OFFERING CIRCULAR IN RELATION TO MEDIUM TERM NOTES 16 JUNE 2009
SUNCORP-METWAY LIMITED (ABN 66 010 831 722) (Incorporated with limited liability in Australia) U.S.$15,000,000,000 Programme for the issuance of Medium Term Notes, Euro-commercial Paper and other debt instruments
On 26 September 2001 Suncorp-Metway Limited (the “Issuer” or “Suncorp”) entered into a U.S.$ 7,500,000,000 Programme for the issuance of Medium Term Notes, Euro-commercial Paper and other debt instruments (the “Programme”) under which it may from time to time issue medium term notes (the “Notes”, which expression includes Senior Notes and Subordinated Notes (each as defined herein)), short term promissory notes (“ECP”) and other debt instruments as agreed between the Issuer and the relevant Dealer (as defined below), and denominated in any currency agreed between the Issuer and the relevant Dealer. As of 8 September 2004, the maximum aggregate nominal amount of all Notes, ECP and other debt instruments which may be outstanding under the Programme was increased to U.S.$15,000,000,000. This Offering Circular supersedes any offering circular with respect to the Programme issued prior to the date hereof. Any Notes issued under the Programme on or after the date of this Offering Circular are subject to the provisions described herein, but this Offering Circular does not affect the terms of any Notes issued prior to the date hereof. Notes may be issued in bearer or registered form (respectively “Bearer Notes” and “Registered Notes”). ECP may be issued in bearer form only. The maximum aggregate nominal amount of all Notes, ECP and other debt instruments from time to time outstanding under the Programme will not exceed U.S.$15,000,000,000 (or its equivalent in other currencies calculated as described herein), subject to increase as described herein. A description of the restrictions applicable at the date of this Offering Circular relating to the maturity of certain Notes is set out under “Summary of the Programme”. Certain Notes issued under this Programme will have the benefit of an irrevocable guarantee dated 20 November 2008 from the Commonwealth of Australia (“Guaranteed Notes”) as expressed in the form of guarantee as reproduced in this Offering Circular and which is available at www.guaranteescheme.gov.au (the “Deed of Guarantee”). Where Guaranteed Notes are issued, “Commonwealth of Australia Guarantee” will be marked “Applicable” in the applicable Final Terms. Any claim under the Deed of Guarantee must be made in writing in the form attached to the Australian Government Guarantee Scheme for Large Deposits and Wholesale Funding Rules (the “Scheme Rules”) available at www.guaranteescheme.gov.au, a website maintained by the Commonwealth of Australia. Certain information about the Commonwealth of Australia (the “Commonwealth Disclosure”) has been prepared by the Commonwealth of Australia in connection with the Australian Government Guarantee Scheme for Large Deposits and Wholesale Funding. The Commonwealth Disclosure, which the Commonwealth of Australia may amend and supplement from time to time, is annexed to this Offering Circular (see “Commonwealth Disclosure”), and (together with the Deed of Guarantee and the Scheme Rules) should be read with this Offering Circular prior to making an investment decision. The Notes may be issued on a continuing basis to one or more of the Dealers specified in “Summary of the Programme” and any additional Dealer appointed under the Programme from time to time, which appointment may be for a specific issue or on an ongoing basis (each a “Dealer” and together the “Dealers”). References in this Offering Circular to the “relevant Dealer” shall, in the case of an issue of Notes being (or intended to be) subscribed for by more than one Dealer, be to all Dealers agreeing to subscribe for such Notes. The Issuer has reserved the right to issue Notes to persons other than Dealers. An investment in Notes issued under the Programme involves certain risks. For a discussion of these risks see “Risk Factors”. Application has been made to the Financial Services Authority in its capacity as competent authority under the Financial Services and Markets Act 2000 (the “UK Listing Authority”) for Notes issued under the Programme during the period of 12 months from the date of this Offering Circular to be admitted to the official list of the UK Listing Authority (the “Official List”) and to the London Stock Exchange plc (the “London Stock Exchange”) for such Notes to be admitted to trading on the London Stock Exchange’s regulated market. References in this Offering Circular to Notes being “listed” (and related references) on the London Stock Exchange shall mean that such Notes have been admitted to trading on the London Stock Exchange’s regulated market and have been admitted to the Official List. The London Stock Exchange’s regulated market is a regulated market for the purposes of Directive 2004/39/EC (the “Markets in Financial Instruments Directive”). Notice of the aggregate nominal amount of, interest (if any) payable in respect of, the issue price of, and any other terms and conditions not contained herein which are applicable to, the Notes of each Tranche (as defined in the “Terms and Conditions of the Notes”) will be set forth in the Final Terms (the “Final Terms”) which, with respect to Notes to be listed on the London Stock Exchange, will be delivered to the UK Listing Authority and the London Stock Exchange. The Programme provides that Notes may be listed or admitted to trading, as the case may be, on such other or further stock exchange(s) as may be agreed between the Issuer and the relevant Dealer. The Issuer may also issue unlisted Notes and/or Notes not admitted to trading on any market. The Notes have not been and will not be registered under the U.S. Securities Act of 1933, as amended, (the “Securities Act”) and may not be offered or sold in the United States or to, or for the benefit of, U.S. persons unless the Notes are registered under the Securities Act or an exemption from the registration requirements of the Securities Act is available. See “Form of the Notes” for a description of the manner in which Notes will be issued. Registered Notes are subject to certain restrictions on transfer, see “Subscription and Sale and Transfer and Selling Restrictions”. The Issuer may agree with any Dealer that Notes may be issued in a form not contemplated by the Terms and Conditions of the Notes herein, in which event a Supplemental Offering Circular, if appropriate, will be made available which will describe the effect of the agreement reached in relation to such Notes. Any person (an “Investor”) intending to acquire or acquiring any securities from any person (an “Offeror”) should be aware that, in the context of an offer to the public as defined in section 102B of the Financial Services and Markets Act 2000 (“FSMA”), the Issuer may be responsible to the Investor for the Offering Circular under section 90 of FSMA only if the Issuer has authorised that Offeror to make the offer to the Investor. Each Investor should therefore enquire whether the Offeror is so authorised by the Issuer. If the Offeror is not authorised by the Issuer, the Investor should check with the Offeror whether anyone is responsible for the Offering Circular for the purposes of section 90 of FSMA in the context of the offer to the public, and, if so, who that person is. Such information would be provided at the time of any sub-offers. If the Investor is in any doubt about whether it can rely on the Offering Circular and/or who is responsible for its contents it should take legal advice. Arranger UBS Investment Bank Dealers Banc of America Securities Limited Barclays Capital Citi Deutsche Bank JPMorgan Merrill Lynch International Nomura International Suncorp-Metway Limited UBS Investment Bank This Offering Circular comprises a base prospectus for the purposes of Article 5.4 of Directive 2003/71/EC (the “Prospectus Directive”).
The Issuer accepts responsibility for the information contained in this Offering Circular. To the best of the knowledge and belief of the Issuer (having taken all reasonable care to ensure that such is the case) the information contained in this Offering Circular is in accordance with the facts and does not omit anything likely to affect the import of such information.
The Commonwealth Disclosure which has been prepared by the Commonwealth of Australia is annexed to this Offering Circular. None of the Issuer, the Dealers or their respective affiliates have reviewed or verified the Commonwealth Disclosure and none of them makes any representation or warranties with respect to, or (in the case of the Dealers) accepts any responsibility for, the Commonwealth Disclosure. By receiving this Offering Circular, you acknowledge that none of the Dealers nor any of their respective affiliates have assumed any responsibility for any part of the Commonwealth Disclosure.
The previous paragraph should be read in conjunction with the last paragraph on the first page of this Offering Circular.
Subject as provided in the applicable Final Terms, the only persons authorised to use this Offering Circular in connection with an offer of Notes are the persons named in the applicable Final Terms as the relevant Dealer or the Managers and the persons named in or identifiable following the applicable Final Terms as the Financial Intermediaries, as the case may be.
An Investor intending to acquire or acquiring any Notes from an Offeror will do so, and offers and sales of the Notes to an Investor by an Offeror will be made, in accordance with any terms and other arrangements in place between such Offeror and such Investor including as to price, allocations and settlement arrangements. The Issuer will not be a party to any such arrangements with Investors (other than the Dealers) in connection with the offer or sale of the Notes and, accordingly, this Offering Circular and any Final Terms will not contain such information. The Investor must look to the Offeror at the time of such offer for the provision of such information. The Issuer has no responsibility to an Investor in respect of such information.
Copies of each Final Terms will be available from the specified office set out below of each of the Paying Agents (as defined below).
This Offering Circular is to be read in conjunction with all documents which are deemed to be incorporated herein by reference (see “Documents Incorporated by Reference” below). This Offering Circular shall, save as specified herein, be read and construed on the basis that such documents are so incorporated and form part of this Offering Circular.
The Dealers have not independently verified the information contained herein. Accordingly, no representation, warranty or undertaking, express or implied, is made and no responsibility or liability is accepted by the Dealers as to the accuracy or completeness of the information contained in this Offering Circular or incorporated by reference in this Offering Circular or any other information provided by the Issuer in connection with the Programme. No Dealer accepts any liability in relation to the information contained or incorporated by reference in this Offering Circular or any other information provided by the Issuer in connection with the Programme.
Other than the Commonwealth Disclosure, the Commonwealth of Australia has not authorised the publication of, and has not reviewed, this Offering Circular, and it has not verified the information contained in it or made representations or warranties with respect to, or accepted any responsibility for, the contents of it or any other statement made or purported to be made on its behalf in connection herewith or the issue and offering of the Guaranteed Notes by the Issuer.
No person is or has been authorised by the Issuer to give any information or to make any representation not contained in or inconsistent with this Offering Circular or any other information supplied in connection with the Programme or the Notes and, if given or made, such information or representation must not and cannot be relied upon as having been authorised by the Issuer or any of the Dealers.
Neither this Offering Circular nor any other information supplied in connection with the Programme or any Notes (i) is intended to provide the basis of any credit, taxation or other evaluation or (ii) should be considered as a recommendation or to constitute an invitation or offer by the Issuer or any of the Dealers that
2 any recipient of this Offering Circular or any other information supplied in connection with the Programme or any Notes should purchase any Notes. Each investor contemplating purchasing any Notes should make its own independent investigation of the financial condition and affairs, and its own appraisal of the creditworthiness, of the Issuer. Each investor contemplating purchasing any Guaranteed Notes must also rely on their own examination of the Commonwealth Disclosure and the terms of the Deed of Guarantee and the Scheme Rules, including (without limitation) the risks summarised herein under “Risks related to the Guaranteed Notes”. Neither this Offering Circular nor any other information supplied in connection with the Programme or the issue of any Notes constitutes an offer or invitation by or on behalf of the Issuer or any of the Dealers to any person to subscribe for or to purchase any Notes.
Neither the delivery of this Offering Circular nor the offering, sale or delivery of any Notes shall in any circumstances imply that the information contained herein concerning the Issuer is correct at any time subsequent to the date hereof or that any other information supplied in connection with the Programme or any Notes is correct as of any time subsequent to the date indicated in the document containing the same. The Dealers expressly do not undertake to review the financial condition or affairs of the Issuer during the life of the Programme or to advise any investor in the Notes of any information coming to their attention. Investors should review, inter alia, the most recently published documents deemed to be incorporated herein by reference when deciding whether or not to purchase any Notes.
The Notes in bearer form are subject to U.S. tax law requirements and may not be offered, sold or delivered within the United States or its possessions or to United States persons, except in certain transactions permitted by U.S. tax regulations. Terms used in this paragraph have the meanings given to them by the U.S. Internal Revenue Code and the regulations promulgated thereunder.
This Offering Circular does not constitute an offer to sell or the solicitation of an offer to buy any Notes in any jurisdiction to any person to whom it is unlawful to make the offer or solicitation in such jurisdiction. The distribution of this Offering Circular and the offer or sale of Notes may be restricted by law in certain jurisdictions. The Issuer and the Dealers do not represent that this document may be lawfully distributed, or that any Notes may be lawfully offered, in compliance with any applicable registration or other requirements in any such jurisdiction, or pursuant to an exemption available thereunder, or assume any responsibility for facilitating any such distribution or offering. In particular, no action has been taken by the Issuer or the Dealers which would permit a public offering of any Notes outside the United Kingdom or distribution of this Offering Circular in any jurisdiction where action for that purpose is required. Accordingly, no Notes may be offered or sold, directly or indirectly, and neither this Offering Circular nor any advertisement or other offering material may be distributed or published in any jurisdiction, except under circumstances that will result in compliance with any applicable laws and regulations and the Dealers have represented that all offers and sales by them will be made on the same terms. Persons into whose possession this Offering Circular or any Notes may come must inform themselves about, and observe, any such restrictions on the distribution of this Offering Circular and the offering and sale of Notes. In particular, there are restrictions on the distribution of this Offering Circular and the offer or sale of Notes in the United States, the European Economic Area (including the United Kingdom), Australia, Japan and Hong Kong (see “Subscription and Sale and Transfer and Selling Restrictions” below).
This Offering Circular has been prepared on the basis that, except to the extent sub-paragraph (ii) below may apply, any offer of Notes in any Member State of the European Economic Area which has implemented the Prospectus Directive (each, a “Relevant Member State”) will be made pursuant to an exemption under the Prospectus Directive, as implemented in that Relevant Member State, from the requirement to publish a prospectus for offers of Notes. Accordingly any person making or intending to make an offer in that Relevant Member State of Notes which are the subject of an offering contemplated in this Offering Circular as completed by final terms in relation to the offer of those Notes may only do so (i) in circumstances in which no obligation arises for the Issuer or any Dealer to publish a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to Article 16 of the Prospectus Directive, in each case, in relation to such offer, or (ii) if a prospectus for such offer has been approved by the competent authority in that Relevant Member State or, where appropriate, approved in another Relevant Member State and notified to the competent authority in that Relevant Member State and (in either case) published, all in accordance with the Prospectus Directive, provided that any such prospectus has subsequently been completed by final terms which specify that offers may be made other than pursuant to Article 3(2) of the Prospectus Directive in that Relevant Member State and such offer is made in the period beginning and ending on the dates specified for such purpose in such prospectus or final terms, as applicable. Except to the extent
3 sub-paragraph (ii) above may apply, neither the Issuer nor any Dealer have authorised, nor do they authorise, the making of any offer of Notes in circumstances in which an obligation arises for the Issuer or any Dealer to publish or supplement a prospectus for such offer.
In making an investment decision, investors must rely on their own examination of the Issuer, the terms of the Notes being offered, the Commonwealth Disclosure and the terms of the Deed of Guarantee and the Scheme Rules, including the merits and risks involved. Neither the Notes, the Deed of Guarantee nor the Scheme Rules have been approved or disapproved by the United States Securities and Exchange Commission or any other securities commission or other regulatory authority in the United States, nor have the foregoing authorities approved this Offering Circular or the Commonwealth Disclosure or confirmed the accuracy or determined the adequacy of the information contained in this Offering Circular or the Commonwealth Disclosure. Any representation to the contrary is unlawful.
None of the Dealers or the Issuer makes any representation to any investor in the Notes regarding the legality of its investment under any applicable laws. Any investor in the Notes should be able to bear the economic risk of an investment in the Notes for an indefinite period of time.
U.S. INFORMATION
This Offering Circular is being submitted on a confidential basis in the United States to a limited number of QIBs (as defined under “Form of the Notes”) for informational use solely in connection with the consideration of the purchase of the Notes being offered hereby. Its use for any other purpose in the United States is not authorised. It may not be copied or reproduced in whole or in part nor may it be distributed or any of its contents disclosed to anyone other than the prospective investors to whom it is originally submitted.
Registered Notes may be offered or sold within the United States only to QIBs in transactions exempt from registration under the Securities Act. Each U.S. purchaser of Registered Notes is hereby notified that the offer and sale of any Registered Notes to it may be being made in reliance upon the exemption from the registration requirements of the Securities Act provided by Rule 144A under the Securities Act (“Rule 144A”).
Each purchaser or holder of Notes represented by a Rule 144A Global Note or any Notes issued in registered form in exchange or substitution therefor (together “Legended Notes”) will be deemed, by its acceptance or purchase of any such Legended Notes, to have made certain representations and agreements intended to restrict the resale or other transfer of such Notes as set out in “Subscription and Sale and Transfer and Selling Restrictions”. Unless otherwise stated, terms used in this paragraph have the meanings given to them in “Form of the Notes”.
4 NOTICE TO NEW HAMPSHIRE RESIDENTS NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A LICENSE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISED STATUTES WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE OF NEW HAMPSHIRE THAT ANY DOCUMENT FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT ANY EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE OF NEW HAMPSHIRE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH. AVAILABLE INFORMATION To permit compliance with Rule 144A in connection with any resales or other transfers of Notes that are “restricted securities” within the meaning of the Securities Act, the Issuer has undertaken in a deed poll dated 8 September 2004 (the “Deed Poll”) to furnish, upon the request of a holder of such Notes or any beneficial interest therein, to such holder or to a prospective purchaser designated by him, the information required to be delivered under Rule 144A(d)(4) under the Securities Act if, at the time of the request, the Issuer is neither a reporting company under Section 13 or 15(d) of the U.S. Securities Exchange Act of 1934, as amended, (the “Exchange Act”) nor exempt from reporting pursuant to Rule 12g3-2(b) thereunder. SERVICE OF PROCESS AND ENFORCEMENT OF CIVIL LIABILITIES The Issuer is a corporation organised under the laws of Australia. All of the officers and directors named herein reside outside the United States and all or a substantial portion of the assets of the Issuer and of such officers and directors are located outside the United States. As a result, it may not be possible for investors to effect service of process outside Australia upon the Issuer or such persons, or to enforce judgments against them obtained in courts outside Australia predicated upon civil liabilities of the Issuer or such directors and officers under laws other than Australian law, including any judgment predicated upon United States federal securities laws. The Issuer has been advised by Clayton Utz, its counsel, that there is doubt as to the enforceability in Australia in actions for enforcement of final conclusive and in personam judgments of United States courts of civil liabilities predicated solely upon the federal securities laws of the United States. PRESENTATION OF FINANCIAL AND OTHER INFORMATION The financial information included in the Offering Circular has not been prepared in accordance with the international accounting standards (the “International Accounting Standards”) adopted pursuant to the procedure of Article 3 of Regulation (EC) No1606/2002 and there may be material differences in the financial information had Regulation (EC) No 1606/2002 been applied to the historical financial information. The Issuer maintained its financial books and records and prepared its financial statements in Australian dollars in accordance with generally accepted accounting principles in Australia (“AGAAP”) until 30 June 2005 and, thereafter, in accordance with Australian Equivalents to International Financial Reporting Standards. AGAAP differs in certain important respects from generally accepted accounting principles in the United States and the International Accounting Standards. All references in this document to “Australian dollars”, “A dollars”, “A$” and “cents” or “¢” refer to the currency of Australia, those to “U.S. dollars”, “U.S.$” and “U.S. cent.” refer to the currency of the United States of America, those to “Japanese Yen” and “Yen” refer to the currency of Japan, those to “sterling” and “£” refer to pounds sterling, and those to “euro” or “€” refer to the currency introduced at the start of the third stage of European economic and monetary union pursuant to the Treaty establishing the European Community, as amended. Any financial information shown in this document has been extracted from its original source without material adjustment. The statements in the Offering Circular made by the Issuer regarding its competitive position are based on the Australian Prudential Regulation Authority Statistics, Monthly Banking Statistics February 2008 (issued 31 March 2008), the KPMG General Insurance Survey 2007 and internal due diligence.
5 TABLE OF CONTENTS
Page Page Summary of the Programme...... 7 Suncorp-Metway Limited ...... 87 Risk Factors ...... 13 Regulation and Supervision of Banking, General and Life Insurance and Superannuation Businesses Documents Incorporated by Reference...... 22 in Australia...... 102 Form of the Notes ...... 23 Australian Taxation...... 105 Applicable Final Terms...... 27 Book-Entry Clearance Systems ...... 109 Terms and Conditions of the Notes...... 53 Subscription and Sale and Transfer and Selling Description of the Deed of Guarantee ...... 82 Restrictions ...... 113 Form of Deed of Guarantee ...... 83 General Information...... 119 Use of Proceeds ...... 86 Annex I – Commonwealth Disclosure ...... 121
In connection with the issue of any Tranche of Notes, the Dealer or Dealers (if any) named as the Stabilisation Manager(s) (or persons acting on behalf of any Stabilisation Manager(s)) in the applicable Final Terms may over-allot Notes or effect transactions with a view to supporting the market price of the Notes at a level higher than that which might otherwise prevail. However, there is no assurance that the Stabilising Manager(s) (or persons acting on behalf of a Stabilising Manager) will undertake stabilisation action. Any stabilisation action may begin on or after the date on which adequate public disclosure of the terms of the offer of the relevant Tranche of Notes is made and, if begun, may be ended at any time, but it must end no later than the earlier of 30 days after the issue date of the relevant Tranche of Notes and 60 days after the date of the allotment of the relevant Tranche of Notes. Any stabilisation action or over-allotment must be conducted by the relevant Stabilising Manager(s) (or persons acting on behalf of any Stabilising Manager(s)), in accordance with all applicable laws and rules.
6 Summary of the Programme
This summary must be read as an introduction to this Offering Circular and any decision to invest in any Notes should be based on a consideration of this Offering Circular as a whole, including the documents incorporated by reference. Following the implementation of the relevant provisions of the Prospectus Directive in each Member State of the European Economic Area no civil liability will attach to the Responsible Persons in any such Member State in respect of this Summary, including any translation hereof, unless it is misleading, inaccurate or inconsistent when read together with the other parts of this Offering Circular. Where a claim relating to information contained in this Offering Circular is brought before a court in a Member State of the European Economic Area, the plaintiff may, under the national legislation of the Member State where the claim is brought, be required to bear the costs of translating the Offering Circular before the legal proceedings are initiated.
Words and expressions defined in “Forms of the Notes” and “Terms and Conditions of the Notes” shall have the same meanings in this summary.
Issuer: Suncorp-Metway Limited
Guarantor in respect of The Commonwealth of Australia (the “Guarantor”) Guaranteed Notes:
Guarantee in respect of The due payment of all sums due and payable by the Issuer in respect of Guaranteed Notes: Guaranteed Notes will be irrevocably guaranteed by the Guarantor.
The Guarantor’s obligations in that respect are contained in a deed of guarantee dated 20 November 2008, the form of which is available at www.guaranteescheme.gov.au
The holders of Guaranteed Notes will be the beneficiaries of the Deed of Guarantee (as defined herein).
Notwithstanding the remaining paragraphs of this Summary, Guaranteed Notes will have the following features:
Currency: Guaranteed Notes may be denominated in any one currency.
Maturities: Guaranteed Notes are subject to a requirement that the term may only be up to 60 months.
Index-Linked: No Guaranteed Notes will be index-linked.
Redemption: Guaranteed Notes cannot be redeemed prior to their stated maturity (other than a redemption by the Issuer for certain taxation reasons or a redemption following an applicable Event of Default).
Taxation: All payments in respect of Guaranteed Notes will be made without deduction for or on account of withholding taxes to the extent provided in Condition 8. In the event that any such deduction is made, the Issuer will, save in certain limited circumstances provided in Condition 8, be required to pay additional amounts to cover the amounts so deducted. However, in the event that any payment made by the Guarantor in respect of the Deed of Guarantee is made subject to deduction or withholding for or on account of any taxes, duties, assessments or governmental charges of any nature, no additional amounts shall be payable by the Guarantor, the Issuer, any Paying Agent, or any other person in respect of such deduction or withholding.
Cross Default: None.
Governing Law: The Deed of Guarantee is governed by the laws of the State of New South Wales.
7 Summary of the Programme
Risk Factors: There are certain factors that may affect the Issuer’s ability to fulfil its obligations under Notes issued under the Programme. These are set out under “Risk Factors” below and include the Issuer’s exposure to adverse changes in the Australian economy, risks relating to increased competition, credit risk, market risk, liquidity risk, operational risk, integration risk and potential regulatory developments. In addition, there are certain factors which are material for the purpose of assessing the market risks associated with Notes issued under the Programme. These are set out under “Risk Factors” below and include the fact that the Notes may not be a suitable investment for all investors, certain risks relating to the structure of particular Series of Notes and certain market risks.
There are certain factors that may affect the Guarantor’s ability to fulfil its obligations under the Deed of Guarantee. These are set out under “Risk Factors” below.
Description: Programme for the issuance of Medium Term Notes, Euro-commercial Paper and other debt instruments.
Arranger: UBS Limited
Dealers: MTN Barclays Bank PLC Citigroup Global Markets Limited Deutsche Bank AG, London Branch J. P. Morgan Securities Ltd. Merrill Lynch International Nomura International plc Suncorp-Metway Limited UBS Limited
ECP Banc of America Securities Limited Barclays Bank PLC Citibank International plc Deutsche Bank AG, London Branch Nomura International plc Suncorp-Metway Limited UBS Limited
and any other Dealers appointed in accordance with the Programme Agreement.
Certain Restrictions: Each issue of Notes denominated in a currency in respect of which particular laws, guidelines, regulations, restrictions or reporting requirements apply will only be issued in circumstances which comply with such laws, guidelines, regulations, restrictions or reporting requirements from time to time (see “Subscription and Sale and Transfer and Selling Restrictions”) including the following restrictions applicable at the date of this Offering Circular. Notes with a maturity of less Notes having a maturity of less than one year will, if the proceeds of the than one year: issuer are accepted in the United Kingdom, constitute deposits for the purposes of the prohibition on accepting deposits contained in Section 19 of the FSMA unless they are issued to a limited class of professional investors and have a denomination of at least £100,000 or its equivalent, see “Subscription and Sale and Transfer and Selling Restrictions”. Issuing and Principal Paying Deutsche Bank AG, London Branch Agent:
8 Summary of the Programme
Registrar: Deutsche Bank Trust Company Americas
Programme Size: Up to U.S.$15,000,000,000 (or its equivalent in other currencies calculated as described herein) outstanding at any time. The Issuer may increase the amount of the Programme in accordance with the terms of the Programme Agreement.
Distribution: Notes may be distributed by way of private or public placement and in each case on a syndicated or non-syndicated basis.
Currencies: Subject to any applicable legal or regulatory restrictions, such currencies as may be agreed between the Issuer and the relevant Dealer.
Redenomination: The applicable Final Terms may provide that certain Notes may be redenominated in euro. The relevant provisions applicable to any such redenomination are contained in Condition 4.
Maturities: Such maturities as may be agreed between the Issuer and the relevant Dealer and as indicated in the applicable Final Terms, subject to such minimum or maximum maturities as may be allowed or required from time to time by the relevant central bank (or equivalent body) or any laws or regulations applicable to the Issuer or the relevant Specified Currency.
Issue Price: Notes may be issued on a fully-paid or a partly-paid basis and at an issue price which is at par or at a discount to, or premium over, par.
Form of Notes: The Notes will be issued in bearer or registered form (see “Form of the Notes”). Registered Notes will not be exchangeable for Bearer Notes and vice versa.
Fixed Rate Notes: Fixed interest will be payable on such date or dates as may be agreed between the Issuer and the relevant Dealer and on redemption and will be calculated on the basis of such Day Count Fraction as may be agreed between the Issuer and the relevant Dealer.
Floating Rate Notes: Floating Rate Notes will bear interest at a rate determined:
(i) on the same basis as the floating rate under a notional interest-rate swap transaction in the relevant Specified Currency governed by an agreement incorporating the 2006 ISDA Definitions (as published by the International Swaps and Derivatives Association, Inc., and as amended and updated as at the Issue Date of the First Tranche of the Notes of the relevant Series); or
(ii) on the basis of a reference rate appearing on the agreed screen page of a commercial quotation service; or
(iii) on such other basis as may be agreed between the Issuer and the relevant Dealer,
as indicated in the applicable Final Terms.
The Margin (if any) relating to such floating rate will be agreed between the Issuer and the relevant Dealer for each Series of Floating Rate Notes.
Index-Linked Notes: Payments of principal in respect of Index-Linked Redemption Notes or of interest in respect of Index-Linked Interest Notes will be calculated by reference to such index and/or formula or to changes in the prices of securities or commodities or to such other factors as the Issuer and the relevant Dealer may agree (as indicated in the applicable Final Terms).
9 Summary of the Programme
Other provisions in relation Floating Rate Notes and Index-Linked Interest Notes may also have a to Floating Rate Notes and maximum interest rate, a minimum interest rate or both (as indicated in the Index-Linked Interest Notes: applicable Final Terms).
Interest on Floating Rate Notes and Index-Linked Interest Notes in respect of each Interest Period, as selected prior to issue by the Issuer and the relevant Dealer, will be payable on such Interest Payment Dates as are specified in, or determined pursuant to, the applicable Final Terms and will be calculated on the basis of such Day Count Fraction as may be agreed between the Issuer and the relevant Dealer and as indicated in the applicable Final Terms.
Dual Currency Notes: Payments (whether in respect of principal or interest and whether at maturity or otherwise) in respect of Dual Currency Notes will be made in such currencies, and based on such rates of exchange, as the Issuer and the relevant Dealer may agree (as indicated in the applicable Final Terms).
Zero Coupon Notes: Zero Coupon Notes will be offered and sold at a discount to their nominal amount (unless otherwise specified in the applicable Final Terms) and will not bear interest.
Redemption of Notes: The Final Terms relating to each Tranche of Notes will indicate either that the Notes of such Tranche cannot be redeemed prior to their stated maturity (other than in specified installments (see below), if applicable, or for taxation reasons or, in the case of a Subordinated Note, for regulatory or other reasons or following a Subordinated Note Event of Default) or that such Notes (other than any Guaranteed Note) will be redeemable at the option of the Issuer and/or the Noteholders upon giving not less than 15 nor more than 30 days’ irrevocable notice (or such other notice period (if any) as is indicated in the applicable Final Terms) to the Noteholders or the Issuer, as the case may be, on a date or dates specified prior to such stated maturity and at a price or prices and on such terms as are indicated in the applicable Final Terms.
Any early redemption of a Subordinated Note (other than for a Subordinated Note Event of Default) will be subject to the provisions set out in Condition 7(l).
The Final Terms may provide that Notes may be redeemable in two or more installments of such amounts and on such dates as are indicated in the applicable Final Terms.
Notes having a maturity of less than one year may be subject to restrictions on their denomination and distribution, see “Certain Restrictions”, above.
Denomination of Notes: Notes will be issued in denominations as may be agreed between the Issuer and the relevant Dealer and as indicated in the applicable Final Terms save that the minimum denomination of each Note will be such as may be allowed or required from time to time by the relevant central bank (or equivalent body) or any laws or regulations applicable to the relevant Specified Currency, see “Certain Restrictions” above and save that the minimum denomination of each Note admitted to trading on a regulated market within the European Economic Area or offered to the public in a Member State of the European Economic Area in circumstances which otherwise require the publication of a prospectus under the Prospectus Directive will be €1,000 (or, if the Notes are denominated in a currency other than euro, the equivalent amount in such currency).
Taxation: All payments in respect of the Notes will be made without deduction for or on account of withholding taxes imposed within Australia, subject as provided in Condition 8. In the event that any such deduction is made, the
10 Summary of the Programme
Issuer will, save in certain limited circumstances provided in Condition 8, be required to pay additional amounts to cover the amounts so deducted.
With respect to any Guaranteed Note, payments by the Guarantor in respect of the Deed of Guarantee should not be subject to withholding or deduction for, or on account of, taxes, duties, assessments or governmental charges of whatever nature imposed or levied by or on behalf of the Commonwealth of Australia. In the event that any payment made by the Guarantor in respect of the Deed of Guarantee is made subject to deduction or withholding for or on account of any taxes, duties, assessments or governmental charges of any nature, no additional amounts shall be payable by the Guarantor, the Issuer, any Paying Agent or any other person in respect of such deduction or withholding. (For further details see the section of this Offering Circular entitled “Australian Taxation – Payments under the Deed of Guarantee”.) Cross Default: The terms of the Senior Notes (other than any Guaranteed Notes) will contain a cross-default provision as further described in Condition 10(a). In respect of any Guaranteed Note, any cross default provision or cross acceleration provision will not apply as further described in Condition 10(a). The terms of the Subordinated Notes will not contain a cross-default provision and will contain only limited events of default as further described in Condition 10(b). Status of the Senior Notes: Senior Notes and any relative Receipts and/or Coupons will be direct, unsubordinated, unsecured and general obligations of the Issuer and will rank pari passu, without any preference among themselves, with all other outstanding unsecured and unsubordinated obligations of the Issuer, present and future (other than indebtedness preferred by mandatory provisions of law) – see Condition 3(a). Status of the Subordinated Subordinated Notes and any relative Receipts and/or Coupons will be direct, Notes: unsecured and subordinated obligations of the Issuer and will rank pari passu without any preference among themselves. The claims of the holders of Subordinated Notes and any relative Receipts and/or Coupons against the Issuer will, in the event of a Winding Up (as defined in Condition 3(b)) of the Issuer, be subordinated in right of payment to the claims of Other Creditors as defined in Condition 3(b)) in the manner provided in Condition 3(b). Rating: The rating of certain series of Notes or Guaranteed Notes to be issued under the Programme may be specified in the applicable Final Terms. Listing and admission to Application has been made to the UKLA for Notes issued under the trading: Programme to be admitted to the Official List and to admit them to trading on the London Stock Exchange’s regulated market. The Notes may also be listed on such other or further stock exchange(s) as may be agreed between the Issuer and the relevant Dealer in relation to each Series. Unlisted Notes may also be issued. The Final Terms relating to each Tranche of Notes will state whether or not and, if so, on which stock exchange(s) the Notes are to be listed. The Programme Agreement provides that, if the maintenance of the listing of any Notes has, in the opinion of the Issuer, become unduly onerous for any reason whatsoever, the Issuer shall be entitled to terminate such listing subject to its using its best endeavours promptly to list or admit to trading the Notes on an alternative stock exchange, within or outside the European Union, to be agreed between the Issuer and the relevant Dealer or, as the case may be, the Lead Manager. Governing Law: The Notes and any non-contractual obligations arising out of or in connection with the Notes will be governed by, and shall be construed in accordance with, English law except in the case of Subordinated Notes, in
11 which case the provisions of Condition 3 as it applies to such Notes should be governed by, and construed in accordance with, the laws of the State of Queensland, Australia. Selling Restrictions: Selling Restrictions: There are restrictions on the offer, sale and transfer of the Notes in the United States, the European Economic Area (including the United Kingdom), Australia, Japan and Hong Kong and such other restrictions as may be required in connection with the offering and sale of a particular Tranche of Notes. See “Subscription and Sale and Transfer and Selling Restrictions”
12 Risk Factors
The Issuer believes that the following factors may affect its ability to fulfil its obligations under Notes issued under the Programme. These factors are contingencies which may or may not occur and the Issuer is not in a position to express a view on the likelihood of any such contingency occurring.
In addition, factors which are material for the purpose of assessing the market risks associated with Notes issued under the Programme are also described below.
The Issuer believes that the factors described below represent the principal risks inherent in investing in Notes issued under the Programme, but the inability of the Issuer to pay interest, principal or other amounts on or in connection with any Notes may occur for other reasons which may not be considered significant risks by the Issuer based on information currently available to it or which it may currently be able to anticipate. Prospective investors should also read the detailed information set out elsewhere in this Offering Circular and reach their own views prior to making any investment decision.
Factors that may affect the Issuer’s ability to fulfil its obligations under Notes issued under the Programme
Dependence on the Australian economy The Issuer’s earnings are dependent on the level of financial services required by its customers. In particular, levels of borrowing are heavily dependent on customer confidence, the state of the economy, the home and business lending market and prevailing market interest rates at the time.
