach $80 billion, t he hi ghest Stat e debt i n Australia. This means that befor e i t pr ovides any ser vices t o Queenslander s, the St ate will have to pay an int erest bi l of $4 bil li on - over $450,000 an hour - of “dead money”. By 2017-18, this bill is proj ected ot r ise to $4.4 billi on - or $497,716.90 per hour. By that imt e, t he i nterest bill will have robbed Queenslander s of near l y $17 billion in tot al t hat could other w ise have been i nvested ni new infrast r uctur e t o help drive economic gr owth and cater for t he needs of the gr owing populat ion. For exam ple, at current cost level, s with $4 bill i on ( the interest bill for one year al one), Queensland could build: 25 new primar y school s; Almost 900km of hi ghway; and Pay for the edevelr opment and expansion of a 300-bed r egional hospi tal . “Queensl and’s if scal position and out l ook i s unsustai nabl eand restor at ion must be an ur gent pror i i ty f or thi s t erm of Gover nm ent.” Q UEE NSLA ND T REA SU RY - I NC OMI NG G OVERN MENT B RIEF, MAR CH 2012 Is AllDebt Bad? It is mi por tant to note that the Governm ent is not seeking to reduce t he State debt based on a simplistic noti on t hat all debt is bad. There are t i mes when it is reasonabl e, even usef ul, t o carry a certain amount o f debt, such as when a busi ness is expanding or a couple are ookil ng for a lar ger house because heyt are planni ng to start a family. A oanl at that time will hel p bui ld for tthe fuur e. Si milarl y, most gover nm ents believe it si accept able to carry a certai n l evel of debt, particul arly when het populaton i i s growing, comm uni ti es ar e expandi ng and new servi ces and inf rastuct r ur e, li ke roads, sch ools and hospitals are needed. H owever , if spendi ng cont i nues to out strip earni ngs, debt can qui ckl y get out of ont c rol. T his appli es r egardl ess of whether t he debt i s car red i ni a househol d budget , a busi ness, or by a governm ent . If int erest paym ents become too big, t her ewill not be enough m oney t o cover t he necessities; i n a gover nments ’case, t hese m ay be vital servi ces lke i healt h and educati on. Nor is it possibl e t o invest for the futur e, or addr ess future chal lenges, such as a nat ural disaster or f i nancial crisis. For gov ernments, things can becom e even m ore di fficult if rati ngs agenci es dow ngrade heit r credit rati ng, m eaning they are considered more at risk of def aulting on thei r loans. I f t his occur s, borro wing m oney becom es m ore expensive because the int er est paym ents are high er. The drain on r evenue avai labl e t o pay f or servi ces and infrastructur e gr ow s—and at this po int , the debt is consider ed unsust ainable. Fi nal Plan – The St r ongest & Smart est C hoice 8

How did our debtget t o $80 bili l on? Expendi ture exceeded ncomi e The Ind ependent Queensland Commission of Audit commented that since 2005- 06, the St at e had been “l ivi ng beyond its means”, wit h expenses gr owth si gni fi cantl y out str i pping r evenue. In the period betw een 2006- 07 and 2010- 11: expenses grew at an aver age annual r ate of 10. 5% r evenue gr ew at an aver age annual r ate ofonl y 6. 9% . As a propor tion of revenue, t he debt and def ici t at the time of t he change of gover nment was larger i n Queensland than f ederally. Char t 2: R evenue vs Expenditure Grow th 2001- 2011 % 10 8 6 4 2 0 2001- 2006 2006- 2011 Revenue Expenses Sour ces: Queensland Treasury and Trade -Repor t on Stat e Finances “...large capial t expansion sand a signi f icant i ncrease i n expenses l ed t o a rapid and subst antial grow t h i n debt f r om 2006- 07 onwards. T he slo wing of r evenue grow th f rom t he h ighs exper i enced from 2006-07 t o 2008- 09, i ncluding as a r esult of t he Global Financi al Cr iis s from lat e 2008, al so cont r ibuted to the rise ni debt .” TR EAS URY I N CO MI N G GOVER NMEN T BRIEF, MA RC H 2012 Char t 3: 2005- 2006 Sour ce of capi tal spendi ng 5% 34% 57% 4% Char t 4: 2011- 2012 Sour ce of capi tal spendi ng Ca s h romf operati ng sur pl uses Asset sales Borr owings Other 1% 3% 96% Queensl and’s Plan f or Secure Finances and a St rong Econom y 9

Lack of fiscal discipline For m any years, previous governm ents spent mor e m oney than they earned, w it h Budget def icis t ott alling $29 billi on between 2006- 07 and 2011- 12, and addi t ional def icits locked in. Whie l evenuesr m oder ated rf om 2006, expendi t ures oser st r ongly, openi ng agap between gover nment income and government spending, w hi ch has t hen w idened and necessitated substantal i bor r owing. The previ ous G over nment al so m oved aw ay from fund ing capital expenditure pur ely from operating cash flow, rapidly increasi ng t he debt bur den. I n 2005- 06, j ust 34% of capi tal expendiur t e on things such as new r oads, new hospitals and new school swa s funded by borrowings. By 2011-12, 96% of allcapit al i nvestment in the Queensl and public sect or w as f unded f r om bor row ing s. The Ind ependent Queensland Commission of Audit regarded the forward estimates as overly optimistic. nI par ticular, het Commission noted t hat budget im pr ovement w as reliant on the follow ing assumpt ions: 14% annual gr ow th in transfer duty year on year fr om 2013- 14 to 2015- 16, compar ed t o aver age grow th r ates of 5% in t he years foll owing the events in the nt i ernat ion al econom y in 2008. a rapi d decelrati e on in employee xpe enses grow th f rom aver age annual gr ow th of 9.6% since 2005- 06 t o 3. 7% over t he f or war d estmat i es. a declne i in net capital expendi ture from $4. 6 billion i n 2012-13 to less t han $1 bi llion in 2015- 16. The Com mission also noted hatt opt imist i c r oyalt y forecasts were a key dri ver of gr ow th in revenue estimates. As oyalr ty r evenue is a hi ghl y vol atile tem,i het Commissi on considered that a conservat i ve bi as should be appl i ed i n f or ecastng i this item , gi ven t he r isks and uncer tai nti es i nvol ved. The s tructur al budget def ici t led to an increase in bor r owing needed to fun d cor e gover nm ent servi ces especi( ally in the non-G overnment -ow ned cor por ations sector ) , which caused the downgrade of Queensland’s A AA credi t ratn i g i n 2009. “Queensl and’s budgetar y performance si t he w eakest of all the Australian Stat es.” G LOB AL CR EDIT RA TING A GE NCY S TANDARD& PO OR ’ SR ATIN GS SER VICES , RESE ARC H UP DATE, SEP TEMBE R 2011 Revenue chall enges Econom ic gr owth has st r ong l ink sto Go vernment revenues, and all ot her t hings being equal, improvem ents ni economi c gr ow th will improve the St ate Budget posi ti on. H owever , in 2014- 15, it is estimated hatt 47% of Queensl and’s evenuer will b esour ced from C omm onw eal t h paym ents hrt ough GST distribut io n and payment s for specific pur poses. Lss e hant one-third of Queensl and’ srevenu eis sourced from S tat etaxat i on and royal t ies. This means that , for exampl e, a 50% increase ni Queensl and’ stax and royal ty coll ecti ons w ould onl y increase t ot al Stat e r evenue by 15% . I n ot her w ords, t he State’s capaciy t to raise sufficient revenue through taxaton i to pay down the debt is everels y limit ed. To rai se f unds of t he m agniude t necessary to make a real i m pact on t he debt , tax ncreasesi wo u ld have t o be so large they would thr eaten eco nomi c gr ow th by st ifli ng busi ness expansio n and consum er conf idence, pot entially ritgg er i ng t ens of t housands of j ob losses. Almost inevitably, t ax increases of this scale wo u ld also ncreasi e cost of li vi ng pr essures o n everyday Q ueensl ander s. “Queensl and’s if nancial po siti on is unsust ainabl e. The Stat e i s currently locked into a debi litat i ng cycl e of over - expenditure, vee r-increasing level s of debt , and cr i ppli ng increases ni debt servi cing costs. A major t ask of fiscal repai ris mperai t i ve t o prevent further damage to the futur e prosper ity of the St ate.” I NDEPEN DE NT QUEEN SLA ND C OMMI SSI ON O F A UDI T INT ERIM R EPO RT, JU NE 2012 Fi nal Plan – The St r ongest & Smart est C hoice 10

Char t 5: B orrowings per person at 30 June 2014 $17, 000 $15, 000 $13, 000 $11, 000 $9, 000 $7, 000 $5, 000 New S outh Wales Vict oria Queensl and Western A ustralia Sout h A ustralia Ta s m ania Aver age of other Stat es ( $8,834) As at 30 June 2014 ever y person $16, 209 Borr owings per p er son at 30 June 2 014 D o ot her St at es have the same pobl r em? The average debt per Queensl ander is now $16,2 09, higher t han every other S tat e i n A ustralia. This will only increase unl ess str ong and disciplined acti on i s t aken. Alt hough debt i s f or ecast to grow m or e slowl y over t he f or war d estmat i es, a i s gni fi cant reduct i on i n debt l evels si not projected under cur r ent policy setti ngs. Aver age debt-to- r evenue r atios - n a i ndicat or of t he abiit l y to f und debt r epaym ents - are higher for Queensland than any ot her A ustrali an St at e, with debt curr ent ly at 146% of r evenue. I n 2009, r at ings agencies considered hatt the deterior ati on i n the revenue outl ook, com bined with the previous Gover nmnt e ’ s com mitment to maint aini ng a lar ge capital progr am , would f uel l arge increases ni debt . As a resul t, Q ueensland lost its AA A c redi t rati ng. Thi smeans Queenslnd a er s n ow pay a higher interest rate on m oney t he St at ebor rows, compar ed t o other S tat es such as N ew Sout h Wal es and Vict or ia. In its brief to the incomi ng Gover nment in 2012, the Queensl and Treasury Corpor ati on noted hatt if all publi c sect or bor row ings werere-f i nanced at t he peak mar gi ns current at t he tme, i the premium paid by he t Stat e reltive a to pre-GFC levels w oul d cost Qu eensl andabout $7 50 m illi on per annum. More recent analysi s show sQueensl and’s borrowing costs wer e appr oximatel y $428 million higher than AAA-rat ed Sat t es betw een 2008- 09 and 2013- 14. T his cost w as reduced because of t he G overnment ’s immediat e and ubst s antial fiscal repair after omc i ng i nto of fi ce. The high r ate of debt is being driven by Queensland’ s cont inui ng deficits. Since 2007- 08, Queensland has had the argestl deficits of all the states. Chart 6: Interstate comparison of debt t o r evenue r atios1 160% 140% 120% 100% 80% 60% 40% 09- 10 10- 11 11- 12 12- 13 13-14 14- 15 15-16 16-1 7 17- 18 Queensl and ( 4. 7m) NSW (7.4m) Vict oria (5.7m) Sout h A ustralia (1.7m) Western A ustralia 2.( 6m) Brackets ndii cate popul at i on f igu res Note: 1. B orrowings divi ded by total r evenue ( NFP S). Sour ces: AB S 5512.0, Repor t on Stat e Finances and at l est Budget Updates Queensl and’s Plan f or Secure Finances and a St rong Econom y 11

Char t 7: C ompar ison St ate debt $ billi on 90 80 70 60 50 40 30 20 10 0 09- 10 10- 11 11- 12 12- 13 13-14 14- 15 15-16 16-1 7 17- 18 Queensl and ( 4. 7m) NSW (7.4m) Vict oria (5.7m) Western A ustralia 2.( 6m) Sout h A ustralia (1.7m) Ta s m ania 0.( 5m) Brackets ndii cate popul at i on f igu res Sour ce: 2014- 15 St at e Budget s and 2013- 14 Mi d Y ear Re v i e ws Char t 8: C ompar ison St ate nti erest expense $ billi on 5. 0 4. 0 3. 0 2. 0 1. 0 0 09- 10 10- 11 11- 12 12- 13 13-14 14- 15 15-16 16-1 7 17- 18 Queensl and ( 4. 7m) NSW (7.4m) Vict oria (5.7m) Western A ustralia 2.( 6m) Sout h A ustralia (1.7m) Ta s m ania 0.( 5m) Brackets ndii cate popul at i on f igu res Sour ce: 2014- 15 St at e Budget s and 2013- 14 Mi d Y ear Re v i e ws Char t 9: Deficit s by Stat e Sour ce: Var i ous St ate budgets, mid- year review sand annu al r epor ts $ billi on 2 1 0 -1 -2 -3 -4 -5 -6 -7 -8 -9 07- 08 08- 09 09- 10 10- 11 11-12 12- 13 13-14 NSW Vic Qld SA WA Ta s Fi nal Plan – The St r ongest & Smart est C hoice 12

Why action is needed – t he cost of doi ng not hi ng Queensl and’s economy is pr ojectd e t o gr ow f aster t han any other S tat e over t he next decade. B ut that econom ic gr owth will not be en ough t o r et urn the Budget t o sur pl us. Indeed, wt i h gr ow th comes grow ing pai ns: het added pressur es and demands of a rapi dly changing and expandi ng econom y and populati on. Queensl and’s economy is expected ot gr ow by 3% in 2014-15, with gr owth for ecast t o doub le ot 6% i n 2015- 16. I n bot h years, Queensl and’s atr e of grow th i sstr onger t han cur r ently forecast i n ot her st ates, and i s out pacing the national forecast s of 2. 5% i n 2014- 15 and 3% i n 2015-16 ( as out lined in the Comm onw ealth’s 2014- 15 Budget). H o we v e r , wh i le evenuesr will increase as a result of this gr owth, t hey ar e gr owing more sl owly t han befor e, and ar e bei ng outpaced by t he G overnm ent ’s xpense es over the medium term. In t he next decade, our po pulat ion will grow by near ly 1 million – and by anot her 1. 5 m illi on in the 10 year s af ter hatt . By then, Q ueensl and will have an ext ra 650,0 00 peopl e over t he age of 65, and will need o t educate another 4 00,000 sch ool children . Based on Queensland Treasury demand pr ojectons, i heal th expenditure is forecast t o grow at 8% a year, whil e educaton i wil l grow at 5. 75% a year. To mai nt ai n our curr ent st andard of livi ng and to pr epare orf the needs of our g row ing and changi ng Stat e, Queenslnd a w ill need new school s, hospi tal s, oar ds, hi ghw ays, r ail inesl and bri dges. The Gover nm ent alr eady has b ig plans ot meet t hese needs. But if Queensl and’s $80 bil li on debt i s not f i rst br ought under con trol, the Stat e wll i not have t he capaciy t to f und t hese pl ans in a usts ainabl e w ay. Instead, because of t hese growing xp e enses, t he predicted return to Budget sur pl us in 2015- 16 will be short-li ved – with t he Budg et pedi r cted ot r eturn toa fiscal deficit fr om 2018- 19 onwar ds. Even under a scenar io which invol ves str onger r evenue gr ow th and lower capital ex penditure hat n Treasury’ s basel ine medi um ter m pr oj ect i ons, fiscal defi cits wo u ld re-emrge, e t hereby r esulti ng in even more debt. If acton i i s not taken, taxes wll i need to i r se or ser vices reduced or f the Stat e t o be able ot meet i t sgr owing interest payment s. Wihout t deci sive and disciplined action, St at e bo rrowings ar e pr oj ected ot increase from almost $80 billi on, or more hant $16,00 0 per per son, in 2014- 15, to $121 billi on, or m or e t han $21, 000 per person, i n 202 2-23. Meanw hil e t he “dead money” of interest pym a ent s, currentl y at $4 bi llion annually, will conti nue t o grow and dr ain fund sfrom t he pub lic coffers. Queensl and’s Plan f or Secure Finances and a St rong Econom y 13