As the Issuer currently conducts all of its business in Australia, its performance is influenced by the level and cyclical nature of business and home lending activity in Australia, which is, in turn, impacted by both domestic and international economic and political events. There can be no assurance that a weakening in the Australian economy will not have a material effect on the Issuer’s financial condition and results of operations.
Competition The Issuer faces intense competition in all aspects of its business. The Issuer competes domestically with asset managers, retail and commercial banks, non-bank mortgage brokers, private banking firms, investment banking firms, brokerage firms and other investment services firms. The level of competition continues to increase as the trend toward consolidation in the global financial services industry is creating competitors with broader ranges of product and services, increased access to capital, and greater efficiency and enhanced pricing power. As a number of the Issuer’s competitors are significantly larger and have greater resources, the Issuer could lose market share or be forced to reduce prices in order to compete effectively, if industry participants engage in aggressive growth strategies or severe price discounting.
Credit risk The Issuer is exposed to credit risk as a consequence of its lending activities. As at 31 December 2008, the Issuer held specific provisions to cover bad and doubtful debts. From 1 July 2005, under IFRS, the Issuer will apply the incurred loss approach for loan provisioning. If these provisions prove inadequate, either because of an economic downturn or a significant breakdown in its credit disciplines, then this could have a material adverse effect on its business.
Market risk The Issuer is exposed to market risk as a consequence of its trading activities in financial markets and through the asset and liability management of the Issuer’s overall financial position. In the financial markets trading businesses, the Issuer is exposed to losses arising from adverse movements in levels and volatility of interest rates and foreign exchange rates.
Liquidity risk Liquidity risk is the potential inability to meet the Issuer’s payment obligations which could potentially arise as a result of mismatched cashflows generated by its business. The Issuer manages this risk through an approved liquidity framework.
13 Risk Factors
The Issuer’s liquidity risk management framework models its ability to fund under both normal conditions and during a crisis situation. This approach is designed to ensure that the Issuer’s funding framework is sufficiently flexible to ensure liquidity under a wide range of market conditions.
Operational risk As a financial services organisation, the Issuer is exposed to a variety of other risks, including those arising from process error, fraud, systems failure, security and physical protection, customer services, staff skills and performance, and product development and maintenance.
Information technology The Issuer relies to a significant degree on information technology systems. Most of the Issuer’s daily operations are computer based and its information technology systems are essential to maintaining effective communication with customers. The Issuer generally manages its information technology systems internally rather than outsource that function to a third party. The Issuer is exposed to a number of system risks, including:
• complete or partial failure of the information technology systems;
• inadequacy of internal or third party information technology systems due to, among other things, failure to keep pace with industry developments;
• capacity of the existing systems to effectively accommodate the Issuer’s planned growth and integrate existing and future acquisitions and alliances; and
• systems integration programs not being completed within the timetable or budget.
The Issuer has disaster recovery and systems development plans in place to mitigate some of these risks. However, any failure in the Issuer’s systems could result in business interruption, the loss of customers, damaged reputation and weakening of its competitive position and could adversely affect its business.
Regulatory risk The Issuer’s business is subject to substantial regulatory and legal oversight. In particular the Issuer is subject to prudential supervision by the Australian Prudential Regulation Authority (“APRA”).The Issuer is required, amongst other things, to meet minimum capital requirements within its operations. Any significant regulatory developments, including changes to capital adequacy and accounting standards, could have an adverse effect on how the Issuer conducts its business and on the Issuer’s financial condition and results of operations. Its business and earnings are also affected by the fiscal or other policies that are adopted by various regulatory authorities of the Australian government, foreign governments and international agencies. The nature and impact of future changes in such policies are not predictable and are beyond the Issuer’s control.
Integration risk associated with Promina Merger The merger of Suncorp and Promina was implemented on 20 March 2007 and resulted in the formation of the Suncorp Group (See “Group Overview”). Combining two groups of the size and complexity of Suncorp and Promina carries integration risks. There is a risk that the merged Suncorp Group will lose customers and market share, or face operational disruptions, if the integration is not achieved in an orderly and timely fashion.
In addition, the ability to achieve targeted synergies on time or at all and to their fullest extent is subject to a number of risks, including the following:
1. unforeseen difficulties in the amalgamation of business sites and physical business locations;
2. unforeseen difficulties in integrating management information systems;
3. unforeseen difficulties in integrating existing or introducing new information technology platforms;
4. lower than expected cost savings; and
5. any differences in the cultures or management styles of the two organisations.
14 Risk Factors
If, as a consequence of the integration, any damage occurs to the reputation of the Promina or Suncorp brands, this could have an adverse impact on the future financial position of Suncorp Group.
Any failure to achieve targeted synergies may impact on the financial performance and position of the Suncorp Group. Suncorp has estimated the total pre-tax cost of integration at around A$375 million. There is no guarantee that integration costs will not exceed the expected amount. There is a risk that costs could increase due to unforeseen complications. Such an increase may have a material adverse impact on the future financial position and performance of the Suncorp Group.
The Issuer’s results may be adversely affected by general economic conditions and other business conditions The Issuer’s business activities are dependent on the level of banking, finance and financial services required by its customers. In particular, levels of borrowing are heavily dependent on customer confidence, employment trends, the state of the economy and market interest rates at the time. As the Issuer currently conducts substantially all of its business in Australia, its performance is influenced significantly by the level and cyclical nature of business activity in Australia, which is in turn impacted by both domestic and international economic and political events. There can be no assurance that a weakening in the Australian economy will not have a material effect on the Issuer’s future results.
Since mid-2007 and the more widespread dislocation in international financial markets, it has become increasingly difficult to accurately predict likely short- to medium-term trends in the economies in which we operate. Nonetheless, there is evidence of significant weakening in each of these economies, including the Issuer’s key markets in Australia where a number of concerns (including commercial and other property market concerns) continue to impact consumer and investor confidence. Although the Issuer intends to continue its focus on controlled growth and asset quality, any contraction of its key markets will impact the Issuer and other participants in the financial sector.
Liquidity risk may impair the Issuer’s ability to fund its business and make timely payments on the notes Liquidity risk is the risk that the Issuer does not have sufficient funds available at all times to meet its contractual and contingent cash flow obligations. The Issuer seeks to manage its liquidity risk by holding a stock of highly liquid assets which can be readily realised for cash and by focusing on the liquidity profile of its assets and liabilities. However, the Issuer’s liquidity may be adversely affected by a number of factors, including significant unforeseen changes in interest rates, ratings downgrades, higher than anticipated losses on investments and disruptions in the financial markets generally.
An inability on the Issuer’s part to access funds or to access the markets from which it raises funds may put the Issuer’s positions in liquid assets at risk and lead it to be unable to finance operations adequately. A dislocated credit environment compounds the risk that the Issuer will not be able to access funds at favourable rates. These and other factors could also lead creditors to form a negative view of the Issuer’s liquidity, which could result in less favourable credit ratings, higher borrowing costs and less accessible funds. In addition, because the Issuer receives a significant portion of its funding from deposits, the Issuer is subject to the risk that depositors could withdraw their funds at a rate faster than the rate at which borrowers repay their loans, thus causing liquidity strain.
In addition, there are always some timing differences between cash payments the Issuer owes on the Issuer’s liabilities and the cash payments due to it on its investments. The Issuer’s ability to overcome these cash mismatches and make timely payments on the Notes may be adversely affected if the fixed income markets were to experience significant liquidity problems. Also, under certain market conditions, the Issuer could be unable to sell additional products and unable to sell the Issuer’s portfolio investments in sufficient amounts to raise the cash required to pay the Notes when due.
Furthermore, in circumstances where the Issuer’s competitors have ongoing limitations on their access to other sources of funding such as wholesale market derived funding, this also may adversely affect the Issuer’s access to funds and the Issuer’s cost of funding.
Like most banks, the Issuer has been affected by the decreased availability and increased cost of wholesale funding that has been a feature of recent dislocations in global financial markets. As described in more detail in this Offering Circular, the Issuer has continued to perform well in its funding activities during this period. However, until global financial markets return to more normal levels, it is difficult to predict what impact the current markets are likely to have on the Issuer and other participants in the financial sector.
15 Risk Factors
Risks related to the Guaranteed Notes
Acceleration of the Guaranteed Notes will not be available until holders make a valid claim under the Guarantee and the Commonwealth of Australia fails to pay such claim in a timely manner Upon the occurrence of an event of default resulting from the Issuer’s failure to make any payment under the Guaranteed Notes, the holders of the Guaranteed Notes will not be entitled to accelerate the maturity of the Guaranteed Notes unless the holder makes a written valid claim against the Commonwealth of Australia for payment under the Deed of Guarantee and the Commonwealth of Australia fails to pay such claim in a timely manner. As a result, holders will not be able to accelerate the maturity of a Guaranteed Note as long as the Commonwealth of Australia makes timely payment under the Deed of Guarantee in respect of the Guaranteed Notes after receiving a written valid claim from a holder of Guaranteed Notes for such payment. The length of time within which the Commonwealth of Australia will or must make a payment in respect of the Deed of Guarantee has not been determined.
Payments by the Commonwealth of Australia may be delayed There is no designated period within which the Commonwealth of Australia is required to make payments under the Deed of Guarantee, after it receives a valid claim from a holder of a Guaranteed Note and verifies the same. If the Commonwealth of Australia does not make the applicable guarantee payments on receipt of a valid claim, the guarantee payments on the Guaranteed Notes could be delayed from the date the payment is due and payable under the terms of the Guaranteed Notes.
You may not receive payment under the Deed of Guarantee if you fail to follow the Scheme Rules The Deed of Guarantee and the Scheme Rules contain procedures relating to the submission of claims under the Deed of Guarantee. In order to recover payment under the Deed of Guarantee after the Issuer’s failure to pay on the Guaranteed Notes, you, as holder of the Guaranteed Notes, must make a written valid claim through the Scheme Administrator (as specified in the Scheme Rules) to the Commonwealth of Australia in accordance with the form specified and manner specified within the Scheme Rules. See “Description and Form of the Deed of Guarantee”. You may not receive payment under the Deed of Guarantee if you fail to follow the Scheme Rules.
You will be required to commence proceedings in Australia if the Commonwealth of Australia does not perform its obligations under the Deed of Guarantee. If the Commonwealth of Australia does not perform its obligations under the Deed of Guarantee, a holder of the Guaranteed Notes could commence proceedings against the Commonwealth of Australia under the Judiciary Act 1903 (Cth) (the “Judiciary Act”). In proceedings under the Judiciary Act, the Commonwealth of Australia may not be entitled to any defence based on crown or sovereign immunity. In proceedings against the Commonwealth of Australia, the rights of parties are, as nearly as possible, the same as in proceedings between subjects of the Commonwealth of Australia.
The Deed of Guarantee does not contain any submission to the courts of any jurisdiction outside Australia, and it does not contain any waiver of any crown or sovereign immunity which might be available to the Commonwealth of Australia under the law of any foreign jurisdiction, including member states of the European Union. A holder of a Guaranteed Note who brings an action against the Commonwealth of Australia in a jurisdiction other than Australia may therefore be unable to enforce its rights under the Deed of Guarantee outside Australia. If a holder of a Guaranteed Note was able to obtain a judgment from a foreign court against the Commonwealth of Australia based on the Deed of Guarantee, applicable Australian law may prevent or limit the enforceability of that judgment. A money judgment obtained in relation to the Deed of Guarantee in a superior court of a foreign country could, in certain circumstances, be registered in the Federal Court of Australia or the Supreme Court of a State or Territory and enforced as a judgment of that Australian court, under the Foreign Judgments Act 1991 (Cth). The circumstances include that the Foreign Judgments Act 1991 (Cth) applies to the relevant foreign country on the basis of reciprocity of treatment in that country of money judgments given in Australian superior courts.
If a judgment is obtained against the Commonwealth of Australia under the Judiciary Act, no execution or attachment can be issued against the property or revenues of the Commonwealth of Australia. If any judgment is given against the Commonwealth of Australia, the Minister for Finance is obliged under the Judiciary Act to satisfy the judgment out of money legally available, on receipt of a certificate of the judgment issued by an officer of a court in which such judgment has been obtained.
16 Risk Factors
The Deed of Guarantee is governed by the laws of the State of New South Wales.
The Commonwealth of Australia has enacted the Guarantee Scheme for Large Deposits and Wholesale Funds Appropriation Act 2008 (Cth) for the purposes of appropriating funds to pay any valid claims made, in accordance with the Scheme Rules, under the Deed of Guarantee.
Changes to the Australian Government Guarantee Scheme for Large Deposits and Wholesale Funding The Australian Government Guarantee Scheme for Large Deposits and Wholesale Funding is subject to the Scheme Rules. The Scheme Rules may be withdrawn or changed, which may have a negative impact on the availability of funding in the markets in which the Issuer operates. The Commonwealth of Australia has announced the Australian Government Guarantee Scheme for Large Deposits and Wholesale Funding will be reviewed on an ongoing basis and revised if necessary.
The Commonwealth of Australia shall not be liable to perform its obligations under the Deed of Guarantee in respect of Guaranteed Liabilities (as defined in the Deed of Guarantee) which have been varied, amended, waived, released, novated, supplemented, extended or restated in any material respect without the prior written consent of the Commonwealth of Australia. The Guaranteed Notes may not be varied, amended, waived, released, novated, supplemented, extended or restated in any material respect without the prior written consent of the Commonwealth of Australia.
The Commonwealth of Australia may also amend the terms of the Deed of Guarantee at any time at its discretion, provided that (except insofar as such amendment is required by law) such amendment does not reduce the Commonwealth of Australia’s obligations to the beneficiaries under the Deed of Guarantee in a manner which is prejudicial to the interests of the beneficiaries in respect of any subsisting Guaranteed Liability (as defined in the Deed of Guarantee).
Effect of the Australian Government’s proposals on its financial position There is no limit on the amount which may be guaranteed under the Deed of Guarantee and the effect of this on the financial position of the Commonwealth of Australia is unknown.
Factors which are material for the purpose of assessing the market risks associated with Notes issued under the Programme
The Notes may not be a suitable investment for all investors Each potential investor in the Notes must determine the suitability of that investment in light of its own circumstances. In particular, each potential investor should:
(i) have sufficient knowledge and experience to make a meaningful evaluation of the Notes, the merits and risks of investing in the Notes and the information contained or incorporated by reference in this Offering Circular or any applicable supplement;
(ii) have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its particular financial situation, an investment in the Notes and the impact the Notes will have on its overall investment portfolio;
(iii) have sufficient financial resources and liquidity to bear all of the risks of an investment in the Notes, including Notes with principal or interest payable in one or more currencies, or where the currency for principal or interest payments is different from the potential investor’s currency;
(iv) understand thoroughly the terms of the Notes and be familiar with the behaviour of any relevant indices and financial markets; and
(v) be able to evaluate (either alone or with the help of a financial adviser) possible scenarios for economic, interest rate and other factors that may affect its investment and its ability to bear the applicable risks.
Some Notes are complex financial instruments. Sophisticated institutional investors generally do not purchase complex financial instruments as stand-alone investments. They purchase complex financial instruments as a way to reduce risk or enhance yield with an understood, measured, appropriate addition of risk to their overall portfolios. A potential investor should not invest in Notes which are complex financial instruments unless it has the expertise (either alone or with a financial adviser) to evaluate how the Notes will perform
17 Risk Factors under changing conditions, the resulting effects on the value of the Notes and the impact this investment will have on the potential investor’s overall investment portfolio.
Risks related to the structure of a particular issue of Notes A wide range of Notes may be issued under the Programme. A number of these Notes may have features which contain particular risks for potential investors. Set out below is a description of the most common such features:
Notes subject to optional redemption by the Issuer An optional redemption feature of Notes is likely to limit their market value. During any period when the Issuer may elect to redeem Notes, the market value of those Notes generally will not rise substantially above the price at which they can be redeemed. This also may be true prior to any redemption period.
The Issuer may be expected to redeem Notes when its cost of borrowing is lower than the interest rate on the Notes. At those times, an investor generally would not be able to reinvest the redemption proceeds at an effective interest rate as high as the interest rate on the Notes being redeemed and may only be able to do so at a significantly lower rate. Potential investors should consider reinvestment risk in light of other investments available at that time.
Any redemption of the Subordinated Notes is subject to the prior written approval of APRA.
Index Linked Notes and Dual Currency Notes The Issuer may issue Notes (other than Guaranteed Notes) with principal or interest determined by reference to an index or formula, to changes in the prices of securities or commodities, to movements in currency exchange rates or other factors (each, a “Relevant Factor”). In addition, the Issuer may issue Notes (other than Guaranteed Notes) with principal or interest payable in one or more currencies which may be different from the currency in which the Notes are denominated. Potential investors should be aware that:
(i) the market price of such Notes may be volatile;
(ii) they may receive no interest;
(iii) payment of principal or interest may occur at a different time or in a different currency than expected;
(iv) they may lose all or a substantial portion of their principal;
(v) a Relevant Factor may be subject to significant fluctuations that may not correlate with changes in interest rates, currencies or other indices;
(vi) if a Relevant Factor is applied to Notes in conjunction with a multiplier greater than one or contains some other leverage factor, the effect of changes in the Relevant Factor on principal or interest payable likely will be magnified; and
(vii) the timing of changes in a Relevant Factor may affect the actual yield to investors, even if the average level is consistent with their expectations. In general, the earlier the change in the Relevant Factor, the greater the effect on yield.
Partly-paid Notes The Issuer may issue Notes where the issue price is payable in more than one installment. Failure to pay any subsequent installment could result in an investor losing all of his investment.
Variable Rate Notes with a multiplier or other leverage factor Notes with variable interest rates can be volatile investments. If they are structured to include multipliers or other leverage factors, or caps or floors, or any combination of those features or other similar related features, their market values may be even more volatile than those for securities that do not include those features.
Inverse Floating Rate Notes Inverse Floating Rate Notes have an interest rate equal to a fixed rate minus a rate based upon a reference rate such as LIBOR. The market values of those Notes typically are more volatile than market values of other conventional floating rate debt securities based on the same reference rate (and with otherwise comparable
18 Risk Factors terms). Inverse Floating Rate Notes are more volatile because an increase in the reference rate not only decreases the interest rate of the Notes, but may also reflect an increase in prevailing interest rates, which further adversely affects the market value of these Notes.
Fixed/Floating Rate Notes Fixed/Floating Rate Notes may bear interest at a rate that the Issuer may elect to convert from a fixed rate to a floating rate, or from a floating rate to a fixed rate. Where the Issuer has the right to effect such a conversion, this will affect the secondary market and the market value of the Notes since the Issuer may be expected to convert the rate when it is likely to produce a lower overall cost of borrowing. If the Issuer converts from a fixed rate to a floating rate in such circumstances, the spread on the Fixed/Floating Rate Notes may be less favourable than then prevailing spreads on comparable Floating Rate Notes tied to the same reference rate. In addition, the new floating rate at any time may be lower than the rates on other Notes. If the Issuer converts from a floating rate to a fixed rate in such circumstances, the fixed rate may be lower than then prevailing rates on its Notes. The rate at which Floating Rate Notes will bear interest shall not at any time be less than 0%.
Notes issued at a substantial discount or premium The market values of securities issued at a substantial discount or premium from their principal amount tend to fluctuate more in relation to general changes in interest rates than do prices for conventional interest bearing securities. Generally, the longer the remaining term of the securities, the greater the price volatility as compared to conventional interest-bearing securities with comparable maturities.
The Issuer’s obligations under Subordinated Notes are subordinated The Issuer’s obligations under Subordinated Notes will be unsecured and subordinated and will rank junior in priority of payment to claims of Other Creditors as defined and more fully described in Condition 3(b) of the Terms and Conditions of the Notes contained in this Offering Circular. Although Subordinated Notes may pay a higher rate of interest than comparable Notes which are not subordinated, there is a substantial risk that an investor in Subordinated Notes will lose all or some of his investment should the Issuer become insolvent.
Risks related to Notes generally Set out below is a brief description of certain risks relating to the Notes generally:
Modification and waiver The conditions of the Notes contain provisions for calling meetings of Noteholders to consider matters affecting their interests generally. These provisions permit defined majorities to bind all Noteholders including Noteholders who did not attend and vote at the relevant meeting and Noteholders who voted in a manner contrary to the majority.
The conditions of the Notes also provide that the Principal Paying Agent and the Issuer may, without the consent of Noteholders, agree to (i) any modification of the Notes, the Coupons, the Receipts or the Agency Agreement which is not prejudicial to the interests of the Noteholders or (ii) any modification of the Notes, the Coupons, the Receipts or the Agency Agreement which is of a formal, minor or technical nature or is made to correct a manifest error or to comply with a mandatory provision of law.
EU Savings Directive Under EC Council Directive 2003/48/EC on the taxation of savings income, Member States are required, to provide to the tax authorities of another Member State details of payments of interest (or similar income) paid by a person within its jurisdiction to an individual resident in that other Member State or to certain limited types of entities established in that other Member State. However, for a transitional period, Belgium, Luxembourg and Austria are instead required (unless during that period they elect otherwise) to operate a withholding system in relation to such payments (the ending of such transitional period being dependent upon the conclusion of certain other agreements relating to information exchange with certain other countries). A number of non-EU countries and territories including Switzerland have adopted similar measures (a withholding system in the case of Switzerland).
19 Risk Factors
On 15 September 2008 the European Commission issued a report to the Council of the European Union on the operation of the Directive, which included the Commission’s advice on the need for changes to the Directive. On 13 November 2008 the European Commission published a more detailed proposal for amendments to the Directive, which included a number of suggested changes. The European Parliament approved an amended version of this proposal on 24 April 2009. If any of the proposed changes are made in relation to the Directive, they may amend or broaden the scope of the requirements described above.
If a payment were to be made or collected through a Member State which has opted for a withholding system and an amount of, or in respect of, tax were to be withheld from that payment, neither the Issuer nor any Paying Agent nor any other person would be obliged to pay additional amounts with respect to any Note as a result of the imposition of such withholding tax. The Issuer is required to maintain a Paying Agent in a Member State that is not obliged to withhold or deduct tax pursuant to the Directive.
Change of law The conditions of the Notes are based on English law in effect as at the date of this Offering Circular save that the provisions of Condition 3 as it applies to Subordinated Notes are governed by, and shall be construed in accordance with, the laws of the State of Queensland in effect as at the date of this Offering Circular and the provisions of the Deed of Guarantee are governed by, and shall be construed in accordance with, the laws of the State of New South Wales in effect as at the date of this Offering Circular. No assurance can be given as to the impact of any possible judicial decision or change to English law or to the laws of the State of Queensland or to the laws of the State of New South Wales or administrative practice after the date of this Offering Circular.
Notes where denominations involve integral multiples: definitive Notes In relation to any issue of Notes which have denominations consisting of a minimum Specified Denomination plus one or more higher integral multiples of another smaller amount, it is possible that such Notes may be traded in amounts that are not integral multiples of such minimum Specified Denomination. In such a case a holder who, as a result of trading such amounts, holds an amount which is less than the minimum Specified Denomination in his account with the relevant clearing system at the relevant time may not receive a definitive Note in respect of such holding (should definitive Notes be printed) and would need to purchase a principal amount of Notes such that its holding amounts to a Specified Denomination.
If definitive Notes are issued, holders should be aware that definitive Notes which have a denomination that is not an integral multiple of the minimum Specified Denomination may be illiquid and difficult to trade.
Risks related to the market generally Set out below is a brief description of the principal market risks, including liquidity risk, exchange rate risk, interest rate risk and credit risk:
The secondary market generally Notes may have no established trading market when issued, and one may never develop. If a market does develop, it may not be very liquid. Therefore, investors may not be able to sell their Notes easily or at prices that will provide them with a yield comparable to similar investments that have a developed secondary market. This is particularly the case for Notes that are especially sensitive to interest rate, currency or market risks, are designed for specific investment objectives or strategies or have been structured to meet the investment requirements of limited categories of investors. These types of Notes generally would have a more limited secondary market and more price volatility than conventional debt securities. Illiquidity may have a severely adverse effect on the market value of Notes.
In addition, Noteholders should be aware of the prevailing and widely reported global credit market conditions (which continue at the date of this Offering Circular), whereby there is a general lack of liquidity in the secondary market for instruments similar to the Notes. Such lack of liquidity may result in investors suffering losses on the Notes in secondary resales even if there is no decline in the performance of the assets of the Issuer. The Issuer cannot predict which of these circumstances will change and whether, if and when they do change, there will be a more liquid market for the Notes and instruments similar to the Notes at that time.
20 Risk Factors
Exchange rate risks and exchange controls The Issuer will pay principal and interest on the Notes in the Specified Currency. This presents certain risks relating to currency conversions if an investor’s financial activities are denominated principally in a currency or currency unit (the “Investor’s Currency”) other than the Specified Currency. These include the risk that exchange rates may significantly change (including changes due to devaluation of the Specified Currency or revaluation of the Investor’s Currency) and the risk that authorities with jurisdiction over the Investor’s Currency may impose or modify exchange controls. An appreciation in the value of the Investor’s Currency relative to the Specified Currency would decrease (1) the Investor’s Currency-equivalent yield on the Notes, (2) the Investor’s Currency-equivalent value of the principal payable on the Notes and (3) the Investor’s Currency-equivalent market value of the Notes.
Government and monetary authorities may impose (as some have done in the past) exchange controls that could adversely affect an applicable exchange rate. As a result, investors may receive less interest or principal than expected, or no interest or principal.
Interest rate risks Investment in Fixed Rate Notes involves the risk that subsequent changes in market interest rates may adversely affect the value of the Fixed Rate Notes.
Credit ratings may not reflect all risks One or more independent credit rating agencies may assign credit ratings to the Notes. The ratings may not reflect the potential impact of all risks related to structure, market, additional factors discussed above, and other factors that may affect the value of the Notes. A credit rating is not a recommendation to buy, sell or hold securities and may be revised or withdrawn by the rating agency at any time.
Legal investment considerations may restrict certain investments The investment activities of certain investors are subject to legal investment laws and regulations, or review or regulation by certain authorities. Each potential investor should consult its legal advisers to determine whether and to what extent (1) Notes are legal investments for it, (2) Notes can be used as collateral for various types of borrowing and (3) other restrictions apply to its purchase or pledge of any Notes. Financial institutions should consult their legal advisers or the appropriate regulators to determine the appropriate treatment of Notes under any applicable risk-based capital or similar rules.
21 Documents Incorporated by Reference
The following documents which have previously been published shall be incorporated in, and form part of, this Offering Circular:
• the auditors’ report and the published audited consolidated financial statements of the Issuer in respect of the years ended 30 June 2007 and 30 June 2008;
• the auditors’ report and the published reviewed consolidated financial statements of the Issuer in respect of the six months ended 31 December 2007 and 31 December 2008;
• the constitution of Suncorp-Metway Limited as adopted on 28 October 2008; and
• the terms and conditions of the Notes contained in the previous Offering Circulars dated 26 September 2001, pages 22 to 48 (inclusive); 6 September 2002, pages 22 to 48 (inclusive); 8 September 2003, pages 22 to 48 (inclusive); 8 September 2004, pages 22 to 48 (inclusive); 15 September 2005, pages 28 to 54 (inclusive); 5 June 2006, pages 29 to 55 (inclusive); and 5 June 2008, pages 47-82 (inclusive) prepared by the Issuer.
Following the publication of this Offering Circular a supplement may be prepared by the Issuer and approved by the UK Listing Authority in accordance with Article 16 of the Prospectus Directive. Statements contained in any such supplement (or contained in any document incorporated by reference therein) shall, to the extent applicable (whether expressly, by implication or otherwise), be deemed to modify or supersede statements contained in this Offering Circular or in a document which is incorporated by reference in this Offering Circular. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Offering Circular.
Copies of documents incorporated by reference in this Offering Circular can be obtained from the registered office of the Issuer and from the specified office of the Paying Agent for the time being in London, set out at the end of this Offering Circular.
The Issuer will, in the event of any significant new factor, material mistake or inaccuracy relating to information included in this Offering Circular which is capable of affecting the assessment of any Notes, prepare a supplement to this Offering Circular or publish a new Offering Circular for use in connection with any subsequent issue of Notes. The Issuer has undertaken to the Dealers in the Programme Agreement (as defined in “Subscription and Sales and Transfer and Selling Restrictions”) that it will comply with section 87G of the Financial Services and Markets Act 2000.
22 Form of the Notes
The Notes of each Series will be in either bearer form, with or without interest coupons attached, or registered form, without interest coupons attached. Bearer Notes will be issued outside the United States in reliance on Regulation S under the Securities Act (“Regulation S”) and Registered Notes will be issued both outside the United States in reliance on the exemption from registration provided by Regulation S and within the United States in reliance on Rule 144A.
Bearer Notes Each Tranche of Bearer Notes will initially be represented by either a temporary bearer global Note (a “Temporary Bearer Global Note”) or a permanent bearer global note (a “Permanent Bearer Global Note”) as indicated in the applicable Final Terms which, in either case will be delivered on or prior to the original issue date of the Tranche to a common depositary (the “Common Depositary”) for Euroclear Bank S.A./N.V. (“Euroclear”) and Clearstream Banking, société anonyme (“Clearstream, Luxembourg”). Whilst any Bearer Note is represented by a Temporary Bearer Global Note, payments of principal, interest (if any) and any other amount payable in respect of the Notes due prior to the Exchange Date (as defined below) will be made against presentation of the Temporary Bearer Global Note only to the extent that certification (in a form to be provided) to the effect that the beneficial owners of interests in such Bearer Note are not U.S. persons or persons who have purchased for resale to any U.S. person, as required by U.S. Treasury regulations, has been received by Euroclear and/or Clearstream, Luxembourg and Euroclear and/or Clearstream, Luxembourg, as applicable, has given a like certification (based on the certifications it has received) to the Principal Paying Agent. Any reference in this section “Form of the Notes” to Euroclear and/or Clearstream, Luxembourg shall, whenever the context so permits, be deemed to include a reference to any additional or alternative clearing system approved by the Issuer and the Principal Paying Agent specified in the applicable Final Terms.
On and after the date (the “Exchange Date”) which is 40 days after a Temporary Bearer Global Note is issued, interests in such Temporary Bearer Global Note will be exchangeable (free of charge) upon a request as described therein either for (i) interests in a Permanent Bearer Global Note without receipts, interest coupons or talons or (ii) for definitive Bearer Notes with, where applicable, receipts, interest coupons and talons attached (as indicated in the applicable Final Terms and subject, in the case of definitive Bearer Notes, to such notice period as is specified in the applicable Final Terms) in each case against certification of beneficial ownership as described above unless such certification has already been given, provided that purchasers in the United States and certain U.S. persons will not be able to receive definitive Bearer Notes. The holder of a Temporary Bearer Global Note will not be entitled to collect any payment of interest, principal or other amount due on or after the Exchange Date unless, upon due certification, exchange of the Temporary Bearer Global Note for an interest in a Permanent Bearer Global Note or for definitive Bearer Notes is improperly withheld or refused.
Payments of principal, and interest (if any) or any other amounts on a Permanent Bearer Global Note will be made through Euroclear and/or Clearstream, Luxembourg against presentation or surrender (as the case may be) of the Permanent Bearer Global Note without any requirement for certification. The applicable Final Terms will specify that a Permanent Bearer Global Note will be exchangeable (free of charge), in whole but not in part, for definitive Bearer Notes with, where applicable, receipts, interest coupons and talons attached upon either (i) not less than 60 days’ written notice from Euroclear and/or Clearstream, Luxembourg (acting on the instructions of any holder of an interest in such Permanent Bearer Global Note) to the Principal Paying Agent as described therein or (ii) only upon the occurrence of an Exchange Event. For these purposes, “Exchange Event” means that (i) a Senior Note Event of Default or a Subordinated Note Event of Default (as each such term is defined in Condition 10) has occurred and is continuing, (ii) the Issuer has been notified that both Euroclear and Clearstream, Luxembourg have been closed for business for a continuous period of 14 days (other than by reason of holiday, statutory or otherwise) or have announced an intention permanently to cease business or have in fact done so and no alternative clearing system is available or (iii) the Issuer has or will become subject to adverse tax consequences which would not be suffered were the Notes represented by the Permanent Bearer Global Note in definitive form. The Issuer will promptly give notice to Noteholders in accordance with Condition 14 if an Exchange Event occurs. In the event of the occurrence of an Exchange Event, Euroclear and/or Clearstream, Luxembourg (acting on the instructions of any holder of an interest in such Permanent Bearer Global Note) may give notice to the Principal Paying Agent requesting exchange and, in the event of the occurrence of an Exchange Event as described in (iii) above, the Issuer may also give notice
23 Form of the Notes to the Principal Paying Agent requesting exchange. Any such exchange shall occur not later than 60 days after the date of receipt of the first relevant notice by the Principal Paying Agent.
The following legend will appear on all Bearer Notes, which have an original maturity of more than 365 days and on all receipts, interest coupons and talons relating to such Notes:
“ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(J) AND 1287(A) OF THE INTERNAL REVENUE CODE.”
The sections referred to provide that United States holders, with certain exceptions, will not be entitled to deduct any loss on Bearer Notes, receipts or interest coupons and will not be entitled to capital gains treatment of any gain on any sale, disposition, redemption or payment of principal in respect of such Notes, receipts or interest coupons.
Notes which are represented by a Bearer Global Note will only be transferable in accordance with the rules and procedures for the time being of Euroclear or Clearstream, Luxembourg, as the case may be.
Registered Notes The Registered Notes of each Tranche offered and sold in reliance on Regulation S, which will be sold to non- U.S. persons outside the United States, will initially be represented by a global note in registered form (a “Regulation S Global Note”). Prior to expiry of the distribution compliance period (as defined in Regulation S) applicable to each Tranche of Notes, beneficial interests in a Regulation S Global Note may not be offered or sold to, or for the account or benefit of, a U.S. person save as otherwise provided in Condition 2 and may not be held otherwise than through Euroclear or Clearstream, Luxembourg and such Regulation S Global Note will bear a legend regarding such restrictions on transfer.
The Registered Notes of each Tranche may only be offered and sold in the United States or to U.S. persons in private transactions to “qualified institutional buyers” within the meaning of Rule 144A under the Securities Act (“QIBs”). The Registered Notes of each Tranche sold to QIBs will be represented by a global note in registered form (a “Rule 144A Global Note” and, together with a Regulation S Global Note, the “Registered Global Notes”).
Registered Global Notes will either (i) be deposited with a custodian for, and registered in the name of a nominee of, The Depository Trusty Company (“DTC”) for the accounts of Euroclear and Clearstream, Luxembourg or (ii) be deposited with a common depositary for, and registered in the name of a common nominee of, Euroclear and Clearstream, Luxembourg, as specified in the applicable Final Terms. Persons holding beneficial interests in Registered Global Notes will be entitled or required, as the case may be, under the circumstances described below, to receive physical delivery of definitive Notes in fully registered form.
The Rule 144A Global Note will be subject to certain restrictions on transfer set forth therein and will bear a legend regarding such restrictions.
Payments of principal, interest and any other amount in respect of the Registered Global Notes will, in the absence of provision to the contrary, be made to the person shown on the Register (as defined in Condition 6(d)) as the registered holder of the Registered Global Notes. None of the Issuer, any Paying Agent or the Registrar will have any responsibility or liability for any aspect of the records relating to or payments or deliveries made on account of beneficial ownership interests in the Registered Global Notes or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests.
Payments of principal, interest or any other amount in respect of the Registered Notes in definitive form will, in the absence of provision to the contrary, be made to the persons shown on the Register on the relevant Record Date (as defined in Condition 6(d)) immediately preceding the due date for payment in the manner provided in that Condition.
Interests in a Registered Global Note will be exchangeable (free of charge), in whole but not in part, for definitive Registered Notes without receipts, interest coupons or talons attached only upon the occurrence of an Exchange Event. For these purposes, “Exchange Event” means that (i) Senior Note Event of Default or a Subordinated Note Event of Default (as each such term is defined in Condition 10) (as applicable) has
24 Form of the Notes occurred and is continuing, (ii) in the case of Notes registered in the name of a nominee for DTC, either DTC has notified the Issuer that it is unwilling or unable to continue to act as depository for the Notes and no alternative clearing system is available or DTC has ceased to constitute a clearing agency registered under the Exchange Act, (iii) in the case of Notes registered in the name of a nominee for a common depositary for Euroclear and Clearstream, Luxembourg, the Issuer has been notified that both Euroclear and Clearstream, Luxembourg have been closed for business for a continuous period of 14 days (other than by reason of holiday, statutory or otherwise) or have announced an intention permanently to cease business or have in fact done so and, in any such case, no successor clearing system is available or (iv) the Issuer has or will become subject to adverse tax consequences which would not be suffered were the Notes represented by the Registered Global Note in definitive form. The Issuer will promptly give notice to Noteholders in accordance with Condition 14 if an Exchange Event occurs. In the event of the occurrence of an Exchange Event, DTC, Euroclear and/or Clearstream, Luxembourg (acting on the instructions of any holder of an interest in such Registered Global Note) may give notice to the Registrar requesting exchange and, in the event of the occurrence of an Exchange Event as described in (iv) above, the Issuer may also give notice to the Registrar requesting exchange. Any such exchange shall occur not later than 10 days after the date of receipt of the first relevant notice by the Registrar.
Transfer of Interests Interests in a Registered Global Note may, subject to compliance with all applicable restrictions, be transferred to a person who wishes to hold such interest in another Registered Global Note. No beneficial owner of an interest in a Registered Global Note will be able to transfer such interest, except in accordance with the applicable procedures of DTC, Euroclear and Clearstream, Luxembourg, in each case to the extent applicable. Registered Notes are also subject to the restrictions on transfer set forth therein and will bear a legend regarding such restrictions, see “Subscription and Sale and Transfer and Selling Restrictions”.
General Pursuant to the Agency Agreement (as defined under “Terms and Conditions of the Notes”), the Principal Paying Agent or the Registrar shall arrange that, where a further Tranche of Notes is issued which is intended to form a single Series with an existing Tranche of Notes, the Notes of such further Tranche shall be assigned a common code and ISIN and, where applicable, a CUSIP and CINS number which are different from the common code, ISIN, CUSIP and CINS assigned to Notes of any other Tranche of the same Series until at least the expiry of the distribution compliance period applicable to the Notes of such Tranche.
For so long as any of the Notes are represented by a Global Note held on behalf of Euroclear and/or Clearstream, Luxembourg each person (other than Euroclear or Clearstream, Luxembourg) who is for the time being shown in the records of Euroclear or of Clearstream, Luxembourg as the holder of a particular nominal amount of such Notes (in which regard any certificate or other document issued by Euroclear or Clearstream, Luxembourg as to the nominal amount of such Notes standing to the account of any person shall be conclusive and binding for all purposes save in the case of manifest error) shall be treated by the Issuer and its agent as the holder of such nominal amount of such Notes for all purposes other than with respect to the payment of principal or interest on such nominal amount of such Notes, for which purpose the bearer of the relevant Bearer Global Note or the registered holder of the relevant Registered Global Note shall be treated by the Issuer and its agents as the holder of such nominal amount of such Notes in accordance with and subject to the terms of the relevant Global Note and the expressions “Noteholder” and “holder of Notes” and related expressions shall be construed accordingly.
So long as DTC or its nominee is the registered owner or holder of a Registered Global Note, DTC or such nominee, as the case may be, will be considered the sole owner or holder of the Notes represented by such Registered Global Note for all purposes under the Agency Agreement and such Notes except to the extent that in accordance with DTC’s published rules and procedures any ownership rights may be exercised by its participants or beneficial owners through participants.
Any reference herein to Euroclear and/or Clearstream, Luxembourg and/or DTC shall, whenever the context so permits, be deemed to include a reference to any additional or alternative clearing system specified in the applicable Final Terms.
A Note may be accelerated by the holder thereof in certain circumstances described in Condition 10. In such circumstances, where any Note is still represented by a Global Note and the Global Note (or any part thereof)
25 Form of the Notes has become due and repayable in accordance with the Terms and Conditions of such Notes and payment in full of the amount due has not been made in accordance with the provisions of the Global Note then the Global Note will become void at 8.00 p.m. (London time) on such day. At the same time, holders of interests in such Global Note credited to their accounts with Euroclear and/or Clearstream, Luxembourg and/or DTC, as the case may be, will become entitled to proceed directly against the Issuer on the basis of statements of account provided by Euroclear, Clearstream, Luxembourg and DTC on and subject to the terms of a deed of covenant (the “MTN Deed of Covenant”) dated 15 September 2005 and executed by the Issuer. In addition, holders of interests in such Global Note credited to their accounts with DTC may require DTC to deliver Definitive Notes in registered form in exchange for their interest in such Global Note in accordance with DTC’s standard operating procedures.
1 Consider including this legend where a non-exempt offer of Notes is anticipated.
26 Applicable Final Terms
Set out below is the form of Final Terms which will be completed for each Tranche of Notes issued under the Programme with a denomination of less than EUR 50,000 (or its equivalent in another currency).
[Date] SUNCORP-METWAY LIMITED (ABN 66010831 722)
Issue of [Aggregate Nominal Amount of Tranche] [Title of Notes] under the U.S.$15,000,000,000 Programme for the issuance of Medium Term Notes, Euro-commercial Paper and other debt instruments [The Offering Circular referred to below (as completed by these Final Terms) has been prepared on the basis that, except as provided in sub-paragraph (ii) below, any offer of Notes in any Member State of the European Economic Area which has implemented the Prospectus Directive (2003/71/EC) (each, a “Relevant Member State”) will be made pursuant to an exemption under the Prospectus Directive, as implemented in that Relevant Member State, from the requirement to publish a prospectus for offers of the Notes. Accordingly, any person making or intending to make an offer of the Notes may only do so:
(i) in circumstances in which no obligation arises for the Issuer or any Dealer to publish a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to Article 16 of the Prospectus Directive, in each case, in relation to such offer; or
(ii) in those Public Offer Jurisdictions mentioned in Paragraph 36 of Part A below, provided such person is one of the persons mentioned in Paragraph 36 of Part A below and that such offer is made during the Offer Period specified for such purpose therein.
Neither the Issuer nor any Dealer has authorised, nor do they authorise, the making of any offer of Notes in any other circumstances.]1
[The Offering Circular referred to below (as completed by these Final Terms) has been prepared on the basis that any offer of Notes in any Member State of the European Economic Area which has implemented the Prospectus Directive (2003/71/EC) (each, a “Relevant Member State”) will be made pursuant to an exemption under the Prospectus Directive, as implemented in that Relevant Member State, from the requirement to publish a prospectus for offers of the Notes. Accordingly any person making or intending to make an offer in that Relevant Member State of the Notes may only do so in circumstances in which no obligation arises for the Issuer or any Dealer to publish a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to Article 16 of the Prospectus Directive, in each case, in relation to such offer. Neither the Issuer nor any Dealer has authorised, nor do they authorise, the making of any offer of Notes in any other circumstances.]
27 Applicable Final Terms
PART A – CONTRACTUAL TERMS
Terms used herein shall be deemed to be defined as such for the purposes of the Conditions set forth in the Offering Circular dated 16 June 2009 which constitutes a base prospectus for the purposes of the Prospectus Directive (Directive 2003/71/EC) (the “Prospectus Directive”). This document constitutes the Final Terms of the Notes described herein for the purposes of Article 5.4 of the Prospectus Directive and must be read in conjunction with the Offering Circular. Full information on the Issuer and the offer of the Notes is only available on the basis of the combination of these Final Terms and the Offering Circular.The Offering Circular is available for viewing on the website of the Regulatory News Service operated by the London Stock Exchange at http://londonstockexchange.com/en-gb/pricenews/marketnews under the name of the Issuer and the headline “Publication of Prospectus”, and copies may be obtained from the offices of the Principal Paying Agent at Winchester House, 1 Great Winchester Street, London EC2N 2DB.
[The following alternative language applies if the first tranche of an issue which is being increased was issued under an Offering Circular with an earlier date.]
Terms used herein shall be deemed to be defined as such for the purposes of the Conditions (the “Conditions”) set forth in the Offering Circular dated [original date]. This document constitutes the Final Terms of the Notes described herein for the purposes of Article 5.4 of the Prospectus Directive (Directive 2003/71/EC) (the “Prospectus Directive”) and must be read in conjunction with the Offering Circular dated [current date] which constitutes a base prospectus for the purposes of the Prospectus Directive, save in respect of the Conditions which are extracted from the Offering Circular dated [original date] and are attached hereto. Full information on the Issuer and the offer of the Notes is only available on the basis of the combination of these Final Terms and the Offering Circulars dated [current date] and [original date]. Copies of such Offering Circulars are available for viewing on the website of the Regulatory News Service operated by the London Stock Exchange at http://londonstockexchange.com/en-gb/pricenews/marketnews under the name of the Issuer and the headline “Publication of Prospectus”, and copies may be obtained from the offices of the Principal Paying Agent at Winchester House, 1 Great Winchester Street, London EC2N 2DB.
[Include whichever of the following apply or specify as “Not Applicable” (N/A). Note that the numbering should remain as set out below, even if “Not Applicable” is indicated for individual paragraphs or subparagraphs. Italics denote directions for completing the Final Terms.]
[When adding any other final terms or information consideration should be given as to whether such terms or information constitute “significant new factors” and consequently trigger the need for a supplement to the Offering Circular under Article 16 of the Prospectus Directive.]
[If the Notes have a maturity of less than one year from the date of their issue, the minimum denomination may need to be £100,000 or its equivalent in any other currency.]
1. Issuer: Suncorp-Metway Limited
2. Commonwealth of Australia Guarantee: [Applicable/Not Applicable]2
3. (i) Series Number [ ]
(ii) Tranche Number [ ]
(If fungible with an existing Series, details of that Series, including the date on which the Notes become fungible)
4. Specified Currency or Currencies: [ ]
5. Aggregate Nominal Amount:
(i) Series: [ ]
(ii) Tranche: [ ]
2 Mark as “Applicable” if Deed of Guarantee dated 20 November 2008 will apply to guarantee all sums payable under the applicable Note.
28 Applicable Final Terms
(Insert issue size or “up to” amount in respect of an offer where the total amount has yet to be determined)
6. Issue Price: [ ] per cent. of the Aggregate Nominal Amount [plus accrued interest from [Insert date] (in the case of fungible issues only, if applicable)
7. (a) Specified Denominations [ ]
(In the case of Registered Notes, this means the minimum integral amount in which transfers can be made)
(N.B. If an issue of Notes is (i) NOT admitted to trading on an European Economic Area exchange; and (ii) only offered in the European Economic Area in circumstances where a prospectus is not required to be published under the Prospectus Directive the €[1,000] minimum denomination is not required.)
(b) Calculation Amount: [ ]
(If only one Specified Denomination, insert the Specified Denomination.
If more than one Specified Denomination, insert the highest common factor. Note: There must be a common factor in the case of two or more Specified Denominations.)
8. Issue Date: [ ]
[specify/Issue Date/Not Applicable]
9. Interest Commencement Date: (N.B. An Interest Commencement Date will not be relevant for certain Notes, for example Zero Coupon Notes.)
10. Maturity Date: [Fixed rate – specify date/ Floating rate – Interest Payment Date falling in or nearest to [specify month]]
(N.B. The Maturity Date for Guaranteed Notes must not be longer than 60 months from the Issue Date.)
11. Interest Basis: [[ ] per cent. Fixed Rate] [[LIBOR/EURIBOR] +/- [ ] per cent. Floating Rate] [Zero Coupon] [Index-Linked Interest] [Dual Currency Interest] [specify other] (further particulars specified below)
12. Redemption/Payment Basis: [Redemption at par] [Index-Linked Redemption] [Dual Currency Redemption] [Partly Paid] [Installment] [specify other]
(N.B. If the Final Redemption Amount is other than 100 per cent of the nominal value the Notes will be derivative securities for the purposes of the Prospectus Directive and the requirements of Annex XII to the Prospectus Directive Regulation will apply.)
13.Change of Interest Basis or [Specify details of any provision for change of Notes into Redemption/Payment Basis another Interest Basis or Redemption/Payment Basis]
29 Applicable Final Terms
14. Put/Call Options: [Investor Put] [Issuer Call] [(further particulars specified below)]
15. (i) Status of the Notes: [Senior/Subordinated]
(ii) [Date [Board] approval for [ ] [and [ ], respectively]] issuance of Notes obtained:
(N.B. Only relevant where Board (or similar) authorisation is required for the particular tranche of Notes)
16. Method of distribution: [Syndicated/Non-syndicated]
PROVISIONS RELATING TO INTEREST (IF ANY) AND PAYABLE 17. Fixed Rate Note Provisions [Applicable/Not Applicable]
(If not applicable, delete the remaining sub-paragraphs of this paragraph)
(i) Rate(s) of Interest: [ ] per cent. per annum [payable [annually/semi-annually/ quarterly] in arrear]
(If payable other than annually, consider amending Condition 5)
(ii) Interest Payment Date(s): [[ ] in each year up to and including the Maturity Date]/[specify other]
(NB: This will need to be amended in the case of long or short coupons)
(iii)Fixed Coupon Amount(s): [ ] per Calculation Amount (Applicable to Notes in definitive form.)
(iv)Broken Amount(s) [ ] per Calculation Amount, payable on the Interest Payment (Applicable to notes in Date falling [in/on] [ ] definitive form.)
(v) Day Count Fraction: [30/360 or Actual/Actual (ICMA) or specify other]
(vi) Determination Date(s): [ ] in each year
[Insert regular interest payment dates, ignoring issue date or maturity date in the case of a long or short first or last coupon]
(NB: This will need to be amended in the case of regular interest payment dates which are not of equal duration)
(NB: Only relevant where Day Count Fraction is Actual/Actual (ICMA))
(vii) Other terms relating to the method of calculating interest for Fixed Rate Notes: [None/Give details]
18. Floating Rate Note Provisions [Applicable/Not applicable]
(If not applicable, delete the remaining sub-paragraphs of this paragraph)
30 Applicable Final Terms
(i) Specified Period(s)/Specified Interest Payment Dates: [ ]
(ii) Business Day Convention: [Floating Rate Convention/Following Business Day Convention/ Modified Following Business Day Convention/Preceding Business Day Convention/[specify other]]
(iii) Additional Business Centre(s): [ ]
(iv)Manner in which the Rate of [Screen Rate Determination/ISDA Determination/specify other] Interest and Interest Amount is to be determined:
(v) Party responsible for calculating the Rate of Interest and Interest Amount (if not the Agent): [ ]
(vi) Screen Rate Determination:
– Reference Rate: [ ]
(Either LIBOR, EURIBOR or other, although additional information is required if other – including fallback provisions in the Agency Agreement)
–Interest Determination [ ] Date(s) (Second London business day prior to the start of each Interest Period if LIBOR (other than Sterling or euro LIBOR), first day of each Interest Period if Sterling LIBOR and the second day on which the TARGET2 System is open prior to the start of eachInterest Period if EURIBOR or euro LIBOR)
– Relevant Screen Page: [ ]
(In the case of EURIBOR, if not Reuters EURIBOR01 ensure it is a page which shows a composite rate or amend the fallback provisions appropriately)
(vii) ISDA Determination:
– Floating Rate Option: [ ]
– Designated Maturity: [ ]
– Reset Date: [ ]
(viii) Margin(s): [+/-] [ ] per cent. per annum
(ix) Minimum Rate of Interest: [ ] per cent. per annum
(x) Maximum Rate of Interest: [ ] per cent. per annum
(xi) Day Count Fraction: [Actual/Actual (ISDA) Actual/365 (Fixed) Actual/365 (Sterling) Actual/360 30/360 30E/360 30E/360 (ISDA)
31 Applicable Final Terms
Other] (See Condition 5 for alternatives)
(xii) Fall back provisions, rounding provisions and any other terms relating to the method of calculating interest on Floating Rate Notes, if different from those set out in the Conditions: [ ]
19. Zero Coupon Note Provisions [Applicable/Not Applicable]
(If not applicable, delete the remaining sub-paragraphs of this paragraph)
(i) Accrual Yield: [ ] per cent. per annum
(ii) Reference Price: [ ]
(iii) Any other formula/basis of determining amount payable: [ ]
(iv)Day Count Fraction in [Conditions 7(f)(iii) and 7(k) apply/specify other] relation to Early Redemption (Consider applicable day count fraction if not U.S. dollar Amounts and late payment: denominated)
20. Index Linked Interest Note Provisions [Applicable/Not Applicable]
(If not applicable, delete the remaining sub-paragraphs of this paragraph)
(N.B. If the Final Redemption Amount is other than 100 per cent. of the nominal value the Notes will be derivative securities for the purposes of the Prospectus Directive and the requirements of Annex XII to the Prospectus Directive Regulation will apply.)
(i) Index/Formula: [give or annex details]
(ii) Calculation Agent: [give name (and, if the Notes are derivative securities to which Annex XII of the Prospectus Directive Regulation applies, address)]
(iii) Party responsible for calculating the Rate of Interest (if not the Calculation Agent) and Interest Amount (if not the Agent): [ ]
(iv) Provisions for determining Coupon where calculation by reference to Index and/or Formula is impossible or [need to include a description of market disruption or impracticable: settlement disruption events and adjustment provisions]
(v) Specified Period(s)/Specified Interest Payment Date: [ ]
(vi) Business Day Convention: [Floating Rate Convention/Following Business Day Convention/Modified Following Business Day Convention/Preceding Business Day Convention/specify other]
(vii) Additional Business Centre(s): [ ]
32 Applicable Final Terms
(viii) Minimum Rate of Interest: [ ] per cent. per annum
(ix) Maximum Rate of Interest: [ ] per cent. per annum
(x) Day Count Fraction: [ ]
21.Dual Currency Interest Note [Applicable/Not Applicable] Provisions (If not applicable, delete the remaining sub-paragraphs of this paragraph)
(N.B. If the Final Redemption Amount is other than 100 per cent. of the nominal value the Notes will be derivative securities for the purposes of the Prospectus Directive and the requirements of Annex XII to the Prospectus Directive Regulation will apply.)
(i)Rate of Exchange/method of [give or annex details] calculating Rate of Exchange:
(ii) Party responsible for calculating the Rate of Interest (if not the Calculation Agent) and interest Amount (if not the Agent): [ ]
(iii) Provisions applicable where calculation by reference to Rate of Exchange impossible [need to include a description of market disruption or or impracticable: settlement disruption events and adjustment provisions] (iv) Person at whose option Specified Currency(ies) is/are payable: [ ]
PROVISIONS RELATING TO REDEMPTION 22. Issuer Call: [Applicable/Not Applicable]
(If not applicable, delete the remaining sub-paragraphs of this paragraph)
(i) Optional Redemption Date(s): [ ]
(ii) Optional Redemption Amount and method, if any, of calculation of such amount(s): [[ ] per Calculation Amount/specify other/see Appendix]
(iii) If redeemable in part:
(a)Minimum Redemption [ ] Amount:
(b)Minimum Redemption [ ] Amount:
(iv)Notice period (if other than as [ ] out in the Conditions): (N.B. If setting notice periods which are different to those provided in the Conditions, the Issuer is advised to consider the practicalities of distribution of information through intermediaries, for example, clearing systems and custodians, as
33 Applicable Final Terms
well as any other notice requirements which may apply, for example, as between the Issuer and the Agent)
23. Investor Put: [Applicable/Not Applicable]
(If not applicable, delete the remaining su b-paragraphs of this paragraph)
(i) Optional Redemption Date(s): [ ]
(ii) Optional Redemption Amount and method, if any, of calculation of such amount(s): [[ ] per Calculation Amount/specify other/see Appendix]
(iii)Notice period (if other than as [ ] set out in the Conditions): (N.B. If setting notice periods which are different to those provided in the Conditions, the Issuer is advised to consider the practicalities of distribution of information through intermediaries, for example, clearing systems and custodians, as well as any other notice requirements which may apply, for example, as between the Issuer and the Agent)
24. Final Redemption Amount: [[ ] per Calculation Amount/specify other/see Appendix]
(N.B. If the Final Redemption Amount is other than 100 per cent. of the nominal value the Notes will be derivative securities for the purposes of the Prospectus Directive and the requirements of Annex XII to the Prospectus Directive Regulation will apply.)
25. Early Redemption Amount payable on redemption for taxation reasons, (in the case of Subordinated Notes) redemption for regulatory or other reasons or on event of default and/or the method of calculating the same (if required or if different from that set out in Condition 7(f)): [ ] per Calculation Amount/specify other/see Appendix
GENERAL PROVISIONS APPLICABLE TO THE NOTES 26. Form of Notes: [Bearer Notes: Temporary Bearer Global Note exchangeable for a Permanent Bearer Global Note which is exchangeable for Definitive Notes [on 60 days’ notice given at any time/only upon an Exchange Event]
[Temporary Bearer Global Note exchangeable for Definitive Notes on and after the Exchange Date]
[Permanent Global Note exchangeable for Definitive Notes [on 60 days’ notice given at any time/only upon an Exchange Event/ at any time at the request of the Issuer]]
(Ensure that this is consistent with the wording in the “Form of the Notes” section in the Offering Circular and the Notes themselves. N.B. The exchange upon notice/at any time options should not be expressed to be applicable if the Specified Denomination of the Notes in paragraph 7 includes language substantially to the following effect: “[€50,000] and integral
34 Applicable Final Terms
multiples of [€1,000] in excess thereof up to and including [€99,000].”)
[Registered Notes: Regulation S Global Note (U.S.$[ ] nominal amount) registered in the name of a nominee for [DTC/a common depositary for Euroclear and Clearstream, Luxembourg]/ Rule 144A Global Note (U.S.$[ ] nominal amount registered in the name of a nominee for [DTC/a common depositary for Euroclear and Clearstream, Luxembourg] (specify nominal amounts)]
27.Additional Financial Centre(s) or [Not Applicable/give details] other special provisions relating to Payment Dates: (Note that this paragraph relates to the place of payment and not Interest Period end dates to which sub-paragraphs 18(iii) and 20(vii) relate)
28.Talons for future Coupons or [Yes/No. If yes, give details] Receipts to be attached to Definitive Notes (and dates on which such Talons mature):
29. Details relating to Partly Paid Notes: amounts of each payment comprising the Issue Price and date on which each payment is to be made and consequences of failure to pay, including any right of the Issuer to forfeit the Notes and [Not applicable/give details. NB: new forms of Temporary interest due on late payment: Global Note may be required for Partly Paid issues]
30. Details relating to Installment Notes:
(i) Installment Amount(s): [Not Applicable/give details]
(ii) Installment Date(s): [Not Applicable/give details]
31. Redenomination applicable: Redenomination [not] applicable
[(If Redenomination is applicable, specify the applicable Day Count Fraction and any provisions necessary to deal with floating rate interest calculation (including alternative reference rates))]
32. Other final terms: [Not Applicable/give details]
(When adding any other final terms consideration should be given as to whether such terms constitute “significant new factors” and consequently trigger the need for a supplement to the Offering Circular under Article 16 of the Prospectus Directive.)
(Consider including a term providing for tax certification if required to enable interest to be paid gross by issuers)
DISTRIBUTION 33. (i)If syndicated, names of [Not Applicable/give names] Managers:
35 Applicable Final Terms
(ii)Date of [Subscription] [ ] Agreement:
(iii) Stabilising Manager(s) (if any): [Not Applicable/give name]
34.If non-syndicated, name of [Not Applicable/give name and address] relevant Dealer:
35. U.S. Selling Restrictions: Reg S Compliance Category: [TEFRA D/TEFRA C/TEFRA not applicable]
36. Additional selling restrictions: [Not Applicable/give details]
37. Non-exempt Offer: [Not Applicable] [An offer of the Notes may be made by the Managers and [specify names of other financial intermediaries/ placers making non-exempt offers, to the extent known OR consider a generic description of other parties involved in non¬exempt offers (e.g. “other parties authorised by the Managers”) or (if relevant) note that other parties may make non-exempt offers in the Public Offer Jurisdictions during the Offer Period, if not known]] (together with the Managers, the “Financial Intermediaries”) other than pursuant to Article 3(2) of the Prospectus Directive in [specify relevant Member State(s) – which must be jurisdictions where the Offering Circular and any supplements have been passported (in addition to the jurisdiction where approved and published)] (“Public Offer Jurisdictions”) during the period from [specify date] until a [specify date or a formula such as “the Issue Date” or “the date which falls [ • ] Business Days thereafter”] (“Offer Period”). See further Paragraph 10 of Part B below.
(N.B. Consider any local regulatory requirements necessary to be fulfilled so as to be able to make a non-exempt offer in relevant jurisdictions. No such offer should be made in any relevant jurisdiction until those requirements have been met. Non-exempt offers may only be made into jurisdictions in which the base prospectus (and any supplement) has been notified/passported.)
38. Additional selling restrictions: [Not Applicable/[give details]
LISTING AND ADMISSION TO TRADING APPLICATION These Final Terms comprise the final terms required to list and have admitted to trading the issue [and] [public offer in the Public Offer Jurisdictions] [and] [admission to trading on [specify relevant regulated market (for example the Bourse de Luxembourg, the London Stock Exchange’s regulated market or the Regulated Market of the Irish Stock Exchange) and, if relevant, listing on an official list (for example, the Official List of the UK Listing Authority)] of the Notes described herein pursuant to the U.S.$15,000,000,000 Programme for the issue of Medium Term Notes, Euro-commercial Paper and other debt instruments of Suncorp-Metway Limited.
36 Applicable Final Terms
RESPONSIBILITY The Issuer accepts responsibility for the information contained in these Final Terms. The Guarantor accepts no responsibility for the information contained in these Final Terms.
Signed on behalf of the Issuer:
By: ......
Duly authorised signatory
By: ......
Duly authorised signatory
37 Applicable Final Terms
PART B – OTHER INFORMATION
1. LISTING AND ADMISSION TO TRADING (i) Listing and Admission to trading [Application has been made by the Issuer (or on its behalf) for the Notes to be admitted to trading on [specify relevant regulated market (for example the Bourse de Luxembourg, the London Stock Exchange’s regulated market or the Regulated Market of the Irish Stock Exchange) and, if relevant, listing on an official list (for example, the Official List of the UK Listing
Authority)] with effect from [ ].] [Application is expected to be made by the Issuer (or on its behalf) for the Notes to be admitted to trading on [specify relevant regulated market (for example the Bourse de Luxembourg, the London Stock Exchange’s regulated market or the Regulated Market of the Irish Stock Exchange) and, if relevant, listing on an official list (for example, the Official List of the UK Listing Authority)] with effect from [ ].] [Not Applicable.]
2. RATINGS Ratings: The Notes to be issued have been rated:
[S&P: [ ]] [Moody’s: [ ]] [Fitch: [ ]] [[Other]: [ ]]
[Need to include a brief explanation of the meaning of the ratings if this has previously been published by the rating provider.]
(The above disclosure should reflect the rating allocated to Notes of the type being issued under the Programme generally or, where the issue has been specifically rated, that rating.)
3. INTERESTS OF NATURAL AND LEGAL PERSONS INVOLVED IN THE ISSUE [Save for any fees payable to the [Managers/Dealers], so far as the Issuer is aware, no person involved in the issue of the Notes has an interest material to the offer. – Amend as appropriate if there are other interests].
[(When adding any other description, consideration should be given as to whether such matters described constitute “significant new factors” and consequently trigger the need for a supplement to the Offering Circular under Article 16 of the Prospectus Directive.)]
4. REASONS FOR THE OFFER, ESTIMATED NET PROCEEDS AND TOTAL EXPENSES [(i)] Reasons for the offer [ ]
[(ii)] Estimated net proceeds: [ ]
[(iii)] Estimated total expenses: [ ].
(N.B. If the Notes are derivative securities to which Annex XII of the Prospectus Directive Regulation applies (i) above is required where the reasons for the offer are different from making profit and/or hedging certain risks and, where such reasons are inserted in (i), disclosure of net proceeds and total expenses at (ii) and (iii) above are also required.)
38 Applicable Final Terms
5. YIELD (Fixed Rate Notes only) Indication of yield: [ ]
[Calculated as [include details of method of calculation in summary form] on the Issue Date.]**
The yield is calculated at the Issue Date on the basis of the Issue Price. It is not an indication of future yield.
6. HISTORIC INTEREST RATES (Floating Rate Notes only)** Details of historic [LIBOR/EURIBOR/other] rates can be obtained from [Reuters].]
7. PERFORMANCE OF INDEX/FORMULA, EXPLANATION OF EFFECT ON VALUE OF INVESTMENT AND ASSOCIATED RISKS AND OTHER INFORMATION CONCERNING THE UNDERLYING (Index-Linked Notes only) [If there is a derivative component in the interest or the Notes are derivative securities to which Annex XII of the Prospectus Directive Regulation applies, need to include a clear and comprehensive explanation of how the value of the investment is affected by the underlying and the circumstances when the risks are most evident.]
(N.B. The requirements below only apply if the Notes are derivative securities to which Annex XII of the Prospectus Directive Regulation applies.)
[Need to include details of where past and future performance and volatility of the index/formula can be obtained.]
[Where the underlying is an index need to include the name of the index and a description if composed by the Issuer and if the index is not composed by the Issuer need to include details of where the information about the index can be obtained. Where the underlying is not an index need to include equivalent information.]
[Include other information concerning the underlying required by paragraph 4.2 of Annex XII of the Prospectus Directive Regulation.]
[(When completing the above paragraphs, consideration should be given as to whether such matters described constitute “significant new factors” and consequently trigger the need for a supplement to the Offering Circular under Article 16 of the Prospectus Directive.)]
The Issuer [intends to provide post-issuance information [specify what information will be reported and where it can be obtained]] [does not intend to provide post-issuance information]
8. PERFORMANCE OF RATE[S] OF EXCHANGE AND EXPLANATION OF EFFECT ON VALUE OF INVESTMENT (Dual Currency Notes only) [Need to include details of where past and future performance and volatility of the relevant rates can be obtained.]
[If there is a derivative component in the interest or the Notes are derivative securities to which Annex XII of the Prospectus Directive Regulation applies, need to include a clear and comprehensive explanation of how the value of the investment is affected by the underlying and the circumstances when the risks are most evident.]
(N.B. The requirement below only applies if the Notes are derivative securities to which Annex XII of the Prospectus Directive Regulation applies.)
[(When completing this paragraph, consideration should be given as to whether such matters described constitute “significant new factors” and consequently trigger the need for a supplement to the Offering Circular under Article 16 of the Prospectus Directive.)]
39 Applicable Final Terms
9. OPERATIONAL INFORMATION (i) ISIN Code: [ ]
(ii) Common Code: [ ]
(iii) Any clearing system(s) other than Euroclear Bank S.A./N.V. and Clearstream Banking, société anonyme and the relevant identification number(s): [Not Applicable/give name(s) and number(s)]
(iv) Delivery: Delivery [against/free of] payment
(v) Names and addresses of additional Paying Agent(s) (if any): [ ]
10. TERMS AND CONDITIONS OF THE OFFER Offer Price: [Issue Price/Not applicable/specify]
[Conditions to which the offer is subject:] [ ]
[Description of the application process:] [ ]
[Details of the minimum and/or maximum amount of application:] [Not applicable/give details]
[Description of possibility to reduce subscriptions and manner for refunding excess amount paid by applicants:] [Not applicable/give details]
[Details of the method and time limits for paying up and delivering the Notes:] [Not applicable/give details]
[Manner in and date on which results of the offer are to be made public:] [Not applicable/give details]
[Procedure for exercise of any right of pre-emption, negotiability of subscription rights and treatment of subscription rights not exercised:] [Not applicable/give details]
[Categories of potential investors to which the Notes are offered and whether tranche(s) have been reserved for certain countries:] [Not applicable/give details]
[Process for notification to applicants of the amount allotted and the indication whether dealing may begin before notification is made:] [Not applicable/give details]
40 Applicable Final Terms
[Amount of any expenses and taxes specifically charged to the subscriber or purchaser:] [Not applicable/give details]
[Name(s) and address(es), to the extent known to the Issuer, of the placers in the various countries where the offer takes place:] [None/give details]
Applicable Final Terms Set out below is the form of Final Terms which will be completed for each Tranche of Notes issued under the Programme with a denomination of at least EUR 50,000 (or its equivalent in another currency).
[Date] SUNCORP-METWAY LIMITED (ABN 66010831 722)
Issue of [Aggregate Nominal Amount of Tranche] [Title of Notes] under the U.S.$15,000,000,000 Programme for the issuance of Medium Term Notes, Euro commercial Paper and other debt instruments PART A – CONTRACTUAL TERMS Terms used herein shall be deemed to be defined as such for the purposes of the Conditions set forth in the Offering Circular dated 16 June 2009 which constitutes a base prospectus for the purposes of the Prospectus Directive (Directive 2003/71/EC) (the “Prospectus Directive”). This document constitutes the Final Terms of the Notes described herein for the purposes of Article 5.4 of the Prospectus Directive and must be read in conjunction with the Offering Circular. Full information on the Issuer and the offer of the Notes is only available on the basis of the combination of these Final Terms and the Offering Circular.The Offering Circular is available for viewing on the website of the Regulatory News Service operated by the London Stock Exchange at http://londonstockexchange.com/en-gb/pricenews/marketnews under the name of the Issuer and the headline “Publication of Prospectus”, and copies may be obtained from the offices of the Principal Paying Agent at Winchester House, 1 Great Winchester Street, London EC2N 2DB.
The following alternative language applies if the first tranche of an issue which is being increased was issued under an Offering Circular with an earlier date.
Terms used herein shall be deemed to be defined as such for the purposes of the Conditions (the “Conditions”) set forth in the Offering Circular dated [original date]. This document constitutes the Final Terms of the Notes described herein for the purposes of Article 5.4 of the Prospectus Directive (Directive 2003/71/EC) (the “Prospectus Directive”) and must be read in conjunction with the Offering Circular dated [current date] which constitutes a base prospectus for the purposes of the Prospectus Directive, save in respect of the Conditions which are extracted from the Offering Circular dated [original date] and are attached hereto. Full information on the Issuer and the offer of the Notes is only available on the basis of the combination of these Final Terms and the Offering Circulars dated [current date] and [original date]. Copies of such Offering Circulars are available for viewing on the website of the Regulatory News Service operated by the London Stock Exchange at http://londonstockexchange.com/en-gb/pricenews/marketnews under the name of the Issuer and the headline “Publication of Prospectus”, and copies may be obtained from the offices of the Principal Paying Agent at Winchester House, 1 Great Winchester Street, London EC2N 2DB.
[Include whichever of the following apply or specify as “Not Applicable” (N/A). Note that the numbering should remain as set out below, even if “Not Applicable” is indicated for individual paragraphs or sub¬paragraphs. Italics denote directions for completing the Final Terms.]
[When adding any other final terms or information consideration should be given as to whether such terms or information constitute “significant new factors” and consequently trigger the need for a supplement to the Offering Circular under Article 16 of the Prospectus Directive.]
41 Applicable Final Terms
[If the Notes have a maturity of less than one year from the date of their issue, the minimum denomination [must/may need to] be £100,000 or its equivalent in any other currency.]