What coul d the $4bn a year n i int erest paym ents be bet ter spent on? Buil d 25 new primary sch ools, and r ebuil d a 300- bed r egional h ospital, and, bui ld 900km of new hi ghway In summar y, the $80 billi on debt is not a shor t-ter m pr obl em, but one that w il impact on the St ate orf decades, i f not r educed now . The chi l dren and grandchi ldr en of today’ s Q ueensl ander swill beforc ed ot pay for t he waste and ill dsci i pl i ne of pr evi ous Go v ernments, and bear the bur den of l ost oppor tuni ti es and economic insecurity, unless strong and sm art hoc ices are m ade. “Ther e i s no magi c puddi ng. G overnment must strive ot live within its means, not sim pl y because i’ t s a good t hi ng t o do, bu t to ensure we have t he f unds avai lable to invest, create obsj and grow the Queensl and econom y.” TR EAS URE R TI M NICH OL LS, 2013 QL D BU DGET ADDRE SS OF THE TR EA SUR ER Fi nal Plan – The St r ongest & Smart est C hoice 14

Queensl and’s stat e debt i s expected t o grow if no act ion si akent Now 2013- 2014 $80bn total stte a dbt e $121bn total stte a dbt e Fut ur e wit hout acti on 20 22-2023 That equat es t o an nt i erest bi l o f 2013- 2014 2022- 2023 $4bn stat e i nterest $7bn stat e i nterest Or borrowings per per son of 2013- 2014 $16, 209 per per son 2022- 2023 More than $21, 000 per per son Or an interest bil l per hour of 2013- 2014 $450, 000 stat e i nterest per hour 2022- 2023 $750, 000 stat e i nterest per hour Queensl and’s popul at i on i s expected t o grow over t he next decade 2022- 2023 5. 6mil 4. 7mil 2013- 2014 but t he popul ati on is agei ng meani ng a ar l ger pr opor ti on of t he populaton i ar e not in the workforce 2013- 2014 13. 83% 2022- 2023 16. 29% per centage o fpopulat i on aged 65 and older Wih t Queensland’ s p opulaton i gr owing and aging, t he dem and for g overnm ent servi ces will conti nue t o g row i nto the futur e 2013- 2014 2022- 2023 Cost of fundi ng $11. 254bn $17. 711bn $13. 130bn $24. 370bn $7. 119bn $11. 300bn Educaton i Healh t Infrastru cture Queensl and’s Plan f or Secure Finances and a St rong Econom y 15

“Queensl and has seen het most dr am atic weakeni ng in tats e finances si nce 2007. .. [ I ncreased expendi t ure by] the Labor governm ents ni of fi ce after 1 997... eft l the St ate exposed when i t experi enced a steep declne i in revenue after 2007. I t cont inues to str uggl e w ith a ar l ge oper ati ng deficit . The new governm ent i n 2012 has t aken a much st r onger appr oach t o cur bi ng oper ating expendi t ure and t he capial t pr ogr am is moder at ing as project s are com plet ed.” ‘ STA TES OF DE BT’ , ROBE RT CA RLI NG , CE NTR E FORI ND EPEN DE NTSTU DIES , MA RC H 2014 “The borrowing pr ogram of the Stat e i ncreased astf er than the gr owth i n t he S tat e r evenues over t he past f ive years, and accor di ngly i ts capaciy t to reduce debt is wo rse than i f ve years ago. ” AUDITO R GE NER AL /Q UEE NS L AN D GO VER NM EN T F INANCIAL STATEMENTS REPORT TO PARLIAMENT NO. 7 “Like any organi sati on, ( the Gover nm ent) must live withi n i ts means and soundl y m anage t he f inances o ver thee long t rm.” AUDITO R GE NER AL /Q UEE NS L AN D GO VER NM EN T F INANCIAL STATEMENTS REPORT TO PARLIAMENT NO. 7 Act i on pl an: Budget repair to date The s cal e of he t debt problem has been apparent orf sever al years. I n 2 009, the previ ous G over nment sol d or l eased a ange r of assets, ncli udi ng par t of Queensl and R ail, State Forest sand the Port of Brsbane i ot address the api r dly gr owing debt . Ho wever , thi s di d not l ead t o alasting i mpr ovement ni debt level s because of a ailur f e ot rei n in spend ing and pay down debt. When t he urrent c Gover nm ent wa s el ected, Q ueensland was on t rack ot reach record evell sof debt . In t he previous Gover nm ent’s last ofi fci al budget docum ent they had debt reachi ng $85. 4 bi l lion or $ 17,600 per per son in 2014-15. Thi s G overnment immediat ely appoint ed het Independent Q ueensland Commissi on of Audit to seek recommendat ions on st rengt henin g t he econom y and rest ori ng the Stat e’s if nancil a position and long- term security. Fol low ing t hese recommendat i ons, the Gover nment implem ented a new B udget strategy and si gnificant fi scal repai rin the 2012- 13 Budget, with measures estimat ed t o have saved $7. 8 billio n over t he per i od 2012- 13 to 2015- 16. The Gover nm ent has made savings by cut ti ng w aste il ke havi ng G over nment corporate boxes at stadiums and exi t ing businesses such as het Gover nment printer and a G over nment nur sery busi ness, w hich were not core b usinesses and were dr ai ni ng f unds f r om essential g overnm ent servi ces. Char t 10: B enefits of fiscal repai r on fi scal balance $ billi on 2 0 -2 -4 -6 -8 - 10 2013- 14 2 014-15 2015- 16 2016-17 2017-18 Budg et Defici t Deficitposit i on w ithout budget r epai r Budg et Surpl us Sour ce: Econom ic and fi scal chalenges l Fi nal Plan – The St r ongest & Smart est C hoice 16

Char t 11:T he 2011- 12 Mi d Y ear Fi s cal and Econom ic Revi ew the( former Gover nment ’s last budget do cum ent ) Tabl e 16 N on-financial Publ ic Sector Balance Sheet 1 2011- 12 B udget $ million 2011- 12 Revised $ milli on 2012- 13 Pr oj ect i on $ mill i on 2013- 14 Projecton i $ million 2014- 15 Pr oj ect i on $ mill i on Assets Fi nancial A sset s Cash and deposi ts 1 ,996 2,080 2,31 6 2, 569 2, 687 A dvances paid 1,296 1,117 1,114 1,111 1,128 I nvestments, loans and pl acement s 34, 466 3 4,845 35,894 37, 263 38, 263 Receivables 4 ,565 5,283 5,45 1 5, 627 5, 748 Equi ty I nvestments ni other pu bli c sector entiti es ( 1,088) (1,511) ( 1,5 11) (1 ,511) ( 1, 511) I nvestments - other 2 22 285 345 36 0 378 Tot a l Fi nancial Asets s 41, 458 42,100 43,609 45,421 46,693 N on-financial Assets Land and ot her f ixed asset s 240, 347 23 2,140 243,207 251, 825 259, 526 Other non- f inanci al asset s 791 917 982 1, 054 1, 170 Tot a l Non-financi al Assets 241,13 8 233,057 244,188 252,879 260,697 Tot a l Assets 282,59 6 275,156 287,797 298,300 307,390 Li a bilities Payabl es 4,12 3 4, 657 4, 795 4 ,881 4,984 Super annuati on liabilit y 2 5,832 25,677 25, 929 26, 102 26 ,127 Other em ployee benefits 5,598 5, 723 6, 122 6, 542 6,955 Depo sits held 16 23 25 28 30 A dvances eceir ved740 584 572 555 511 Borr owing 65,088 62,352 74,172 81,378 85,378 Other l iabiiti l es 4,176 4,859 4,910 5,094 5,210 Tot a l Li a bilities 105,573 103,875 116,527 124,580 129,195 NetWo t r h 177, 023 171,282 171, 271 173, 719 1 78,195 NetF nanci i al Worth 64,( 115) ( 61,77 5) (7 2,918) ( 79, 159) ( 82,502) NetF nanci i al Li abilities 63,028 60,264 71,407 77,648 80,991 Net D ebt 28, 085 24, 916 35,445 41,016 43, 841 Notes: 1. N umber s m ay not add due t o roundi ng. St ate Budget 2011-12 Mid Year Fiscal and Economic Review $85bn Debt Sour ce: 2011 - 2012 Mi d Y ear Fi scal and Econom ic Revi ew Queensl and’s Plan f or Secure Finances and a St rong Econom y 17

The Gover nm ent has also akent a num ber of t ough d eci sions that have put Queensl and’s budget on track t o return to surpl us i n 2015-16 – the first fiscal surpl us in a decade. These savi ngs i nclude: Cutting spending on cont r actors, onsc ultants, adver tisi ng and travel . A bolishing redund ant car bon schemes. Re f o c u sng i t he Fi rst H ome Owners Grant t o pr ovi de a b oost orf new const ruct i on. A dditional depar t ment al savi ngs of $100 m illion per annum from 2014-15 onw ards. In t he decade o t 2011- 12, expenses grow t h averaged 8. 9% a year. The Governmnt e ’ s m easur es i n t he 201 2-13 Budget resulted in xpens e es grow th of just 0.2%, t he l owest since accrual account ing comm enced i n 1 998-99, and a gr ow th of onl y 2. 2% i n 2013- 14. A fall in actual empl oyee expenses i n 2 012-13 of 0. 7% ( or $120 mill i on) and a fur t her $224 millio n (1.2%) in 20 13-14, has made a major cont r ibut io n to this outcom e, and cont r asts wit h average em pl oyee expenses growth of 8.6% per annum in the decade to2011- 12. “Thi s r eduction i n debt can not be done by adj ustments ot the St ate operatng i stat ement . To lli ust rat e, fi the Gover nment were t o achi eve a consi stent fiscal surplus of 1% of r evenue year after year, it w ould take 50 years t o reduce dbt e by $25 billion. ” INDEPENDENT QUEENSLAND COMMISSION OF AUDIT FINAL REPORT, FEBRUARY 2013 16% 14% 12% 10% 8% 6% 4% 2% 0% 2002- 03 2003- 04 2004- 05 2005- 06 2006- 07 2007- 08 2008- 09 2009- 10 2010- 11 2011- 12 2012- 13 2013- 14 2014- 15 2015- 16 2016- 17 2017- 18 A nnual grow th Aver age 2001-02 t o 2011- 12 Aver age 2012-13 t o 2017- 18 Char t 12: G eneral G over nment Ex pense Grow th Sour ce: Repor t on Stat e finances ot 2012- 13, 2014-15 St ate Budget . Fi nal Plan – The St r ongest & Smart est C hoice 18

The government has al so t aken t ough but discipli ned acton i by: Increasi ng coal royalty atr es. Increasi ng tansfer r dut y rates on proper ti es val ued at over $1 milli on. Increasi ng gam bling t axes. Increasi ng t he dut y r at es on gener al i nsurance poduct r s. Ext ending t he Em er gency Management , Fire and Rescue Levy. Deferri ng the planned increase i n t he payr oll axt hrt eshold, to deliver an addi ti onal $315 mill i on i n r evenue bet ween 2013- 14 and 2016- 17. These choi ces have meant bor r owings at 30 June 2016 are orf ecast to be $9.2 billi on low er than the compar abl e estimat e i n he t Independent Q ueensland Commissi on of Audit’s ntI erim Report. Butwhil e heset decisions have signi f icanty l slow ed t he gr ow th of debt , they have not r esulted in the necessary r educti on i n d ebt . What must be done now? Before the Government can turn its big pl ans to build a stonger r econom y into r eality, we must f irst deal wi th t he accumulatd e debt of t he past 10 years. The Ind ependent Queensland Commission of Audit recomm ended t he Stat e reduce is t debt by $25 to $30 billi on. Thi s w ill reduce the interest bil l by about $1.3 billion, t o a level w here paym ents are sustainabl e and will not im pede t he G overnm ent ’s plans t o build for the future. Queensl and wll i be able to fford a the critical i nfrastuct r ur e a grow ing St ate needs, as well as capacity to buffer against future events. “Queensl and’s if nancial po siti on is unsust ainabl e. The Stat e i s currently locked into a debi litat i ng cycl e of over - expenditure, vee r-increasing level s of debt , and cr i ppli ng increas es ni debt servi cing costs. A major t ask of fiscal repai ris mperai t i ve t o prevent further damage to the futur e prosper ity of the St ate.” I NDEPEN DE NT QUEEN SLA ND C OMMI SSI ON O F A UDI T INT ERIM R EPO RT, JU NE 2012 Queensl and’s Plan f or Secure Finances and a St rong Econom y 19