1. Issuer: Suncorp-Metway Limited
2.Commonwealth of Australia [Applicable/ Not Applicable]3 Guarantee:
3. (i) Series Number: [ ]
(ii) Tranche Number: [ ]
(If fungible with an existing Series, details of that Series, including the date on which the Notes become fungible)
4. Specified Currency or Currencies: [ ] 5. Aggregate Nominal Amount: (i) Series: [ ] (ii) Tranche: [ ] 6. Issue Price: [ ] per cent. of the Aggregate Nominal Amount [plus accrued interest from [insert date] (if applicable)] 7. (i) Specified Denominations: [ ] (Note – where multiple denominations above [€50,000] or equivalent are being used the following sample wording should be followed: “[€50,000] and integral multiples of [€1,000] in excess thereof up to and including [€99,000]. No Notes in definitive form will be issued with a denomination above [€99,000].”) (N.B. If an issue of Notes is (i) NOT admitted to trading on an European Economic Area exchange; and (ii) only offered in the European Economic Area in circumstances where a prospectus is not required to be published under the Prospectus Directive the [€50,000] minimum denomination is not required.) (ii) Calculation Amount: [ ] (If only one Specified Denomination, insert the Specified Denomination. If more than one Specified Denomination, insert the highest common factor. Note: There must be a common factor in the case of two or more Specified Denominations.) 8. (i) Issue Date: [ ] (ii) Interest Commencement Date: [specify/Issue Date/Not Applicable] (N.B. An Interest Commencement Date will not be relevant for certain Notes, for example Zero Coupon Notes.) 9. Maturity Date: [Fixed rate – specify date/
Floating rate – Interest Payment Date falling in or nearest to [specify month]]/ (N.B. The Maturity Date for Guaranteed Notes must not be longer than 60 months from the Issue Date.)
3 Mark as “Applicable” if Deed of Guarantee dated 20 November 2008 will apply to guarantee all sums payable under the applicable Note.
42 Applicable Final Terms
10. Interest Basis: [[ ] per cent. Fixed Rate]
[[LIBOR/EURIBOR] +/- [ ] per cent. Floating Rate] [Zero Coupon] [Index Linked Interest] [Dual Currency Interest] [specify other]
(further particulars specified below)
11. Redemption/Payment Basis: [Redemption at par] [Index Linked Redemption] [Dual Currency Redemption] [Partly Paid]
[Installment]
[specify other]
(N.B. If the Final Redemption Amount is other than 100 per cent. of the nominal value the Notes will be derivative securities for the purposes of the Prospectus Directive and the requirements of Annex XII to the Prospectus Directive Regulation will apply.)
12.Change of Interest Basis or [Specify details of any provision for change of Notes into Redemption/Payment Basis: another Interest Basis or Redemption/Payment Basis]
13. Put/Call Options: [Investor Put]
[Issuer Call]
[(further particulars specified below)]
14. (i) Status of the Notes: [Senior/Subordinated]
(ii)[Date [Board] approval for [ ] [and [ ], respectively]] issuance of Notes obtained:
(N.B. Only relevant where Board (or similar) authorisation is required for the particular tranche of Notes
15. Method of distribution: [Syndicated/Non-syndicated]
PROVISIONS RELATING TO INTEREST (IF ANY) PAYABLE 16. Fixed Rate Note Provisions [Applicable/Not Applicable]
(If not applicable, delete the remaining subparagraphs of this paragraph)
(i) Rate(s) of Interest: [ ] per cent. per annum [payable [annually/semi- annually/quarterly/other (specify)] in arrear]
(If payable other than annually, consider amending Condition 5)
(ii) Interest Payment Date(s): [[ ] in each year up to and including the Maturity Date]//[specify other]
(N.B. This will need to be amended in the case of long or short coupons)
43 Applicable Final Terms
(iii)Fixed Coupon Amount(s): [ ] per Calculation Amount (Applicable to Notes in definitive form.)
(iv)Broken Amount(s): [ ] per Calculation Amount, payable on the Interest Payment (Applicable to Notes in Date falling [in/on] [- ] definitive form.)
(v) Day Count Fraction: [30/360 or Actual/Actual (ICMA) or [specify other]]
(vi) [Determination Date(s): [ ] in each year
(Insert regular interest payment dates, ignoring issue date or maturity date in the case of a long or short first or last coupon N.B. This will need to be amended in the case of regular interest payment dates which are not of equal duration
N.B. Only relevant where Day Count Fraction is Actual/Actual (ICMA))]
(vii)Other terms relating to the [None/Give details] method of calculating interest for Fixed Rate Notes:
17. Floating Rate Note Provisions [Applicable/Not Applicable]
(If not applicable, delete the remaining subparagraphs of this paragraph)
(i)Specified Period(s)/Specified [ ] Interest Payment Dates:
(ii) Business Day Convention: [Floating Rate Convention/Following Business Day Convention/ Modified Following Business Day Convention/Preceding Business Day Convention/[specify other]]
(iii) Additional Business Centre(s): [ ]
(iv)Manner in which the Rate of [Screen Rate Determination/ISDA Determination/specify other] Interest and Interest Amount are to be determined:
(v) Party responsible for calculating the Rate of Interest and Interest Amount (if not the Agent): [ ]
(vi) Screen Rate Determination:
• Reference Rate: [ ]
(Either LIBOR, EURIBOR or other, although additional information is required if other – including fallback provisions in the Agency Agreement) • Interest Determination Date(s): [ ]
(Second London business day prior to the start of each Interest Period if LIBOR (other than Sterling or euro LIBOR), first day of each Interest Period if Sterling LIBOR and the second day on which the TARGET2 System is open prior to the start of each Interest Period if EURIBOR or euro LIBOR)
44 Applicable Final Terms
• Relevant Screen Page: [ ]
(In the case of EURIBOR, if not Reuters EURIBOR01 ensure it is a page which shows a composite rate or amend the fallback provisions appropriately)
(vii) ISDA Determination:
• Floating Rate Option: [ ]
• Designated Maturity: [ ]
• Reset Date: [ ]
(viii) Margin(s): [+/-] [ ] per cent. per annum
(ix) Minimum Rate of Interest: [ ] per cent. per annum
(x) Maximum Rate of Interest: [ ] per cent. per annum
(xi) Day Count Fraction: [Actual/Actual (ISDA) Actual/365 (Fixed) Actual/365 (Sterling) Actual/360 30/360 30E/360 30E/360 (ISDA) Other] (See Condition 5 – for alternatives)
(xii) Fallback provisions, rounding provisions and any other terms relating to the method of calculating interest on Floating Rate Notes, if different from those set out in the Conditions: [ ]
18. Zero Coupon Note Provisions: [Applicable/Not Applicable]
(If not applicable, delete the remaining subparagraphs of this paragraph)
(i) Accrual Yield: [–] per cent. per annum
(ii) Reference Price: [ ]
(iii)Any other formula/basis of [ ] determining amount payable:
(iv)Day Count Fraction in [Conditions 7(f)(iii) and 7(k) apply/specify other] relation to Early Redemption (Consider applicable day count fraction if not U.S. dollar Amounts and late payment: denominated)
19. Index Linked Interest Note Provisions: [Applicable/Not Applicable]
(If not applicable, delete the remaining subparagraphs of this paragraph)
(N.B. If the Final Redemption Amount is other than 100 per cent. of the nominal value the Notes will be derivative securities for the purposes of the Prospectus Directive and the requirements of Annex XII to the Prospectus Directive Regulation will apply.)
45 Applicable Final Terms
(i) Index/Formula: [give or annex details]
(ii) Calculation Agent: [give name (and, if the Notes are derivative securities to which Annex XII of the Prospectus Directive Regulation applies, address)]
(iii) Party responsible for calculating the Rate of Interest (if not the Calculation Agent) and Interest Amount (if not the Agent): [ ]
(iv) Provisions for determining Coupon where calculation by reference to Index and/or Formula [need to include a description of market disruption or settlement is [need to include a description of market disruption or impossible or impracticable: settlement disruption events and adjustment provisions]
(v) Specified Period(s)/Specified Interest Payment Dates: [ ]
(vi) Business Day Convention: [Floating Rate Convention/Following Business Day Convention/ Modified Following Business Day Convention/ Preceding Business Day Convention/specify other]
(vii) Additional Business Centre(s): [ ]
(viii) Minimum Rate of Interest: [ ] per cent. per annum
(ix) Maximum Rate of Interest: [ ] per cent. per annum
(x) Day Count Fraction: [ ]
20. Dual Currency Interest Note [Applicable/Not Applicable] Provisions (If not applicable, delete the remaining subparagraphs of this paragraph)
(N.B. If the Final Redemption Amount is other than 100 per cent. of the nominal value the Notes will be derivative securities for the purposes of the Prospectus Directive and the requirements of Annex XII to the Prospectus Directive Regulation will apply.)
(i) Rate of Exchange/method of calculating Rate of Exchange: [give or annex details]
(ii) Party, if any, responsible for calculating the principal and/or interest due (if not the Agent): [ ]
(iii) Provision applicable where calculation by reference to Rate of Exchange impossible [need to include a description of market disruption or or impracticable: settlement disruption events and adjustment provisions]
(iv) Person at whose option Specified Currency(ies) is/are payable: [ ]
46 Applicable Final Terms
PROVISIONS RELATING TO REDEMPTION 21. Issuer Call: [Applicable/Not Applicable]
(If not applicable, delete the remaining subparagraphs of this paragraph)
(i) Optional Redemption Date(s): [ ]
(ii) Optional Redemption Amount and method, if any, of calculation of such amount(s): [[ ] per Calculation Amount/specify other/see Appendix]
(iii) If redeemable in part:
(a) Minimum Redemption Amount: [ ]
(b) Maximum Redemption Amount: [ ]
(iv) Notice period (if other than as set out in the Conditions): [ ]
(N.B. If setting notice periods which are different to those provided in the Conditions, the Issuer is advised to consider the practicalities of distribution of information through intermediaries, for example, clearing systems and custodians, as well as any other notice requirements which may apply, for example, as between the Issuer and the Agent)
22. Investor Put: [Applicable/Not Applicable]
(If not applicable, delete the remaining subparagraphs of this paragraph)
(i) Optional Redemption Date(s): [ ]
(ii) Optional Redemption Amount and method, if any, of calculation of such amount(s): [ ] per Calculation Amount/specify other/see Appendix]
(iii) Notice period (if other than as set out in the Conditions): [ ]
(N.B. If setting notice periods which are different to those provided in the Conditions, the Issuer is advised to consider the practicalities of distribution of information through intermediaries, for example, clearing systems and custodians, as well as any other notice requirements which may apply, for example, as between the Issuer and the Agent)
23. Final Redemption Amount: [[ ] per Calculation Amount/specify other/see Appendix]
(N.B. If the Final Redemption Amount is other than 100 per cent. of the nominal value the Notes will be derivative securities for the purposes of the Prospectus Directive and the requirements of Annex XII to the Prospectus Directive Regulation will apply.)
47 Applicable Final Terms
24. Early Redemption Amount payable on redemption for taxation reasons, (in the case of Subordinated Notes) redemption for regulatory or other reasons or on event of default and/or the method of calculating the same (if required or if different from that set out in Condition 7(f)): [[ ] per Calculation Amount/specify other/see Appendix]
GENERAL PROVISIONS APPLICABLE TO THE NOTES 25. Form of Notes: [Temporary Global Note exchangeable for a Permanent Global Note which is exchangeable for Definitive Notes [on 60 days’ notice given at any time/only upon an Exchange Event]]
[Temporary Global Note exchangeable for Definitive Notes on and after the Exchange Date]
[Permanent Global Note exchangeable for Definitive Notes [on 60 days’ notice given at any time/only upon an Exchange Event/at any time at the request of the Issuer]]
(Ensure that this is consistent with the wording in the “Form of the Notes” section in the Offering Circular and the Notes themselves. N.B. The exchange upon notice/at any time options should not be expressed to be applicable if the Specified Denomination of the Notes in paragraph 7 includes language substantially to the following effect: “[€50,000] and integral multiples of [€1,000] in excess thereof up to and including [€99,000].” Furthermore, such Specified Denomination construction is not permitted in relation to any issue of Notes which is to be represented on issue by a Temporary Global Note exchangeable for Definitive Notes.)
[Registered Notes: Regulation S Global Note (U.S.$[•] nominal amount) registered in the name of a nominee for [DTC/a common depositary for Euroclear and Clearstream, Luxembourg]/ Rule 144A Global Note (U.S.$[•] nominal amount registered in the name of a nominee for [DTC/a common depository for Euroclear and Clearstream, Luxembourg] (specify nominal amounts)]
26.Additional Financial Centre(s) or [Not Applicable/[give details] other special provisions relating to Payment Days: (Note that this paragraph relates to the place of payment and not Interest Period end dates to which sub-paragraphs 17(iii) and 19(vii) relate)
27. Talons for future Coupons or Receipts to be attached to Definitive Notes (and dates on which such Talons mature): [Yes/No. If yes, give details]
48 Applicable Final Terms
28. Details relating to Partly Paid Notes: amount of each payment comprising the Issue Price and date on which each payment is to be made and consequences of failure to pay, including any right of the [Not Applicable/give details. N.B. a new form of Temporary Issuer to forfeit the Notes and Global Note and/or Permanent Global Note may be required interest due on late payment: for Partly Paid issues]
29. Details relating to Installment Notes:
(i) Installment Amount(s): [Not Applicable/[give details]
(ii) Installment Date(s): [Not Applicable/[give details]
30. Redenomination applicable: Redenomination [not] applicable
[(If Redenomination is applicable, specify the applicable Day Count Fraction and any provisions necessary to deal with floating rate interest calculation (including alternative reference rates))] [(if Redenomination is applicable, specify the terms of the redenomination in an Annex to the Final Terms)]
31. Other final terms: [Not Applicable/give details]
[(When adding any other final terms consideration should be given as to whether such terms constitute “significant new factors” and consequently trigger the need for a supplement to the Offering Circular under Article 16 of the Prospectus Directive.)]
(Consider including a term providing for tax certification if required to enable interest to be paid gross by issuers.)
DISTRIBUTION 32. (i) If syndicated, names of Managers: [Not Applicable/give names]
(If the Notes are derivative securities to which Annex XII of the Prospectus Directive Regulation applies, include names of entities agreeing to underwrite the issue on a firm commitment basis and names of the entities agreeing to place the issue without a firm commitment or on a “best efforts” basis if such entities are not the same as the Managers.)
(ii) Date of [Subscription] Agreement: [ ]
(The above is only relevant if the Notes are derivative securities to which Annex XII of the Prospectus Directive Regulation applies).
(iii) Stabilising Manager(s) (if any): [Not Applicable/give name]
33. If non-syndicated, name of relevant Dealer: [Not Applicable/give name]
34. U.S. Selling Restrictions: [Reg. S Compliance Category; TEFRA D/TEFRA C/TEFRA not applicable]
35. Additional selling restrictions: [Not Applicable/give details]
49 Applicable Final Terms
PURPOSE OF FINAL TERMS These Final Terms comprise the final terms required for issue and admission to trading on [specify relevant regulated market (for example the Bourse de Luxembourg, the London Stock Exchange’s regulated market or the Regulated Market of the Irish Stock Exchange) and, if relevant, listing on an official list (for example, the Official List of the UK Listing Authority)] of the Notes described herein pursuant to the U.S.$15,000,000,000 Programme for the issue of Medium Term Notes, Euro-Commercial Paper and other debt instruments of Suncorp-Metway Limited.
RESPONSIBILITY The Issuer accepts responsibility for the information contained in these Final Terms. The Guarantor accepts no responsibility for the information contained in these Final Terms.
Signed on behalf of the Issuer:
By: ...... Duly authorised signatory
By: ...... Duly authorised signatory
50 Applicable Final Terms
PART B – OTHER INFORMATION
1. LISTING AND ADMISSION TO TRADING (i) Listing and Admission to trading: [Application has been made by the Issuer (or on its behalf) for the Notes to be admitted to trading on [specify relevant regulated market (for example the Bourse de Luxembourg, the London Stock Exchange’s regulated market or the Regulated Market of the Irish Stock Exchange) and, if relevant, listing on an official list (for example, the Official List of the UK Listing Authority)] with effect from [•].] [Application is expected to be made by the Issuer (or on its behalf) for the Notes to be admitted to trading on [specify relevant regulated market (for example the Bourse de Luxembourg, the London Stock Exchange’s regulated market or the Regulated Market of the Irish Stock Exchange) and, if relevant, listing on an official list (for example, the Official List of the UK Listing Authority)] with effect from [ ].] [Not Applicable.]
(ii) Estimate of total expenses related to admission to trading: [ ]
2. RATINGS Ratings: The Notes to be issued have been rated: [S&P: [ ]] [Moody’s: [ ]] [Fitch: [ ]] [[Other]: [ ]]
(The above disclosure should reflect the rating allocated to Notes of the type being issued under the Programme generally or, where the issue has been specifically rated, that rating.)
3. INTERESTS OF NATURAL AND LEGAL PERSONS INVOLVED IN THE ISSUE [Save for any fees payable to the [Managers/Dealers], so far as the Issuer is aware, no person involved in the issue of the Notes has an interest material to the offer. – Amend as appropriate if there are other interests]
[(When adding any other description, consideration should be given as to whether such matters described constitute “significant new factors” and consequently trigger the need for a supplement to the Offering Circular under Article 16 of the Prospectus Directive.)]
4. REASONS FOR THE OFFER, ESTIMATED NET PROCEEDS AND TOTAL EXPENSES [(i)] Reasons for the offer [ ]
[(ii)] Estimated net proceeds: [ ]
[(iii)]Estimated total expenses: [ ]]
(N.B.: Delete unless the Notes are derivative securities to which Annex XII of the Prospectus Directive Regulation applies, in which case (i) above is required where the reasons for the offer are different from making profit and/or hedging certain risks and, where such reasons are inserted in (i), disclosure of net proceeds and total expenses at (ii) and (iii) above are also required.)]
51 5. YIELD (Fixed Rate Notes only) Indication of yield: [ ]
The yield is calculated at the Issue Date on the basis of the Issue Price. It is not an indication of future yield.
6. PERFORMANCE OF INDEX/FORMULA, EXPLANATION OF EFFECT ON VALUE OF INVESTMENT AND ASSOCIATED RISKS AND OTHER INFORMATION CONCERNING THE UNDERLYING (Index-linked Notes only) [Need to include details of where past and future performance and volatility of the index/formula can be obtained.]
[Where the underlying is an index need to include the name of the index and a description if composed by the Issuer and if the index is not composed by the Issuer need to include details of where the information about the index can be obtained.]
[Include other information concerning the underlying required by paragraph 4.2 of Annex XII of the Prospectus Directive Regulation.]
[(When completing the above paragraphs, consideration should be given as to whether such matters described constitute “significant new factors” and consequently trigger the need for a supplement to the Offering Circular under Article 16 of the Prospectus Directive.)]
The Issuer [intends to provide post-issuance information [specify what information will be reported and where it can be obtained]] [does not intend to provide post-issuance information].
(N.B. This paragraph 6 only applies if the Notes are derivative securities to which Annex XII of the Prospectus Directive Regulation applies.)
7. PERFORMANCE OF RATE[S] OF EXCHANGE (Dual Currency Notes only) [Need to include details of where past and future performance and volatility of the relevant rates can be obtained.]
[(When completing this paragraph, consideration should be given as to whether such matters described constitute “significant new factors” and consequently trigger the need for a supplement to the Offering Circular under Article 16 of the Prospectus Directive.)]
(N.B. This paragraph 7 only applies if the Notes are derivative securities to which Annex XII of the Prospectus Directive Regulation applies.)
8. OPERATIONAL INFORMATION (i) ISIN Code: [ ]
(ii) Common Code: [ ]
(iii) Any clearing system(s) other than Euroclear Bank S.A./N.V. and Clearstream Banking, société anonyme and the relevant identification number(s): [Not Applicable/give name(s) and number(s)]
(iv) Delivery: Delivery [against/free of] payment
(v) Names and addresses of additional Paying Agent(s) (if any): [ ]
52 Terms and Conditions of the Notes
The following are the Terms and Conditions of the Notes which will be incorporated by reference into each Global Note (as defined below) and each definitive Note, in the latter case only if permitted by the relevant stock exchange or other relevant authority (if any) and agreed by the Issuer and the relevant Dealer at the time of issue but, if not so permitted and agreed, such definitive Note will have endorsed thereon or attached thereto such Terms and Conditions (excluding the italicised paragraphs). The applicable Final Terms in relation to any Tranche of Notes may specify other terms and conditions which shall, to the extent so specified or to the extent inconsistent with the following Terms and Conditions, replace or modify the following Terms and Conditions for the purpose of such Notes. The applicable Final Terms (or the relevant provisions thereof) will be endorsed upon, or attached to, each Global Note and definitive Note. Reference should be made to “Form of the Notes” above for a description of the content of Final Terms which will include the definitions of certain terms used in the following Terms and Conditions or specify which of such terms are to apply in relation to the relevant Notes.
This Note is one of a Series (as defined below) of Notes issued by Suncorp-Metway Limited (the “Issuer”) pursuant to the Agency Agreement (as defined below).
References herein to the “Notes” shall be references to the Notes of this Series and shall mean:
(i) in relation to any Notes represented by a global Note (a “Global Note”), units of each Specified Denomination in the Specified Currency;
(ii) any Global Note;
(iii) any definitive Notes in bearer form (“Bearer Notes”) issued in exchange for a Global Note in bearer form; and
(iv) any definitive Notes in registered form (“Registered Notes”) (whether or not issued in exchange for a Global Note in registered form).
References herein to a “Condition” means a term or condition of these Terms and Conditions.
The Notes, the Receipts (as defined below) and the Coupons (as defined below) have the benefit of an Agency Agreement (such Agency Agreement as amended and/or supplemented and/or restated from time to time, the “Agency Agreement”) dated 16 June 2009 and made among the Issuer, Deutsche Bank AG, London Branch as principal paying agent and issue and paying agent (the “Principal Paying Agent” and “Issue and Paying Agent”, which expression shall include any successor principal paying agent, Deutsche Bank Luxembourg S.A. (together with the Principal Paying Agent, the Issue and Paying Agent and the Registrar, the “Paying Agents”, which expression shall include any additional or successor paying agents), Bankers Trust Company as exchange agent (the “Exchange Agent”, which expression shall include any successor exchange agent) and as registrar (the “Registrar”, which expression shall include any successor registrar) and Deutsche Bank AG as transfer agent and the other transfer agents named therein (together with the Registrar, the “Transfer Agents”, which expression shall include any additional or successor transfer agents).
Interest bearing definitive Bearer Notes (unless otherwise indicated in the applicable Final Terms) have interest coupons (“Coupons”) and, if indicated in the applicable Final Terms, talons for further Coupons (“Talons”) attached on issue. Any reference herein to Coupons or coupons shall, unless the context otherwise requires, be deemed to include a reference to Talons or talons. Definitive Bearer Notes repayable in installments have receipts (“Receipts”) for the payment of the installments of principal (other than the final installment) attached on issue. Registered Notes and Global Notes do not have Receipts, Coupons or Talons attached on issue.
The Final Terms for this Note (or the relevant provisions thereof) are set out in Part A of the Final Terms attached to or endorsed on this Note which supplement these Terms and Conditions and may specify other terms and conditions which shall, to the extent so specified or to the extent inconsistent with these Terms and Conditions, replace or modify these Terms and Conditions for the purposes of this Note. References herein to the “applicable Final Terms” are to Part A of the Final Terms (or the relevant provisions thereof) attached to or endorsed on this Note.
53 Terms and Conditions of the Notes
Any reference to “Noteholders” or “holders” in relation to any Notes shall mean (in the case of Bearer Notes) the holders of the Notes and (in the case of Registered Notes) the persons in whose name the Notes are registered and shall, in relation to any Notes represented by a Global Note, be construed as provided below. Any reference herein to “Receiptholders” shall mean the holders of the Receipts and any reference herein to “Couponholders” shall mean the holders of the Coupons and shall, unless the context otherwise requires, include the holders of the Talons.
As used herein, “Tranche” means Notes which are identical in all respects (including as to listing and admission to trading) and “Series” means a Tranche of Notes together with any further Tranche or Tranches of Notes which are (i) expressed to be consolidated and form a single series and (ii) identical in all respects (including as to listing and admission to trading) except for their respective Issue Dates, Interest Commencement Dates and/or Issue Prices (as indicated in the applicable Final Terms).
The Noteholders, the Receiptholders and the Couponholders are entitled to the benefit of the MTN Deed of Covenant (the “MTN Deed of Covenant”) dated 15 September 2005 and made by the Issuer. The original of the MTN Deed of Covenant is held by the common depositary for Euroclear (as defined below) and Clearstream, Luxembourg (as defined below).
Copies of the Agency Agreement, a deed poll (the “Deed Poll”) dated 8 September 2004 and made by the Issuer and the MTN Deed of Covenant are available for inspection during normal business hours at the specified office of each of the Principal Paying Agent, the Registrar and the other Paying Agents and Transfer Agents (such Agents and the Registrar being together referred to as the “Agents”). Copies of the applicable Final Terms are available for viewing at, and copies may be obtained from, the offices of the Principal Paying Agent at Winchester House, 1 Great Winchester Street, London EC2N 2DB save that, if this Note is neither admitted to trading on a regulated market in the European Economic Area nor offered in the European Economic Area in circumstances where a prospectus is required to be published under the Prospectus Directive, the applicable Final Terms will only be available for inspection by a Noteholder holding one or more unlisted Notes of that Series and such Noteholder must produce evidence satisfactory to the Issuer or the relevant Agent, as the case may be, as to its holding of such Notes and identity. The Noteholders, the Receiptholders and the Couponholders are deemed to have notice of, and are entitled to the benefit of, all the provisions of the Agency Agreement, the Deed Poll, the MTN Deed of Covenant and the applicable Final Terms which are applicable to them. The Statements in these Terms and Conditions include summaries of, and are subject to, the detailed provisions of the Agency Agreement.
If the Commonwealth of Australia Guarantee is marked as “Applicable” within the applicable Final Terms (a “Guaranteed Note”), then the Commonwealth of Australia by a deed of guarantee dated 20 November 2008 (the “Deed of Guarantee”) has irrevocably guaranteed the due payment of all sums due and payable by the Issuer under the Guaranteed Notes. Copies of the Deed of Guarantee are available at www.guaranteescheme.gov.au.
Words and expressions defined in the Agency Agreement or used in the applicable Final Terms shall have the same meanings where used in these Terms and Conditions unless the context otherwise requires or unless otherwise stated and provided that, in the event of inconsistency between the Agency Agreement and the applicable Final Terms, the applicable Final Terms will prevail.
1. FORM, DENOMINATION AND TITLE The Notes are in bearer form or in registered form as specified in the applicable Final Terms and, in the case of definitive Notes, serially numbered, in the Specified Currency and the Specified Denomination(s). Notes of one Specified Denomination may not be exchanged for Notes of another Specified Denomination and Bearer Notes may not be exchanged for Registered Notes and vice versa.
This Note may be a Fixed Rate Note, a Floating Rate Note, a Zero Coupon Note, an Index-Linked Interest Note, a Dual Currency Interest Note or a combination of any of the foregoing, depending upon the Interest/ Payment Basis shown in the applicable Final Terms. This Note may be an Index Linked Redemption Note, an Installment Note, a Dual Currency Redemption Note, a Partly Paid Note or a combination of any of the foregoing, depending upon the Redemption/Payment Basis shown in the applicable Final Terms. However, despite any other term, a Guaranteed Note will not be an Index-Linked Interest Note, a Dual Currency Interest Note, an Index Linked Redemption Note or a Dual Currency Redemption Note.
This Note is either a Senior Note or a Subordinated Note as indicated in the applicable Final Terms.
54 Terms and Conditions of the Notes
Definitive Bearer Notes are issued with Coupons attached, unless they are Zero Coupon Notes in which case references to Coupons and Couponholders in these Terms and Conditions are not applicable.
Subject as set out below, title to the Bearer Notes, Receipts and Coupons will pass by delivery and title to the Registered Notes will pass upon registration of transfers in accordance with the provisions of the Agency Agreement. The Issuer and any Agent may deem and treat the bearer of any Bearer Note, Receipt or Coupon and the registered holder of any Registered Note as the absolute owner thereof (whether or not overdue and notwithstanding any notice of ownership or writing thereon or notice of any previous loss or theft thereof) for all purposes but, in the case of any Global Note, without prejudice to the provisions set out in the next succeeding paragraph.
For so long as any of the Notes is represented by a Global Note held on behalf of Euroclear Bank S.A./N.V. (“Euroclear”) and/or Clearstream Banking, société anonyme (“Clearstream, Luxembourg”) each person (other than Euroclear or Clearstream, Luxembourg) who is for the time being shown in the records of Euroclear or of Clearstream, Luxembourg as the holder of a particular nominal amount of such Notes (in which regard any certificate or other document issued by Euroclear or Clearstream, Luxembourg as to the nominal amount of such Notes standing to the account of any person shall be conclusive and binding for all purposes save in the case of manifest error) shall be treated by the Issuer and the Agents as the holder of such nominal amount of such Notes for all purposes other than with respect to the payment of principal or interest on such Notes, for which purpose the bearer of the relevant Bearer Global Note or the registered holder of the relevant Registered Global Note shall be treated by the Issuer and the Agents as the holder of such Notes in accordance with and subject to the terms of the relevant Global Note and the expressions “Noteholder” and “holder of Notes” and related expressions shall be construed accordingly.
For so long as The Depository Trust Company (“DTC”) or its nominee is the registered owner or holder of a Registered Global Note, DTC or such nominee, as the case may be, will be considered the sole owner or holder of the Notes represented by such Registered Global Note for all purposes under the Agency Agreement and the Notes except to the extent that in accordance with DTC’s published rules and procedures any ownership rights may be exercised by its participants or beneficial owners through participants.
Notes which are represented by a Global Note will be transferable only in accordance with the rules and procedures for the time being of DTC, Euroclear or of Clearstream, Luxembourg, as the case may be. References to DTC, Euroclear and/or Clearstream, Luxembourg shall, whenever the context so permits, be deemed to include a reference to any additional or alternative clearing system specified in the applicable Final Terms.
2. TRANSFERS OF REGISTERED NOTES
(a) Transfers of interests in Registered Global Notes Transfers of beneficial interests in Registered Global Notes will be effected by DTC, Euroclear or Clearstream, Luxembourg, as the case may be, and, in turn, by other participants and, if appropriate, indirect participants in such clearing systems acting on behalf of beneficial transferors and transferees of such interests. A beneficial interest in a Registered Global Note will, subject to compliance with all applicable legal and regulatory restrictions, be transferable for Notes in definitive form or for a beneficial interest in another Registered Global Note only in the authorised denominations set out in the applicable Final Terms and only in accordance with the rules and operating procedures for the time being of DTC, Euroclear or Clearstream, Luxembourg, as the case may be, and in accordance with the terms and conditions specified in the Agency Agreement. Transfers of a Registered Global Note registered in the name of a nominee for DTC shall be limited to transfers of such Registered Global Note, in whole but not in part, to another nominee of DTC or to a successor of DTC or such successor’s nominee.
(b) Transfers of Registered Notes in definitive form Subject as provided in paragraphs (e), (f) and (g) below, upon the terms and subject to the conditions set forth in the Agency Agreement, a Registered Note in definitive form may be transferred in whole or in part (in the authorised denominations set out in the applicable Final Terms). In order to effect any such transfer (i) the holder or holders must (A) surrender the Registered Note for registration of the transfer of the Registered Note (or the relevant part of the Registered Note) at the specified office of the Registrar or any Transfer Agent, with the form of transfer thereon duly executed by the holder or holders thereof or his or their attorney or attorneys duly authorised in writing and (B) complete and deposit such other certifications as may be required
55 Terms and Conditions of the Notes by the Registrar or, as the case may be, the relevant Transfer Agent and (ii) the Registrar or, as the case may be, the relevant Transfer Agent must, after due and careful enquiry, be satisfied with the documents of title and the identity of the person making the request. Any such transfer will be subject to such reasonable regulations as the Issuer and the Registrar may from time to time prescribe (the initial such regulations being set out in Schedule 12 to the Agency Agreement). Subject as provided above, the Registrar or, as the case may be, the relevant Transfer Agent will, within three business days (being for this purpose a day on which banks are open for business in the city where the specified office of the Registrar or, as the case may be, the relevant Transfer Agent is located) of the request (or such longer period as may be required to comply with any applicable fiscal or other laws or regulations), authenticate and deliver, or procure the authentication and delivery of, at its specified office to the transferee or (at the risk of the transferee) send by uninsured mail, to such address as the transferee may request, a new Registered Note in definitive form of a like aggregate nominal amount to the Registered Note (or the relevant part of the Registered Note) transferred. In the case of the transfer of part only of a Registered Note in definitive form, a new Registered Note in definitive form in respect of the balance of the Registered Note not transferred will be so authenticated and delivered or (at the risk of the transferor) sent to the transferor.
(c) Registration of transfer upon partial redemption In the event of a partial redemption of Notes under Condition 7, the Issuer shall not be required to register the transfer of any Registered Note, or part of a Registered Note, called for partial redemption.
(d) Costs of registration Noteholders will not be required to bear the costs and expenses of effecting any registration of transfer as provided above, except for any costs or expenses of delivery other than by regular uninsured mail and except that the Issuer may require the payment of a sum sufficient to cover any stamp duty, tax or other governmental charge that may be imposed in relation to the registration.
(e) Transfers of interests in Regulation S Global Notes Prior to expiry of the applicable Distribution Compliance Period, transfers by the holder of, or of a beneficial interest in, a Regulation S Global Note to a transferee in the United States or who is a U.S. person will only be made:
(i) upon receipt by the Registrar of a written certification substantially in the form set out in the Agency Agreement, amended as appropriate (a “Transfer Certificate”), copies of which are available from the specified office of the Registrar or any Transfer Agent, from the transferor of the Note or beneficial interest therein to the effect that such transfer is being made to a person whom the transferor reasonably believes is a QIB in a transaction meeting the requirements of Rule 144A; or
(ii) otherwise pursuant to the Securities Act or an exemption therefrom, subject to receipt by the Issuer of such satisfactory evidence as the Issuer may reasonably require, which may include an opinion of U.S. counsel, that such transfer is in compliance with any applicable securities laws of any State of the United States, and, in each case, in accordance with any applicable securities laws of any State of the United States or any other jurisdiction.
In the case of (e)(i) above, such transferee may take delivery through a Legended Note in global or definitive form. After expiry of the applicable Distribution Compliance Period (i) beneficial interests in Regulation S Global Notes registered in the name of a nominee for DTC may be held through DTC directly, by a participant in DTC, or indirectly through a participant in DTC and (ii) such certification requirements will no longer apply to such transfers.
(f) Transfers of interests in Legended Notes Transfers of Legended Notes or beneficial interests therein may be made:
(i) to a transferee who takes delivery of such interest through a Regulation S Global Note, upon receipt by the Registrar of a duly completed Transfer Certificate from the transferor to the effect that such transfer is being made in accordance with Regulation S and that in the case of a Regulation S Global Note registered in the name of a nominee for DTC, if such transfer is being made prior to expiry of the
56 Terms and Conditions of the Notes
applicable Distribution Compliance Period, the interests in the Notes being transferred will be held immediately thereafter through Euroclear and/or Clearstream, Luxembourg; or
(ii) to a transferee who takes delivery of such interest through a Legended Note where the transferee is a person whom the transferor reasonably believes is a QIB in a transaction meeting the requirements of Rule 144A, without certification; or (iii) otherwise pursuant to the Securities Act or an exemption therefrom, subject to receipt by the Issuer of such satisfactory evidence as the Issuer may reasonably require, which may include an opinion of U.S. counsel, that such transfer is in compliance with any applicable securities laws of any State of the United States, and, in each case, in accordance with any applicable securities laws of any State of the United States or any other jurisdiction.