Char t 13:Pl anned and m et hodi cal approach ot f ixi ng Q ueensland’ s f inances 2012 29 MARC H 2012 Commissioners for Commissi on of A udi t announced. 5 MAY 2012 New wages fram ework for the public service announced. 17 MAY 2012 Treasury ( Cost of Li vi ng) and Other Legislati on A m end ment Bll i Int r oduced t o P arliam ent. 1 JU NE 2012 New GOC Chair s announced. 7 JU NE 2012 QTC provi des advi ce on unsustai nable position of t he Bu dget. 14 JU NE 2012 Newman Go vernment exceeds $100 million savings tar get . 15 JU NE 2012 I ndependent Queenslnd a Commission of A udit nti erim r eport released. 19 JU NE 2012 Treasury ( Cost of Li vi ng) and Other Legislati on A m end ment A ct passed by Par l iam ent. 30 JU NE 2012 Creati on of Pr oject s Q ueensl and. 11 JU LY 2012 G overnment’s initial response t o the Commissi on of Audit’s ntI erim Repo rt tabled ni par liament . 11 SEPTE MBER 2012 Queensl and H ealt h B udget incr eased 7. 3% t o $11. 862 bi l lion f or 2012- 13. 11 SEPTE MBER 2012 Delivered het 2012- 13 St ate Budget - aonce in agener at i on B udget charting t he cour se for Queensl and’s if scal repai r. 26 NOVEMB ER 2012 Ra tng i s agency St andar d & Poor ’ s endor ses the Newman Go vernment’s fiscal repair plan, reaffirm i ng Q ueensl and’ scredit rati ng as AA+ with a stabl e ou tl ook. 2013 28 FEBR UARY 2013 I ndependent Queenslnd a Commission of A udit’ s Fi nal Repor t handed to Gover nment . 12 MARC H 2013 Impr oved Budget account abilit y and tr anspar ency t hrough enhanced Par lam i entar y scr uti ny of Gover nm ent spending. 30 APR IL 2013 G overnment’ s r esponse t o t he I ndependent Q ueensl and C ommissi on of Audit’s Fi nal Repor t r eleased. 26 MAY 2013 G overnment announces fall s i n r evenue of $4.5 billion since com i ng t o office. 4 JU NE 2013 Delivered het 2013- 14 St ate Budget - focuses on gr owing Q ueensland’ s econom y, ebuildi r ng after natural di sasters and m aki ng com munities more resilient for the future. 4 JU NE 2013 The 2013- 14 Budget outlined a 4. 5% i ncrease ni healt h expendi tur e (t o $12 .3 billi on) and a 6. 6% increase i n educaton i expendi tur e ( t o $11. 4 bi l i on). 11 OCT OB ER 2013 St ate Account s show Queensl and’s economi c gr ow th outstri ppi ng t he r est of the nation. 13 NOVEMB ER 2013 Release of t he 2012- 13 Repor t on Stat e Finances shows expenditure bein g br ought under cont r ol. 12 DEC EMBER 2013 Scopi ng st udies announcement to sell or lease oms e go vernment businesses. Mar ket soundi ng f or pr ivat e sect or investment in electricity retai l and distri but ion asset s announced. 27 DEC EMBER 2013 Release of t he i naugur al Annual Report of Reducing t he Burden of Regul ation in Queensland. 2014 18 MARC H 2014 Release of t he Econo mic and Fiscal Chal lng e es Document (tabled in Parliam ent). 13 MAY 2014 St ron g Cho ices reaches 55, 000 subm ission s. 19 MAY 2014 Fi rst phase of Str ong Choices consultati on comes t o aconclusi on. 3 JU NE 2014 The 2014- 15 Budget outlined a 6% increase i n healh t expenditure (to $13.6 billion) , a 7% increase i n educaton i expenditure (to $11. 8 billion) and an expendit ur e of $5. 4 b illion for transpor t and roads. Fi nal Plan – The St r ongest & Smart est C hoice 20

EX TER NA L F ACT OR S: Impl icatons i of the 2014- 15 Feder al B udget I n May 2014, the Feder al Gover nment deliver ed a Bud get hatt si gnificanty l alt er ed t he cont ext in which the Stat e G overnm ent w as consider ing i ts choi ces f or debt r educti on. The Budget included a num ber of r evi sions t o undi f ng agreemnt e s that wr e e unilaterally determi ned by the Feder al Gover nmnt e . I n doi ng so, t he F ederal G overnment shift ed t he financial bur den of its ow n loomi ng d ebt and defici t pr oblem s t o t he States. The most si gnificant F ederal change was an $80 bi l lion f undi ng cut t o ll a Stat es orf school s and hospitals. The narr ow r evenue base of the Stat es wll i make ti i ncreasi ngl y di fficult t o f und the delivery of t hese vi tal services from 2017- 18 onwar ds. I n addi tion, t he Feder al Gover nm ent unilateraly l rem oved t he S tat e Speciic f Guarant ee (SSG ) aspect of the Nat i onal Health Ref orm A greement, which was designed to ensure a guar ant eed level of additional undif ng would fl ow to the Stat e i rrespective of gro wth in public hospital activity. The Federal B udget also announced that the rate of gr owth i n educat ion f unding to stat es w ould r edu ce from 1 January 2018. I n t hi senvir onm ent, t he Q ueensland Gover nm ent is n ot wi lling t o r educe i ts own fund ing of school educati on. Wihout t st rong and smart choices t hat acknowledge and r espond t o t he Feder al Go v ernment’ s budget , t he St ate Budget will be i n an even w orse position , placing further pr essure on a etr ur n t o sur pl us and our ability to hold a sur plus into the fut ur e. Queensl and’s Plan f or Secure Finances and a St rong Econom y 21

St ron g Cho ices The path to the final pl an The chall enge The Gover nm ent has a com mitment t o econom ic iterl acy and bel ieves Q ueenslander s deser ve t o be ful ly i nfor m ed about t heir Stat e’s if nances. The St r ong C hoices amc paign was designed to help Queensl anders underst and t he pr obl ems reatc d e by the unprecedent ed$80 bi llion St ate dbt e an d $4 billi on int erest bi l , and t he cho ices t he G overnment has avaiable l to educe r hatt debt t o a mor e sust ainabl e l evel. T hose choices are: Si gnificantly increase t axes; Reduce servi ces;o r Sel l or lease oms e assets There are no easy optons. i E ach of these choi ces have different im pacts on t he State’ s B udget, econom y and t he br oader com muni ty. The Gover nm ent must al so t ake into accou nt measures alr eady t aken. Si gnificantly Increase Taxes After being elect ed i n 2 012, the Gover nm ent made anum ber of deci sions to raise revenue and put the Budget on a sustai nable path back to surpl us. These included increases ni taxes and charges, such as: increases i n coal royalty atr es; increases i n tansf r er dut y r ates on proper ti es val ued over $1 m illi on; gam bli ng t ax i ncr eases; and increases i n dut y r at es on gener al i nsurance product s These t argeted tax ncreasei s wer e consi dered vital for fiscal repair. nI det ermini ng t he app ropri ate evell for the increases, het Gover nment ’ s gui ding pr inci ple was always ot mai nt ain a balance betw een achi eving a return to surpl us, whil e not i ncreasi ng t axes t o a point t hat would inhi bit conome i c gr owth o r unf airly increase t he cost of living pressures orf Queenslnd a ers. When consi dering possible further tax increases as prt a of its debt reducti on st rat egy, the Go v ernment wa s sensii t ve t o preserving Queensl and ’s omc pet itive advantage as a low-taxing r egime, compar ed t o ot her St ates. Thi s st atus encourages val uabl einterstat e and nt i ernat ion al nvesti m ent . The 2014-15 St at e B udget shows taxaton i r evenue per capi ta in Queensland was $2,601 in 2013-14 com par ed t o an average of $3, 137 acr oss the ot her Stat es and erri t tories. As the Gover nm ent works to streng then Queensland’ s f our - pillar econom y, f ounded on agrcul i ur t e, tourism, const ruct i on and resources, it is committed to maintai ning thi s advant age, which w ill help stimulat e i nvestment and f uel j obs gr owth in these vi tal sect ors. Sum mary Impact of si gni fi cantly increasi ng t axes: Requi r e a d oubling of tot al stat e t axati on, which w oul d dr amat ically incr ease t he cost of doi ng business and discour age i nvestment and j ob cr eati on Re s u l t in an $80 0 m illi on hit to the Queensland economy, w hen i t can least afford it Mean t he l oss of 10, 000 j obs Sever ely reduce housing af for dability for famlie i s and fi rst hom e buyer s t ogether with redu ci ng const r ucti on act ivity Make Q ueensl and based resource com panies essl com petitive, forci ng them to consider thei r oper ations and Make t he f amily motor vehicl e registraton i costs het highest in the nation Reduce Services Si nce 2012, t he G over nment has taken is gni fi cant steps t owar ds m aki ng t he publ ic servi ce m ore cost-efficient , flexi ble and responsive to the needs of m oder n Q ueensl ander s. I t has r educed exp enditure ni a num ber of w ays, ncl i udi ng: Depar t ment al expenditure savings of $4. 5 bi lli on over f our year s, mai nly t hrough redundancies. Fiscal repair measures in 2012- 13 w er e f ocused on the Gover nment s’ com mitment to reduce w ast e and improve efficinc e y t hrough expendi tur e r estraint Reduct ion sin t he use of con tractor s, consultants, adver tising and tr avel Li miting the First Home Owners Grant ( now the Great St art Grant ) so hat t it is no l onger avai labl e for establshed i homes Fi nal Plan – The St r ongest & Smart est C hoice 22

Fur ther department al savings of $100 million per annum f r om 2014- 15 onwar ds Impr ovi ng pr oduct ivi ty by tr ansitioni ng to become an “enabler”, not a “doer. ” The Gover nm ent has been p ursui ng cont estabiit l y f or the pr ovisi on of ser vi ces ni the health, comm uni ty servi ces, rt ansport and trai ning sector s. Divestment sand cl osure of non-cor eservi ces and accom m odati on, such as G o Print, QFleet, G overnment N urser y and he t lease of Queenslnd a G overnm ent Bu idi l ngs As the most decentalis r ed State in Australia, Q ueensl and p oses particul ar chall enges t o go vernments committed t o ensuring all Q ueenslander s, not just t hose l iving i n he t South East corner, have adequate access to essent ial services. In addii t on, as t he pr opor ti on of older Queenslander s cont inu es ot gr ow mor e qu ickl y t han younger ones, Q ueensland is experi encing dr amatc i ncreasi es ni demand f or gover nment services such as health arc e and di sabiity l services. The Gover nm ent is t herefor e consci ous t hat reduci ng servi ces could affect t he peopl e w ho need hem t most. For exampl e, the largest areas of Gover nm ent spending are ni healt h ( 28% ) and education ( 23% ). T here were more than one million admissions to publ ic hospitals ni Queensland i n 2012- 13. I f a 1% reduct io n i n f undi ng t ransl ated nti o a 1% r educti on in activity, hit s w ould mean that publi c hospi tal s coul d m anage 10, 000 ess l admission sin a year, whch i would have a sever eimpact on those who can not afford private heal t h care. Char t 14: T otal State Owned Asset s St ate Assets $291 Billi on Asset transactons i 11.6% of tot al St ate assets Sum mary Impact of r educi ng ser vices Mean t he l oss of 30, 000 p ubli c sector jobs, i ncludi ng t eachers, doct or sand nurses Woul d r everse het im pr ovements in surgery, em er gency depar tment wa i ti ng times nda dent al care achi eved by t he G overnm ent Massively i ncrease G o C ard f ares for public transpor t users Re s u l t in 10, 000 f ewer hospi tal adm isi s ons per year See a decrease ni the number of poli ce, fir e and emer gency ser vices, correctons, i di sabilities and chi ld safet y em ployees Re s u l t in less undif ng f or no n-gover nm ent servi ces pr ovider sand comm uni ty organi sations Lease or SellAss et s The Ind ependent Queensland Commission of Audit recomm ended t hat t he G overnm ent evaluat e w hether conti nued i nvestment in Go vernm ent-ow ned corporat i ons, and t he r evenue f r om them , outweighs the benef its for the St ate ni reduci ngd ebt an d put ting t he proceeds t o work i n new and productive infrastuct r ur e. In its inalf r eport, the Commission nom inat ed 12 Gover nm ent-owned corporaton i sfor potential divestm ent , subj ect to market condi t ions. The Gover nm ent accept ed som e of t hese recomm endations, while rejectng i other s: specificaly l t he sale of Ener gex, Ergon and Pow erlin k and Queensland I nvestment Corporation (QIC). The tot al value of t he st ate’s asset s i s about $291 bi llion. T he assets t he Gover nment w as prepared ot consider for sal e, easel or private sector par t ici pati on r epr esent about $33.6 billion on a book- value basi s – about 11. 6% of t he State’s t otal assets. Queensl and’s Plan f or Secure Finances and a St rong Econom y 23

CH AR T 15: ASSESSMENTOF CHOICES OVERFORWARD ESTI M A TES Fur ther increase axest Fur ther reduce ervis ces Lease assets STA TE St ron g Cho ices Feedback Econom ic gr owth Gener al gover nment fi scal bal ance Si gnificant l y r educe debt Reduce nti er est expense BU SI NES S Co m p e tti i ve tax envir onm ent Increased b usiness oppor tun ities Job creati on Q UEE NSLA ND ER S Access to nw e infrastuct r ur e Cost of living Fr ont l ine servi ces KEY Pos i tive Neut r al Negative 24 Final P lan – The Strongest & Sm ar test Choce i

$69. 80bn SU STA IN AB LE LEV EL TA RG ET U NSU STA IN AB LE LEV EL 0bn 10bn 20bn 30bn 40bn 50bn 55bn 60bn 65bn 70bn 75bn 80bn Payr oll Tax Increase t he P ayrol l Tax rat e on “Mum and D ad”sm all businesses by Queensl and currently has a com petiti ve payr ol l tax egimer with a atr e of 4. 75% and a t hr eshol d o f $1.1 milli on i n w ages. Increasing payr oll tax... i MORE NFO I 50% r at eincr ease t o 7. 13% SA VING $7, 393m Li s teni ng t o Q ueenslander s A cor e com ponent of t he St r ong C hoices cam paig n wa s Au s t rala’s i first interacti ve ‘Peopl e’s Budget ’, which gave peopl e t he chance o t nomi nat e t heir ow n spendi ng and savings priorities withi n a St ate Budget fram ework, and submit them to he t Gover nment . More t han 255, 000 peopl e vi sited www.Str ongChoices. qld. gov. au and m or e t han 55, 000 people compl eted and subm itted het i r ow n Peopl e’ sBudget , online or in printed form, telli ng us thei r pr ior i ties for saving and spendi ng. Thousands mor e vi sited informati on booths and parici t pat ed i n comm unity forums, r oundt able discussions and vir tual t own hall meeti ngs host ed by the Qu eensl and Teasurer r Ti m Nicholls thro ughout the St ate. Almost half of those Q ueenslander s – 46% – supp orted asset transacti ons as t he main m eans of reducing debt ; 28% of submssi i ons most ly f avoured raising t axes and 8% most ly chose cutt i ng ser vices. The emr aini ng 1 8% of subm issions sh owed no st rong preference for t he m eans of reducing debt. “Gov ernments have t o m ake t ough choi ces... We w ill be far better off if they m ake these decisi ons sooner rather than later. Leavi ng t he pobl r em to futur e t axpayer sis deeply unf air.” J OH N DA LEY , CH IEF EXECUTIVE OFFICER, GRATTAN INSTITUTE, MAY 2014 Queensl and’s Plan f or Secure. Finances and a S trong E conomy 25