Upon the transfer, exchange or replacement of Legended Notes, or upon specific request for removal of the Legend, the Registrar shall deliver only Legended Notes or refuse to remove the Legend, as the case may be, unless there is delivered to the Issuer such satisfactory evidence as may reasonably be required by the Issuer, which may include an opinion of U.S. counsel, that neither the Legend nor the restrictions on transfer set forth therein are required to ensure compliance with the provisions of the Securities Act.
(g) Exchanges and transfers of Registered Notes generally Holders of Registered Notes in definitive form may exchange such Notes for interests in a Registered Global Note of the same type at any time.
(h) Definitions In this Condition, the following expressions shall have the following meanings:
“Distribution Compliance Period” means the period that ends 40 days after the completion of the distribution of each Tranche of Notes, as certified by the relevant Dealer (in the case of a non-syndicated issue) or the relevant Lead Manager (in the case of a syndicated issue); “Legended Note” means Registered Notes (whether in definitive form or represented by a Registered Global Note) sold in private transactions to QIBs in accordance with the requirements of Rule 144A; “QIB” means a “qualified institutional buyer” within the meaning of Rule 144A; “Regulation S” means Regulation S under the Securities Act; “Regulation S Global Note” means a Registered Global Note representing Notes sold outside the United States in reliance on Regulation S; “Rule 144A” means Rule 144A under the Securities Act; “Rule 144A Global Note” means a Registered Global Note representing Notes sold in the United States or to QIBs; and “Securities Act” means the United States Securities Act of 1933, as amended.
3. STATUS OF THE NOTES
(a) Status of the Senior Notes This Condition 3(a) only applies to Senior Notes and references to Noteholders, Receiptholders and Couponholders shall be construed accordingly.
The Senior Notes and any relative Receipts and/or Coupons are direct, unsecured and general obligations of the Issuer and rank and will rank pari passu, without any preference among themselves, with all other outstanding unsecured and unsubordinated obligations of the Issuer, present and future (other than indebtedness preferred by mandatory provisions of law including Section 13A(3) of the Banking Act 1959 of Australia).
Section 13A(3) of the Banking Act provides that, in the event of an ADI becoming unable to meet its obligations or suspending payment, the assets of the ADI in Australia are to be available to meet its deposit liabilities in Australia in priority to all other liabilities of the ADI. The Senior Notes, Receipts and Coupons
57 Terms and Conditions of the Notes do not constitute deposit liabilities in Australia of the Issuer. Under Section 16 of the Banking Act, debts due to APRA shall in a winding up of an ADI have, subject to Section 13A(3) of the Banking Act, priority over all other unsecured debts of that ADI. Further, section 86 of the RBA Act provides that debts due to the Reserve Bank of Australia by an ADI shall, in a winding-up of that ADI, but subject to the aforesaid Section 13A(3) of the Banking Act, have priority over all other debts other than debts due to the Commonwealth of Australia. For the purposes of this paragraph, the following terms have the following meanings:
“ADI” means “authorised deposit-taking institution” as defined in the RBA Act and of which the Issuer is one;
“Banking Act” means the Banking Act 1959 of Australia; and “RBA Act” means the Reserve Bank Act 1959 of Australia.
(b) Status of the Subordinated Notes This Condition 3(b) only applies to Subordinated Notes and, unless expressly stated otherwise, references to Noteholders, Receiptholders and Couponholders shall be construed accordingly.
The Subordinated Notes and any relative Receipts and/or Coupons are direct, unsecured and subordinated obligations of the Issuer and rank and will rank pari passu without any preference among themselves. The claims of the Noteholders, the Receiptholders and the Couponholders against the Issuer will, in the event of a Winding Up (as defined below) of the Issuer, be subordinated in right of payment to the claims of any Other Creditors (as defined below) in the manner provided in this Condition 3(b). The Subordinated Notes do not constitute deposit liabilities of the Issuer.
Subject to the provisions of Condition 6(h) on the Winding-Up of the Issuer the rights of the Noteholders, Receiptholders and Couponholders against the Issuer to recover any sums payable in respect of such Notes, Receipts or Coupons:
(i) shall be subordinate and junior in right of payment to the claims against the Issuer of any Other Creditors, to the intent that all such claims of Other Creditors shall be entitled to be paid in full before any payment shall be paid on account of any sums payable in respect of such Notes, Receipts or Coupons; and
(ii) shall rank at least pari passu and rateably (as to its due proportion only) with the claims of other subordinated creditors of the Issuer other than any other subordinated creditors which are expressed to rank subordinate and junior in right of payment to the claims under the Subordinated Notes.
On a Winding-Up of the Issuer, the Noteholders, Receiptholders and Couponholders shall only be entitled to prove for any sums payable in respect of the Notes, Receipts or Coupons as a debt which is subject to and contingent upon prior payment in full of the Other Creditors; and the Noteholders, Receiptholders and Couponholders waive to the fullest extent permitted by law any right to prove in any such Winding-Up as a creditor ranking for payment in any other manner.
No Noteholder, Receiptholder or Couponholder shall be entitled to contractual set-off against any amounts due in respect of the Notes, Receipts or Coupons held by such Noteholder, Receiptholder or Couponholder any amount held by the Noteholder, Receiptholder or Couponholder to the credit of the Issuer whether in any account, in cash or otherwise, nor any deposits with, advances to or debts of the Issuer, nor any other amount owing by the Noteholder, Receiptholder or Couponholder to the Issuer on any account whatsoever, nor shall any Noteholder, Receiptholder or Couponholder be entitled to effect any reduction of the amount due to such Noteholder, Receiptholder or Couponholder in respect of a Note, Receipt or Coupon by merger of accounts or lien or the exercise of any other rights the effect of which is or may be to reduce the amount due in respect of that Note, Receipt or Coupon in breach of these Terms and Conditions. Except as provided (subject to APRA’s prior written consent) in the applicable Final Terms, the Issuer shall not be entitled to exercise any contractual rights of set-off between any amounts owed to the Issuer by any Noteholder, Receiptholder or Couponholder and any amounts payable by the Issuer in respect of the Notes, Receipts or Coupons.
Any payment whether voluntary or in any other circumstances received by a Noteholder, Receiptholder or Couponholder from or on account of the Issuer (including by way of credit, set-off or otherwise howsoever) or from any liquidator, administrator, receiver, manager or statutory manager of the Issuer in breach of this Condition 3 or Condition 10(b) will be held by the relevant Noteholder, Receiptholder or Couponholder in trust for and to the order of the Other Creditors. The trust hereby created shall be for a term expiring on the
58 Terms and Conditions of the Notes earlier of the date on which all Other Creditors have been paid in full or eighty years from the date of the issue of the Notes, Receipts or Coupons.
For the purposes of these Terms and Conditions, the following terms shown have the following meanings:
“Other Creditors” means all creditors of the Issuer (including but not limited to the depositors of the Issuer) other than:
(i) the Noteholders, the Receiptholders and the Couponholders;
(ii) creditors whose claims against the Issuer rank, or are expressed to rank, pari passu with the claims of the Noteholders, the Receiptholders and the Couponholders (which creditors shall be deemed to include all creditors, present and future, to whom the Issuer is indebted where the terms of such indebtedness (A) provide that such indebtedness will become due and payable on a specified or determinable date or at the end of a specified or determinable period, and that in the event of a Winding-Up of the Issuer the claims of those creditors against the Issuer will be, or are expressed to be, subordinated in right of payment to the claims of all depositors and other unsubordinated creditors of the Issuer, and (B) do not provide that in the event of a Winding-Up of the Issuer the claims of those creditors against the Issuer will rank, or are expressed to rank, ahead of the claims of any other subordinated creditors of the Issuer to whom the Issuer is indebted on terms which conform to the foregoing description contained in this paragraph (ii) excluding this sub-paragraph (B)); and
(iii) creditors whose claims against the Issuer rank, or are expressed to rank, after the claims of the Noteholders, the Receiptholders and the Couponholders (which creditors shall be deemed to include all creditors, present and future, to whom the Issuer is indebted where the terms of such indebtedness provide that such indebtedness is undated or perpetual or otherwise of no fixed and determinable maturity, and that in the event of a Winding-Up of the Issuer the claims of those creditors against the Issuer will be, or are expressed to be, subordinated in right of payment to the claims of all depositors and other unsubordinated creditors of the Issuer and any or all of the creditors of the Issuer referred to in paragraph (ii) above).
“Winding-Up” shall mean any procedure whereby the Issuer may be wound-up, dissolved, liquidated or cease to exist as a body corporate whether brought or instigated by a Noteholder or any other person, but shall exclude any Winding-Up which results in there being a successor to the Issuer and the obligations under the Notes are assumed by that successor.
In the event of the Winding-Up of the Issuer, the rights of the holders of Subordinated Notes, Receipts and Coupons will rank in preference only to the rights of (i) preferred and ordinary shareholders, (ii) creditors of the nature referred to in paragraph (iii) of the definition of Other Creditors, and (iii) creditors whose claims against the Issuer may at any future time be expressed to rank after the claims of the Noteholders, the Receiptholders and the Couponholders while not necessarily ranking pari passu with the claims of creditors of the nature referred to in paragraph (iii) of the definition of Other Creditors.
4. REDENOMINATION
(a) Redenomination Where redenomination is specified in the applicable Final Terms as being applicable, the Issuer may, without the consent of the Noteholders, the Receiptholders and the Couponholders, on giving prior notice to the Principal Paying Agent, Euroclear and Clearstream, Luxembourg and at least 30 days’ notice to the Noteholders in accordance with Condition 14, elect that, with effect from the Redenomination Date specified in the notice, the Notes shall be redenominated in euro.
The election will have effect as follows:
(i) the Notes and the Receipts shall be deemed to be redenominated in euro in the denomination of euro 0.01 with a nominal amount for each Note and Receipt equal to the principal amount of that Note or Receipt in the Specified Currency, converted into euro at the Established Rate, provided that, if the Issuer determines, with the agreement of the Principal Paying Agent, that the then market practice in respect of the redenomination in euro of internationally offered securities is different from the provisions specified above, such provisions shall be deemed to be amended so as to comply with such market practice and the Issuer shall promptly notify the Noteholders, the stock exchange or other relevant authority (if any)
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on which the Notes may be listed or by which they have been admitted to listing and the Agents of such deemed amendments;
(ii) save to the extent that an Exchange Notice has been given in accordance with paragraph (iv) below, the amount of interest due in respect of the Notes will be calculated by reference to the aggregate nominal amount of Notes presented (or, as the case may be, in respect of which Coupons are presented) for payment by the relevant holder and the amount of such payment shall be rounded down to the nearest euro 0.01;
(iii) if definitive Notes are required to be issued after the Redenomination Date, they shall be issued at the expense of the Issuer in the denomination of euro 1,000, euro 10,000, euro 100,000 and (but only to the extent of any remaining amounts less than euro 1,000 or such smaller denominations as the Principal Paying Agent may approve) euro 0.01 and such other denominations as the Principal Paying Agent shall determine and notify to the Noteholders;
(iv) if issued prior to the Redenomination Date, all unmatured Coupons denominated in the Specified Currency (whether or not attached to the Notes) will become void with effect from the date on which the Issuer gives notice (the “Exchange Notice”) that replacement euro-denominated Notes, Receipts and Coupons are available for exchange (provided that such securities are so available) and no payments will be made in respect of them. The payment obligations contained in any Notes and Receipts so issued will also become void on that date although those Notes and Receipts will continue to constitute valid exchange obligations of the Issuer. New euro denominated Notes, Receipts and Coupons will be issued in exchange for Notes, Receipts and Coupons denominated in the Specified Currency in such manner as the Principal Paying Agent may specify and as shall be notified to the Noteholders in the Exchange Notice. No Exchange Notice may be given less than 15 days prior to any date for payment of principal or interest on the Notes;
(v) after the Redenomination Date, all payments in respect of the Notes, the Receipts and the Coupons, other than payments of interest in respect of periods commencing before the Redenomination Date, will be made solely in euro as though references in the Notes to the Specified Currency were to euro. Payments will be made in euro by credit or transfer to a euro account (or any other account to which euro may be credited or transferred) specified by the payee or, at the option of the payee, by a euro cheque;
(vi) if the Notes are Fixed Rate Notes and interest for any period ending on or after the Redenomination Date is required to be calculated for a period ending other than on an Interest Payment Date, it will be calculated:
(i) in the case of the Notes represented by a Global Note, by applying the Rate of Interest to the aggregate outstanding nominal amount of the Notes represented by such Global Note; and
(ii) in the case of definitive Notes, by applying the Rate of Interest to the Calculation Amount;
and, in each case, multiplying such sum by the applicable Day Count Fraction, and rounding the resultant figure to the nearest sub-unit of the relevant Specified Currency, half of any such sub-unit being rounded upwards or otherwise in accordance with applicable market convention. Where the Specified Denomination of a Fixed Rate Note in definitive form is a multiple of the Calculation Amount, the amount of interest payable in respect of such Fixed Rate Note shall be the product of the amount (determined in the manner provided above) for the Calculation Amount and the amount by which the Calculation Amount is multiplied to reach the Specified Denomination without any further rounding; and
(vii) if the Notes are Floating Rate Notes, the applicable Final Terms will specify any relevant changes to the provisions relating to interest.
(b) Definitions In these Terms and Conditions, the following expressions have the following meanings:
“Established Rate” means the rate for the conversion of the Specified Currency (including compliance with rules relating to roundings in accordance with applicable European Community regulations) into euro established by the Council of the European Union pursuant to Article 123 of the Treaty;
60 Terms and Conditions of the Notes
“euro” means the currency introduced at the start of the third stage of European economic and monetary union pursuant to the Treaty;
“Redenomination Date” means (in the case of interest bearing Notes) any date for payment of interest under the Notes or (in the case of Zero Coupon Notes) any date, in each case specified by the Issuer in the notice given to the Noteholders pursuant to paragraph (a) above and which falls on or after the date on which the country of the Specified Currency first participates in the third stage of European economic and monetary union; and
“Treaty” means the Treaty establishing the European Community, as amended.
5. INTEREST
(a) Interest on Fixed Rate Notes Each Fixed Rate Note bears interest from (and including) the Interest Commencement Date at the rate(s) per annum equal to the Rate(s) of Interest. Interest will be payable in arrear on the Interest Payment Date(s) in each year up to (and including) the Maturity Date.
Except as provided in the applicable Final Terms, the amount of interest payable on each Interest Payment Date in respect of the Fixed Interest Period ending on (but excluding) such date will amount to the Fixed Coupon Amount. Payments of interest on any Interest Payment Date will, if so specified in the applicable Final Terms, amount to the Broken Amount so specified.
As used in these Terms and Conditions, “Fixed Interest Period” means the period from (and including) an Interest Payment Date (or the Interest Commencement Date) to (but excluding) the next (or first) Interest Payment Date.
Except in the case of Notes in definitive form where an applicable Fixed Coupon Amount or Broken Amount is specified in the applicable Final Terms, interest shall be calculated in respect of any period by applying the Rate of Interest to:
(A) in the case of Fixed Rate Notes which are represented by a Global Note, the aggregate outstanding nominal amount of the Fixed Rate Notes represented by such Global Note (or, if they are Partly Paid Notes, the aggregate amount paid up); or
(B) in the case of Fixed Rate Notes in definitive form, the Calculation Amount, and, in each case, multiplying such sum by the applicable Day Count Fraction, and rounding the resultant figure to the nearest sub-unit of the relevant Specified Currency, half of any such sub-unit being rounded upwards or otherwise in accordance with applicable market convention. Where the Specified Denomination of a Fixed Rate Note in definitive form is a multiple of the Calculation Amount, the amount of interest payable in respect of such Fixed Rate Note shall be the product of the amount (determined in the manner provided above) for the Calculation Amount and the amount by which the Calculation Amount is multiplied to reach the Specified Denomination without any further rounding.
In these Terms and Conditions the following terms have the following meanings:
“Day Count Fraction” means, in respect of the calculation of an amount of interest in accordance with this Condition 5(a):
(i) if “Actual/Actual (ICMA)” is specified in the applicable Final Terms:
(A) in the case of Notes where the number of days in the relevant period from (and including) the most recent Interest Payment Date (or, if none, the Interest Commencement Date) to (but excluding) the relevant payment date (the “Accrual Period”) is equal to or shorter than the Determination Period during which the Accrual Period ends, the number of days in such Accrual Period divided by the product of (1) the number of days in such Determination Period and (2) the number of Determination Dates (as specified in the applicable Final Terms) that would occur in one calendar year; or
(B) in the case of Notes where the Accrual Period is longer than the Determination Period during which the Accrual Period ends, the sum of:
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(1) the number of days in such Accrual Period falling in the Determination Period in which the Accrual Period begins divided by the product of (x) the number of days in such Determination Period and (y) the number of Determination Dates that would occur in one calendar year; and
(2) the number of days in such Accrual Period falling in the next Determination Period divided by the product of (x) the number of days in such Determination Period and (y) the number of Determination Dates that would occur in one calendar year; and
(ii) if “30/360” is specified in the applicable Final Terms, the number of days in the period from (and including) the most recent Interest Payment Date (or, if none, the Interest Commencement Date) to (but excluding) the relevant payment date (such number of days being calculated on the basis of a year of 360 days with 12 30-day months) divided by 360.
“Determination Period” means each period from (and including) a Determination Date to (but excluding) the next Determination Date (including, where either the Interest Commencement Date or the final Interest Payment Date is not a Determination Date, the period commencing on the first Determination Date prior to, and ending on the first Determination Date falling after, such date); and
“sub-unit” means, with respect to any currency other than euro, the lowest amount of such currency that is available as legal tender in the country of such currency and, with respect to euro, one cent.
(b) Interest on Floating Rate Notes and Index-Linked Interest Notes (i) Interest Payment Dates Each Floating Rate Note and Index-Linked Interest Note bears interest from (and including) the Interest Commencement Date and such interest will be payable in arrear on either:
(A) the Specified Interest Payment Date(s) in each year as specified in the applicable Final Terms; or
(B) if no Specified Interest Payment Date(s) is/are specified in the applicable Final Terms, each date (together with the Specified Interest Payment Date(s), each an “Interest Payment Date”) which falls the number of months or other period specified as the Specified Period in the applicable Final Terms after the preceding Interest Payment Date or, in the case of the first Interest Payment Date, after the Interest Commencement Date.
The rate at which Floating Rate Notes will bear interest shall not at any time be less than 0%. Such interest will be payable in respect of each Interest Period (which expression shall, in these Terms and Conditions, mean the period from (and including) an Interest Payment Date (or the Interest Commencement Date) to (but excluding) the next (or first) Interest Payment Date).
If a business day convention is specified in the applicable Final Terms and (x) if there is no numerically corresponding day in the calendar month in which an Interest Payment Date should occur or (y) if any Interest Payment Date would otherwise fall on a day which is not a Business Day, then, if the business day convention specified is:
(1) in any case where Specified Periods are specified in accordance with Condition 5(b)(i)(B) above, the Floating Rate Convention, such Interest Payment Date (i) in the case of (x) above, shall be the last day that is a Business Day in the relevant month and the provisions of (B) below shall apply mutatis mutandis or (ii) in the case of (y) above, shall be postponed to the next day which is a Business Day unless it would thereby fall into the next calendar month, in which event (A) such Interest Payment Date shall be brought forward to the immediately preceding Business Day and (B) each subsequent Interest Payment Date shall be the last Business Day in the month which falls within the Specified Period (specified in the applicable Final Terms) after the preceding applicable Interest Payment Date occurred; or
(2) the Following Business Day Convention, such Interest Payment Date shall be postponed to the next day which is a Business Day; or
(3) the Modified Following Business Day Convention, such Interest Payment Date shall be postponed to the next day which is a Business Day unless it would thereby fall into the next calendar month, in which event such Interest Payment Date shall be brought forward to the immediately preceding Business Day; or
62 Terms and Conditions of the Notes
(4) the Preceding Business Day Convention, such Interest Payment Date shall be brought forward to the immediately preceding Business Day.
In these Terms and Conditions, “Business Day” means a day which is both:
(A) a day on which commercial banks and foreign exchange markets settle payments and are open for general business (including dealing in foreign exchange and foreign currency deposits) in London and any Additional Business Centre specified in the applicable Final Terms; and
(B) either (1) in relation to any sum payable in a Specified Currency other than euro, a day on which commercial banks and foreign exchange markets settle payments and are open for general business (including dealing in foreign exchange and foreign currency deposits) in the principal financial centre of the country of the relevant Specified Currency (if other than London and any Additional Business Centre and which, if the Specified Currency is Australian dollars, shall be Sydney), or (2) in relation to any sum payable in euro, a day on which the Trans-European Automated Real-Time Gross Settlement Express Transfer (TARGET2) System (the “TARGET2 System”) is open.
(ii) Rate of Interest The Rate of Interest payable from time to time in respect of Floating Rate Notes and Index-Linked Interest Notes will be determined in the manner specified in the applicable Final Terms.
(A) ISDA Determination for Floating Rate Notes Where ISDA Determination is specified in the applicable Final Terms as the manner in which the Rate of Interest is to be determined, the Rate of Interest for each Interest Period will be the relevant ISDA Rate plus or minus (as indicated in the applicable Final Terms) the Margin (if any). For the purposes of this sub-paragraph (A), “ISDA Rate” for an Interest Period means a rate equal to the Floating Rate that would be determined by the Principal Paying Agent under an interest rate swap transaction if the Principal Paying Agent were acting as Calculation Agent for that swap transaction under the terms of an agreement incorporating the 2006 ISDA Definitions, as published by the International Swaps and Derivatives Association, Inc. and as amended and updated as at the Issue Date of the First Tranche of the Notes (the “ISDA Definitions”) and under which:
(1) the Floating Rate Option is as specified in the applicable Final Terms;
(2) the Designated Maturity is a period specified in the applicable Final Terms; and
(3) the relevant Reset Date is either (i) if the applicable Floating Rate Option is based on the London inter-bank offered rate (“LIBOR”) or on the Euro-zone inter-bank offered rate (“EURIBOR”), the first day of that Interest Period or (ii) in any other case, as specified in the applicable Final Terms.
For the purposes of this sub-paragraph (A), “Floating Rate”, “Calculation Agent”, “Floating Rate Option”, “Designated Maturity” and “Reset Date” have the meanings given to those terms in the ISDA Definitions.
(B) Screen Rate Determination for Floating Rate Notes Where Screen Rate Determination is specified in the applicable Final Terms as the manner in which the Rate of Interest is to be determined, the Rate of Interest for each Interest Period will, subject as provided below, be either:
(1) the offered quotation; or
(2) the arithmetic mean (rounded if necessary to the fifth decimal place, with 0.000005 being rounded upwards) of the offered quotations,
(expressed as a percentage rate per annum) for the Reference Rate which appears or appear, as the case may be, on the Relevant Screen Page as at 11.00 a.m. (London time in the case of LIBOR, or Brussels time, in the case of EURIBOR) on the Interest Determination Date in question plus or minus (as indicated in the applicable Final Terms) the Margin (if any), all as determined by the Principal Paying Agent. If five or more of such offered quotations are available on the Relevant Screen Page, the highest (or, if there is more than one such highest quotation, one only of such quotations) and the lowest (or, if there is more than one such lowest quotation, one only of such quotations) shall be disregarded by the
63 Terms and Conditions of the Notes
Principal Paying Agent for the purpose of determining the arithmetic mean (rounded as provided above) of such offered quotations.
The Agency Agreement contains provisions for determining the Rate of Interest in the event that the Relevant Screen Page is not available or if, in the case of (1) above, no such offered quotation appears or, in the case of (2) above, fewer than three such offered quotations appear, in each case as at the time specified in the preceding paragraph.
If the Reference Rate from time to time in respect of Floating Rate Notes is specified in the applicable Final Terms as being other than LIBOR or EURIBOR, the Rate of Interest in respect of such Notes will be determined as provided in the applicable Final Terms.
(iii) Minimum and/or Maximum Interest Rate If the applicable Final Terms specifies a Minimum Interest Rate for any Interest Period, then, in the event that the Rate of Interest in respect of such Interest Period determined in accordance with the provisions of paragraph (ii) above is less than such Minimum Rate of Interest, the Rate of Interest for such Interest Period shall be such Minimum Rate of Interest.
If the applicable Final Terms specifies a Maximum Rate of Interest for any Interest Period, then, in the event that the Rate of Interest in respect of such Interest Period determined in accordance with the provisions of paragraph (ii) above is greater than such Maximum Rate of Interest, the Rate of Interest for such Interest Period shall be such Maximum Rate of Interest.
(iv) Determination of Rate of Interest and Calculation of Interest Amounts The Principal Paying Agent, in the case of Floating Rate Notes, and the Calculation Agent, in the case of Index-Linked Interest Notes, will at or as soon as practicable after each time at which the Rate of Interest is to be determined, determine the Rate of Interest for the relevant Interest Period. In the case of Index-Linked Interest Notes, the Calculation Agent will notify the Principal Paying Agent of the Rate of Interest for the relevant Interest Period as soon as practicable after calculating the same.
The Principal Paying Agent will calculate the amount of interest (the Interest Amount) payable on the Floating Rate Notes or Index Linked Interest Notes for the relevant Interest Period by applying the Rate of Interest to:
(i) in the case of Floating Rate Notes or Index Linked Interest Notes which are represented by a Global Note, the aggregate outstanding nominal amount of the Notes represented by such Global Note (or, if they are Partly Paid Notes, the aggregate amount paid up); or
(ii) in the case of Floating Rate Notes or Index Linked Interest Notes in definitive form, the Calculation Amount;
and, in each case, multiplying such sum by the applicable Day Count Fraction, and rounding the resultant figure to the nearest sub-unit of the relevant Specified Currency, half of any such sub-unit being rounded upwards or otherwise in accordance with applicable market convention. Where the Specified Denomination of a Floating Rate Note or an Index Linked Interest Note in definitive form is a multiple of the Calculation Amount, the Interest Amount payable in respect of such Note shall be the product of the amount (determined in the manner provided above) for each Calculation Amount and the amount by which the Calculation Amount is multiplied to reach the Specified Denomination without any further rounding.
“Day Count Fraction” means, in respect of the calculation of an amount of interest for any Interest Period:
(1) if “Actual/Actual (ISDA)” or “Actual/Actual” is specified in the applicable Final Terms, the actual number of days in the Interest Period divided by 365 (or, if any portion of that Interest Period falls in a leap year, the sum of (A) the actual number of days in that portion of the Interest Period falling in a leap year divided by 366 and (B) the actual number of days in that portion of the Interest Period falling in a non- leap year divided by 365);
(2) if “Actual/365 (Fixed)” is specified in the applicable Final Terms, the actual number of days in the Interest Period divided by 365;
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(3) if “Actual/365 (Sterling)” is specified in the applicable Final Terms, the actual number of days in the Interest Period divided by 365 or, in the case of an Interest Payment Date falling in a leap year, 366;
(4) if “Actual/360” is specified in the applicable Final Terms, the actual number of days in the Interest Period divided by 360;
(5) if “30/360”, “360/360” or “Bond Basis” is specified in the applicable Final Terms, the number of days in the Interest Period divided by 360, calculated on a formula basis as follows:
[360 x (Y – Y )] + [30 x (M – M )]+(D – D ) Day Count Fraction = 2 1 2 1 2 1 360
where:
“Y1” is the year, expressed as a number, in which the first day of the Interest Period falls;
“Y2” is the year, expressed as a number, in which the day immediately following the last day of the Interest Period falls;
“M1” is the calendar month, expressed as a number, in which the first day of the Interest Period falls;
“M2” is the calendar month, expressed as a number, in which the day immediately following the last day of the Interest Period falls;
“D1” is the first calendar day, expressed as a number, of the Interest Period, unless such number is 31, in which case D1 will be 30; and
“D2” is the calendar day, expressed as a number, immediately following the last day included in the Interest Period, unless such number would be 31 and D1 is greater than 29, in which case D2 will be 30;
(6) if “30E/360” or “Eurobond Basis” is specified in the applicable Final Terms, the number of days in the Interest Period divided by 360, calculated on a formula basis as follows:
[360 x (Y – Y )] + [30 x (M – M )]+(D – D ) Day Count Fraction = 2 1 2 1 2 1 360
where:
“Y1” is the year, expressed as a number, in which the first day of the Interest Period falls;
“Y2” is the year, expressed as a number, in which the day immediately following the last day of the Interest Period falls;
“M1” is the calendar month, expressed as a number, in which the first day of the Interest Period falls;
“M2” is the calendar month, expressed as a number, in which the day immediately following the last day of the Interest Period falls;
“D1” is the first calendar day, expressed as a number, of the Interest Period, unless such number would be 31, in which case D1 will be 30; and
“D2” is the calendar day, expressed as a number, immediately following the last day included in the Interest Period, unless such number would be 31, in which case D2 will be 30; (7) if “30E/360 (ISDA)” is specified in the applicable Final Terms, the number of days in the Interest Period divided by 360, calculated on a formula basis as follows:
[360 x (Y – Y )] + [30 x (M – M )] + (D – D ) Day Count Fraction = 2 1 2 1 2 1 360
where:
“Y1” is the year, expressed as a number, in which the first day of the Interest Period falls;
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“Y2” is the year, expressed as a number, in which the day immediately following the last day of the Interest Period falls;
“M1” is the calendar month, expressed as a number, in which the first day of the Interest Period falls;
“M2” is the calendar month, expressed as a number, in which the day immediately following the last day of the Interest Period falls;
“D1” is the first calendar day, expressed as a number, of the Interest Period, unless (i) that day is the last day of February or (ii) such number would be 31, in which case D1 will be 30; and
“D2” is the calendar day, expressed as a number, immediately following the last day included in the Interest Period, unless (i) that day is the last day of February but not the Maturity Date (if
applicable) or (ii) such number would be 31, in which case D2 will be 30.
(v) Notification of Rate of Interest and Interest Amounts The Principal Paying Agent will cause the Rate of Interest and each Interest Amount for each Interest Period and the relevant Interest Payment Date to be notified to the Issuer and any stock exchange on which the relevant Floating Rate Notes or Index-Linked Interest Notes are for the time being listed and notice thereof to be published in accordance with Condition 14 as soon as possible after their determination but in no event later than the fourth London Business Day (as defined below) thereafter. Each Interest Amount and Interest Payment Date so notified may subsequently be amended (or appropriate alternative arrangements made by way of adjustment) without prior notice in the event of an extension or shortening of the Interest Period. Any such amendment will be promptly notified to each stock exchange or other relevant authority on which the relevant Floating Rate Notes or Index-Linked Interest Notes are for the time being listed or by which they have been admitted to listing and to the Noteholders in accordance with Condition 14. For the purposes of this paragraph, the expression “London Business Day” means a day (other than a Saturday or a Sunday) on which banks and foreign exchange markets are open for general business in London.
(vi) Notifications to be Final All notifications, communications, opinions, determinations, certificates, calculations, quotations and decisions given, expressed, made or obtained for the purposes of the provisions of this Condition 5(b), whether by the Principal Paying Agent or, if applicable, the Calculation Agent, shall (in the absence of default, bad faith or manifest error by them or any of their directors, officers, employees or agents) be binding on the Issuer, the Principal Paying Agent, the Calculation Agent (if applicable), the other Agents and all Noteholders, Receiptholders and Couponholders and (in the absence of the above) no liability to the Issuer, the Noteholders, the Receiptholders or the Couponholders shall attach to the Principal Paying Agent or (if applicable) the Calculation Agent in connection with the exercise or non-exercise by it of its powers, duties and discretions under this Condition.
(c) Interest on Dual Currency Interest Notes In the case of Dual Currency Interest Notes, if the rate or amount of interest falls to be determined by reference to an exchange rate, the rate or amount of interest payable shall be determined in the manner specified in the applicable Final Terms.
(d) Interest on Partly Paid Notes In the case of Partly Paid Notes (other than Partly Paid Notes which are Zero Coupon Notes), interest will accrue as aforesaid on the paid-up nominal amount of such Notes and otherwise as specified in the applicable Final Terms.
(e) Accrual of Interest Each Note (or, in the case of the redemption of part only of a Note, that part only of such Note) will cease to bear interest (if any) from the date for its redemption unless, upon due presentation thereof, payment of principal is improperly withheld or refused. In such event, interest will continue to accrue until whichever is the earlier of:
(1) the date on which all amounts due in respect of such Note have been paid; and
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(2) five days after the date on which the full amount of the moneys payable in respect of such Note has been received by the Principal Paying Agent or the Registrar, as the case may be, and notice to that effect has been given to the Noteholders in accordance with Condition 14.
(f) Interest Accrual on Unpaid Interest in relation to Subordinated Notes Interest accrues on each amount of interest which is due but unpaid as a result of the operation of Condition 6(h) at the Rate of Interest applicable to the relevant Subordinated Note in relation to which the interest is due, from the relevant Interest Payment Date up to, but excluding, the date of actual payment.
6. PAYMENTS
(a) Method of Payment Subject as provided below:
(i) payments in a Specified Currency other than euro will be made by credit or transfer to an account in the relevant Specified Currency maintained by the payee with, or, at the option of the payee, by a cheque in such Specified Currency drawn on, a bank in the principal financial centre of the country of such Specified Currency (which, if the Specified Currency is Australian dollars, shall be Sydney); and
(ii) payments in euro will be made by credit or transfer to a euro account (or any other account to which euro may be credited or transferred) specified by the payee or, at the option of the payee, by a euro cheque.
Payments will be subject in all cases to any fiscal or other laws and regulations applicable thereto in the place of payment, but without prejudice to the provisions of Condition 8.
(b) Presentation of definitive Bearer Notes, Receipts and Coupons Payments of principal in respect of definitive Bearer Notes will (subject as provided below) be made in the manner provided in paragraph (a) above only against presentation and surrender (or, in the case of part payment of any sum due, endorsement) of definitive Bearer Notes, and payments of interest in respect of definitive Bearer Notes will (subject as provided below) be made as aforesaid only against presentation and surrender (or, in the case of part payment of any sum due, endorsement) of Coupons, in each case at the specified office of any Paying Agent outside Australia and the United States (which expression, as used herein, means the United States of America (including the States and the District of Columbia, its territories, its possessions and other areas subject to its jurisdiction)).
Payments of installments of principal (if any) in respect of definitive Bearer Notes, other than the final installment, will (subject as provided below) be made in the manner provided in paragraph (a) above against presentation and surrender (or, in the case of part payment of any sum due, endorsement) of the relevant Receipt in accordance with the preceding paragraph. Payment of the final installment will be made in the manner provided in paragraph (a) above only against presentation and surrender (or, in the case of part payment of any sum due, endorsement) of the relevant Bearer Note in accordance with the preceding paragraph. Each Receipt must be presented for payment of the relevant installment together with the definitive Bearer Note to which it appertains. Receipts presented without the definitive Bearer Note to which they appertain do not constitute valid obligations of the Issuer. Upon the date on which any definitive Bearer Note becomes due and repayable, unmatured Receipts (if any) relating thereto (whether or not attached) shall become void and no payment shall be made in respect thereof.
Fixed Rate Notes in definitive bearer form (other than Dual Currency Notes or Index-Linked Notes or Long Maturity Notes (as defined below)) should be presented for payment together with all unmatured Coupons appertaining thereto (which expression shall for this purpose include Coupons falling to be issued on exchange of matured Talons), failing which the amount of any missing unmatured Coupon (or, in the case of payment not being made in full, the same proportion of the amount of such missing unmatured Coupon as the sum so paid bears to the sum due) will be deducted from the sum due for payment. Each amount of principal so deducted will be paid in the manner mentioned above against surrender of the relative missing Coupon at any time before the expiry of 10 years after the Relevant Date (as defined in Condition 8) in respect of such principal (whether or not such Coupon would otherwise have become void under Condition 9) or, if later, five years from the date on which such Coupon would otherwise have become due, but in no event thereafter.