Is there a Four t h C hoice? During this consultati on phase, som e peopl e asked i f t here was a “fourth hoc ice”: an alternatve i besi des si gnificant l y raisi ng t axes, cutting servi ces or leasi ng or selling asset s. Some comm ent at or s have suggest ed t hat rel yi ng on economic gr ow th alone, r ather than adopting specii f c debt reduct ion strategi es, could be that choice, argui ng t hat gr owth will ul timat ely generat e enough addi ti onal government r evenue t o cover nt i erest paym ents. H owever , thi s i s not consi stent wit h Treasur y pr ojectons i of Queensl and’ seconomi c gr ow th in the St ate Budget and in the Econom ic and Fiscal Ch a lenges l paper r el eased in March 2014. Thi s anal ysi s f ound Queensl and ’s atr e of econom ic growth i n t he com i ng decade shoul d be str onger t han t he r est of t he nat ion. H owever , t he econom y al so f aces struct ural chale l nges i n the for m of l ower rat es of working age populati on gr ow th, pr oduct ivi ty gr owth and labo ur for ce partici pati on. Un less there is concert ed pol icy acti on to address t hese chalenges, l the Treasury mod el i ng show seconomi c gr ow th ( and hence r evenue g row th) is expect ed t o b eslow er over t he l onger t erm than in he t past. Whie l het Gover nment hs a already cut w aste and adopt ed pol ici es t o rein i n spendi ng acr oss por tfolios, these savi ngs ar e n ot expected to be enough to mat ch a risi ng dem and f or ser vices, particularly in healt h, educati on and disability services, w hich will result in xpens e es overal l outpaci ng revenue grow th . Housin g and comm unity ers vi ces, pol ici ng and educati on are alr eady exper ienci ng aver age annual g row th r ates of 8% or more. O f t he $24 billi on in additional ecurrer nt expenditure ni the last 10 year s, 70% of the increase occurred i n j ust fi ve years, betw een 2005- 06 and 2010- 11. Econom ic and Fiscal Ch a lenges l Interim Result s of Medi um Te r m Modelling March 2014 The Ind ependent Queensland Commission of Audit made similar f i ndings in it s Fi nal Repor t , delivered i n Febr uar y 2013, not i ng t hat “the Queenslnd a econom y has been dr iven over the last 25 years arl gely by populaton i gr owth, i ncreased w orkfor ce par t ici pati on and the developm ent of t he Stat’s e v ast mineral resources. [But ] Queensl and cannot r ely on these factor s al one t o drive its economi c gr ow th over the next 25 years or so.” Instead, t he Com mssi i on w arned that “based on var ious scenarios developed by the Commissi on, long term econom i c pr ojectons i show that Q ueensl and’ s per capi ta economi c gr ow th rat e over t he next 40 year s i slikely to be signi fi cantly owl er than t hat of the last 25 years. “If Queensl and does no t engage in long-term planni ng in an order ed and coher ent w ay, it will be or f ced by cr isis ot r espond t o em erging p ressures ni an ad hoc and sub -op timal m anner. T his will lead to harsher adjustments and poor er out comes for t he Stat eof Queensl and. ” Regar di ng debt r educti on speci fically, the Commissi on concl uded t hat the ‘f our t h choi ce’ opti on would not be enough. “To illustrate,” het Commissioner s w r ote, “i fthe Gover nm ent were t o achi eve a ons c istent fi scal surplus of 1% of revenue year aft er year, ta i w ould t ke 50 years to reduce debt by $25 billion ( ignor i ng gr owth in the base and inflaton i im pact sfor simplicity).” I n shor t, Q ueensland faces an economc i hallec ng eshared by many developed nations. Around the world, mature economi es are batli t ng to meet het needs of agei ng popul ati ons, particularly in health are,c w hile the relatve i pr oport i on of t he po pulaton i of working age – t hat i s, t hose pr i marily uelf li ng econom i c gr owth and cont ri buti ng to gover nment r evenue t hr ough t hing slike pyr a ol l tax – cont i nues to decline. The Draft Plan Queensl anders overwhelm i ngly told the Gover nment t hr ough t he Str ong Choices campai gn t hat they bel ieved het $80 bil l i on St ate debt wa s too lar ge, and t he gr owng i interest bll i was a signi f icant brake on he t St ate’s pl ans for gr owth and pr osper i ty. H owever , most di d not support i ncreased taxes. Nor did Queenslnde a r s want services cut . While there wer e no easy choi ces, sseta transactons, i such as easil ng or selling some assets, were clearly het favour ed met hod of m ost Queensl anders ot substant ially r edu ce het debt. The Gover nm ent listened ot thi s val uable feedback romf the communi t y, and com bined it with independent advi ce received through the I ndependent Queensland Comm ission of Audit , Queensl and Treasur y and Trade r eport s, and ot her econom ic naa lysis such as t he G rattan Institut e’ s‘ Budget Pr essur es on A ustrali an G overnm ent s2014’ . 26 Final P lan – The Strongest & Sm ar test Choce i

It also ookt into account the 2014-15 Feder al Budget . The Gover nment r ecogni sed hatt to ai r se State axest and l evi es after at ough Feder al Budget w oul d be an unf air “d ouble wham my” that w oul d r isk signi fi cant i ndivi dual har dship as well as threat en Q ueensl and’ s pr omising gr owth. Nor was it plausible to make up he t difference eftl by Federal changes by cuti t ng ser vices i n uch s vital sectors as Health na d Educaton. i After consider ing all of these fact ors and per spectives, het Gover nment released itsDr aft Plan of A cti on on June 3. The Draft Plan outl i ned a pat hw ay t o r educing t he State debt to a sustainable level of $55 bil li on t hr ough a series of asset transacti ons, incl uding sales, long term easesl and pri vate nvesti ment . A por ti on of the direct proceeds from t hese tansact r ons i would t hen be used t o est ablish t he St r ong C hoices Fuur t e I nvestment Pr ogr am, a range of funding pools dedicat ed t o suppor t ing jobs and st imulat i ng t he Q ueensl and econom y by building schoo ls, hospitals, r oadsand other vital infrastructur e. TH E STRO NG EST & SM A RTE ST C HO I CE Q UEE NS LA ND ’ S PL AN FO R S EC URE FI N AN CES AN D A S TR ON G ECO NO M Y Great stat e. Great opportun ity. AUDAX AT FIDELIS Queensl and G over nment Fur ther feedback romf Q ueensl ander s U nveiling the Draf t Plan dur ing the deli ver y of t he S tat e Bu dget, Treasurer Tim Nichollsinvi t ed m or e f eedback on itsdesi gn , in line with the Government ’s real nda ongoi ng com m itment to listening t o Q ueensl ander sabout the futur e of thei r St ate. Si nce is t elr ease on June 3, the Gover nm ent has engaged wit h Queensland business l eaders, com m unity spokespeopl e, i ndependent econom ic analyst sand members o fthe publi c ar ound the Stat e t o hear heit r vi ew s on the Pl an. It became clear dur ing this onsc ultat i on per iod t hat wh i le Queenslnd a er s suppor t ed t he G overnm ent ’s commitment ot tacklng i the St ate dbt e , m any w ere concerned about selling asset s. They ecognir sed the threat posed by t he Stat’s e billi on- dollar int erest pym a ent s, and coul d see t he pot ential for furt her i nvestment and econom ic stimul ati on if t he bur den of tho se payment s coul d be lifted. B ut they rem ained r eluct ant to lose a stake ni t hese public enterprises. I n r esponse t o Q ueensl ander s’ concer ns, the Governm ent has deci ded not t o sel l the asset s. The deci sion was made ot repl ace t hat aspect of the debt reduct i on st rat egy w ith an alternative that wi l allo w Queenslanders to retai n owner ship of t he assets, while still deliveri ng the best possi ble if nancial ou tcom es for the St ate. Queensl and’s Plan f or Secure Finances and a St rong Econom y 27

CO M MU NI TYLE AD ER RO UN DTA BLE S Held throughout Queenslnd a , het t w ohour m eeti ngs wth i the Treasurerh ve a br ought ogett her mor e than 380 leader s f r om Ch a m brs e of Commerce, ndusti y r groups, uni ons, Councis, l not-for-pr oft i gr oups, education and ervi s ces sect ors ot dicuss s t he choi ces, fiel di ng hundr eds of questons i and stat ement s. “Where will t he debt l evel be i n f i ve year?” s Gladst one R oundtabl e PEO PLE’ S BU DG ET NTERACTII VETOOL An Au s t rlia a n frst i , the People’s Budget gives people an insight i nto the Budget process by provi ding a r ange of i nf ormati on t o understand t he choices vailaa bl e t o G over nment t o r educe debt . “A very enlightening exercise – har d deci sions need ot bem ade– asacr ifice byeveryone i srequi r ed.” Peopl e’s Choice submissi on S outh Str adbr oke CO M MUNITY FORUMS Publc i orf um s with the Treasurerw ere opent ocom muni tes i across Qu e e n sand, l wth i mor e t han 400 people akit ng up he t opporuni t y t to ask a question or m ake a di r ect tats em ent on the ‘Strong Choices’ ni het 15 t wo-hour f or ums. “Howw ould assetl easing ealr y l work?” Bokar i na Co m munity Forum The People’ s B udget 55, 664 Peopl e’s Budget Submssi i ons Toow oomba Regi on Most ubs missi ons r eceived 93% of submssi i ons uppors t ed r einvestng i nti erestsavi ngs Over 27,400 Stong r Choices socialm edia conversations Co m munit yLeader R oundtabl es Vi ru t a lTo wn Hals l Co m munity Forums Infor m ati on B ooths Ca ins r He r v e yB a y Tow ns ville Noosaville Mount Isa Noosa Heads MackayK ngar i oy Ca ins r Ro c k h a m pon t Longreach Mar oochydore Ka w a n a Em eal r dC aloundr a Gl a d sone t North Lakes Bundaber g C hermside Ch a r lvill e e T oowoomba Tow ns ville Brisbane Ca rnda i le Ipswich Mt Gr a v at Mount Isa Sprngf i i eld Lakes Logan Hel ensvale Sout hport Surers f P radis a e Robina Longreach Rockham pton Broadbeach Em eal r d Gl a d sone t Bundaber g Ch a r lvill e e He r v e yB a y No oavi s l e N oosa Heads Kingar oy Ka w a n a Maoochydore Cal oundr a Nort h Lakes Ch e r mide s Toow oomba Br ibane s Ca rnda i le Ipswich Mt Gr a v at Sprngf i i eld Lakes Logan Hel ensvale Southpor t Surers f P radis a e Robina Boadbeach r 28% of submssi i ons mosty l chose axest 8% of submssi i ons mosty l chose reduce ervis ces 46% of submssi i ons mosty l chose selling or easingl assets 18% of submssi i ons had no ts r ong pr eference VI RT UA L T OW N HA LLS Au t o m aed t alc s l were placed on ourf eveni ngs t hrougho ut Queensland nvii i t ng peopl e t o partici pate ni a virtual owt n hal l with the Treasurerfrom het comfort of heit r ow n hom e. More t han 2 0,000 people partici pated skinga the Treasurer directl y over 1 50 questi ons. “Iw s a wondering i f hert e’s any w ay t he G overnment can put any egi l lat s i on in to afeguard,s ot tops hit shappening i n t he f uture - o t stop Gover nment sspending money where it’snot wisel y done. ” Ou t b a c k& D a ring l Downs Virtual Town Hal l INFORMATION BOOTHS The People’ s B udget nti eractve i oolt w as br ought directly to he t publi c at 27 nf i or maton i booths in hos pping cent r es and libr ares i t hr oughout Queensl and. Thousands of peopl e asked questions, made ubms issi ons and ecei r ved extra nfi ormation boa ut het Stat e’s debt hac llenge. “This has been agr eat wayf ort heG overnm ent ot get more ni touch with het people. ” Robina I nf o B ooth How w e have ist l ened 4. 5% Cu lur t e 6. 2% Educati on 0. 8% Emrgency e S ervi ces 1. 2% Envionm r ent 5. 3% Health 0. 6% ndustI r y 2. 1% nfrasI tructur e 11. 5% nnoI vati on 1. 2% Power suppl y 8. 2% Ra il 3. 3% Re g u lt a i on 21% R oads 4. 9% Spor/l t ei sure 7. 8% Tourism 3. 7% Utli i ties 7. 4% Water Suppl y 10. 3% Ot h e r Sectorssuppor td e for f unding All parts of Ql d 435 Submssi i ons 381 vi awe b s ie t over 2000 pages of submssi i ons Ho ww e r e submissi ons r eceived? A public onli ne submssi i on portal on he t Str ong C hoices Websie. t Direct nge agem ent wih t key com munty i leader s and rpr e esentatve i organi sations. For malsubm ssi i ons eceir ved by QTT and other G overnm ent agencies. Working with Gover nm ent gencia es t o i dentify other opport uniies t orpri or iies t . 28 Final Pl an – The Str ongest & Smartst e C hoice Queensl and’s Plan orf Secure Finances and a St r ong Econom y 29

The FinalP an: l t he St r ongest and Sm ar test Choice The Gover nm ent now prop oses ot offer assets previ ously intended for sal e or pr i vate nvesti ment for l ease only. This means: I ndustrial w ater pipel ines of SunWater and t he gener ation assets CS Ener gy and St anw ell, which were previously nominated orf sal e, wil l now be off ered for lease only. The Ergon Energy Queensl and retai l asset s wll i be included wit h one of the assets to be leased. Electricity distribut i on and tr ansmissi on businesses Ener gex, Ergon and Pow erlink , whichwer e previ ously nom inat ed f or pr ivat e sect or hybr id invest ment, will now also be offered orf l ease. The pro posal t o lease t he Port sof Gladst one ( excludi ng the Port of Bundaber g) and Townsvi l e aggregat ed wth i the Mt Isa Rai l Li ne ( excl uding the Por t of Luci nda) , originally flagged in the Dr a f t Pl an, rem ains unchanged. St ron gest and Sm artest Choice Sector Busi nesses Sr t ongest and Sm ar test Choice Por ts Gladstone Por ts C or poraton i Li mited Lease Por ts Port of Tow ns ville Limited with the Mt Isa Rail li ne L ease Water Distribut io n SunWat er I ndustrial Ppel i ines L ease Electricity Generation St anwell Corporation Limit ed Lease Electricity Generation CS Ener gy Limit ed L ease N on-core A sset s of the Gener ati on and Distr i buti on B usinesses There are a ange r of non-cor e business ctivitia es, such as oac l mines and ret ail el ectriciy t f uncti ons Lease Electricity transmssi i on Powerl i nk Lease Electricity distribut i on Ener gex Limited Lease Electricity distribut i on Ergon Li mited Lease 30 Final P lan – The Strongest & Sm ar test Choce i

By offeri ng t he assets for lease for a per i od of 50 year s, with an option t o ext end f or 49 years houls d key lease conditions be met, the Stat e wll i ret ai n ow nership of the ssets a while allowing the pri vat e sector t o operat e, mai ntai n and expand t he assets over t he l ease erm.t To maximise het value the Go v ernment recei ves, on behal f of al l Queenslander s as owner s, the lease t erms for all asset s are antci i pated ot be 50 years. After t hat time, fi the lessees have met the term sand condi t ions set by the Go v ernment, there will be t he opt ion of an extension for a fur t her 49 year s. Impor t antly, het Gover nm ent can receive the value of future l ease rental sas an upfr ont paym ent, m eaning that the Gover nm ent wi l have swift access t o t hese proceeds t o r educet he $80 billion Stat e debt and i nvest in vital infrast r ucture for Q ueensland’ s f utur e. U nder leasing arrangem ents, t he G over nment expect sit will still achieve a reducti on o f debt of $25 billi on, w ith a ur f t her $8. 6 bi llion for infrastructure proj ects, and an addi tional $3. 4 bili l o n to establish a fund to help ease cost of livi ng pr essures: a ot t al of $37 billi on of anticipat ed proceeds. Cr ii t call y, owner ship of al l these assets will rem ain in public hands. The conditions of t he l eases will be writt en by the Gover nm ent, and will i ncl ude pr ovisi ons t o ensure Q ueensl ander s’ int erest s ar e uphel d, in ter m s of appr opr iat e use o fthe land and assets, safety and ser vice perform ance. Such lease t erms can ncl i ude cer tai n obligati ons on lessees t o ensure busi nesses keep pace wth i market conditions and har ness growth potental i t o benef it het Queensland economy. The Stat e, as t he ow ner, will be bl a e ot recover t he asset should the lessee fai l to comply with the lease t erms. At the end of t he l ease, he t ri ght sto t he oper ati ng assets will return to t he State. $80bn Queensl and Stat eDebt $37bn received romf t he Lease of om s e Gover nment assets $25bn $8.6bn $3.4bn Reduce Stat e debt t o $55bn St r ong C hoices Futur e I nvest ment Program St rong Choices Cost of Livi ng Fund Queensl and’s Plan f or Secure Finances and a St rong Econom y 31