67 Terms and Conditions of the Notes
Upon any Fixed Rate Note in definitive bearer form becoming due and repayable prior to its Maturity Date all unmatured Talons (if any) appertaining thereto will become void and no further Coupons will be issued in respect thereof.
Upon the date on which any Floating Rate Note, Dual Currency Note or Index-Linked Note or Long Maturity (as defined below) Note in definitive form becomes due and repayable, unmatured Coupons and Talons (if any) relating thereto (whether or not attached) shall become void and no payment or, as the case may be, exchange for further Coupons shall be made in respect thereof. A “Long Maturity Note” is a Fixed Rate Note (other than a Fixed Rate Note which on issue had a Talon attached) whose nominal amount on issue is less than the aggregate interest payable thereon provided that such Note shall cease to be a Long Maturity Note on the Interest Payment Date on which the aggregate amount of interest remaining to be paid after that date is less than the nominal amount of such Note.
If the due date for redemption of any definitive Bearer Note is not an Interest Payment Date, interest (if any) accrued in respect of such Note from (and including) the preceding Interest Payment Date or, as the case may be, the Interest Commencement Date shall be payable only against surrender of the relevant definitive Bearer Note.
(c) Payments in respect of Bearer Global Notes Payments of principal and interest (if any) in respect of Notes represented by any Global Note in bearer form will (subject as provided below) be made in the manner specified above in relation to definitive Bearer Notes and otherwise in the manner specified in the relevant Global Note against presentation or surrender, as the case may be, of such Global Note at the specified office of any Paying Agent outside the United States and Australia. A record of each payment made against presentation or surrender of such Global Note in bearer form, distinguishing between any payment of principal and any payment of interest, will be made on such Global Note by the Paying Agent to which it was presented and such record shall be prima facie evidence that the payment in question has been made.
(d) Payments in respect of Registered Notes Payments of principal (other than installments of principal prior to the final installment) in respect of each Registered Note (whether or not in global form) will be made against presentation and surrender (or, in the case of part payment of any sum due, endorsement) of the Registered Note at the specified office of the Registrar or any of the Paying Agents. Such payments will be made by transfer to the Designated Account (as defined below) of the holder (or the first named of joint holders) of the Registered Note appearing in the register of holders of the Registered Notes maintained by the Registrar (the “Register”) at the close of business on the third business day (being for this purpose a day on which banks are open for business in the city where the specified office of the Registrar is located) before the relevant due date. Notwithstanding the previous sentence, if (i) a holder does not have a Designated Account or (ii) the principal amount of the Notes held by a holder is less than U.S.$250,000 (or its approximate equivalent in any other Specified Currency), payment will instead be made by a cheque in the Specified Currency drawn on a Designated Bank (as defined below). For these purposes, “Designated Account” means the account (which, in the case of a payment in Japanese yen to a non-resident of Japan, shall be a non-resident account) maintained by a holder with a Designated Bank and identified as such in the Register and “Designated Bank” means (in the case of payment in a Specified Currency other than euro) a bank in the principal financial centre of the country of such Specified Currency (which, if the Specified Currency is Australian dollars shall be Sydney) and (in the case of a payment in euro) any bank which processes payments in euro.
Payments of interest and payments of installments of principal (other than the final installment) in respect of each Registered Note (whether or not in global form) will be made by a cheque in the Specified Currency drawn on a Designated Bank and mailed by uninsured mail on the business day in the city where the specified office of the Registrar is located immediately preceding the relevant due date to the holder (or the first named of joint holders) of the Registered Note appearing in the Register at the close of business on the fifteenth day (whether or not such fifteenth day is a business day) before the relevant due date (the “Record Date”) at his address shown in the Register on the Record Date and at his risk. Upon application of the holder to the specified office of the Registrar not less than three business days in the city where the specified office of the Registrar is located before the due date for any payment of interest in respect of a Registered Note, the payment may be made by transfer on the due date in the manner provided in the preceding paragraph. Any such application for transfer shall be deemed to relate to all future payments of interest (other than interest due on redemption) and installments of principal (other than the final installment) in respect of the Registered
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Notes which become payable to the holder who has made the initial application until such time as the Registrar is notified in writing to the contrary by such holder. Payment of the interest due in respect of each Registered Note on redemption and the final installment of principal will be made in the same manner as payment of the principal amount of such Registered Note.
Holders of Registered Notes will not be entitled to any interest or other payment for any delay in receiving any amount due in respect of any Registered Note as a result of a cheque posted in accordance with this Condition arriving after the due date for payment or being lost in the post. No commissions or expenses shall be charged to such holders by the Registrar in respect of any payments of principal or interest in respect of the Registered Notes.
All amounts payable to DTC or its nominee as registered holder of a Registered Global Note in respect of Notes denominated in a Specified Currency other than U.S. dollars shall be paid by transfer by the Registrar to an account in the relevant Specified Currency of the Exchange Agent on behalf of DTC or its nominee for conversion into and payment in U.S. dollars in accordance with the provisions of the Agency Agreement.
None of the Issuer or the Agents will have any responsibility or liability for any aspect of the records relating to, or payments made on account of, beneficial ownership interests in the Registered Global Notes or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests.
(e) General provisions applicable to payments The holder of a Global Note shall be the only person entitled to receive payments in respect of Notes represented by such Global Note and the Issuer will be discharged by payment to, or to the order of, the holder of such Global Note in respect of each amount so paid. Each of the persons shown in the records of Euroclear, Clearstream, Luxembourg or DTC as the beneficial holder of a particular nominal amount of Notes represented by such Global Note must look solely to Euroclear, Clearstream, Luxembourg or DTC, as the case may be, for his share of each payment so made by the Issuer to, or to the order of, the holder of such Global Note.
Notwithstanding the foregoing provisions of this Condition, if any amount of principal and/or interest in respect of Bearer Notes is payable in U.S. dollars, such U.S. dollar payments of principal and/or interest in respect of such Notes will be made at the specified office of a Paying Agent in the United States if:
(i) the Issuer has appointed Paying Agents with specified offices outside the United States with the reasonable expectation that such Paying Agents would be able to make payment in U.S. dollars at such specified offices outside the United States of the full amount of principal and interest on the Bearer Notes in the manner provided above when due;
(ii) payment of the full amount of such principal and interest at all such specified offices outside the United States is illegal or effectively precluded by exchange controls or other similar restrictions on the full payment or receipt of principal and interest in U.S. dollars; and
(iii) such payment is then permitted under United States law without involving, in the opinion of the Issuer, adverse tax consequences to the Issuer.
(f) Payment Day If the date for payment of any amount in respect of any Note, Receipt or Coupon is not a Payment Day, the holder thereof shall not be entitled to payment until the next following Payment Day in the relevant place and shall not be entitled to further interest or other payment in respect of such delay. For these purposes, “Payment Day” means any day which (subject to Condition 9) is:
(i) a day on which commercial banks and foreign exchange markets settle payments and are open for general business (including dealing in foreign exchange and foreign currency deposits) in:
(A) the relevant place of presentation; London; and
(B) any Additional Financial Centre specified in the applicable Final Terms;
(ii) either (1) in relation to any sum payable in a Specified Currency other than euro, a day on which commercial banks and foreign exchange markets settle payments and are open for general business (including dealing in foreign exchange and foreign currency deposits) in the principal financial centre of
69 Terms and Conditions of the Notes
the country of the relevant Specified Currency (if other than the place of presentation, London and any Additional Financial Centre and which if the Specified Currency is Australian dollars shall be Sydney) or (2) in relation to any sum payable in euro, a day on which the TARGET2 system is open; and
(iii) in the case of any payment in respect of a Registered Global Note denominated in a Specified Currency other than U.S. dollars and registered in the name of DTC or its nominee and in respect of which an accountholder of DTC (with an interest in such Registered Global Note) has elected to receive any part of such payment in U.S. dollars, a day on which commercial banks are not authorised or required by law or regulation to be closed in New York City.
(g) Interpretation of Principal and Interest Any reference in these Terms and Conditions to principal in respect of the Notes shall be deemed to include, as applicable:
(i) any Additional Amounts which may be payable with respect to principal under Condition 8;
(ii) the Final Redemption Amount of the Notes;
(iii) the Early Redemption Amount of the Notes;
(iv) the Optional Redemption Amount(s) (if any) of the Notes;
(v) in relation to Notes redeemable in installments, the Installment Amounts;
(vi) in relation to Zero Coupon Notes, the Amortised Face Amount (as defined in Condition 7(f)); and
(vii) any premium and any other amounts (other than interest) which may be payable by the Issuer under or in respect of the Notes.
Any reference in these Terms and Conditions to interest in respect of the Notes shall be deemed to include, as applicable, any Additional Amounts which may be payable with respect to interest under Condition 8.
(h) Solvency Requirement – Subordinated Notes This Condition 6(h) applies only to Subordinated Notes and any reference to “principal” is a reference to principal which is due prior to the Maturity Date.
Prior to the Winding-Up (as defined in Condition 3(b)) of the Issuer:
(i) the obligations of the Issuer to make payments of any principal or interest due in respect of the Notes and any Receipts or Coupons shall be conditional upon the Issuer being Solvent (as defined below) at the time of payment by the Issuer;
(ii) no principal or interest due shall be payable in respect of the Notes except to the extent that the Issuer could make such payment and still be Solvent immediately thereafter; and
(iii) failure to make payments of any principal or interest due, if the Issuer is not Solvent at the time of payment or if the Issuer can not make such payment and still be Solvent immediately thereafter, does not constitute a Subordinated Note Event of Default (as defined in Condition 10(b)).
For purposes of this Condition 6(h), the Issuer shall be considered to be “Solvent” if:
(A) it is able to pay its debts to Other Creditors as they fall due; and
(B) its Assets (as defined below) exceed its Liabilities (as defined below).
In this Condition 6(h), the following terms shall have the following meanings:
“Assets” means the non-consolidated gross assets of the Issuer;
“Auditors” means the auditors for the time being of the Issuer or, in the event of their being unable or unwilling promptly to carry out any action requested of them pursuant to the provisions of these Conditions, such other firm of accountants as may be nominated for the purposes of these Conditions;
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“Authorised Signatory of the Issuer” means (i) any Director of the Issuer or (ii) any other officer of the Issuer authorised by the Issuer to sign any document for the purposes of these Conditions;
“Liabilities” means the non-consolidated gross liabilities of the Issuer to Other Creditors, in each case as shown by the latest published accounts of the Issuer but adjusted for contingencies and for events subsequent to the date of such accounts in such manner and to such extent as the Directors or the Auditors may determine to be appropriate.
A report as to whether the Issuer is Solvent signed by two Authorised Signatories of the Issuer or the Auditors shall, unless the contrary is proved, be treated and accepted by the Issuer and the Noteholders, Receiptholders and Couponholders as correct and sufficient evidence of the truth of its contents.
(i) Order of Application Any payment made by the Issuer in respect of a Note is deemed to be made, and will be applied, in the following order:
(a) first, in payment of interest due but unpaid;
(b) second, in payment of other amounts due in respect of the relevant Note, that are not principal or interest; and
(c) third, in repayment of the principal amount of the Note.
7. REDEMPTION AND PURCHASE
(a) At Maturity Unless previously redeemed or purchased and cancelled as specified below, each Note (including each Index- Linked Redemption Note and Dual Currency Redemption Note) will be redeemed by the Issuer at its Final Redemption Amount specified in, or determined in the manner specified in, the applicable Final Terms in the relevant Specified Currency on the Maturity Date.
(b) Redemption for Tax Reasons Subject in the case of Subordinated Notes to paragraph (l) of this Condition 7, the Issuer may, at its option, redeem the Notes in whole, but not in part, at any time (if this Note is neither a Floating Rate Note, an Index- Linked Interest Note or a Dual Currency Interest Note) or on any Interest Payment Date (if this Note is either a Floating Rate Note, an Index-Linked Interest Note or a Dual Currency Interest Note), on giving not less than 30 nor more than 60 days’ notice to the Principal Paying Agent and, in accordance with Condition 14, the Noteholders (which notice shall be irrevocable), if: (i) as a result of any change in, or amendment to, the laws or regulations of the Commonwealth of Australia or the State of Queensland or any political sub-division of, or any authority in, or of, the Commonwealth of Australia or the State of Queensland having power to tax, or any change in the application or official interpretation of the laws or regulations, which change or amendment becomes effective after the Issue Date of the First Tranche of the Notes, on the occasion of the next payment due in respect of the Notes the Issuer would be required to pay Additional Amounts as provided or referred to in Condition 8, and (ii) the requirement cannot be avoided by the Issuer taking reasonable measures available to it. Prior to the publication of any notice of redemption pursuant to this Condition 7(b), the Issuer shall deliver to the Principal Paying Agent a certificate signed by two Directors of the Issuer stating that the Issuer is entitled to effect such redemption and setting forth a statement of facts showing that the conditions precedent to the right of the Issuer so to redeem have occurred, and an opinion of independent legal advisers of recognised standing to the effect that the Issuer has or will become obliged to pay such additional amounts as a result of such change or amendment. Upon the expiry of any notice as is referred to in this paragraph the Issuer shall be bound to redeem the Notes to which the notice refers in accordance with the provisions of this paragraph.
Notes redeemed pursuant to this Condition 7(b) will be redeemed at their Early Redemption Amount referred to in paragraph (f) below together (if appropriate) with interest accrued to (but excluding) the date of redemption.
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(c) Redemption of Subordinated Notes for Regulatory and other Reasons In the case of Subordinated Notes subject as provided in paragraph (l) of this Condition 7, the Issuer may, at its option, redeem the Notes in whole, but not in part, at any time (if this Note is neither a Floating Rate Note, an Index-Linked Interest Note or a Dual Currency Interest Note) or on any Interest Payment Date (if this Note is either a Floating Rate Note, an Index-Linked Interest Note or a Dual Currency Interest Note), on giving not less than 30 nor more than 60 days’ notice to the Principal Paying Agent and, in accordance with Condition 14, the Noteholders (which notice shall be irrevocable), if on the occasion of the next payment due in respect of the Notes:
(i) interest payable by the Issuer in respect of the Notes is not allowed by the Australian Taxation Office as a deduction for Australian income tax purposes in accordance with the Income Tax Assessment Act 1997 of Australia; or
(ii) the Subordinated Notes cease to qualify as “Lower Tier 2 capital” under the standards and guidelines of APRA (as defined below) or its successors.
Prior to the publication of any notice of redemption pursuant to this Condition 7(c), the Issuer shall deliver to the Principal Paying Agent a certificate signed by two Directors of the Issuer stating that the Issuer is entitled to effect such redemption and an opinion of independent tax or legal advisers of recognised standing to the effect that either of the events set out above has occurred. Upon the expiry of any notice as is referred to in this paragraph the Issuer shall, subject to the terms of this Condition 7(c), be bound to redeem the Notes to which the notice refers in accordance with the provisions of this paragraph.
Notes redeemed pursuant to this Condition 7(c) will be redeemed at their Early Redemption Amount referred to in paragraph (f) below together (if appropriate) with interest accrued to (but excluding) the date of redemption.
The Issuer may redeem the Notes of any Series under this Condition 7(c) provided that the Issuer will be in a position on the relevant date to discharge all its liabilities in respect of the Notes and any amounts required to be paid in priority to or ranking equally with the Notes.
(d) Redemption at the Option of the Issuer If lssuer Call is specified in the applicable Final Terms, the Issuer, having given (and subject, in the case of Subordinated Notes, as provided in paragraph (l) of this Condition 7):
(i) not less than 15 nor more than 30 days’ notice to the Noteholders in accordance with Condition 14; and
(ii) not less than 15 days before the giving of the notice referred to in Condition 7(d)(i), notice to the Principal Paying Agent and, in the case of a redemption of Registered Notes, the Registrar;
(which notices shall be irrevocable and shall specify the date fixed for redemption), redeem all or some only of the Notes then outstanding on any Optional Redemption Date and at the Optional Redemption Amount(s) specified in, or determined in the manner specified in, the applicable Final Terms together, if appropriate, with interest accrued to (but excluding) the relevant Optional Redemption Date. Any such redemption must be of a nominal amount not less than the Minimum Redemption Amount and not more than the Maximum Redemption Amount in each case as may be specified in the applicable Final Terms. In the case of a partial redemption of Notes, the Notes to be redeemed (“Redeemed Notes”) will be selected individually by lot, in the case of Redeemed Notes represented by definitive Notes, and in accordance with the rules of Euroclear and/or Clearstream, Luxembourg and/or DTC, in the case of Redeemed Notes represented by a Global Note, not more than 30 days prior to the date fixed for redemption (such date of selection being hereinafter called the “Selection Date”). In the case of Redeemed Notes represented by definitive Notes, a list of the serial numbers of such Redeemed Notes will be published in accordance with Condition 14 not less than 15 days prior to the date fixed for redemption. No exchange of the relevant Global Note will be permitted during the period from (and including) the Selection Date to (and including) the date fixed for redemption pursuant to this paragraph (d) and notice to that effect shall be given by the Issuer to the Noteholders in accordance with Condition 14 at least 5 days prior to the Selection Date.
(e) Redemption at the Option of the Noteholders If Investor Put is specified in the applicable Final Terms, upon the holder of any Note giving to the Issuer in accordance with Condition 14 not less than 15 nor more than 30 days’ notice or such other period of notice
72 Terms and Conditions of the Notes as is specified in the applicable Final Terms the Issuer will, upon the expiry of such notice, redeem, subject to, and in accordance with, the terms specified in the applicable Final Terms, in whole (but not in part), such Note on the Optional Redemption Date and at the Optional Redemption Amount specified in, or determined in the manner specified in, the applicable Final Terms together (if appropriate) with interest accrued to (but excluding) the Optional Redemption Date. Registered Notes may be redeemed under this Condition 7(e) in any multiple of their lowest specified Denomination. It may be that before an Investor Put can be exercised, certain conditions and/or circumstances will need to be satisfied. Where relevant, the provisions will be set out in the applicable Final Terms.
To exercise the right to require redemption of this Note the holder of this Note must deliver, at the specified office of any Paying Agent (in the case of Bearer Notes) or the Registrar (in the case of Registered Notes) at any time during normal business hours of such Paying Agent or, as the case may be, the Registrar, falling within the notice period, accompanied by a duly completed and signed notice of exercise in the form (for the time being current) obtainable from any specified office of any Paying Agent or, as the case may be, the Registrar (a “Put Notice”) and in which the holder must specify a bank account outside Australia (or, if payment is by cheque, an address (which is outside Australia)) to which payment is to be made under this Condition and, in the case of Registered Notes, the nominal amount thereof to be redeemed and, if less than the full nominal amount of the Registered Notes so surrendered is to be redeemed, an address to which a new Registered Note in respect of the balance of such Registered Notes is to be sent subject to and in accordance with the provisions of Condition 2(b). If this Note is in definitive form, the Put Notice must be accompanied by this Note or evidence satisfactory to the Paying Agent concerned that this Note will, following delivery of the Put Notice, be held to its order or under its control.
Any Put Notice given by a holder of any Note pursuant to this paragraph shall be irrevocable except where prior to the due date of redemption a Senior Note Event of Default or a Subordinated Note Event of Default shall have occurred and be continuing in which event such holder, at its option, may elect by notice to the Issuer to withdraw the notice given pursuant to this paragraph and instead to declare such Note forthwith due and payable pursuant to Condition 10.
(f) Early Redemption Amounts For the purpose of paragraphs (b) and (c) above and Condition 10, each Note will be redeemed at the Early Redemption Amount calculated as follows:
(i) in the case of a Note with a Final Redemption Amount equal to the Issue Price, at the Final Redemption Amount thereof;
(ii) in the case of a Note (other than a Zero Coupon Note but including an Installment Note and a Partly Paid Note) with a Final Redemption Amount which is or may be less or greater than the Issue Price or which is payable in a Specified Currency other than that in which the Note is denominated, at the amount specified in, or determined in the manner specified in, the applicable Final Terms or, if no such amount or manner is so specified in the Final Terms, at their nominal amount; or
(iii) in the case of a Zero Coupon Note, at an amount (the “Amortised Face Amount”) calculated in accordance with the following formula:
y Early Redemption Amount = RP x (1 + AY)
where:
“RP” means the Reference Price; and
“AY” means the Accrual Yield expressed as a decimal; and
“y” is a fraction the numerator of which is equal to the number of days (calculated on the basis of a 360-day year consisting of 12 months of 30 days each) from (and including) the Issue Date of the First Tranche of the Notes to (but excluding) the date fixed for redemption or (as the case may be) the date upon which such Note becomes due and repayable and the denominator of which is 360,
or on such other calculation basis as may be specified in the applicable Final Terms.
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(g) Installments If the Notes are repayable in installments, they will be redeemed in the Installment Amounts and on the Installment Dates (as each such term is specified in the applicable Final Terms). In the case of early redemption, the Early Redemption Amount will be determined pursuant to paragraph (f) above.
(h) Partly Paid Notes If the Notes are Partly Paid Notes, they will be redeemed, whether at maturity, early redemption or otherwise, in accordance with the provisions of this Condition and the applicable Final Terms.
(i) Purchases The Issuer or any of its Subsidiaries (as that term is defined in the Corporations Act) may, subject, in the case of Subordinated Notes, as provided in paragraph (l) of this Condition, at any time purchase Notes (provided that, in the case of definitive Bearer Notes, all unmatured Receipts, Coupons and Talons appertaining thereto are purchased therewith) at any price in the open market or otherwise. If purchases are made by tender, tenders must be available to all Noteholders alike. Such Notes may be held, reissued, resold or, at the option of the Issuer, surrendered to any Paying Agent and/or Registrar for cancellation.
(j) Cancellation All Notes which are redeemed will forthwith be cancelled (together with all unmatured Receipts and Coupons attached thereto or surrendered therewith at the time of redemption). All Notes so cancelled and the Notes purchased and cancelled pursuant to paragraph (h) above (together with all unmatured Receipts and Coupons cancelled therewith) shall be forwarded to the Principal Paying Agent and cannot be reissued or resold.
(k) Late payment on Zero Coupon Notes If the amount payable in respect of any Zero Coupon Note upon redemption of such Zero Coupon Note pursuant to paragraph (a), (b), (c), (d) or (e) above or upon its becoming due and repayable as provided in Condition 10 is improperly withheld or refused, the amount due and repayable in respect of such Zero Coupon Note shall be the amount calculated as provided in paragraph (f)(iii) above as though the references therein to the date fixed for the redemption or the date upon which such Zero Coupon Note becomes due and repayable were replaced by references to the date which is the earlier of:
(i) the date on which all amounts due in respect of such Zero Coupon Note have been paid; and
(ii) the fifth day after the date on which the full amount of the moneys payable has been received by the Principal Paying Agent or the Registrar and notice to that effect has been given to the Noteholders in accordance with Condition 14.
(l) Consent of Australian Prudential Regulation Authority (“APRA”) Unless otherwise specified in the applicable Final Terms, the Issuer has given an undertaking to APRA not to redeem any Subordinated Notes pursuant to paragraph (b), (c) or (d) of this Condition 7, nor to purchase any Subordinated Notes pursuant to paragraph (i) of this Condition 7, without first consulting with and obtaining the prior written consent of APRA.
8. TAXATION (a) All payments in respect of the relevant Notes, Receipts and Coupons by the Issuer shall be made without withholding or deduction for, or on account of, any present or future taxes, duties, assessments or governmental charges of whatever nature (“Taxes”) imposed or levied by or on behalf of the Commonwealth of Australia or the State of Queensland, or any political sub-division of, or any authority in, or of, the Commonwealth of Australia or the State of Queensland having power to tax, unless the withholding or deduction of the Taxes is required by law. In that event, the Issuer will pay such additional amounts (“Additional Amounts”) as may be necessary in order that the net amounts received by the Noteholders, Receiptholders and Couponholders after such withholding or deduction shall equal the respective amounts which would have been receivable in respect of the Notes or, as the case may be, Receipts or Coupons in the absence of the withholding or deduction; except that no Additional Amounts shall be payable in relation to any payment in respect of any Note, Receipt or Coupon:
(i) to, or to a third party on behalf of, a holder who is liable to the Taxes in respect of the Note, Receipt or Coupon by reason of his having some connection with the Commonwealth of Australia or the
74 Terms and Conditions of the Notes
State of Queensland other than the mere holding of the Note, Receipt or Coupon or receipt of principal or interest in respect thereof provided that such a holder shall not be regarded as being connected with the Commonwealth of Australia for the reason that such a holder is a resident of the Commonwealth of Australia within the meaning of the Income Tax Assessment Act 1936 where, and to the extent that, such tax is payable by reason only of Section 128B(2A) of that Act; or
(ii) presented for payment more than 30 days after the Relevant Date except to the extent that a holder would have been entitled to Additional Amounts on presenting the same for payment on the last day of the period of 30 days assuming that day to have been a Payment Date; or
(iii) on account of taxes, duties, assessments or governmental charges which are payable by reason of the Noteholder and/or Receiptholder and/or Couponholder being an associate of the Issuer within the meaning of Section 128F of the Income Tax Assessment Act 1936; or
(iv) where such withholding or deduction is imposed on a payment to an individual and is required to be made pursuant to European Council Directive 2003/48/EC or any law implementing or complying with, or introduced in order to conform to, such Directive; or
(v) presented for payment by or on behalf of a holder who would be able to avoid such withholding or deduction by presenting the relevant Note, Receipt or Coupon to another Paying Agent in a Member State of the European Union.
As used herein, the “Relevant Date” means the date on which such payment first becomes due, except that, if the full amount of the moneys payable has not been duly received by the Principal Paying Agent or the Registrar on or before the due date, it means the date on which, the full amount of such moneys having been so received, notice to that effect is duly given to the Noteholders in accordance with Condition 14.
(b) In the case of any Subordinated Notes, any Additional Amounts will be subordinated in right of payment as described in Condition 3(b).
9. PRESCRIPTION The Notes (whether in bearer or registered form), Receipts and Coupons will become void unless presented for payment within a period of 10 years (in the case of principal) and five years (in the case of interest) after the Relevant Date (as defined in Condition 8) therefor, subject as provided in Condition 5(b).
There shall not be included in any Coupon sheet issued on exchange of a Talon any Coupon the claim for payment in respect of which would be void pursuant to this Condition or Condition 5(b) or any Talon which would be void pursuant to Condition 6(b).
10. EVENTS OF DEFAULT (a) This Condition 10(a) applies only to Senior Notes (except that Condition 10(a)(vii) and Condition 10(a)(ix) of the Terms and Conditions of the Notes will not apply to Guaranteed Notes) and references to Noteholders shall be construed accordingly.
If any one or more of the following events (each a “Senior Note Event of Default”) occurs and is continuing:
(i) if the Issuer fails to pay any principal or any interest in respect of the Notes within ten days of the relevant due date;
(ii) the Issuer defaults in performance or observance of or compliance with any of its other obligations set out in the Notes where the failure is incapable of remedy or which, being a default capable of remedy the failure continues for a period of 21 days following the service by a Noteholder on the Issuer of notice requiring such default to be remedied;
(iii) it is or will become unlawful for the Issuer to perform or comply with any one or more of its obligations under the Notes or the Agency Agreement;
75 Terms and Conditions of the Notes
(iv) the Issuer (a) becomes insolvent, is unable to pay its debts as they fall due or fails to comply with a statutory demand (which is still in effect) under Section 459F of the Corporations Act, or (B) stops or suspends or threatens to stop or suspend payment of all or a material part of its debts, or appoints an administrator under Section 436A of the Corporations Act, or (C) begins negotiations or takes any proceeding or other steps with a view to re-adjustment, rescheduling or deferral of all its indebtedness (or any part of its indebtedness which it will or might otherwise be unable to pay when due) or proposes or makes a general assignment or an arrangement or composition with or for the benefit of its creditors, or a moratorium is agreed or declared in respect of or affecting indebtedness of the Issuer, except in any case referred to in (C) above for the purposes of a solvent reconstruction or amalgamation the terms of which have previously been approved by an Extraordinary Resolution of the Noteholders;
(v) an order is made or an effective resolution is passed for the winding up of the Issuer, except in any such case for the purposes of a solvent reconstruction or amalgamation the terms of which have previously been approved by an Extraordinary Resolution of the Noteholders or an administrator is appointed to the Issuer by a provisional liquidator of the Issuer under Section 436B of the Corporations Act;
(vi) a distress, attachment, execution or other legal process is levied, enforced or sued out against or on the Issuer or against the assets of the Issuer in respect of any Financial Indebtedness of the Issuer in excess of A$2,000,000 and is not stayed, satisfied or discharged within 14 days or otherwise contested in bona fide proceedings;
(vii) any present or future Security Interest(s) on or over the assets of the Issuer becomes enforceable and any step (including the taking of possession or the appointment of a receiver, manager or similar officer which is not vacated or discharged within 14 days) is taken to enforce that Security Interest by reason of a default or event of default (howsoever described) having occurred;
(viii) any event occurs which, under the laws of any relevant jurisdiction has an analogous or equivalent effect to any of the events mentioned in this Condition; or
(ix) any Financial Indebtedness of the Issuer which in aggregate exceeds A$20,000,000 (or its equivalent in any other currency or currencies):
(A) is not paid when due as a result of the default of the Issuer (or, if payable or to be discharged or honoured on demand, when demanded); or
(B) becomes due and repayable before its scheduled maturity by reason of a default or event of default (howsoever described),
then any holder of a Senior Note may, by written notice to the Issuer at the specified office of the Principal Paying Agent, effective upon the date of receipt thereof by the Principal Paying Agent, declare any Senior Notes held by the holder to be forthwith due and payable whereupon the same shall become forthwith due and payable at the Early Redemption Amount (as described in Condition 7(f)), together with accrued interest (if any) to the date of repayment, without presentment, demand, protest or other notice of any kind. Notwithstanding the foregoing, in the case of any failure by the Issuer to make any payment of interest on, principal of or any other amount payable in respect of any Guaranteed Note prior to the expiration of any applicable grace period with respect to such payment as specified in the Senior Note Events of Default, such failure shall not constitute a Senior Note Event of Default unless (i) the holder of the relevant Guaranteed Note shall have validly submitted a written claim to the Commonwealth of Australia, in accordance with the Scheme Rules, for any amount due with respect to the relevant Guaranteed Note and (ii) the Commonwealth of Australia shall have failed to pay such claim in a timely manner.
(b) (i) Subject to Condition 10(b)(ii), no remedy against the Issuer (including, without limitation, any right to sue for a sum of damages which has the same economic effect of an acceleration of the Issuer’s payment obligations), other than:
(A) action to recover amounts of principal, interest or other amounts due in respect of the Notes which the Issuer has failed to pay; or
76 Terms and Conditions of the Notes
(B) the institution of proceedings for winding-up or liquidation or proving or claiming in any winding-up or liquidation of the Issuer, shall be available to the holders of any Subordinated Notes for the recovery of amounts owing in respect of such Notes or in respect of any breach by the Issuer of any obligation, condition or provision binding on it under the terms of the Subordinated Notes. In particular, the holder of any Subordinated Note shall not be entitled to exercise any right of set-off or counterclaim which may be available to it against amounts owing by the Issuer in respect of such Notes, Receipts, Coupons or Talons (whether prior to, or following, any bankruptcy, liquidation, winding-up or sequestration of the Issuer).
(ii) The remedies specified in Condition 10(b)(i) shall become exercisable in the event that there is a failure to make payment of any principal, interest or other amounts due in respect of the Subordinated Notes within 10 days of the due date provided that such remedies will not be exercisable as a result only of a failure to pay any principal which is due prior to the Maturity Date, or interest due, for the reasons specified in Condition 6(h).
(iii) In the event (a “Subordinated Note Event of Default”) that an effective resolution is passed by shareholders or an order of a court of competent jurisdiction is made that the Issuer be wound up otherwise than for the purposes of a consolidation, amalgamation, merger or reconstruction the terms of which have previously been approved by the shareholders of the Issuer or by a court of competent jurisdiction under which the continuing corporation or the corporation formed as a result of such consolidation, amalgamation, merger or reconstruction effectively assumes the entire obligations of the Issuer under the Notes, the Receipts and the Coupons (the terms of such resolution or court order to have been approved by an Extraordinary Resolution of Noteholders), then any holder of a Subordinated Note may, by written notice to the Issuer at the specified office of the Principal Paying Agent, effective upon the date of receipt thereof by the Principal Paying Agent, declare any such Subordinated Notes held by the holder to be forthwith due and payable whereupon the same shall become forthwith due and payable at the Early Redemption Amount (as described in Condition 7(f)), together with accrued interest (if any) to the date of repayment, without presentment, demand, protest or other notice of any kind.
(c) For the purposes of these Terms and Conditions:
(i) “Corporations Act” means the Corporations Act 2001 of Australia;
(ii) “Financial Arrangement” includes a futures contract, a futures option, a currency swap, an interest rate swap, a forward exchange rate agreement, a forward interest rate agreement or any other option agreement or combination of the above or any similar arrangement;
(iii) “Financial Indebtedness” means, in respect of any person, any indebtedness, present or future, actual or contingent of that person in respect of moneys borrowed or raised or any financial accommodation or Financial Arrangement whatsoever including (without limiting the generality of the foregoing):
(A) under or in respect of any Guarantee, bill, acceptance or endorsement or any discounting arrangement;
(B) in respect of any obligation to pay par value, premium and dividend (whether or not declared, and whether or not there are sufficient profits or other moneys for payment) of any redeemable share or stock issued by that person or to purchase any share or stock issued by that person which is the subject of a put option against that person;
(C) in respect of any Lease which under current accounting practice would be required to be capitalised on the balance sheet of the lessee;
(D) the deferred purchase price (for more than 90 days) of any asset or service and any related obligation; and
(E) in respect of any obligation to deliver goods or services which are paid for in advance by a financier or which are paid for in advance in relation to any financing transaction;
(iv) “Government Agency” means any government or any governmental, semi-governmental or judicial entity or authority;
77 Terms and Conditions of the Notes
(v) “Guarantee” means any guarantee, indemnity, letter of credit, suretyship or any other obligation (whatever called and of whatever nature):
(A) to pay or to purchase; or
(B) to provide funds (whether by the advance of money, the purchase of or subscription for shares or other securities, the purchase of assets, rights or services, or otherwise) for the payment or discharge of; or
(C) to indemnify against the consequences of default in the payment of; or
(D) otherwise to be responsible for;
any obligation or indebtedness, any dividend, capital or premium on shares or stock or the insolvency or the financial condition of any other person;
(vi) “Lease” means:
(A) any lease, charter or hiring arrangement of any property;
(B) any other agreement under which any property is or may be used or operated by a person other than the owner; and
(C) any agreement under which any property is or may be managed or operated for or on behalf of the owner or another person by a person other than the owner, and the operator or manager or its related body corporate (as defined in Section 9 of the Corporations Act) (whether in the same or another agreement) is required to make or assure minimum, fixed and/or floating rate payments of a periodic nature;
(other than agreements under which the manager of a joint venture uses assets owned by the joint venture on behalf of the joint venture);
(vii) “Security Interest” includes any mortgage, pledge, lien or charge or any security or preferential interest or arrangement of any kind (including, without limitation, retention of title and any deposit of money by way of security), but excluding (A) any charge or lien arising in favour of any Government Agency by operation of statute (provided there is no default in payment of moneys owing under such charge or lien) (B) a right of title retention in connection with the acquisition of goods in the ordinary course of business on the terms of sale of the supplier (provided there is no default in connection with the relevant acquisition) and (C) any security or preferential interest or arrangement arising under or created pursuant to any right of set-off.