Sale and Lease - How They Difer f SA LE VS. LEAS E Sal e Lease Enabl es debt r educti on Enabl es i nvestment in vital infrastructur e Maximises value Up-f r ont payment U nderst ood by the inv est or m arket Qualify f or Co m monw ealth asset recycling initiative Pr e-exi sti ng regul ati on r em ains Incenti ve t o upgr ade and maint ain the business Maint ain ow ner shi p of t he und erlying asset s Asset retur ned to Queenslander s i n the fut ur e Abilit y t o enforce contact r ual r equirement s on the pr ivat e sector e.g. safet y, security Contr actual termination if key Stat e requirements are n ot met N o asset wi l be leased unil t the Gover nm ent has taken i ts meth odical and discipli ned pl an f or debt r educti on to the next St ate le ecti on. The str ongest and sm artest choice for Queensland is het one that secures Queensland’ s f ut ure, and respect s t he vi ews of Queenslander s. 32 Final P lan – The Strongest & Sm ar test Choce i

A lease will enabl e: G overnment to r etai n ow nershi p of the assets; Ser vice standar ds t o be upheld through the lease ermt s, as w ritten by t he G over nment ; The private sector t o operat e t he busi ness, but w i th assets r everting t o Governm ent on defaul t or expi ry of t he l ease; The private sector t o be r esp onsible for upgr ades and maintenance, reducing the dependence on Stat e debt t o fi nance t hese activities; Pr ivat e sect or capital to be used for expansion of the asset or business; The businesses t o oper ate more effici ently without t he const rai nt sof gover nment r ed tape but wi th pr ivat e sector discipli nes and effici encies; The Stat e t o ret ain the ri ght t o r eclai m the leased assets, houls d the lessee fail to comply wit h key lease ermt s; Pr otecton i f or consumers to continue throu gh exi sti ng r egulat or y f r amew orks, i ncluding st andards for servi ce and el r iabii l t y of suppl y w i thi n t he el ectrici t y net work; Maint enance of safety standar ds; Compliance w ih t existing envir onm ental l egislati on; The Stat e wll i be ligi e bl e t o cl aim f undi ng f r om the Comm onweal th Asset Recyclng i Fund for al l transacti ons, boosting tot al fun ds available for invest ment in vital infrast r ucture; and A substantal i upf r ont lease premum i to be used by t he St ate o:t - R educe debt to a usts ainabl e l evel of $55 billi on, and int erest paym ents ot $2.7 billion, f r eeing up $1. 3 b illi on a year - Establi sh an $8.6 billion, si x-year nvesti m ent pr ogr am to build vital new infrast r uctur e ar ound the Stat e - Establi sh a $3.4 billion fu nd t o hel p ease cost of l i ving pr essures on all Q ueensl ander s. Leasin g Expl ained What is a lease? A lease si acont ract w here het lessee (the user) pays the lessor ( t he ow ner - in this case, t he State) orf t he use of t he asset orf an agr eed period of time. A finance or capital lease i s a lease t hat tansfer r s het ri sks of t he asset(s) from the lessor to the lessee orf the durato i n of t he l ease, while het lessor remai ns t he l egal owner . Why is t here now a decision to lease asset s? Through the Strong Choices campai gn, Q ueensl anders ndii cated heyt shared het Gover nm ent’ s concer n about t he $80 bi llion State debt. Most di d not suppor t si gnificanty l raisi ng t axes or cut ti ng ser vices ot reduce ti . In cont rast , hert e w as suppor t for selling or leasing som e assets ot do so. Combined wit h advi ce from independent exper t s, this suppor t for m ed t he basi s of t he G overnm ent’s Draft Pan l of Ac t ion, r el eased on June 3, 2014. The Gover nm ent al so annou nced t hat ti w ould seekfurt her com munit y f eedback on the Draf t Plan, before releasi ng t he Fi nal Pl an. Since t hen, he t Gover nm ent has consulted with many Queenslander s and our Treasur y and independent f i nance experts. While some assets, such as he t por ts of Gladst one and Townsville, w ere alw ays pr oposed t o b eleased, Q ueensl ander s have voi ced concer ns t hat pr ivat e sector owner ship of t he elect ricity generaton i assets CS Energy and Stanw ell , and industrial water pipel ines SunWater, wo uld mean osil ng cont r ol of these public assets orever.f Whie l het proposed “hybrid” nvesti ment structure for the electici r t y network businesses of P owerli nk, Ener gex and Ergon never represented a sale, som e Q ueensl ander swe r e al so unsur e about the compl exit y of this pr ivat e i nvestment structure, and its impact into the futur e. By imitil ng t hese ransactt ions to leasi ng only, Q ueensland will still retai n ow nershi p of the assets. T he G overnment w ill incl ude key term s in the lease about mini mum ser vice standar ds and key par amet ers about the futur e i nvestment and expansi on of those assets for the benefit of Queenslander s and the econ omy. H o w wi l the infrastuct r ur eleases oprate? e The infrast r ucture l eases would requi r ethe paym ent of an upfr ont lease premum i to the Stat e and are il kel y t o be fi nance l eases where t he G overnment wll i enable het lessee t o Queensl and’s Plan f or Secure Finances and a St rong Econom y 33

assume het ri sks of oper ati ng these assets orf an initial per i od of 50 year s. Should key l ease condi tions be met , het lessee w ould be off ered a r enewal op tion of u p t o 49 years. Th elease entr al wi l be pai d i n one lump sum i nstal ment ta het comm encem ent of t he l ease. A l onger lease t erm makes ti attractive for potential lessees t o oprate e the businesses and nv i est i n t he expansi on of a l eased asset as the conom e y grow s and the demand f or servi ces increases. fI the Government remained as oper ator, ti w oul d need to borrow a fur t her $23bn to fi nance fut ure expansi ons and upgr ades, putting f urt her pressure o n an l a r eady unsustai nabl edebt posit i on. Can debt still be reduced? Yes. When asset s are offered ot the private sector by w ay of a lease, hert e i s usually the paym ent of an upfr ont lease premum i t o the government . This easel premum i w ill be used by the governm ent t o reduce State debt. Ultimatel y, the Gover nm ent expects it will still achi eve a educt r ion of debtof at eastl $25 billi on. H o w wi l safety, securit y and r eliabilit y of the servi ces beaffe ct ed? The lease t erms w ill include performance and delver i y st andar ds to ensure Qu eensl anders’ interests are upheld, particul arly ni terms of reliability, safet y and security. The lessee wll i replace t he S tate as t he operat or of t he asset na d as such will need o t comply with all the Feder al and Stat e l aws with which t he S tat e currenty l has to comply as the owner of the assets. There wll i also be l ease trms e requir i ng t he assets ot be maint ained and insur ed and for v iabl e expansion of t he asset to meet gr ow th, as wel l as term srelat ed t o subl easi ng. There will also be sol vency r equi rem ents placed o n t he l essee. Shoul d t he lessee fail to comply wit h key lease t erms, the State will have the r ight t o r eclaim the leased asset s. Wil pr ices orf use of these servi ces increase? The private sector lessee will operat e t he assets orf the term of t he l ease. T hey will be required to honour exi sti ng cont r act ual arrangem ents hatt have been put i n pl ace by he t var ious businesses. T his will gi ve cer tai nt y t o exi sting user s i n r espect of these fut ur echarges. Var i ous r eport s have shown that assets are operat ed m ore efficient l y by the private sector t han the publi c sector, and over time this could place downw ard pr essur e on elect ricity pri ces. For exam ple, t he N ew Sout h Wal es Go v ernment recenty l com missi oned E rnst & Y oung to invest igate the impact of private owner shi p of el ectriciy t net works on electici r ty bills and f ound t hat f rom 1996-9 7 t o 2012- 13, net work pri ces in t he G overnm ent own ed net works of N ew Sout h Wal es and Queensland increased i n real terms by 122% and 140% respectively. During that sam e per i od i n V ict or ia, w here het networks are pr ivat ely owned, net work pri ces decreased in real terms by 18% . A dditional l y, in the pr ivat ely owned Sout h Australi an net work, f rom 1998-99 t o 2010- 11, net work p ri ces also decreased b y 17%. Char t 16: L ong-term change i n aver age annual el ectriciy t net work pr i ces 160% 140% 140% 122% 120% 100% 90% 80% 60% 40% 20% 0% Vict oria Sout h A ustralia New S outh Wales Queensl and - 20% - 18% - 17% - 40% Sour ce: Electriciy t Net work Services R eport , Ernst & You ng The repor t al so f ound t hat over t he past t wo regul atory determnat i ion peri ods ( bei ng 2000- 2005 and 2005- 2010 f or Ener gex and Ergon) , the privatel y o wned networks substantially outperform ed t he al l owabl e oper ating and capital expenditure set by the AER ( by up t o 20% for operatng i expendit ur e and 17% f or capital expendi tur e). Meanwhie, l the publicly owned networks in Qu eensl and and New Sout h Wales substantiall y over spent against bot h t hei r operatn i g and capital expenditure allowances by( up to 24% for oper at i ng expendi tur e and 39% f or capi tal expendi tur e) . Thi s cl earl y dem onstrates het efficiencis, e w hich can be achieved under privat e oper ati on. It is hit s ef ficiency whi ch, through f utur e A ER det erminat i ons, willassi st t o put dow nw ards pressure on the cost of electici r ty for Queensland households. 34 Final P lan – The Strongest & Sm ar test Choce i

What will im pr ove Subst antial upfront proceeds t o reduce debt and i nterest payment s. Proceeds will not be r educed f rom those estmat i ed ni the St rong Choices D raft Plan of A cti on. El igi bi lity f or fu nding from the Comm onw ealth Asset Rcycl e n i g Fund f or all transactons i = great er fund savailable orf invest ment in vital infrast r ucture. Low e r St ate ir sk exposur e of cont i nuing to r un t hese asset s, which have var iabl e retur ns. Evi dence show sthat egulr ati on i s a mor e effecti ve cont r ol on pri ces hant Stat e ow nershi p, and that pr i vate o peration puts gr eat er dow nwar d pr essure on pri ces. Pr ivat e sect or is esponsir ble orf operaton i and fut ure nvei stm ent ni the assets, meani ng: - t he G overnm ent can ocus f its resour ces on ot her im por tant infrastuct r ure pr ior i ties ar ound t he St ate - t he G overnment w ill no l onger need to bor row t o f i nance t hese commercial activities The businesses can operat ewit hout the constraint s of Gover nment r ed tape, w hich will increase operaton i al ffie ci ency. What will stay het sam e G overnment owner ship of assets. Pr otecton i f or consumer s t hr ough t he exi sting r egul atory f r amew or ks that w i ll cont inue. Consi stent service and reliability of supply - minimum relabili i t y st andards are set by gover nment regul ati on, regardless of w ho ow ns t he asset. Maint enance of safety standar ds and compl iance with existing envi ronm ental l egi slati on. What leasi ng m eans for Q ueensl anders Less debt accordin g t o t he I ndependent Q ueensl and C ommissi on of Audit recom mnd e ati ons, w hi ch al low sfor a reduct ion in the St ate’s debt t o $55bn and t he i nt erest bi ll t o $ 2.7bn. No sign ificant i ncrease ot taxes w hih c w ould dram atically ncreasi e het cost of livi ng and the cost of doing busi ness, di scouragi ng investm ent and job creaton. i N o r eduction t o ser vi ces which would r educe t he num ber and quality of Go v ernment servi ces t o t he Q ueensl and com m unity. I nvestment in jobs and inf rastuct r ure through an $8.6 billi on Strong Choices Future nvestI ment Pogr r am . Create up to 25,000 Ful l Ti me Equivalent jobs in the construct ion and associ ated i ndustries sa a direct result of the St rong Choices Fut ur e Investment Pr ogram . All o w Qu e e n s lander s t o ret ain owner ship of t he assets by replaci ng t he pr oposed sale of assets wth i eases.l Creati on of the St rong Choices Cost of Li ving Fund to reduce cost of living pr essures for Queensl ander s. Queensl and’s Plan f or Secure Finances and a St rong Econom y 35

Consi derat i ons for Asset Transacti ons Be n e ft i s and Risks Reduced Debt vs Loss of R evenue If the Gov ernment leases an asset and uses the f unds received ot pay dow n St at edebt , it will r educe the bur den of int erest paym ents. In Queensland’s case, hat t bur den is n ow consi derable: m ore hat n $4 billi on ann ually and climbi ng. Low eri ng int erest paym ents will f r ee up public f unds to invest i n vi tal i nfrastuct r ur e ar ound t he S tat e. Before moving ahead with sseta transactions it is impor tant ot ack nowledge t he pot ential loss of incom e, i n t he f or m of dividends t he Gover nment currently receives from its Gover nm ent Owned Corpor ati ons ( G OCs) . I n addi tion, t he G OCs pay i ncome tax t o Queensl and. If the Queensl and Governm ent leases t hese busi nesses, it would not con ti nue receivi ng t hi srevenue. T he major i ty of the asset s pr oposed f or l ease i n t he Fi nal Plan are currently retur ni ng r evenue ( di vidends and taxes) . I n 20 12-13, t hese am ounted ot $1. 083 bill i on or 2. 6% of G ener al Gover nment r evenue. H owever , unlike the interest paym ents t hat w ould be saved by r epaying debt, t he earni ngs from these busi nesses ra e not certain, but are sub ject to commercial , envir onm ental and market risks ssociaa t ed with any prof it-maki ng ent erpr i se. T hese nci l ude: Over - supply, com petti i on and r educed dem and, whch i reduce prof i tabiit l y; Resour ces m arket condi tions and t he val ue of t he A ustralian dollar; Feder al Regul ator intervention in t he energy m arket ot set pri ces based on cost ffie ci encies; Changes to Feder al G over nment energy policies; Business efficiency or otherwise; and New ent rants and more efficient replacem ent technol ogy. As such, tiis risky and even wrong to assume that these assets wll i conti nue t o ret urn r evenue t o G overnment of t he sam e or even grat e er val ue i nto the f uture. Changi ng mar ket conditions, com petition fr om ot her businesses and echnol t ogi es, and operat i onal inefficinc e i es under G over nment ow ner shi p may all negat ively impact ret urns from these businesses over time. Si gnificantly, het 1996 Queensland Commission of Au d it recomm ended t he pr i vati zati on of a num ber of Governm ent O wned Corporatons i , especi all y i n t he energy sect or. T he most recent Independent Q ueensl and C ommissi on of Audit estim at ed t he l oss of value to the Stat efor not taking up that recomm endati on i n 1996 w as i n t he or der of $7. 2 bi l lion ( i n 2011- 12 dollars). U nder the pro posed model, the Governm ent will tr ansfer esponsir bility for the costs and ri sks in volved in oper ating these asset s i n a rapi dl y changi ng and uncertain market , but will use t he proceeds from l eases to r einvest i n pr oduct ive infrastructur e. Thi s investment, in additi on t o improving vital infrastructure available orf Q ueenslander s, is ikell y to lead ot furt her r evenue, such as payr ol l tax and royal ties. The Gover nm ent may also nvesti i n t he next gener ation o f economic infrastuct r ur ethat anc gener ate future revenuer fo the St ate. I n t he l onger t erm, het Go v ernment consider s t hat reduci ng the Stat e’s debt, freeing up f unds t o invest i n new i nfrastructure, and transferring business isksr to the privat e sect or outweig h t he pot ential im pacts on t he f i scal bal ance from the loss of divi dends and taxes, notng i again t he uncertai nty of retur ns of these busi nesses ot the Stat e. In this context , ti si i m portant t o recognise hatt t he G overnment has al rady e under taken het steps necessary t o bring t he State’ s annual r evenue and expenditure into balance, wth i fiscal surpl uses proj ected across the or f war d estimates rf om 2015- 16. T his w as the first stage of t he budget r epair recom mended by the Independent Q ueensland Commissi on of Audit. The asset transact i ons r epr esent t he second stage of the Commissi on’ s budget r epair measures, which are focussed on r educi ng debt , while conti nui ng t o ensur e t hat the benef its of t he f irst stage of budget r epair are mai ntai ned. 36 Final P lan – The Strongest & Sm ar test Choce i

Feder al Gover nm ent Incentves i I n May 2014, the Commonw ealt h Gover nment announ ced an incentive withi n t he Feder al Budg et ot encourage het Stat es t o recycle existing asset s t hro ugh m ajor i ty sal e or lease i nto pr oductive economic infrastructure. The Asset Recyclng i I nitiatve i is a $5 Billion i nitiatve i all ocati ng funds to the St at es on a f i rst come first served basis f or new pr oduct ive infrast r uctur e i nvestment financed from asset sal es or l eases. T he f unds ar e avai lable to the Stat es for pr oject sbetw een 1 July 2014 and 30 Jun e2019 and ar e cal culat ed as 15% of the value of t he asset recycl ed, essl any debt r epaid with transacti on proceeds. Thi s i san opport unity orf Queensland to increase t he Stat’ e s r evenue, condi ti onal on the utilis ati on of the proceeds. Quensl e and coul d receive more hant $1bn fr om this initiative. Jobs The natur e and extent of empl oym ent in a leased asset depends on how ef f ici ently the business was being ru n by government and the fut ur e gr owth potental i of t he business. There are likel y t o be changes in the composition of t he w orkforce as a result of t he di f fering dem ands and expect ati ons of t he governm ent and private sect or. For exam ple, t he G overnment m oni tors and requi r es ongoi ng repor ti ng of certain types of expenditure like entertinment a and travel , and issues more ocusedf on t he oper ati on of gover nment . A privat e-sector lessee wll i have a different focus and may r equire employees with different skills. Fur the r investment and gro wth in leased businesses can reat c e new em ploym ent oppor tuni ties. The Str ong Choices Fut ure I nvestment Program i s expectd e t o di recty l suppor t approx imatel y 25, 000 f ul l time equi vale nt ( FTE) jobs in the Queensl and constuct r ion and suppor t ing indu stries. Comm onweal th Serum Labor ator ies C( SL Limited), for exampl e, obtai ned p rivate nvesti ment t hr ough an initial publ ic offering i n 1994. A t that time, C SL Lmi i ted had 1300 empl oyeesi n A ustrali a, had sal es of $170 mill i on and paid $4 mi llion in tax. Today it has over 1 1,000 employees i n A ustrali a and arou nd t he w orld, sales of almost $5 bil li on and pays $300 milli on i n t ax. Pr ici ng/ compet ition G overnm ent-ow ned busi nesses including those in the electici r t y, por t and water pipel ine sect or sare subject t o he t sam e com petition and pri cing arr angement s as t hei rpr ivat e sector cou nter part s under Stat e and Federal l egislati on. Shoul d t hey b eleased, t hey wll i be subj ect to the same pricin g constraints or regu lat ory structures. For exam ple: Whol esal e el ectriciy t pr ices are set by he t Au s t r al i an Ener gy Market O perat or (AEMO) every thirty minut es, based on com petti i ve bids fr om gener ati on plant, s b oth publi c and pr ivat e. All el ectriciy t netw or k busi nesses, whet her publ icl y or pri vat ely owned, ar e subj ect to thee same dtailed evenuer and price regu laton i by t he A ustralian Energy Regul ator (AER). E very five yars, e het AE R set s “alow l ed r evenues” and r evi ews t hei r annual prici ng pr oposals orf compl iance with the Nat ional E lectici r ty Rules. The Queenslnd a Compet ition Author it y m oni tor el ectricity prices charged by el ectricity retaier l s, helping consum er sto better under stand and t ake advant age of he t choices on of fer. Water pri ces are negot iated com mercially bef ore het pi peline is bui lt and usually set for the lif e of the contract. Por ts negotiate onl g t erm agreement s (usuall y abou t 10 year s) wi th t heir customer s w ho ar e t ypi cally large resource com panies hatt pr ovi de pr ici ng cert aint y. A ny nat ural m onopol ies anc be subj ect to r egulaton i if there are concerns t hat monop oly power i s bei ng abused. The Queenslnd a G overnm ent has specifi c arrangem ents orf electici r ty pricing in rural and r egional Q ueensl and. The cost of electici r ty ups ply to Sout h East Q ueensl and is lower than the cost of supply in regional Q ueensland, because el ectriciy t m ust be di stribut ed across m uch greater di stances ot reach customers ni regi onal Qu eensl and. The Gover nment ’s uni form tariff policy (UTP) ensures all Queensland non- mar ket electicit r y customers of a si milar t ype pay the same pr ice for el ectricity, egardlr ss e of where t hey l i ve. As t hese prices do not r ef lect t he ful l costr of elect icit y suppl y f or m ost remot e and regi onal Queensl anders, t he G overnment pr ovi des subsidy fund ing to Ergon Energy Queensl and. In 2014-15 thi s subsidy payment is expected to total ni excess of $650 mi llion. The Gover nm ent proposes to open t he sout h east Qu eensl and el ectriciy t market to competition to encour age elect ricity pri ce com petition betw een retaiers l for the benefit of Queenslnde a rs. The Gover nm ent’ s pol icy hatt r egi onal Queenslnd a er s shoul d pay a pri ce for elct e ricity which i s on a par w i th that pai d by t he residents of Sout h E ast Queensland will not change as a esul r t of the intr oduct ion of price compet ition. Thi s w ill r equir e changes t o the EEQ subsidy arrangem ents, so hat t cust omers can access t he benefit of the subsidy whet her EEQ or a privat ely- ow ned r etaier l upps lies them. Impor t antl y t he subsi dy w ill remai n. Queensl and’s Plan f or Secure Finances and a St rong Econom y 37

“I can underst and t hat people are concerned in relaton i to elect ricity bills. I’d simpl y say that w hilst Ergon, Ener gex and Pow erlink have been in Gov ernment owner ship, t hei r electici r ty bills have cont inued to incr ease. And we know from t he Q ueensland Competiti on Authority that the maj or dr iver of the increases i n power bills (has) been t he car bon t ax and network charges. Carbon t ax – Federal L abor im posed. If that w as r emoved tom or ro w we coul d save almost $147 o n a power bi ll, str ai ght away by remov ing the carbon tax. Scon e dly, el ectriciy t charges ncri eased by invest ment in the networks – that is, Ergon, E nergex andPowerl i nk – to deal wit h under invest ment by pr evious Labor Governm ent s. We all remem ber i n 2004 t he bl ack outs and br ownouts t hat occurred because Labor failed to nvest i i n t hose net works.” TR EAS URE R TI M NI CH OL LS , MED IA D OORST OP, 29 MAY, 2014 Regul ation In matters invo lvi ng pr i cing, com petiti on, heal th and saf et y, envi ronm ent , empl oyment , development and planni ng appr oval s, and ser vice st andards, G over nmentow - ned b usinesses are subject to the same Commonwealth, St ate and local r egulatons i as their privat e sect or count erparts. Shoul d t he assets be leased ot t he pr ivat e sect or, each of the Gover nm ent businesses listed will be subj ect ot the sam e r egul ati ons as t hey r a e now. Pr i vate esseel s will not be subj ect ot additional un necessar y polcy i estr icti r ons o n t hese businesses t o oper ate on a fully commercil a basis, maki ng t he cost of ny a G overnm ent pol icy equir r ement smor e rt ansparent . Evi dence (as outined l in he t Infrast r uctur e A ustralia eporr t, the Produ ctivity Commissi on r epor t on Pu blic Infrastuct r ure -rel eased on 14 Jul y 2014 and the Grat tan nstI itute December 2012 repor t) shows regul ati on i s a more effecti ve cont rol on prices hant Stat e ow nershi p, and t hat pr ivat e oper at ion puts great er dow nwar d pressure on pri ces. Ser vice Standar ds The electici r ty gener at ion, r etai l and network businesses are subject ot the sam e service standar d obl i gations as pr i vate ects or or ganisations under St at e and Comm onweal th law s. The AE MO r equi res la l el ectriciy t generat ors t o com ply with str i ngent techni cal and oper ating st andar ds t o suppl yel ectriciy t in the Nati onal El ect ricity Market . The el ectricit y net works ar e subj ect to a range of performance obligati ons t o co nnect nda suppl y customer s w ithin thei r f ranchi se areas, and m ust devel op thei r netw or k i n r esponse t o new devel opment s and increasing custom er needs. The El ect ricity Act 1996 i mposes st rict obl igat ions on al l electici r ty etr ail businesses in Queenslnd a , whet her private or G overnm ent -ow ned, and t he G over nment is currently consideri ng w hether nati onal rules shoul d be adopted across all el ectriciy t r etaiers l i n Q ueensl and. The s ervi ce standards for water ppel i ine businesses are negot iat ed w ith each customer when the long- t erm cont ract is nte ered i nto and set out i n t he suppl y gr a eem ent. Por ts are an impo rtant part of the r egional econom ies where t hey are l ocated, and it is typical for a lease process t o i nclude an obli gati on t o expand the por t in r esponse to economi c gr ow th and genui ne cust omer dm e and. Queensl and Po rts Strat egy The Queenslnd a Por t sSt rat egy i s t he Q ueensl and G over nment ’s bluepr i nt for managi ng and i mprovi ng t he ef ficiency and envi r onment al managem ent of t he st ate’ s por ts network over t he next decade. The Queenslnd a G overnm ent’s vision i s‘to dri ve econom i c gr owth t hr ough t he ef fci i ent use and developm ent of Queensl and’ slo ng-estbl a ished m aj or port areas, while prot ecti ng and m anaging Queensland’ s o utstand ing envir onm ental assets.’ As a key acti on of Gover ning f or Grow th, t he Q ueensland Por ts Srat t egy sets the drect i i on f or how f ut ure por t developm ents will occur n i Queensland. Through major ref or m to por t planni ng, gover nance, env ironment al managem ent and supp ly chain connections, Queensland wil l lead het way with an efficint e port ntwor e k that suppor t seconom ic grow th and ef f ectively manages envi ronment al obj ectives. The Gover nm ent has committed to driving economi c gr ow th through the establshment i of Pr ior i ty Por t Devel opment A reas PPDAs)( and concent rat i ng por t develop ment i n t hese exit s i ng and long- establshed i maj or por t areas. 38 Final P lan – The Strongest & Sm ar test Choce i

The Re s ult of Str ong Choices Impr ovem ent in the St ate’s debt posi ti on New po siti on The assets listed for lease would pr ovi de $37 billion to the St ate. Thi s upl ift, from the value in the Draft Plan, com es from updat ed bo ok val ues and t he change o t a l ease tansact r i on st r ucture for t he el ectricity transmssi i on and distri but ion businesses. The Gover nm ent proposes to use $25 billi on o f the proceeds orf debt reduct ion, $8.6 billi on to est abl ish the Str ong Choices Future nvestI ment Pogr r am , a six year investment progr am ; and $3. 4 bi l lion to establi sh a fund to hel p ease cost of living pressures. The amount of infrast r uctur e f undi ng m ay al so i ncrease depei nd ng on el igi bi lity f or Co m monw ealt h f undi ng un der the Federal G over nment ’s asset recycli ng incentves. i Thi s w ill r educe the St ate’s i nterest bill from $4 billion t o appr oximatel y $2.7 billion, f r eei ng up $1. 3 bi l i on a year. I t w ould reduce the average debt per per son from $16,209 to $11, 293, which i s m or e equi valent to other stat es. Char t 17: I m pact of asset transactons i on t he St at e’s debt $ billi on 90 80 70 60 50 40 30 $80bn D own $25 bill i on $55bn Tot a l St ate debt before asset transacti ons Tot a l St ate debt after transacti ons Char t 18: I m pact of asset transactons i on t he St at e’s interest bi l $ billi on 4. 5 4 3. 5 3 2. 5 2 1. 5 1 $4bn D own $1.3 billion $2. 7bn Tot a l int erestb fore e asset transacti ons Tot a l int erest after asset transactons i Queensl and’s Plan f or Secure Finances and a St rong Econom y 39

$80bn Queensl and Stat eDebt $37bn received romf t he Lease of om s e Gover nment assets $25bn Reduce Stat e debt t o $ 55 bn $8. 6bn St ron g Cho ices Fut ure Investment Pr ogr am $3. 4bn St ron g Cho ices C ost of Li ving Fund Leasin g assets will also m ean t he St ate will no lo nger have t o f und any capi tal expansio n r equir ed for t hese assets ot meet futur e operatng i r equirement s. nI t he case of pow er stat i on or por t upgr ades, this w ill save t he G overnment $23 billi on over the next ten years alone. Fut ur ecapital expansion wil l be under taken by t he pri vate sect or i n r esponse t o cust omer dem and. The Gover nm ent’s commitm ent t o ongoi ng expendi t ure constraint , coupl ed with a equi r r ement for infrastructure esseesl t o m aint ain and expand t he infrastructure, and a greater relance i on pr ivat e sector fund ing and del iver y model sfor ot her infrast r ucture, will ensur e that the State’ s debt does not again r etur n t o u nsust ainabl e l evels. 40 Final P lan – The Strongest & Sm ar test Choce i