11. REPLACEMENT OF NOTES, RECEIPTS, COUPONS AND TALONS Should any Note, Receipt, Coupon or Talon be lost, stolen, mutilated, defaced or destroyed, it may be replaced at the specified office of the Principal Paying Agent (in the case of Bearer Notes, Receipts or Coupons) or the Registrar (in the case of Registered Notes) upon payment by the claimant of such costs and expenses as may be incurred in connection therewith and on such terms as to evidence and indemnity as the Issuer may reasonably require. Mutilated or defaced Notes, Receipts, Coupons or Talons must be surrendered before replacements will be issued.
12. AGENTS The names of the initial Agents and their initial specified offices are set out below.
The Issuer is entitled to vary or terminate the appointment of any Agent and/or appoint additional or other Agents and/or approve any change in the specified office through which any Agent acts, provided that:
(i) so long as the Notes are listed on any stock exchange or admitted to listing by any other relevant authority, there will at all times be a Paying Agent (in the case of Bearer Notes) and a Transfer Agent (in the case of Registered Notes) with a specified office in such place as may be required by the rules and regulations of the relevant stock exchange or other relevant authority;
(ii) there will at all times be a Principal Paying Agent and a Registrar;
78 Terms and Conditions of the Notes
(iii) so long as any of the Registered Global Notes payable in a Specified Currency other than U.S. dollars are held through DTC or its nominee, there will at all times be an Exchange Agent with a specified office in New York City; and
(iv) there will at times be a Paying Agent in a Member State of the European Union that is not be obliged to withhold or deduct tax pursuant to European Council Directive 2003/48/EC or any law implementing or complying with, or introduced in order to conform to such Directive.
In addition, the Issuer shall forthwith appoint a Paying Agent having a specified office in New York City in the circumstances described in the final paragraph of Condition 6(e). Any variation, termination, appointment or change shall only take effect (other than in the case of insolvency, when it shall be of immediate effect) after not less than 30 nor more than 45 days’ prior notice thereof shall have been given to the Noteholders in accordance with Condition 14.
In acting under the Agency Agreement, the Agents act solely as agents of the Issuer and do not assume any obligation to, or relationship of agency or trust with, any Noteholders, Receiptholders or Couponholders. The Agency Agreement contains provisions permitting any entity into which any Agent is merged or converted or with which it is consolidated or to which it transfers all or substantially all of its assets to become the successor agent.
13. EXCHANGE OF TALONS On and after the Interest Payment Date on which any Coupon sheet matures, the Talon (if any) forming part of such Coupon sheet may be surrendered at the specified office of the Principal Paying Agent or any other Paying Agent in exchange for a further Coupon sheet including (if such further Coupon sheet does not include Coupons to (and including) the final date for the payment of interest due in respect of the Note to which it appertains) a further Talon, subject to the provisions of Condition 9. Each Talon shall, for the purposes of these Conditions, be deemed to mature on the Interest Payment Date or Fixed Interest Date, as the case may be, on which the final Coupon comprised in the Coupon Sheet in which that Talon was included on issue matures.
14. NOTICES All notices regarding the Bearer Notes will be deemed to validly given if published in a leading English language daily newspaper of general circulation in the United Kingdom (expected to be the Financial Times). The Issuer shall also ensure that notices are duly published in a manner which complies with the rules of any stock exchange (or other relevant authority) on which the Bearer Notes are for the time being listed, or by which they have been admitted to trading. Any such notice will be deemed to have been given on the date of the first publication or, where required to be published in more than one newspaper, on the date of the first publication in all the required newspapers. Receiptholders and Couponholders shall be deemed for all purposes to have notice of the contents of any notice given to Noteholders in accordance with this Condition.
All notices regarding the Registered Notes will be deemed to be validly given if sent by first class mail or (if posted to an address overseas) by airmail to the holders (or the first named of joint holders) at their respective addresses recorded in the Register and will be deemed to have been given on the fourth day after mailing and, in addition, for so long as any Registered Notes are listed on a stock exchange or are admitted to trading by another relevant authority and the rules of that stock exchange (or any other relevant authority) so require, such notice will be published in a daily newspaper of general circulation in the place or places required by those rules.
Until such time as any definitive Notes are issued, there may, so long as the Global Notes are held in their entirety on behalf of Euroclear and/or Clearstream, Luxembourg and/or DTC, be substituted for such publication in such newspaper(s) the delivery of the relevant notice to Euroclear and/or Clearstream, Luxembourg and/or DTC for communication by them to the holders of the Notes and, in addition, for so long as any Notes are listed on a stock exchange and the rules of that stock exchange (or any other relevant authority) so require, such notice will be published in a daily newspaper of general circulation in the place or places required by those rules. Any such notice shall be deemed to have been given to the holders of the Notes on the seventh day after the day on which the said notice was given to Euroclear and Clearstream, Luxembourg and/or DTC.
79 Terms and Conditions of the Notes
Notices to be given by any Noteholder shall be in writing and given by lodging the same, together (in the case of any Note in definitive form) with the relative Note or Notes, with the Principal Paying Agent (in the case of Bearer Notes) or the Registrar (in the case of Registered Notes). Whilst any of the Notes are represented by a Global Note, such notice may be given by any Noteholder to the Principal Paying Agent or the Registrar via Euroclear and/or Clearstream, Luxembourg and/or DTC, as the case may be, in such manner as the Principal Paying Agent or the Registrar and Euroclear and/or Clearstream, Luxembourg and/or DTC, as the case may be, may approve for this purpose.
15. MEETINGS OF NOTEHOLDERS, MODIFICATION AND WAIVER
(a) Meetings of Noteholders The Agency Agreement contains provisions for convening meetings of the Noteholders to consider any matter affecting their interests, including the sanctioning by Extraordinary Resolution of a modification of these Terms and Conditions or any of the provisions of the Agency Agreement. Such a meeting may be convened by the Issuer or Noteholders holding not less than 5 per cent. in nominal amount of the Notes for the time being remaining outstanding. The quorum at any meeting for passing an Extraordinary Resolution will be one or more persons present holding or representing a clear majority in nominal amount of the Notes for the time being outstanding, or at any adjourned meeting one or more persons present representing the Noteholders whatever the nominal amount of the Notes held or represented by him or them, except that at any meeting, the business of which includes the modification of certain provisions of the Notes, the Receipts or the Coupons (including modifying the date of maturity of the Notes or any date for payment of interest thereon, reducing or cancelling the amount of principal or the rate of interest payable in respect of the Notes or altering the currency of payment of the Notes, the Receipts or the Coupons), the quorum shall be one or more persons holding or representing not less than two-thirds in nominal amount of the Notes for the time being outstanding, or at any adjourned such meeting one or more persons holding or representing not less than one- third in nominal amount of the Notes for the time being outstanding. An Extraordinary Resolution passed at any meeting of the Noteholders will be binding on all Noteholders, whether or not they are present at the meeting, and on all Receiptholders and Couponholders.
In respect of any Guaranteed Note, the Issuer shall not modify, vary, amend, waive, release, novate, supplement, extend or reinstate in any material respect the terms and conditions of the Guaranteed Notes through a meeting of Noteholders without obtaining the prior written consent of the Commonwealth of Australia as Guarantor.
(b) Modification and Waiver The Principal Paying Agent and the Issuer may agree, without the consent of the Noteholders, Receiptholders or Couponholders, to:
(a) any modification (except such modifications in respect of which an increased quorum is required as mentioned above) of the Notes, the Receipts, the Coupons or the Agency Agreement which is not prejudicial to the interests of the Noteholders; or
(b) any modification of the Notes, the Receipts, the Coupons or the Agency Agreement which is of a formal, minor or technical nature or is made to correct a manifest error or to comply with mandatory provisions of the law.
In respect of any Guaranteed Note, the Issuer shall not agree to modify, vary, amend, waive, release, novate, supplement, extend or reinstate in any material respect the terms and conditions of the Guaranteed Notes without obtaining the prior written consent of the Commonwealth of Australia as Guarantor.
In respect of any Subordinated Note, the Issuer shall not agree to any modification of the terms or conditions of any Subordinated Note which may affect the eligibility of any Subordinated Note to continue to qualify as “Lower Tier 2 capital” under the standards and guidelines of APRA or its successors, without obtaining the prior written consent of APRA.
(c) Notification Any modification, waiver or authorisation shall be binding on the Noteholders, the Receiptholders and the Couponholders and any such modification shall be notified by the Issuer to the Noteholders as soon as practicable thereafter in accordance with Condition 14.
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16. FURTHER ISSUES The Issuer is at liberty from time to time without the consent of the Noteholders, the Receiptholders or the Couponholders to create and issue further notes ranking pari passu in all respects (or in all respects save for the first payment of interest thereon) and so that the same shall be consolidated and form a single Series with the outstanding Notes.
Any further issue of Subordinated Notes by the Issuer will only be permissible with APRA’s prior written approval.
17. GOVERNING LAW AND SUBMISSION TO JURISDICTION
(a) Governing Law The Agency Agreement, the MTN Deed of Covenant, the Deed Poll, the Notes, the Receipts and the Coupons are governed by, and will be construed in accordance with, English law except in the case of Subordinated Notes, in which case the provisions of Condition 3 as it applies to such Notes shall be governed by, and construed in accordance with, the laws of the State of Queensland, Australia.
(b) Jurisdiction The Issuer agrees, for the exclusive benefit of the Noteholders, the Receiptholders and the Couponholders that the courts of England are to have jurisdiction to settle any disputes which may arise out of or in connection with the Notes, the Receipts and/or the Coupons (including a dispute relating to any non-contractual obligations arising out of or in connection with the Notes, the Receipts and/or the Coupons) and that accordingly any suit, action or proceedings arising out of or in connection therewith (together referred to as “Proceedings”) may be brought in the courts of England.
The Issuer hereby irrevocably and unconditionally waives any objection which it may have now or subsequently to the laying of the venue of any Proceedings in the courts of England and any claim that any such Proceedings have been brought in an inconvenient forum and hereby further irrevocably and unconditionally agrees that a judgment in any Proceedings brought in the courts of England shall be conclusive and binding upon it and may be enforced in the courts of any other jurisdiction. Nothing in this Condition shall limit any right to take Proceedings against the Issuer in any other court of competent jurisdiction, nor shall the taking of Proceedings in one or more jurisdictions preclude the taking of Proceedings in any other jurisdiction, whether concurrently or not.
(c) Agent for service of process The Issuer irrevocably and unconditionally appoints RB Secretariat Limited, Beaufort House, 10th Floor, 15 St Botolph Street, London EC3A 7EE as its agent for service of process in England in respect of any Proceedings and undertakes that in the event of its ceasing so to act or ceasing to be registered in England, it will appoint such other person as its agent for service of process in England in respect of any Proceedings. Nothing herein shall affect the right to serve proceedings in any other manner permitted by law.
(d) Other documents The Issuer has in the Agency Agreement, the MTN Deed of Covenant and the Deed Poll submitted to the jurisdiction of the English courts and appointed an agent for service of process in terms substantially similar to those set out above.
18. CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999 No rights are conferred on any person under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of this Note, but this does not affect any right or remedy of any person which exists or is available apart from that Act.
81 Description of the Deed of Guarantee
For a description of the Deed of Guarantee, please refer to the Commonwealth Disclosure in Annex 1.
82 Form of Deed of Guarantee
Set out below is the form of the Deed of Guarantee which is available as at the date of this Offering Circular.
DEED OF GUARANTEE Deed of Guarantee in respect of the Australian Government Guarantee Scheme for Large Deposits and Wholesale Funding
Date
This Deed of Guarantee is dated the 20 day of November 2008.
Parties
This Deed of Guarantee is made by: 1. THE COMMONWEALTH OF AUSTRALIA (the Commonwealth) IN FAVOUR OF 2. THE BENEFICIARIES being persons to whom the Guaranteed Liabilities are from time to time owed (the Beneficiaries). Context
This Deed of Guarantee is made in the following context: A. The Commonwealth wishes to maintain public confidence in Australian incorporated authorised deposit-taking institutions (ADIs) and, to the extent they operate within Australia, foreign ADIs and maintain the stability of the Australian wholesale debt markets. B. The Commonwealth has given effect to a guarantee of specific deposits with Eligible Institutions under the Financial Claims Scheme established under the Banking Act 1959. C. In accordance with this Deed of Guarantee, the Commonwealth guarantees payments by Eligible Institutions under certain debt instruments and deposits.
NOW THIS DEED OF GUARANTEE WITNESSES as follows:
1. Interpretation
1.1. Definitions
1.1.1. Unless the contrary intention appears a term in bold type has the meaning shown opposite it:
Beneficiary means a person to whom a Guaranteed Liability from time to time is owed. Business Day means a day (excluding Saturday and Sunday) on which banks are generally open in New South Wales for the transaction of banking business. Due Date has the meaning given to it in Clause 2.1.1.b. Eligibility Certificate means a certificate issued in accordance with the Scheme Rules. Eligible Institution has the meaning given in the Scheme Rules. External Administration has the same meaning as in section 5 of the Payment Systems and Netting Act 1998. Final Application Date means the date determined by the Guarantor in accordance with the Scheme Rules. Guaranteed Liability means a liability that is the subject of an Eligibility Certificate. Guarantor means the Commonwealth of Australia. Scheme Rules means the rules of the Australian Government Guarantee Scheme for Large Deposits and Wholesale Funding published on www.guaranteescheme.gov.au
83 Form of Deed of Guarantee
1.2. Interpretation
1.2.1. Any reference in this Guarantee to a Clause or the Schedule is, unless otherwise stated, to a clause hereof or the schedule hereto.
1.2.2. Any reference in this Guarantee to “this Guarantee” shall be deemed to be a reference to this Guarantee as a whole and not limited to the particular clause, schedule or provision in which the relevant reference appears and to this Guarantee as varied, amended, supplemented or substituted from time to time.
1.2.3. In this Guarantee, unless the contrary intention appears:
a. Words and expressions defined in the Scheme Rules have the same meanings where used in this Guarantee;
b. The headings in this Guarantee are inserted for convenience only and shall be of no legal effect;
c. Words denoting the singular number only shall include the plural and vice versa;
d. A reference to a person includes a body politic, body corporate or partnership;
e. The word “includes” in any form is not a word of limitation;
f. A reference to a person includes that person’s administrators, successors and permitted assigns; and
g. Any reference to time of day shall be a reference to that time of day in Sydney in the State of New South Wales.
1.3. Effective Date
1.3.1. This Guarantee comes into effect on 28 November 2008.
1.4. Eligibility Certificates
1.4.1. A Beneficiary may rely upon the issue of an Eligibility Certificate as conclusive evidence that the liability described in the Eligibility Certificate satisfies the Eligibility Criteria.
2. Guarantee
2.1.1. Subject to the terms of this Guarantee, the Guarantor irrevocably:
a. guarantees to the Beneficiaries the payment by each Eligible Institution of the Guaranteed Liabilities; and
b. undertakes in favour of the Beneficiaries that, whenever the Eligible Institution does not pay any Guaranteed Liability on the date on which it becomes due and payable (the “Due Date”), the Guarantor shall, upon a claim by a Beneficiary made in accordance with Clause 3, and following the expiry of any applicable grace period, pay that Guaranteed Liability in accordance with the Scheme Rules.
2.1.2. The Guarantor shall not be liable under Clause 2.1.1 in respect of any Guaranteed Liability which has been varied, amended, waived, released, novated, supplemented, extended or restated in any material respect without the written consent of the Guarantor.
3. Claims
3.1.1. A claim by a Beneficiary for payment under this Guarantee must be in accordance with the Scheme Rules.
4. Benefit of Guarantee
4.1.1. This Guarantee shall inure to the benefit of each Beneficiary and its administrators, successors and permitted assigns. Such administrators, successors and permitted assigns shall be entitled to enforce this Guarantee against the Guarantor.
84 Form of Deed of Guarantee
5. Preservation of Rights
5.1.1. The obligations of the Guarantor under this Guarantee are continuing obligations despite any intermediate payment or settlement of a claim in respect of a specific Guaranteed Liability.
5.1.2. Neither the obligations of the Guarantor nor the rights of the Beneficiaries under this Guarantee shall be discharged, impaired or otherwise affected by the External Administration or dissolution of an Eligible Institution or any analogous proceeding in any jurisdiction.
6. Amendment and termination
6.1.1. Subject to Clause 6.1.2 below, this Guarantee shall terminate at midnight on the date which is sixty- seven calendar months after the Final Application Date but without prejudice to the rights of any Beneficiary in respect of a valid claim lodged prior to that time.
6.1.2. The Guarantor may extend the date of termination of this Guarantee at any time prior to termination in accordance with the Scheme Rules.
6.1.3. The Guarantor may amend the terms of this Guarantee at any time at its discretion by publishing such amendment on the website referred to in the Scheme Rules provided that (except insofar as such amendment is required by law) such amendment does not reduce the Guarantor’s obligations to the Beneficiaries in a manner which is prejudicial to the interests of the Beneficiaries in respect of any subsisting Guaranteed Liability.
7. Notices
7.1.1. Any notice or other communication under this Guarantee shall be given in accordance with the Scheme Rules.
8. Governing law
8.1.1. This Guarantee is governed by, and shall be construed in accordance with, and any matter related to it is to be governed by, the law of New South Wales.
Executed as a Deed.
Signatures
SIGNED for and on behalf of the Commonwealth of Australia by: } The Honourable Wayne Swan MP, ______Treasurer Signature
In the presence of:
______Name of Witness Signature of witness
85 Use of Proceeds
The net proceeds from each issue of Notes will be used for the general funding purposes of the Issuer which include making a profit. If in respect of any particular issue, there is a particular identified use of proceeds, this will be stated in the applicable Final Terms.
86 Suncorp-Metway Limited
GROUP OVERVIEW
Corporate Profile Suncorp-Metway Limited (‘‘Suncorp’’) is a public limited company incorporated in the Commonwealth of Australia and registered in Queensland, Australia. Suncorp-Metway Ltd is one of Australia’s 25 largest listed companies based on market capitalisation and is the parent company of all of Suncorp’s controlled entities (as described in ‘‘Organisational Structure’’ on page 88) (the ‘‘Suncorp Group’’ or ‘‘the Group’’). Suncorp’s main businesses are banking, general insurance and wealth management. Suncorp is focused on leveraging its unique diversified business mix and range of assets to deliver consistent strong returns.
As at 31 December 2008, Suncorp had assets in excess of A$97.3 billion, and a portfolio of 26 brands that span product categories and geographies. Suncorp has extensive and varied distribution channels for reaching customers and encompassing direct and intermediated channels including a number of joint ventures.
As at 1 December 2008, Suncorp had over seven million customers, 15,694 employees and around 225,000 shareholders.
The registered office of Suncorp is located at level 17, Suncorp Centre, 36 Wickham Terrace, Brisbane QLD 4000 and its telephone number is +61 7 3835 5355.
Corporate History On 1 December 1996, the Queensland Government owned Suncorp and Queensland Industry Development Corporation (‘‘QIDC’’) financial entities were merged into the publicly listed company Metway Bank Limited to create the new allfinanz group Suncorp-Metway Limited.
The Suncorp Group’s history goes back more than 100 years when the Queensland Government established the Agricultural Bank in 1902. The Agricultural Bank ultimately became part of the QIDC, which was formed in 1986 primarily as a rural financier. Suncorp started business in 1916 as the State Accident Insurance Office and grew into the State Government Insurance Office before becoming Suncorp. Metway Bank Limited was first established in 1959 as the Metropolitan Permanent Building Society before converting to a bank in 1988.
On 1 July 2001, Suncorp acquired AMP’s Australian general insurance interests, which increased the group’s annual premium income to $2 billion, making it the second largest general insurer in Australia. The number of general insurance customers doubled and the business mix became more diversified, with growth in personal and commercial lines and the addition of workers compensation.
On 20 March 2007 Suncorp merged with the Promina Group. This brought the number of customers to over 7 million and lifted total assets to $84.9 billion across Australia and New Zealand.
The Promina Group’s operations trace back to 1833 in Australia and 1878 in New Zealand. Shares in Promina were delisted as a consequence of the Promina Merger.
Issuer and Subsidiaries The Suncorp Group’s main business lines are conducted by various companies in the Suncorp Group. The main companies and the business lines they carry on are:
(a) Suncorp-Metway Limited, banking business;
(b) Suncorp Metway Insurance Ltd (‘‘SMIL’’), general insurance business (Qld);
(c) GIO, general insurance business (NSW and other states);
(d) Suncorp Life & Superannuation Limited (‘‘SLSL’’) and Suncorp Metway Investment Management Limited (‘‘SMIML’’), life, superannuation and managed investments business.
(e) Promina Group Holdings Pty Ltd, NZ general insurance business;
(f) Tyndall Investment Management Limited, wealth management business;
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(g) Vero Insurance Limited, Australian general insurance business.
ORGANISATIONAL STRUCTURE The Promina Merger provided for all ordinary shares in Promina to be transferred to Suncorp Insurance Holdings Limited (‘‘SIHL’’), a wholly-owned Subsidiary of Suncorp and, accordingly, for Promina and its subsidiaries to become wholly-owned subsidiaries of Suncorp. As a consequence of the Promina Merger, Suncorp became the ultimate holding company of Promina on the Implementation Date.
A simplified diagram of the post-Promina Merger organisational structure of the Suncorp Group is set out below:
Suncorp-Metway Limited
Suncorp Metway Suncorp Life & Suncorp Hooker Investment Superannuation Insurance Corporation Management Limited Holdings Limited Limited Limited
Promgroup Limited
Suncorp Group Ty ndall Investment Vero Insurance Holdings Pty Ltd Asteron Limited Management Limited Limited (New Zealand)
Australian Alliance Suncorp Metway Australian Associated Insurance Limited Insurance Company Motor Insurers Ltd Limited
GIOEntities & Others
Bank Operating Company Non-Operating Holding Company Other
GI Operating Company GI Operating Companies & Others
GROUP OPERATIONS
Suncorp-Metway Ltd and all of its controlled entities As at 31 December 2008, Suncorp was Australia’s fifth largest bank and comprised Australia’s second largest general insurance group, with assets of more than A$97.3 billion and total equity of A$12.3 billion. Suncorp’s profit before tax and Promina acquisition items for the half year ended 31 December 2008 was A$482 million. Net profit after tax and minority interests was A$258 million.
As at 30 June 2008, Suncorp had total assets of A$94.2 billion and total equity of A$12.4 billion. Suncorp’s consolidated profit before tax expense for the year ended 30 June 2008 was A$628 million. Net profit after income tax was A$561 million.
The insurance group has a broadly diversified portfolio, comprised of personal lines insurance (home, motor, compulsory third party), commercial insurance focused on small to medium sized enterprises, and workers’ compensation. Suncorp is a well-established market leader in Queensland and holds substantial market shares nationally.
Suncorp operates across the following main business lines: Banking, General Insurance and Wealth Management. Supporting divisions include Business Technology, Human Resources, Finance and Legal.
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SUNCORP-METWAY LTD AND ALL OF ITS CONTROLLED ENTITIES The Suncorp Group’s primary businesses are general insurance, banking and wealth management. The banking business is carried out by Suncorp while the general insurance and wealth management businesses are carried out by wholly owned subsidiaries.
The three main business divisions of the Suncorp Group are detailed as follows:
General insurance The Suncorp Group’s general insurance business provides personal insurance products such as home and contents, motor and compulsory third party personal insurance, a range of commercial insurance products for small to medium sized businesses and workers compensation insurance. These insurance products are provided to more than 6 million customers across Australia and New Zealand. Premium revenue for the half year ended 31 December 2008 was over A$3.3 billion.
Banking Suncorp is Australia’s fifth largest bank, with A$79.5 billion in assets as at 31 December 2007.
Suncorp’s retail banking provides home and personal loans, transaction savings and investment accounts, margin lending, credit cards and foreign exchange services, to more than 800,000 customers nationally through 63 retail outlets, call centres, internet banking and ATMs.
Suncorp’s business banking focuses on commercial banking, corporate banking, property investment, development finance, equipment finance and agribusiness.
Wealth management Following the Promina merger (see Section 3.1.3), the Suncorp Group now owns a trans-Tasman financial services business, which includes Suncorp Wealth Management and Financial Planning, and brands such as Asteron (Australia and New Zealand), Tyndall (Australia and New Zealand), Standard Pacific, Guardian Financial Planning, Guardian Trust (New Zealand) and Comeron Walshe.
The wealth management business provides superannuation (personal and employer sponsored), managed investments (unit trusts and wrap services), life insurance (death, trauma and disability), and financial planning advice to over 600,000 individual and small business customers.
Total funds under management for the wealth management business was A$23.4 billion as at 31 December 2008.
Financial Services These operations provide a range of life insurance, wealth management, asset management, and custodial products through its specialised businesses in Australia and New Zealand. Promina’s financial services operations include brands such as Asteron, Tyndall and New Zealand Guardian Trust.
Suncorp’s financial results for the half year ended 31 December 2008 Suncorp reported a net profit after tax of A$258 million for the half year ended 31 December 2008, up 29.6 per cent. from the previous half year. Profit before tax and items relating to the Promina merger was up 24.9 per cent. to A$482 million from the prior corresponding period.
General insurance half year profit before tax and Promina merger items was A$253 million with an insurance trading ratio for the half year of 5.3 per cent., reflecting a number of external events occurring during the half.
Wealth management’s half year profit after tax and Promina merger items was A$135 million, up 31.1 per cent. on the prior corresponding half-year period.
Banking half-year profit before tax was down 70.2 per cent. to A$97 million from the prior period, reflecting deteriorating economic conditions, higher impairment charges and substantially increased funding costs.
Suncorp declared an interim fully franked dividend of 20 cents per Ordinary Share.
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TREND INFORMATION There has been no material adverse change in the prospects of Suncorp since the date of its last published reviewed financial statements as at 31 December 2008 (as incorporated by reference into this document).
There are no known trends, uncertainties, demands, commitments or events that are reasonably likely to have a material effect on Suncorp’s prospects for at least the current fiscal year, other than as disclosed in the full- year and half-year results of Suncorp (as incorporated by reference in this document).
PROFIT FORECASTS OR ESTIMATES Suncorp does not intend to make or imply any profit forecast or profit estimates in this Offering Circular. No statement contained in this Offering Circular should be interpreted as such a forecast or estimate.
RECENT DEVELOPMENTS AND REGULATORY CHANGES In recent years we have seen some very significant regulatory changes.
Compliance with the Basel II framework has required Suncorp to develop and improve its systems capability through the use of better data management.
This has resulted in the Bank implementing improved risk management systems which are now driving improved measurements and management of risk through the application of the Basel II capital requirements across the banking operations of Suncorp.
As at January 2008, Suncorp is now reporting for regulatory capital purposes under the Basel II standardised approach.
It is a principle of Basel II that, beyond compliance, there is a strong focus on the implementation and use of operational and strategic outcomes in achieving internationally accepted best banking practices.
SHAREHOLDING
Ordinary Shares At 7 April 2009, the 20 largest holders of fully paid Ordinary Shares held 453,007,615 shares, equal to 36.4 per cent. of the 1,245,708,576 total fully paid shares on issue.
CORPORATE GOVERNANCE STATEMENT The Board of Directors of Suncorp is responsible for the Corporate Governance of the Suncorp Group. This statement outlines the principal Corporate Governance practices and policies that the Board has established, to ensure the interests of shareholders are protected and the confidence of the investment market in the Suncorp is maintained. These practices and policies were in place throughout the 2008 financial year (unless otherwise stated) and are current as at the date of this Offering Circular.
In establishing the Corporate Governance framework, the Board has considered various governance standards, including the “Corporate Governance Principles and Recommendations” published by the ASX Corporate Governance Council (“Council”) in March 2003 and revised in August 2007 (“Recommendations”).
The Recommendations articulated core principles and practices that the Council believes underlie good corporate governance. All listed companies are required to disclose the extent to which they depart from these Recommendations.
BOARD OF DIRECTORS
Role of the Board The Board is accountable to shareholders for the Group’s performance and has overall responsibility for the Group’s operations.
The Group conducts a diverse and complex range of business including banking, general insurance, life insurance and funds management, which means an important feature of the Board’s work is to monitor
90 Suncorp-Metway Limited compliance with the prudential and solvency requirements of the Australian Prudential Regulation Authority (‘‘APRA’’). Therefore, directors of Suncorp-Metway Ltd also undertake roles as directors of Asteron Life Limited ACN 001 698 228, Australian Associated Motor Insurers Limited ACN 004 791 744, Australian Alliance Insurance Company Limited ACN 006 471 709, Promgroup Limited (formerly called Promina Group Limited), Suncorp Metway Insurance Ltd ACN 075 695 966, GIO General Limited ACN 002 861 583, Suncorp Life & Superannuation Limited ACN 073 979 530 and Vero Insurance Ltd which are all subject to APRA regulation.
The Group’s operations also extend to New Zealand and Mr Geoffrey Ricketts, a director of Suncorp-Metway Ltd, was also a director and Chairman of the Group’s major operating entities in New Zealand over the course of the year.
Responsibilities of the Board The Board has adopted a Charter, which sets out the principles for the operation of the Board of Directors and provides a description of the functions and responsibilities of the Board and the functions delegated to management. A copy of that Charter is available on Suncorp’s website under ‘Corporate Governance’. The key functions of the Board are summarised below:
• Approve the strategic direction and related objectives for the Group;
• Approve annual budgets, dividend policy and dividend payments;
• Monitor financial performance and executive management performance in the implementation and achievement of strategic and business objectives;
• Monitor the process whereby business risks are identified and approve systems and controls to manage those risks and monitor compliance;
• Appoint and remove the CEO and ratify the appointment and removal of executives reporting directly to the CEO (senior executives);
• Approve the CEO’s performance targets, monitor performance, set remuneration and manage succession plans for the CEO;
• Determine and approve the level of authority to be granted to the CEO in respect of operating and capital expenditure and credit facilities;
• Authorise the further delegation of those authorities to management by the CEO; and
• Approve major operating and capital expenditure and credit facilities in excess of the limits delegated to management.
Composition of the Board At the date of this Offering Circular, the Board comprises ten non-executive directors, and one executive director (the Managing Director (CEO)).
The composition of the Board is subject to review in a number of ways, as outlined below:
• The Suncorp Constitution provides that at every Annual General Meeting, one third of the directors, excluding the Managing Director (CEO), shall retire from office but may stand for re-election.
Directors offering themselves for re-election are subject to a performance assessment conducted by the Board at the end of the financial year immediately preceding the directors’ retirement date. That assessment is based largely on the outcomes of the annual Board appraisal, which includes assessments of individual director performance.
The Board confirms to members whether it supports the re-election of each retiring director in a statement that accompanies the Notice of Meeting.
• Board composition is reviewed periodically by the Nomination Committee, either when a vacancy arises or if it is considered that the Board would benefit from the services of a new director, given the Board’s
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existing mix of skills and experience and the ongoing need to align those skills with the strategic demands of the Group.
• A Board appraisal is conducted annually which includes an assessment of future requirements in relation to Board composition based on the above criteria and overall Board performance. The appraisal process for the Board is set out in greater detail later in this section.
Once it has been determined by the Board that a new director is to be appointed, a search is undertaken for suitable candidates, usually using the services of external consultants. Nominations are subsequently received and reviewed by the Board. When undertaking such a review, the following principles, which form part of the Board Charter, are applied:
• The Board shall comprise no more than 13 directors and no less than seven;
• A majority of directors must be independent, non-executive directors; and
• The directors shall appoint as Chairman of the Board, one of the non-executive directors whom is deemed by the Board to be independent.
The composition of the Board is also subject to certain legislative requirements as prescribed in Section 64(1)(b) of the State Financial Institutions and Metway Merger Facilitation Act 1996 (Qld) and which are listed below:
A prescribed number of directors, one of whom must be the Managing Director, must ordinarily be resident in Queensland. The prescribed number of directors will be the number that is the greatest of the following:
• five;
• 40% of the total number of directors; and
• if 40% of the total number of directors is not a whole number, the next highest whole number.
Meetings of the Board The Board generally meets monthly to consider matters relevant to the operations and performance of the Group, however, additional meetings are also held as required. The Board also meets with senior management at least twice a year to consider matters of strategic importance to the Group.
Prior to each meeting of directors, the non-executive directors meet in the absence of executive directors and any other management representatives. Senior management are invited to attend meetings where matters relevant to their respective business unit are to be considered.
The number of meetings of directors held over the course of the year and details of directors’ attendance at those meetings are provided in the Directors’ Report.
Director independence and conflicts of interest The Board has adopted a policy in regard to director independence, that is consistent with the ASX Limited ABN 98 008 624 691 (“ASX”) guidelines and includes:
• Criteria for determining the independence of directors; and
• Criteria for determining the materiality of a director’s association or business relationship with Suncorp.
Based on these criteria, which are summarised below and which are consistent with the ASX guidelines, the Board considers all current directors, other than the CEO Acting, Chris Skilton (director since November 2002), to be independent.
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The names of the directors considered to be independent at the date of this Offering Circular are:
Director Term in Office (at the date of this Offering Circular) John Story (Chairman) 14 years 4 months Bill Bartlett 5 years 11 months Ian Blackburne 8 years 10 months Paula Jane Dwyer 2 years 1 month Cherrell Hirst 7 years 4 months Ewoud Jacobus Kulk 2 years 2 months Martin Kriewaldt 12 years 6 months Geoffrey Thomas Ricketts 2 years 2 months Ziggy Switkowski 3 years 9 months Leo Edward Tutt 2 years 2 months
The Board regularly assesses each director against the following criteria to determine whether they are in a position to exercise independent judgment. A director is considered to be independent if the director is a non- executive director and:
• Is not a substantial shareholder of Suncorp or a company that has a substantial shareholding in Suncorp or an officer of or is otherwise assoicated with, either directly or indirectly, a shareholder more than 10 percent of the fully paid ordinary shares on issue in Suncorp;
• Within the last three years has not been employed in an executive capacity by the Suncorp Group or been a director of a Suncorp subsidiary after ceasing to hold any such employment;
• Within the last three years has not been a principal or employee of a professional advisor or a consultant whose annual billings to the Suncorp Group represent greater than 1 percent of Suncorp’s annual (before tax) profit or greater than 5 percent of the professional advisor’s or consultant’s total annual billings;
• Is not a supplier or customer whose annual revenues from the Suncorp Group represent greater than 1 percent of Suncorp’s annual (before tax) profit or greater than 5 percent of the supplier’s or customer’s total annual revenue;
• Has no material contractual relationship with the Suncorp Group other than as a director of Suncorp; and
• Has no other interest or relationship that could interfere with the director’s ability to act in the best interests of Suncorp and independently of management.
As at the date of this Offering Circular, the Board considers all of the current non-executive directors to be independent. In reaching this view, the following matters were taken into consideration:
(a) Director Associations with a Professional Advisor or Consultant Mr Story was, until 30 June 2006, a partner of Corrs Chambers Westgarth Lawyers, which provided legal services to the Suncorp Group throughout the year. Mr Story remained as the non-executive Chairman of the Board of Directors of that firm until his resignation on 21 June 2007.
Mr Kriewaldt provided advice to AON Holdings Australia Limited and Allens Arthur Robinson Lawyers throughout the year. Those firms provided insurance brokerage and legal services respectively to the Group.
Mr Ricketts is a director of Spotless Group Limited, the parent entity of a company that provided catering services to the Group over the course of the year. The contractual arrangements between the Company and Spotless Services Australia Limited were in place prior to the date Mr Ricketts joined the Suncorp Board.