St ron g Cho ices Fut ure Investment Pr ogr am The Str ong Choices Fi nal Plan si a discipl ined and metho dical acti on plan ot low er ing Queensland’ s unprecedent ed$80 billion debt to sustai nable evell . s C onsequently, it will al so reduce t his Stat e’s bur den of i nterest payment s, freei ng up fu nds to reinvest i n bui lding vital infrastructur e li ke hospi tal, s school s and roads. Whie l oms e have argued that 100% of income from t he pr oposed asset leases houls d be direct ed t o payi ng down the Stat e debt , the Go v ernment is committed to deliver in g t he gr owth and suppor t requ ir ed t o dr i ve econom ic growth in Queensl and, and build a br ight er future for all Queensl anders. Therefore, as ou lit ned above, the Gover nm ent propo ses ot set asi de $8. 6 bi li l on, from t he proceeds of easi l ng asset s, ni the St rong Choices Fut ur e I nvestment Pr ogram . The money f rom t he P rogram shoul d becom e avaiabl l e over a six- year per iod, bet ween Mar ch 2015and March 2021 - an d onl y af ter het next Stat e el ecti on, when the Go v ernment wi l eeks a mandate orf it s Fi nal Pl an. The Str ong Choices Fut ure I nvestment Program wll i be a lastng i legacy orf Queenslnd, a as a result of having the courage ot make the str ongest and smartest choice ot t ackl e t he $8 0 bi llion St ate debt. It wi l incorporate a range of f undi ng pool s t o suppor t and enhance Queensl and’s ouf r-pillar economy built on agri cultur e, tour ism, const ruct ion and resour ces. It is expected ot cr eat e appr oxi mat ely 25,00 0 full-time equival ent ( FTE) jobs i n the Queensland construction and relat ed i ndustries. These f unds will be invest ed: di recty l to build infrast r ucture w here r equired; to finance proj ects hatt w illyiel d an investment return, which can hent be rei nvested in additional pr oj ects; to finance proj ects untilthey are mature, after w hich heyt can be recycl ed t o fi nance new project s. Where i nvestments ar e m ade i nt o pr ojct e s t hat generat e a return, hit s r eturn will b ereinvest ed wit h t he f unds, ther eby increasi ng the value of the f unds avai labl e for i nvestment . Over tim e some of the asset s m ay be r ecycl ed and ho t se pr oceeds will al so be invest ed. Char t 19:St r ong C hoices Futur e I nvest ment Program Fund Allocaton i Rural and Regi onal Roads Fun d $1. 5 B illi on Sout h E ast Q ueensland Roads F und $1. 5 Bll i i on Publ ic Transport Rail Infrastuct r ur e Fund $1 Billion Bus and Trai n Proj ect $1 Billi on Fut ur eSchool s Fund $1 Billi on Rural and Regi onal Econom ic Develop ment Fund $700 Milli on Local G overnment Co-I nvestment Fund $500 Mi llion Fut ur eFund (Natur al D isasters) $500 Milli on Ent r epreneurial and I nnovation F und $500 Milli on Comm unity Hospitals Fund $300 Mi llion Cultural Infrastuct r ur e Fund $100 Milli on Tot a l Package $8. 6 Blli i on Fund Allocaton i St ron g Cho ices C ost of Li ving Fund $3.4 Billion $8. 6bn over 6 years Fut ur eFund (Natur al D isasters) Bus and Trai n Proj ect Local G overnment Co-I nvestment Fund Publ ic TransportRai l Infrastuct r ur e Fund Rural and Regi onal Ro a d s Fu n d Sout h E ast Q ueensland Roads Fund Rural and Regi onal Econom ic Develop ment Fund Ent r epreneurial and I nnovation F und Fut ur eSchool s Fund Comm unity Hospitals Fund Cultural Infrastuct r ur e Fund Queensl and’s Plan f or Secure Finances and a St rong Econom y 41

The Funds The Str ong Choices Fut ure I nvestment Program com prises of 11 separat e f unds, each of w hih c is dedi cat ed t o suppor t ing a speciic f form of infrastructure consi dered vial t t o econom i c gr owth, or w hich will timulats e het vibrancy and wellbei ng of Queensl and com muni ties. Four of the eleven undsf tar get transpor t needs. In a Stat eas diverse and decental r zed i as Qu eensl and, moder n and ef ficient rt ansport systems are essental i , orf li veability as well as econom ic grow th. When dvi e sing t he f unds, the Gover nm ent was det ermined to reflect t he uni que nat ur eof Queensl and, as t he onl y state ni Aust r alia where mor e peopl e r eside out si de t he capi tal ciy t t han within it. As such, sever al f unds ar e excl usivel y devot ed t o t he needs of Queensl anders ivil ng beyond the South East corner, while not excludi ng t he capi tal , sim pl y because t hat is where most need lies. I n r esponse t o consul taton i with Qu eensl anders, t he G overnment is also now proposing the creaton i of an addition al undf to reduce cost of livi ng pr essures for Queenslander s. $3. 4bn St ron g Cho ices C ost of Li ving Fund Unli ke t he ot her f unds list ed her e, which ar e desi gned t o suppor t i nfrastructure nvesti ment ar ound the Stat e, undert he um brella of t he St r ong C hoices F utur e I nvestment Pr ogr am, the Cost of Li ving Fund will be establshed i by t he G overnm ent t o hel p ease cost of l i ving pr essures. The Gover nm ent anticipat es that offering the assets for lease will gener ate an ext ra $3. 4 bil i on on top of t he $33. 6 bi l lion or i ginal ly f orecast in t he Draft Pl an. Thi s upl ift results from ichangng to a lease ransactt i on st r ucture for t he el ectriciy t t ransmssi i on and distr i buti on businesses and t he change in book values from 2013 to 2014. The decision to set aside $3.4 billion in a cost of ivi l ng f und, recogni ses t he Governm ent’ s ong oing commitment to combat cost of living pr essures. Rural & Regional R oads Fund - $1.5 billion I n suppor t of Rural and Regi onal Queensl and and the nearl y 1. 4 million peopl e that live there, t he G overnment wll i commit $1.5 billion to bui ld new and upgrade exi sti ng road infrast r uctur e. An y project sel ect ed f or f undi ng w ill need o t demonst rat e t hat it uppos rt s t he f our pi llars of t he Q ueensl and econom y and allow Queensl ander sto get product to m arket , get to wor k and connect com munities t o h ospital s, schools, communi ty and essential services safely and ef f ici ently. The undf will omc pl ement t he Q ueensland Transpor t and Roads I nvestment Pr ogr am and $495 milli on R oyalties orf the Regi ons progr am nda serve to extend that program by a further t w o year st o 2017-18. Thi s f und will: Link road-user pr eferences wi th i nvestment and maint enance decii s ons; Lead ot job cr eation in rural and region al ar eas t hr ough r oad const r ucti on or povi r din g access to w orkpl aces or market s; Help urr al and regi onal comm uni ties become more eco nomi cally sustainable and esi r ient; l Enhance eco nomi c gr owth and com petiti on by ensur ing that w or kers can get t o w ork and product can be del iver ed t o mar ket; Encourage greatr e private sector i nvestment in the regions because of t he i mpr oved road access; Re f lct e t he aspi rat i ons ofrural and regional com m unities; Impr oves t he l i veabilit y and ameniy t of rur al and regional com m unities, m aking these comm unities mor e attractve, i accessible safer places i n w hih c to live and work; and Include an open and trns a par ent pr ocedure for direct i nvolvem ent of r oad user s and ons c ultat i on w ith t he br oader com munit y on pr oject selecton, i f undi ng, and any r oad char ging decisi ons. The Rur a l and Regional R oads Fund is nti ended t o suppor t t he i nf rastuct r ur e needs of Q ueensland comm uni ties out si de of South East Queensl and. 42 Final P lan – The Strongest & Sm ar test Choce i

Sout h E ast Q ueensland Roads F und - $1 .5 billi on The mor e than 3.2 mill i on peopl e t hat call South East Queenslnd a hom e ar e dependent on the road system t o connect t hem wth i employm ent , servi ces and their comm unit y and del iver goods to market . The expect ed growh t in populat i on and populato i n density will m ean m or e congested roads with Queensl anders spending more time ni thei r vehi cles and lss e imt e on product ive activities hatt gr ow t he econom y. The Sout h East Q ueensland R oads Fund i sto pr ovide f unding for new and t he upgr adi ng of exi sti ng Stat e roads t hat enhance t he f our -pi l ar econom y and support conoe mi c gr owth. The road pr oject s under consi deraton i should dem onstrate hatt they: Enhance eco nomi c gr owth and com petiti on; Lead ot job cr eat i on; Encourage greatr e private sector i nvestment; Re f lct e t he aspi rat i ons of t he com munity; Impr ove li veabilit y and amenity; Include an open and tr anspar ent pr ocedure for direct i nvolvem ent of r oad user s and ons c ultat i on w ith t he br oader com munit y on pr oject selecton, i f undi ng, and any r oad char ging decisi ons. Publ ic TransportRai l Infrastuct r ur e Fund - $1 billi on The Br isbane urban passenger task i s forecast to gow r by 2.41 % per annum bet ween 2 011 and 2030 al ong w ih t the expected ncreasi e ni popul ati on. City Train and Travel Tai r n ser vices hatt connect com munities wth i Brisbane and ot her regi onal centres will requir e expansi on. The Public Transport Rail Infrastructure Fund will pr ovi de f undi ng f or new and upgrade of exiti sn g Publ ic Transport Rail Infrastruct ure. The proj ects onc sidered under this unf d shoul d: Lead ot job cr eation throu gh construction or provi ding connecti ons t o w or k; Help omc m unities become eco nomi cally sustainable and resiient l ; and Impr ove li veabilit y and amenity of communities, m aking them more attractive, safer pl aces i n w hich ot li ve and wo rk. Bus and Trai n Proj ect Ini ti al Fundi ng - $1 bil li on The Ba T (B us and Train) pr oj ect is a new 5km nort h-sout h t unnel that wi l deliver rai l and bus together in a world-first design. I t com bines a railway and a busway in a si ngle, doubl e-decked, 15m - wide t unnel beneath the Br ibane s River and Br isbane’s central business district (CBD). T he pr oj ect t ackles Brisbane’s m ajor pub lic transpor t capacit y chalenges: l the Merival e B ri dge, the Cultural Cnt e r e bus preci nct, Central St ati on and the Capt ain Cook Bridg e. The Ba T pr oject wll i run from Dutton Par k i n t he sout h t o Victoria Park at Spri ng Hll i in t he north wit h new under gr ound st ations at Wool loongabba, G eor ge Steet r and Rom a Street. The tu nnel wi l connect wth i busw ays and rai l li nes nor t h and south of the Brisbane River . The project is expected ot cost about $5 bil lion, wit h $1 billi on to be cont ri but ed f or construction of t he t unnel by t he S tat e G overnm ent and the balance to be sour ced hrt ough ar rangem ents with the pr ivat e sector , w ith the State ot pay an avail abi lity fee over t he lf i e of the tunnel . The proposal s w ill be subj ect ot a rigorous cost - benef it analysi s. Fut ur eSchool s Fund - $1 billi on The planni ng and construction of new schools akest on average m ore hant f ive years. With Queensland’ s p opulaton i expected ot gr ow by one milli on peopl e over the next decade, 400 ,000 children need to be educated, hence he t need t o pl an and bui ld more school s. As only 70% of Q ueensland children are educated ni St ate Schools, an nvest i ment i n bot h public and independent school s w ill be requi red. T he Q ueensl and S cho ols Panni l ng C ommissi on’s recenty l r eleased report highl i ghts aneed for 48 new schools by 2021 and a f urt her 59 school s by 2031 based on its 20- year demand map for futur e school s. The Fut ure Schools Fund will cont r ibute t o t he pr ogr am to bui ld new sch ools, addi ti onal classrooms ta xie sti ng school s and new school faciiti l es. Funds wi l be available primariy l to the i ndependent publi c school s sector, but som e f unding w ill also be m ade avail abl e t o t he i ndependent school sect or. Queensl and’s Plan f or Secure Finances and a St rong Econom y 43

Rural & Regional Econo mic Devel opm ent Fund - $700 mi llion Rural and Regi onal Queensland is home ot nearly one third of Queensl and’s population yet comprises the vast majorit y of the Stat e f oot print. A ubs stantial pr opor ti on of the four pillars of t he Q ueensland economy origi nate ni r ural and regional Q ueensland w i th mining , agriculture, ourt ism and constructi on for m ing an important par t of the economy. These gog e raphi cally dispersed regi ons face m any chalenges, l i ncluding har sh w eather con ditions, avaiabi l it l y of infrastructure and ser vices, access to l ab our and connect ivity. Much of t he r esource capaci t y i s unexpl oited and the vast agricultural oppor tuni ty under utilised. The Rur a l & Regi onal Econom ic Devel opment Fund wil l pr ovide f unding for infrastructur e and com muni ty- l ed l ocal ini tiati ves unl ock t he potental i in rural and regi onal Queensland which: Pr ovi de essential servi ces nfrasi t r ucture (w ater, electici r ty nda t ranspor t that ncoure ages new i nvestment into the regi ons; Enhance eco nomi c gr owth and com petiti on; Lead ot job cr eation in rural and region al areas; Help urr al and regi onal comm uni ties become more eco nomi cally sustainable and esi r ient; l Encourage greatr e private sector i nvestment in the regions; Assist ni attri act ng addi ti onal fu nds from al l level s of governm ent and the private sector for critical i nfrastuct r ur e pr oject s; Re f lct e t he aspi rat i ons ofrural and regional com m unities; and Impr ove the livability nda amenity of rural and regi onal comm uni ties, m aki ng t hese comm uni ties more attractive pl aces ni which to live and work. Local G overnment Co-I nvestment Fund - $500 million Local G overnm ent sare responsi ble for the infrastructur e and services of t hei rcomm uni ties. T he r evenues and borrowing capacity of local gover nment s are lmi i t ed and the infrastructure may not be built wh e n it i s needed. Th eCo-I nvestment by t he S tat e G overnm ent will help to kick- tarts developm ent in gr owing com m unities, and once t hese developm ent sare self-sust aini ng t o invest i n new r egions. Preference will be given t o project s t hat assist in bui ldi ng t hef our pi l lar econom y and pr ovide prod uctive infrastructure. Thi s f und shoul d: Co-i nvest with Local Go v ernment; Seek aretur n f or t he i nvestment so that the f unds can be roll ed over mul tiple imes;t Help omc m unities become eco nomi cally sustainable and resiient; l Impr ove the livability nda amenit y of com m unities, m aking them more attractive, safer p laces i n w hich ot l ive and work. Fut ur eFund (Natur al D isasters) - $500 milli on Queensl and has experienced natural disaster s ever y year bet ween 2002 and 2014 that cost bet ween $30 m illi on and $2. 5 bi llio n per annum . The maj ority of the disasters wre e primarily dr iven by weather (stor m s, cycl ones, rain) , but ther e have also been bushf ires that have devast ated areas of he t Stat e. Natural Di sast er Re lef i and Recover y A r rangem ents are activated ni the event of a d isaster. The Australian Gover nm ent funds 75% of t he cost of di sast er , and 25% is f unded by t he Q ueensland Gover nment . In recent years hit s has been a subst antial contr i buti on f r om the Budget . The objectve i of t he Fut ur e Fund ( Nat ural Dsast i ers) i sto allocat eup to $500M together with any interest accrui ng t o meet t he Q ueensl and shar e of disaster recovery cost. s T he di sast er f unding should: Re s t oe r comm uni ties; Ens ur e t ha t pr oducti ve capaciy t of comm uni ties is recover ed; Assist people ot rem ain on the land; and Ens ur e t ha t agriculur t al pr oducti on i s r estor ed. The Fut ure Fund (N atur al Di s a sters) will be utilised w henever t here si ND RRA ac tvat i ion. Any sur pl us f unds w ill be invested and earn a return at l east equal to the average Stat e cost of dbt e . Ent r epreneurial and I nnovation F und - $5 00 m illi on At the hear t of the Queensland economy ar ethe stat e’s 412,0 00 sm allbusines ses. They epresentr over 96% of businesses stat ewide and empl oy appr oxi mat ely 50% of al l pr ivat e sector worker s. Research hs a shown that i nnovat ion accou nts for more than half of Australia’s pr oductivit y gr ow th over t he l ong t erm. New , young entr epr eneur i al firms dispr opor tionatel y gener ate a larger shar e of net job cr eat i on and commerci alise more mj a or t echnologi cal advances. This commerci alisati on o f invent ions will lead ot the great est produ ctivity gains, obj creaton i and better standar ds of l iving. The Ent repr eneur ial and Innov at i on Fund aims to assist and develop startup - businesses and encourage, suppor t and prom ot ethe resear ch and development of i nnovat ive new ideas, echnolt ogi es, cures and sci ence t hat can be exploited commercially to impr ove t he q ualit y of lifefor all invol ved. 44 Final P lan – The Strongest & Sm ar test Choce i

Comm unity Hospitals Fund - $300 mi llion There i s a backlog of hospital maint enance across Queensland, particul arly ni rur al and regi onal areas hatt need upgr ading and redevelopm ent t o catr e for our increasing popul ati on and gr owing dem and f or heal th servi ces. The Mi nister for Health has establshed i het Rural and Remot e Statwi e de Clni i cal Network to gui de t he G overnm ent i n t he devel opment of sust ainabl e l evels of service in rural and remote ets i t ngs. Thi s f und puts aside money for the future healt h and hospital infrastructure needs of Queensl and. Thi s f und w i ll suppor t pr oject sthat are: Fut ur e- f ocused i n i nvestment and innovat ion; Pat ientf - ocused i n ser vi ce delivery; Designed to ensure Q ueensland’ s heal thcare system povi r des t he best servi ces, at the best time and i n t he best pl ace; Suppor t ing healt h boar ds and local peopl e t o make ocall deciions s in the b est interests of the com muni ty; Suppor t ing the standar dizaton, i u pgrade or re-or i entaton i of servi ce facilities in di fferent comm unities. Cultural Infrastuct r ur e Fund - $100 milli on The Queenslnd a G overnm ent invests in the arts ultimat ely for the benefits heyt br ing to all Q ueensland comm uni ties, including their impact on lifestyle and li vabilit y and thei r econom ic contr i buti on. When Queenslander s com e t ogether across t he st ate at concert, s perform ances, galleries, museum sand public festivals na d ceremoni es, they help shape and ref lect our cul t ural di ver sity, denti it y and her itage. As Queensl and and our regions grow, art s and culture make valuable contributions to the wellbeing and resilience of indivi dual sand com m unities; to solutions for social issues, i ncl uding pr event at ive health, ment al illness, and rehabiit l at i ng young of fender s; and t o soci al cohesi on, cul tur al identity and her i tage. The Governmnt e has ident i fi ed t hr ough t he A r ts for all Queensl anders trats egy four principles t hr ough w hich ti will encour age and develop par ticipat ion in Arts and Cultur e: Local i s w here culture count s; Part icipatory cultur e h as anded;l Quality mat ters; Em br a ci ng diver sit y gi ves us the edge. The objectve i of t he Cu ltural Infrastruct ur e Fund i sto pr ovide f unding to revitali se culur t al venues acr oss Queensl and. Thi sf und shoul d: St rengt hen commerci al and ent repr eneur ial capaciy; t Grow publ i cvalue of ar ts and cul tur e; Ret ur n on arts and cultural invest ment ; St rengt hen cultural t our ism; Lead ot job cr eation in arts and cul tur e; Help ra t s and culture bodi es become mor e econom i cally sustai nable and resilient; Encourage greatr e private sector i nvestment arts and culture; and Re f lct e t he aspi rat i ons of ar ts and cul tur e com m unities. Queensl and’s Plan f or Secure Finances and a St rong Econom y 45

Process and Evaluat ion As a result of the Strong Choices feedback, t he G overnment has recei ved i nfor m ati on f r om the publ ic, l ocal government , indust ry gr oups, comm unity organi sati ons and other interested parties on proj ects hatt it could consider under the St rong Choices Fut ur e I nvestment Pr ogram . The Government has also elr eased het InfrastructureQ Drect i i ons S tat ement that outlines the Gover nm ent’s principl es for infrastructur e policy. These principles are: Integrated nfi rastructur e planni ng The need for a r c edi ble nfrasi t r uctur e pr ogr am Pr ior i tised infrastructure orf economi c gr ow th and product ivi ty Encour agi ng new t echnologies and innovat ion Par tner i ng w ith the private ects or; and Sm art f undi ng and f inance sol ut ions. The Queenslnd a G overnm ent will rel ease InfrastructureQ - t he S tate Infrastructure Plan, in earl y 2015 , which w ill ident i fy a credibl e pi pel ine of project sto ensure het sustai ned gr owth of the Queensl and econom y. It si a part of the Queensl and Governm ent ’s ts r ong pl an f or a bri ght er futur e. InfrastructureQ , het St ate Infrast r ucture Plan, wil l combi ne w ith het Strong Choices Future nvI estment Pogr r am t o del iver a clear and coor dinat ed pl an. Wih t the Gover nm ent recei ving 435 subm issi ons dur ing t he consultation process, a det ail ed r evi ew of these submissi ons w ill be requi red ot determne i eligibilit y f or t he St r ong C hoices F utur e I nvestment Pr ogr am. Infrastu r c t u r e Q wi l assist in determining the pr ogram for infrastuct r ur e i nvestment. Potential futur e i nf rastuct r ur e i nvestments will be subject t o rigorous analysi sand proj ect evaluation in line with governm ent pol icy and as tispulat ed i n t he Proj ect Assurance Framew ork. As part of the developm ent of I nf rastuct r ur eQ - the St ate Infrastructure Plan, the Qu eensl and G overnment i s devel oping anInfr astuct r ur e Pr ioritisati on F ram ework. The Prior itisaton i Fr amew or k w ill support het Proj ect Assurance Framew or k ( PA F), which i sthe Queensl and public sector gui del ine for effecti ve pr oj ect vale uations. Char t 20: St r ong C hoices Futur e I nvest ment Program: Ideas to Compl eted Project s St ron g Cho ices Fut ure Investment Pr ogr am ubmiss si ons Ideas compiled from the Strong Choices consultati on phase, as well sa nitii atves i dr aw nf r om existing fr am eworks such as Regi onsQ and t he Q ueensl and P lan Pr ior i tisati on of submissi ons Subm issions will be prioriti sed according to how w ell t hey suppor t and/ or enhance Queensl and’ sf our-pillar econom y Pr elimi nar y A ssessment Som e subm ission sare more advanced than others. Som e r equi re Gover nm ent assistance t o prepare t hem for assessment ; ot hers ar e erady f or detaied l analysi s and proj ect evaluat ion. Detailed Assessment Eval uati on, is line with governm ent pol icy, w hich nci l ude: cost benef it anal ysi s, business case eval uati on and fur ther det ailed desi gn and planni ng. Fundi ng D ecisi on The Gover nm ent wi l deci de w hich pr oject swill proceed and which Strong Choices Fut ur e Investment fund wil l prov ide fi nance. Pr oject D elivery Pr oject delve i ry to begin. 46 Final P lan – The Strongest & Sm ar test Choce i

The Queenslnd a G overnm ent vi ew st hePA F as the minimum st andard f or project i nitiat i on, evaluat ion, pr ocur ement and assur ance. Through the PAF, t he Q ueensland Gover nm ent aims to reliably m easur e t he benef i ts returned f rom pr oj ect invest ment s. The Infrastructur e Prioritisation Fr amew ork strategi c crieri t a will align with the government’ s br oader f iscal and eco nomi c agenda to address si x areas as folow l s: Pr oject st aging and opt i ons assessment (whether staging is practi cal and t he nat ure of options consider ed) Dependency ( whet her the pr oject i sa ‘one off’ or an enabler of other proj ects) Econom ic benefits ( how the pr oject benef its key sect ors of t he econom y) Ri s k ( w ht e her eff icient risk transfer is pr actical) Role of private sector par t ici pation Comm unit y and envir onm ent (the nature, scope and scal e of benef i ts and i mpact). s Econom ic criteria within the tool are expected ot be based on assessment of long-run economic impacts, based on estimated pr oductivity gains associ ated with items such as travel time avis ngs, oper ati onal cost reduct ions, enhanced servi ce level s and system perfor m ance. The tool w i l compl em ent ot her proj ect assessment mechanims s includ ing ri gor ous cost benef it anal ysis. Ti mi ng Fr om t he outset o fthe Strong Choices campai gn, t he G overnm ent pr omi sed t o devel op a disciplined and met hodi cal Final P lan and present it f or endor sement by the peopl eat the next St ate electon, i before proceeding with any debt reduct ion strategy . N o assets wil l be offered for lease until a mandate for the Gover nm ent’ s St r ongest nda Smartest Choice i s obt ained. H owever , the nfrasi t r uctur e i nvestment mar ket has changed since het publi cati on of the Draf t Plan on June 3. Specifi cally, het Commonw ealt h G over nment has announced i t wi l make avail abl e$5 billi on i n incentves i for asset recycl i ng over 5 year s. Given the anticipated omc pet ition f rom ot her St ates orf these f unds, t he St ate Gover nm ent has decided to appoi nt advisers to commence easel preparat i on pr ocesses, i ncludi ng du edi li gence, ot ensure Queensland is able ot move qui ckly to secure tsi share of this Commonw ealt h f undi ng. Shoul d i t secure a mandate. The estimat ed pool of recycl able assets in Australi a i s $120 billi on, m eaning Stat es coul d pot ent ialy l make appli cati ons f or up to $18 billion in Commonw ealt h Fund sif all transacton i proceeds were appl ied ot infrastructur e invest ment . The opport uni ty to access Commonw ealt h f unds i s on a “f irst come, irfst served” basis. T he N ew South Wales Gover nment has alr eady announced it si preparing f or the par tial lease of i t select ricity networks, subj ect to a favour able elect ion outcom e. The Victor ian Gover nm ent has announced the easel of t he Port of Mel bour ne, suppor ted by bot h m ajor parties. The Sout h Australi an G overnment is selling i ts Motor A ccident com missi on and t he West Au stral i an G overnm ent is pr oposing the divest ment of comm odity ports. Because of he t likely timing of these electons, i N ew South Wales and Vict ori a coul d reach heit r eligibility milestones and access t he Com m onwealth Asset Recyclng i Fund ahead of Queensl and. The lease preparati on pr ocesses will xte ensivel y examne i all het risks and issues wit h potential asset t ransacton i s. T his due dili gence and business optmis i aton i phase i s expectd e to take at least si x m ont hs. Shoul d t he G over nment receive a mandate at the next electon, i t hose assets eadyr for leasing will be subj ect to an Ex pression of Int erest pr ocess wher e bidder sare asked t o i ndicat e w hether they would be int er ested in the ssets a pr oposed for lease. The Governm ent evaluat es submissions and w ill sel ect a shor t list of bidder s t o submit a det ail ed of f er before a preferred bi dder is sel ected. The bid will be negot iat ed, contracts agreed and t he l ease conclud ed. The bi ddi ng pr ocess is expected ot take around six months for each asset and it may be a year bfore e the Government receives the first proceeds. The Str ong Choices Fut ure I nvestment Program eval uati on pr ocess w ill begin at the same imt e as t he pr oposed l eases are taken ot m arket , so that proj ects can com mence sa soon as p roceeds from those easesl are realised. Queensl and’s Plan f or Secure Finances and a St rong Econom y 47

www.Stron gChoices. qld. gov. au EXHIBIT (g)(iii)

Consents CONSENT

I hereby consent to the use of (i) the Chairman’s and Chief Executive’s Report found on pages 6-7 of the Queensland Treasury Corporation Annual Report for the Year Ended June 30, 2014 (the “Annual Report”), (ii) the Certificate of the Queensland Treasury Corporation dated August 29, 2014, found on page 57 of the Annual Report and (iii) the Management Report for the year ended June 30, 2014 found on page 60 of the Annual Report, which Annual Report is hereby filed as exhibit (c)(ix) to this Form 18-K/A to be filed and incorporated by reference in the Prospectus included in the Registration Statement dated December 10, 2009 filed by the Queensland Treasury Corporation and the Treasurer on behalf of the Government of Queensland with the United States Securities and Exchange Commission (File No. 333-147600).

By: /s/ Philip Noble Mr. Philip Noble Chief Executive, Queensland Treasury Corporation

Date: 2nd October, 2014 CONSENT

I hereby consent to the use of (i) the Chairman’s and Chief Executive’s Report found on pages 6-7 of the Annual Report for the Year Ended June 30, 2014 (the “Annual Report”), (ii) the Certificate of the Queensland Treasury Corporation dated August 29, 2014, found on page 57 of the Annual Report and (iii) the Management Report for the year ended June 30, 2014, found on page 60 of the Annual Report, which Annual Report is hereby filed as exhibit (c)(ix) to this Form 18-K/A to be filed and incorporated by reference in the Prospectus included in the Registration Statement dated December 10, 2009 filed by the Queensland Treasury Corporation and the Treasurer on behalf of the Government of Queensland with the United States Securities and Exchange Commission (File No. 333- 147600).

By: /s/ Gerard Bradley Mr. Gerard Bradley Chairman, Queensland Treasury Corporation

Date: 2nd October, 2014 CONSENT

I hereby consent to the use of my Report found on pages 58-59 of the Queensland Treasury Corporation Annual Report for the Year Ended June 30, 2014, hereby filed as exhibit (c)(ix) to this Form 18-K/A to be filed and incorporated by reference in the Prospectus included in the Registration Statement dated December 10, 2009 filed by the Queensland Treasury Corporation and the Treasurer on behalf of the Government of Queensland with the United States Securities and Exchange Commission (File No. 333-147600).

By: /s/ Andrew Greaves Mr. Andrew Greaves as Auditor-General, State of Queensland

Date: 2nd October, 2014