Mr Ricketts also acted as a consultant for Russell McVeagh, Solicitors (NZ), which provided legal services to the Group throughout the year.
The Board does not believe these relationships could affect the respective directors’ independence in relation to any matter other than in the selection of a service provider.
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However, the selection of a service provider, other than for the provision of audit services or for matters of a strategic nature, is the responsibility of management and such decisions are made in the ordinary course of business, without any reference to any directors or the Board.
Accordingly, the Board has determined that, in all the above circumstances, none of the relationships or the services provided were or are deemed material in that they were within the Board-determined policy limits referred to above.
(b) Tenure in Office A director’s tenure may also be a relevant consideration in assessing independence where a director has served on the Board for a period which could reasonably be perceived to, materially interfere with the director’s ability to act in the best interests of the Company. As disclosed previously in this Statement, the longest tenure of a director on the Group parent entity Board is fourteen years and four months, although Mr Kriewaldt was a director of Suncorp Insurance & Finance for some seven years prior to the merger with Metway Bank Limited in December 1996. Also, Mr Kulk was Managing Director of the Australian General Insurance Group (a predecessor of Promgroup Limited) from 1994 to 1998 and was appointed Group Director, Asia Pacific for Promgroup’s former parent, Royal & Sun Alliance Insurance Group Plc in 1998. Mr Kluk retired from that role in September 2003.
The Board does not consider those service periods to have in any way interfered with the respective directors’ ability to act independently and in the best interests of the Company.
Board appraisal A performance appraisal of the Board is conducted annually. An independent consultant is engaged to facilitate the process every second year and the Chairman of the Board conducts the appraisal every other year. However the same methodology and processes (as summarised below) are followed for both internal and external reviews.
The appraisal includes completion of a questionnaire by, and interviews with, each director and senior executive, with the main objectives being to:
• Assess the effectiveness of the Board as a whole in meeting the requirements of its Charter;
• Assess the performance and contributions of individual directors, including the Chairman, in assisting the Board fulfil its role; and
• Identify aspects of Board or director performance that require improvement.
The questionnaire results and a summary of the views expressed during the interviews in relation to each of the above matters, or any other matters that directors believe are relevant, is provided to directors in a report prepared by the consultants or the Chairman and the Board as a whole discusses the report and any recommendations for change or improvement are agreed.
Progress against each of the recommendations is assessed in subsequent Board reviews.
In the years when the questionnaire is completed by the independent consultant, the results are also benchmarked against other companies.
Following the interview process, the Chairman may also meet with individual directors to discuss any issues that may have arisen during the interview stage in relation to that director’s performance.
A review has been conducted in accordance with the above process for the 2007/08 financial year.
Director remuneration The remuneration policies and structures that were in place for employees, management and directors over the reporting period including full details of directors’ and executives’ benefits and interests, is provided in the Directors’ Report section of the 2007/08 Suncorp Annual Report.
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Director and senior management dealings in Suncorp securities The Suncorp Constitution permits directors to acquire securities in Suncorp, however the Board has adopted a share dealing policy that prohibits directors and senior management from dealing in the Suncorp’s securities at any time whilst in possession of price sensitive information and for a 30 day period prior to: • The release of Suncorp’s half-year and annual results to the ASX; • The annual general meeting; • Any major announcements. At other times during the year, the following approvals must also be obtained before a director or officer may deal in Suncorp securities: • Directors (including the executive directors) must advise the Chairman of the Board; • The Chairman must advise the Chairman of the Audit Committee; and • Senior managers must advise the CEO. The share dealing policy also extends to dealing in a financial product which operates to limit the economic risk of a holding in Suncorp securities. Dealing in those types of securities is prohibited unless the security is fully vested and the transaction has been approved by either the Chairman (for directors) or the CEO (senior executives). The granting of approval to deal in Suncorp’s securities is co-ordinated by the company secretary who is also responsible for reporting all transactions by directors and senior managers to the Board. In accordance with the provisions of the Corporations Act and the Listing Rules of the ASX, Suncorp advises the ASX of any transaction conducted by directors in securities in Suncorp. The share dealing policy is made available to employees through Suncorp’s internal compliance and governance intranet sites and an advice on the terms of that policy is issued to all senior managers at least twice a year, usually in the month prior to the release of Suncorp’s annual and half-year financial results. Full details of this policy are also available on Suncorp’s website under ‘Corporate Governance’.
Director education Suncorp has an informal induction process for new directors which includes meetings with the CEO, members of the Group Executive and other senior managers to discuss the nature of the business, current issues and the corporate strategy. These meetings are held soon after their appointment to the Board.
Ongoing education for directors is provided through regular presentations to the Board and Board committees by management on certain key functions or business activities from across the Group. The external auditors and industry experts also address the Board from time to time on matters relevant to Suncorp’s business or its operating environment. Most of the topics presented to the Board are determined in advance and form part of the annual meeting schedule.
Also, to ensure directors remain equally informed on all material matters impacting on the Group’s businesses, copies of the agendas for Board committee meetings are provided to all directors, and non-executive directors may attend meetings of any committee of which they are not a member or they can choose to receive copies of particular papers or reports listed for discussion at those meetings.
Access to information and independent advice Directors have unrestricted access to Company records and receive regular financial and operational reports from senior management for consideration at meetings of directors. Also, each director has entered into a deed with the Company that provides for access to documents, in certain circumstances, following their retirement as a director.
In accordance with the terms of its Charter, the Board collectively and each director individually, may take, at Suncorp’s expense, such independent professional advice as is considered necessary to fulfil their relevant duties and responsibilities. A director seeking such advice must obtain the approval of the Chairman and such approval may not be unreasonably withheld. A copy of advice received by a director is made available to all other members of the Board except where the circumstances make that inappropriate.
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BOARD COMMITTEES In order to provide adequate time for the Board to concentrate on strategy, planning and performance enhancement, the Board has delegated certain specific duties to Board committees. To this end, four Board committees have been established to assist and support the Board in the conduct of its duties and obligations.
The committees form an important part of the Group’s overall governance structure and therefore non- executive directors may attend meetings of any committee of which they are not a member or they can choose to receive copies of particular papers or reports listed for discussion at those meetings.
Each of the committees has its own charter, which is approved by the Board and which defines the relevant committee’s roles and responsibilities. Copies of the charters are available on Suncorp’s website under ‘Corporate Governance’.
The number of meetings held by each committee over the year and details of directors’ attendance at those meetings are provided in the section 3 of the Directors’ Report.
Audit Committee The members of the Audit Committee are:
• Mr Bartlett (Chairman) • Ms Dwyer • Mr Kriewaldt • Mr Tutt
Mr Story is an ex-officio member of the Audit Committee.
At the date of this Offering Circular, the qualifications of the members of the Committee satisfy the requirements of the ASX guidelines. Details of those qualifications are provided in the Directors’ Report.
At all times throughout the reporting period, the members of the Audit Committee were all non-executive directors.
However, the Managing Director/CEO, CFO, and the internal and external auditor are invited to Audit Committee meetings at the discretion of the Audit Committee.
The Audit Committee also holds discussions with the auditors in the absence of management on a regular basis.
The primary role of this Committee is to assist the Board in fulfilling its statutory and fiduciary responsibilities with respect to oversight of the Suncorp Group’s financial and operational control environment.
Specific issues addressed by the Committee throughout the year, in accordance with its Charter included:
• Reviewing prudential supervision reports and monitoring management responses;
• Reviewing statutory reports and returns for lodgement with APRA;
• Reviewing half-year and annual financial statements and reports prior to consideration by the Board;
• Reviewing and assessing reports from management, the Approved Actuary, the Appointed Actuary, the Reviewing Actuary and the external auditors in relation to matters impacting on the half-year and annual financial statements;
• Audit planning – reviewing and approving audit plans as submitted by both internal and external auditors and agreeing areas of audit emphasis and audit approach;
• Reviewing the provision of non-audit services by the external auditor to assess whether there is any potential impact on the auditor’s independence, and
• Reviewing internal and external audit reports and where weaknesses in controls or procedures have been identified, assessing whether remedial action taken by management is adequate and appropriate.
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Risk Committee The members of the Risk Committee are:
• Dr Blackburne (Chairman) • Dr Hirst • Mr Kulk • Dr Switkowski
Mr Story is an ex-officio member of the Risk Committee.
The role of the Risk Committee is to provide the Board an oversight across the Group for all categories of risk through the identification, assessment and management of risk and monitoring adherence to internal risk management policies and procedures.
Specific issues addressed by the Committee throughout the year, in accordance with its Charter included:
• Enterprise Risks – monitoring implementation and effectiveness of the group wide risk management framework;
• Balance Sheet, Liquidity and Market Risk – reviewing and monitoring prudential reports, performance reports and compliance with policy limits. Assessing and approving investment strategies and mandates;
• Credit Risk – reviewing and assessing loan portfolio reports, asset quality reports, credit and counterparty limits, bad debt provisioning and reinsurance counterparty provisioning. Assessing credit approvals and monitoring and approval of delegated credit authorities;
• Insurance Risk – reviewing and monitoring pricing and underwriting delegations and limits, performance reports and reinsurance debtor reports;
• Operational Risk – reviewing and assessing operational risk reports and assessing business continuity plans;
• Compliance Risk – reviewing due diligence reports and monitoring compliance with regulatory requirements including Financial Services Reforms; and
• monitoring the development and implementation of the Basel II programme of work.
Remuneration Committee The members of the Remuneration Committee are:
• Dr Switkowski (Chairman)
• Dr Hirst • Mr Tutt
Mr Story is an ex-officio member of the Remuneration Committee.
The Remuneration Committee is responsible for making recommendations to the Board on:
• The remuneration of directors and the remuneration and performance targets of the CEO;
• Appointments to and terminations from Senior Executive positions reporting to the CEO;
• Remuneration and human resource policy matters; and
• Management succession planning.
Nomination Committee The Nomination Committee comprises all the non-executive directors.
Mr Story is the Chairman of the Committee.
The Nomination Committee is responsible for:
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• reviewing Board composition • recommending the appointment of directors • approving appointments to Board committees • planning Board succession, and • approving the Board performance evaluation process.
RISK MANAGEMENT AND INTERNAL CONTROLS Suncorp is required to manage a diverse and complex range of significant risks and an enterprise-based risk management framework has been implemented throughout the Group to ensure material business risks are identified and appropriately managed. Key components of the following internal control framework:
• Financial Reporting – The Board receives reports on a monthly basis from management on the financial performance of each business unit within the Suncorp Group. The reports include details of all key financial and business results reported against budget, with regular updates on yearly forecasts. The CEO and CFO attest to the integrity of the financial reports provided to the Board each month and also provide specific certifications to the Board in connection with the Suncorp Group’s half-year and annual statutory statements.
• Compliance – Policies and procedures are also in place to ensure the affairs of the Group are being conducted in accordance with relevant legislation, regulations and codes of practice. These procedures also ensure that executive management and the Board are made aware, in a timely manner, of any material matters affecting the Group’s operations that may need to be disclosed in accordance with Suncorp’s disclosure policy.
In order to identify any areas of non-compliance with legislative and regulatory requirements as well as internal policies and procedures, all senior management personnel are required to complete a ‘due diligence’ report on a monthly basis, using an automated reporting system.
All matters in the due diligence report are retained on each subsequent monthly report until the matter is finalised to the satisfaction of the appropriate level of management or in some circumstances a Board Committee or the Board itself. A due diligence report for the Group is signed by the CEO each month and a copy of that report is provided to the Risk Committee.
Procedures are also in place to ensure all material correspondence between group entities and their primary regulators, including APRA and ASIC, is referred to the Board or relevant Board Committee in a timely manner.
Code of Conduct A code of conduct has been adopted by the Group and is available on the Company’s website under ‘Corporate Governance’.
The Suncorp Code of Conduct outlines the standards of behaviour that are expected of all directors, executives, management and employees and describes the values that underpin the way the Company conducts its business. In addition to the Suncorp Code of Conduct, the Group’s main business activities are also subject to a number of industry codes such as the Code of Banking Practice and the General Insurance Code of Practice.
There are also a number of internal policies in place as part of a compliance framework to monitor and encourage adherence with the Suncorp Code of Conduct and industry codes. The key related policies are:
• Conflict of Interest Policy;
• Whistleblower Policy;
• Share Dealing Policy; and
• Personal Dealing Policy.
The Company monitors compliance with the Code and its various other policies using an internal due diligence system, as described earlier in this Statement under ‘Internal Control Framework’.
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Continuous disclosure and shareholder communication Continuous disclosure – the Company has policies and procedures in place to ensure all shareholders and investors have equal access to the Company’s information, and that all price-sensitive information in relation to the Company’s listed securities is disclosed to the ASX in accordance with the continuous disclosure requirements of the Corporations Act and the Listing Rules of the ASX.
The EGM Communications and Investor Relations has primary responsibility for all communications with the ASX and all Company announcements are available via the Company’s website following release to the ASX.
A copy of the Company’s disclosure policy is available on the Company’s website under ‘Corporate Governance’.
Shareholder communication – Suncorp is committed to keeping its shareholders and the investment market fully informed on all matters that are relevant or material to its financial performance, and avoiding the disclosure of material information to anyone on a selective basis.
Information is disseminated primarily through timely announcements to the ASX. Information released to the ASX is also published on the Company’s website immediately, enabling access to the broader investment community.
Direct communication with members regarding the Group’s performance also occurs on a regular basis through the distribution of annual reports (on request) in September each year and also through letters from the Chairman and CEO following the release of the full year and half-year results in August and February respectively and following the AGM.
Members can elect to receive all such communications through the post or in electronic format.
The AGM, which is usually held in October each year and is webcast live, provides shareholders with an opportunity to address the Board and management directly on matters regarding the Group’s performance.
Full details of the Suncorp Disclosure Policy and Shareholder Communications Strategy, which govern how the Company communicates with its members, are available on the Company’s website.
DIRECTORS’ PROFILES John D Story Age 63 Non-executive Chairman Mr. Story was appointed to the board of directors in January 1995, has acted as Deputy Chairman since June 2002 and Chairman since March 2003. Mr. Story was a partner of the national law firm Corrs Chambers Westgarth for 36 years, retiring on 30 June 2006. Mr. Story is Chairman of Tabcorp Holdings Limited and the Australian Institute of Company Directors and a director of CSR Limited. Mr. Story has recently been appointed Chancellor of the University of Queensland and is a Commissioner of the Service Delivery and Performance Commission (Queensland).
William J Bartlett Age 59 Non-executive Mr. Bartlett was appointed to the board of directors on 1 July 2003. Mr. Bartlett is currently a professional director and also sits on the board of Reinsurance Group of America Inc., GWA International Limited and Abacus Property Group. He has 35 years’ experience in accounting and was a partner of Ernst & Young in Australia for 23 years, retiring on 30 June 2003. He also has extensive experience in the actuarial, insurance and financial services sectors through membership of many industry and regulatory advisory bodies, including the Life Insurance Actuarial Standards Board (1994 – 2007).
Dr Ian D Blackburne Age 63 Non-executive Dr. Blackburne was appointed to the board of directors in August 2000. Dr. Blackburne is Chairman of CSR Limited and a director of Teekay Corporation. Dr. Blackburne was formerly Chairman of the Australian
99 Suncorp-Metway Limited
Nuclear Science and Technology Organization (July 2001 – June 2006) and was formerly Managing Director of Caltex Australia Limited, having spent 25 years in the petroleum industry.
Dr Cherrell Hirst AO Age 62 Non-executive Dr. Hirst was appointed to the board of directors in February 2002. Dr. Hirst is a medical doctor and was a leading practitioner in the area of breast cancer diagnosis. She is Deputy Chairman of Queensland BioCapital Funds Pty Ltd, a director of Peplin Inc., Avant Insurance Ltd and Avant Mutual, ImpediMed Ltd, Xenome Ltd and Opera Queensland Limited. Dr Hirst was a director of Metway Bank Limited from July 1995 to December 1996 and was Chancellor of Queensland University of Technology from 1994 to 2004.
Martin D Kriewaldt Age 59 Non-Executive Mr. Kriewaldt was appointed to the board of directors on 1 December 1996. Mr. Kriewaldt was also a director of the Group from 1990 and Chairman at the time of the merger that formed the Suncorp-Metway Ltd Group in 1996. He is Chairman of Opera Queensland Limited, and a director of Campbell Brothers Limited, BrisConnections Management Company Limited, Oil Search Limited and ImpediMed Ltd. Mr. Kriewaldt also provides advice to Allens Arthur Robinson Lawyers and Aon Holdings Australia Limited.
Zygmunt E Switkowski Age 60 Non-executive Mr. Switkowski was appointed to the board of directors in September 2005. Mr. Switkowski is Chairman of the Australian Nuclear Science and Technology Organization and Opera Australia and a director of Tabcorp Holdings Limited and Healthscope Limited. He was previously the CEO of Telstra Corporation Limited, Optus Communications Ltd. and Kodak Australasia Pty Ltd.
Chris Skilton Executive Director Chief Executive Officer (acting) Age 54 Mr. Skilton became our acting Chief Executive Officer effective 2 March 2009. Mr. Skilton, who has been our Chief Financial Officer and an executive director for the past eight years, has agreed with the board of directors that he will leave Suncorp after the new Chief Executive Officer has had the opportunity to appoint a replacement Chief Financial Officer.
Mr. Skilton joined Suncorp in July 2001 as Chief Financial Officer and was appointed to the board of directors on 13 November 2002. Prior to joining us as CFO, he was Group Executive, New Zealand and the Pacific Islands at Westpac Banking Corp. (“Westpac”), before which he was Westpac’s Deputy Chief Financial Officer. Prior to his time at Westpac, Mr. Skilton was Managing Director and CEO of AIDC Ltd. While still employed with AIDC, Mr. Skilton also acted as CEO of the Australian Submarine Corporation, one of Australia’s largest and most complex engineering projects. His professional experience also includes executive positions with Security Pacific Australia and the Barclay Group of Companies.
Leo Edward Tutt Age 71 Non-executive Mr. Tutt was appointed to the board of directors on 20 March 2007. Mr. Tutt was Chairman of Promina at the date of merger with Suncorp and was a non-executive director of Promina group companies in Australia since February 1994. Mr.Tutt has over 32 years’ experience in the insurance sector as a non-executive director or Chairman of Phoenix Assurance Company Australia Limited (1974 – 1982), Friends Provident Life Assurance Company Limited (1984 – 1994) and a non-executive director of Friends Life Office (UK) (1987–1993). He was a director of Metway Bank Limited (1992 -– 1996) and Chairman of MIM Holdings Limited until 2003. He is also Chairman of Crane Group Limited.
100 Suncorp-Metway Limited
Geoffrey Thomas Ricketts Age 63 Non-executive Mr. Ricketts was appointed to the board of directors on 20 March 2007. Mr. Ricketts was a director of Promina at the date of the merger with Suncorp. He is Chairman of Lion Nathan Limited and a non-executive director of Spotless Group Limited, Taylors Group Limited (NZ), Todd Corporation Limited and Southern Cross Building Society (NZ). Mr. Ricketts is also a director of the Centre of Independent Studies Limited. He is a lawyer and a consultant for Russell McVeagh, Solicitors (NZ), and was a partner in that firm from 1973 until 2000. He was formerly Chairman of Royal & Sun Alliance’s New Zealand (R&SA NZ) operations, having been a non-executive director of R&SA NZ for over 10 years.
Ewoud Jacobus Kulk Age 63 Non-exective Mr. Kulk was appointed to the board of directors on 20 March 2007. Mr. Kulk was a director of Promina at the date of the merger with Suncorp. Mr. Kulk was Managing Director of the Australian General Insurance Group (1994 – 1998) and was appointed Group Director Asia Pacific for Royal and Sun Alliance Insurance Group Pty Ltd in March 1998. He continued in that role until his retirement in September 2003. Mr. Kulk is also a past president of the Insurance Council of Australia and has over 25 years’ experience in the insurance industry.
Paula Jane Dwyer Age 47 Non-executive Ms. Dwyer was appointed to the board of directors on 26 April 2007. Ms. Dwyer was a director and Chairman of the Audit, Risk and Compliance Committee of Promina at the date of the merger with Suncorp. Ms. Dwyer is also a director of Tabcorp Holdings Limited, where she is Chairman of the Audit Committee, and Babcock & Brown Japan Property Management Limited, where she is Chairman of the Audit, Risk and Compliance Committee. She is a member of the ASIC Business Consultative Panel (Melbourne Chapter), Vice President of the Baker Heart Research Institute and was appointed a member of the federal Government’s Takeover Panel in May 2008. She is a chartered accountant by profession and during her 20 year executive career held senior positions in the securities, investment management and investment banking sectors. She was formerly a director of David Jones Limited.
The business address of each of the Directors is that of the principal office of Suncorp (as set out below).
No director has any actual or potential conflict of interest between his or her duties to Suncorp and his or her private interests or other duties.
Suncorp’s principal office is the same as its registered office, and is located at level 17, Suncorp Centre, 36 Wickham Terrace, Brisbane QLD 4000. Its telephone number is +61 7 3835 5355.
101 Regulation and Supervision of Banking, General and Life Insurance and Superannuation Businesses in Australia
OVERVIEW The Issuer is the parent company of a diversified financial services group that operates in three business segments:
• banking;
• general insurance; and
• wealth management including life insurance and superannuation.
This section provides a description of the regulatory and supervisory environment in which the Suncorp Group operates.
The Australian Prudential Regulation Authority (‘‘APRA’’) is responsible for the prudential supervision of authorised deposit taking institutions (‘‘ADIs’’), life and general insurance companies and superannuation funds. APRA has powers to act decisively in the interests of depositors, policy holders or fund members if a supervised institution is in difficulty.
The Australian Securities and Investments Commission (‘‘ASIC’’) is responsible for the administration and enforcement of the Australian laws in relation to Australian companies and financial services providers. ASIC is also responsible for consumer protection, monitoring and promoting market integrity and licensing in relation to the Australian financial system, the provision of financial services and the payment system.
The financial services regulatory regime applies to financial services providers, including the Suncorp Group. The purpose of the regime is to provide:
• a single licensing framework for financial service providers;
• uniform disclosure obligations for all financial products provided to retail clients;
• at least a minimum standard of conduct for financial service providers dealing with retail clients; and
• uniform authorisation procedures for financial exchanges and clearing and settlement facilities.
This regime has a broad impact on the Suncorp Group’s operations, including banking, insurance, managed investments and superannuation, and is administered by ASIC.
The Suncorp Group has in place the necessary policies, systems and procedures to ensure compliance with the regulatory and supervisory requirements, and companies in the Suncorp Group hold the necessary licences to operate the businesses described below.
BANKING BUSINESS General banking operations are carried on in Australia by banks authorised under the Banking Act 1959 of Australia (the ‘‘Banking Act’’). It is not permissible to carry on any banking business without either an authority or exemption under the Banking Act.
The banking industry is subject to supervision and regulation by APRA and ASIC. In addition, the Reserve Bank of Australia (the ‘‘RBA’’) has a role relating to the objectives of monetary policy, overall financial system stability and regulation of the payments system. It has no obligation to protect the interests of bank depositors and will not supervise any individual financial institution. The RBA does have the discretion to provide emergency liquidity support to the financial system.
APRA has issued a number of harmonised prudential standards, which apply to all ADIs (as well as licensed General Insurers and Life Insurance Companies). The prudential standards and associated guidance notes establish the minimum prudential standards that ADIs are required to observe. They cover:
• Capital Adequacy;
102 Regulation and Supervision of Banking, General and Life Insurance and Superannuation Businesses in Australia
• Funds Management and Securitisation; • Liquidity; • Credit Quality; • Large Exposures; • Associations with Related Entities; • Audit and Related Arrangements for Prudential Reporting; • Outsourcing; • Business Continuity Management; • Governance; • Risk Management of Credit Card Activities; • Fit and Proper Requirements; and • Prudential Requirements for Providers of Purchased Payment Facilities.
GENERAL INSURANCE General insurance includes: all risks or special risks insurance covering loss or damage to property; aviation and marine insurance; fire insurance; household contents insurance; motor vehicle insurance; public and other liability insurance; and personal accident, sickness and disability insurance if it does not qualify as life insurance.
General insurers carrying on insurance business in Australia must be either authorised by APRA under the Insurance Act 1973, be a Lloyds underwriter carrying on a general insurance business in Australia in accordance with the Insurance Act 1973 or a body corporate otherwise exempt by APRA (subject to review by APRA). Some forms of general insurance, such as workers compensation and health insurance, are separately regulated under specific legislation.
The general insurance industry is prudentially supervised and regulated by APRA. General insurers authorised by APRA must meet prescribed capital adequacy and solvency standards, lodge audited accounts and returns with APRA, and have their reinsurance arrangements approved by APRA. ASIC is responsible for consumer protection regulation in relation to general insurance companies.
WEALTH MANAGEMENT
Life Insurance Life insurance is, broadly, insurance payable on an event that is in some way related to the life of a human being. It includes: term life insurance; trauma insurance; disability insurance (lump sum and income replacement); and some investment products where the benefit is payable on death or on death before a specified date.
Life insurers must be registered by APRA under the Life Insurance Act 1995. Similarly to the general insurance industry, the life insurance industry in Australia is prudentially supervised and regulated by APRA. Life insurers must meet prescribed capital adequacy and solvency standards; maintain, and keep separate from other funds, a statutory fund into which the insurer deposits all amounts received for its life insurance business; and have their financial condition investigated by an actuary at least once every 12 months. APRA also requires life insurers to lodge audited financial reports and returns with APRA. ASIC is responsible for consumer protection regulation in relation to life insurance companies.
Superannuation The term ‘‘superannuation entity’’ encompasses a number of investment products aimed at providing benefits for investors on their retirement, either by way of a lump sum or pension benefit. Superannuation entities are subject to concessional rates of income tax in return for complying with prescribed standards which are additional to the standards imposed on other forms of investment.
Most superannuation entities are regulated under the Superannuation Industry (Supervision) Act 1993 and are required to hold a registrable superannuation entity (‘‘RSE’’) licence issued by APRA. If a superannuation product is offered to the public, the trustee must hold an RSE public offer entity licence issued by APRA. RSE licensees must either comply with prescribed capital adequacy requirements or arrange for all of the assets of the superannuation entity to be held by a custodian which does comply with those requirements, ensure that the superannuation funds comply with prescribed funding and solvency standards and comply with a range of standards in relation to acceptance of contributions, retention and payment of benefits, requirements for
103 Regulation and Supervision of Banking, General and Life Insurance and Superannuation Businesses in Australia appointment of service providers and requirements for formulation and implementation of investment strategies.
The superannuation industry in Australia is prudentially supervised and regulated by APRA and the Commissioner of Taxation. ASIC is responsible for consumer protection, disclosure and enforcement issues in relation to superannuation. APRA, The Commissioner of Taxation and ASIC have various powers to monitor and intervene in the affairs of a superannuation trustee.
104 Australian Taxation
The following is a summary of the Australian taxation treatment at the date of this Offering Circular of payments of interest (as defined in the Income Tax Assessment Act 1936 of Australia (‘‘Australian Tax Act’’) on the Notes and certain other matters. It is not exhaustive and, in particular, does not deal with the position of certain classes of Noteholders (such as dealers in securities). Prospective Noteholders should be aware that the particular terms of issue of any Series of Notes may affect the tax treatment of that and other Series of Notes. The following is a general guide and should be treated with appropriate caution. Noteholders who are in any doubt as to their tax positions should consult their professional advisers.
Interest withholding tax and other matters The requirements for obtaining an exemption from Australian interest withholding tax are set out in Section 128F of the Australian Tax Act. So far as it applies to the Programme, the Australian Tax Act contains the following key features:
(a) in order to qualify for the exemption from Australian interest withholding tax, the Issuer must be either:
(i) a resident of Australia when it issues the Notes and when interest (as defined in Section 128A(1AB) of the Australian Tax Act) is paid; or
(ii) a non-resident of Australia that is carrying on business at or through a permanent establishment in Australia when it issues the Notes and when interest (as defined in Section 128A(1AB) of the Australian Tax Act) is paid;
(b) the Issuer is required to self assess the availability of the exemption from interest withholding tax;
(c) there are five public offer tests (of which one must be satisfied), the purpose of which is to ensure that lenders in overseas capital markets are aware that the Issuer is offering Notes for issue. In summary, the five public offer tests are:
(i) offers to 10 or more unrelated financiers or securities dealers;
(ii) offers to 100 or more investors;
(iii) offers of listed Notes;
(iv) offers via publicly available information sources; and
(v) offers to the Dealers who on-sell the Notes within 30 days by one of the preceding methods.
In addition, the issue of a global bond in a way which satisfies one of the five public offer tests will also satisfy the public offer test;
(d) no public offer test will be satisfied if, at the time of the issue, the Issuer knew or had reasonable grounds to suspect that the Notes would be, or would later be, acquired either directly or indirectly by an associate of the Issuer and:
(i) either:
A. the associate is a non-resident and the Notes were not, or would not be, acquired by the associate in carrying on a business in Australia at or through a permanent establishment of the associate in Australia; or
B. the associate is a resident of Australia and the Notes were, or would be, acquired by the associate in carrying on a business in a country outside Australia at or through a permanent establishment of the associate in that country; and
(ii) the Notes were not, or would not be, acquired by an associate in the capacity of a dealer, manager, underwriter, clearing house, custodian, funds manager or responsible entity of a registered scheme; and
105 Australian Taxation
(e) the Section 128F exemption will also not be available if the Issuer knew, or had reasonable grounds to suspect, at the time of payment of interest, that the interest would be paid to an associate and:
(i) either:
A. the associate is a non-resident and the payment is not received by the associate in respect of Notes that the associate acquired in carrying on a business in Australia at or through a permanent establishment of the associate in Australia; or
B. the associate is a resident of Australia and the payment is received by the associate in respect of Notes that the associate acquired in carrying on a business in a country outside Australia at or through a permanent establishment of the associate in that country; and
(ii) the associate does not receive the payment in the capacity of a clearing house, paying agent, custodian, funds manager or responsible entity of a registered scheme.
The Issuer intends (where appropriate) to issue Notes in a manner which will satisfy one of the five public offer tests or the requirements for a global bond and which otherwise meets the requirements of Section 128F of the Australian Tax Act.
Section 126 of the Australian Tax Act imposes a form of withholding tax at the rate of 45 per cent. on the payment of or crediting of interest on certain bearer debt securities (other than certain promissory notes) if the Issuer fails to disclose the names and addresses of the holders to the Australian Taxation Office. Section 126 does not apply to the extent that the debenture is held by a non-resident who is not engaged in carrying on a business in Australia at or through a permanent establishment in Australia where the issue of the Notes satisfied the requirements of Section 128F of the Australian Tax Act or interest withholding tax is payable. In relation to Notes held by other persons, the Australian Taxation Office has confirmed that for the purposes of Section 126, the holder of the Notes means the person in possession of the Notes. Therefore, where interests in Notes are held through the Euroclear or Clearstream systems, the operators of the systems are the holders of the Notes for the purposes of Section 126.
As set out in more detail under the heading ‘‘Terms and Conditions of the Notes – Taxation’’, if the Issuer should at any time be compelled by law to deduct or withhold an amount in respect of any withholding taxes, the Issuer shall, subject to certain exceptions set out under the heading ‘‘Terms and Conditions of the Notes – Taxation’’, pay such additional amounts of principal and interest as may be necessary in order to ensure that the net amounts received by the Noteholders after such deduction or withholding shall equal the respective amounts which would have been receivable had no such deduction or withholding been required.
The Issuer has been advised that, if the Notes qualify as ‘‘debt instruments’’ for Australian tax purposes, under Australian laws as presently in effect:
(i) assuming the requirements of Section 128F of the Australian Tax Act are satisfied with respect to the Notes of each Series, payment of interest (or amounts in the nature of interest) to a Noteholder who is a non-resident of Australia and who, during the taxable year, has not held any Note in the course of carrying on trade or business through a permanent establishment within Australia will not be subject to Australian income taxes. However, the Issuer may be required by Section 126 of the Australian Tax Act to deduct or withhold income tax at the rate of 45 per cent., on interest paid or credited during a taxable year on Notes which, during that taxable year, are acquired by an Australian resident or by a non-resident that carries on business (whether within or outside Australia) at or through a permanent establishment in Australia;
(ii) a Noteholder who is a non-resident of Australia and who during the taxable year has not engaged in trade or business at or through a permanent establishment within Australia will not be subject to Australian income tax on gains realised during that year on sale or redemption of Notes, provided such gains do not have an Australian source. A gain arising on the sale of a Note by a non-Australian resident holder to another non-Australian resident where the Note is sold outside Australia and all negotiations and documentation are conducted and executed outside Australia would not be regarded as having an Australian source;
(iii) no Notes will be subject to death, estate or succession duties imposed by Australia, or by any political subdivision or authority therein having power to tax, if held at the time of death;
106 Australian Taxation
(iv) no ad valorem, stamp duty, issue, registration or similar taxes are payable in Australia on the issue of any Notes or the transfer of any Notes (except where the transfer is not for full value and the Notes are physically in, or registered in, South Australia);
(v) Section 12-140 of the Taxation Administration Act 1953 of Australia (‘‘TAA’’) imposes a type of withholding tax at the rate of (currently) 46.5 per cent. on the payment of interest on Notes in registered form unless the relevant Noteholder has quoted a tax file number (‘‘TFN’’), in certain circumstances an Australian Business Number (‘‘ABN’’) or proof of some other exception (as appropriate). Assuming that the requirements of Section 128F of the Australian Tax Act are satisfied with respect to Notes in registered form, these rules should not apply to payments to a Noteholder who is not a resident of Australia for tax purposes and not holding such Notes in the course of carrying on business at or through a permanent establishment in Australia. Withholdings may be made from payments to holders of Notes in registered form who are residents of Australia or non-residents who carry on business at or through a permanent establishment in Australia but who do not quote a TFN, ABN or an appropriate exemption. For the avoidance of doubt, these provisions will not apply to Notes in bearer form;
(vi) Section 12-190 of the TAA imposes another type of withholding obligation such that if the Issuer makes payment to a Noteholder for a supply the Noteholder has made to the Issuer in the course of furtherance of an enterprise carried on in Australia by the Noteholder, the Issuer must withhold amounts from that payment at the prescribed rate (currently 46.5 per cent.) unless the Noteholder has quoted its ABN or another exception applies. There is some uncertainty as to the precise operation of these rules. However, these rules will not apply where a TFN, ABN or proof that a relevant exemption is applicable has been provided in accordance with sub-paragraph (v) above, or a deduction is made by the Issuer for a failure to provide such information. On the basis that all Noteholders will fall within Section 12-140 (discussed above), the withholding requirements in Section 12-190 of the TAA should have no residual operation;
(vii) for Noteholders that are resident in the United States or the United Kingdom and certain other jurisdictions, the double tax conventions with Australia contain provisions which prevent interest withholding tax applying to interest derived by:
A. certain government bodies, authorities and agencies; and
B. certain financial institutions.
These provisions have not been considered in detail because it is envisaged that, if they are treated as debt instruments, the issue of the Notes will satisfy the exemption from interest withholding tax in Section 128F;
(viii) there are certain provisions in the Income Tax Assessment Act 1997 of Australia which deal with the taxation consequences of foreign exchange transactions. These new rules are very complicated and, generally speaking, will require Australian taxpayers, or non-residents that hold assets or incur liabilities in the course of carrying on business in Australia, to perform complex calculations to determine the foreign exchange gains and losses that they are taxed upon in respect of assets and liabilities in non- Australian currency. The object of the rules is to bring the gains and losses to account when realised regardless of whether there is an actual conversion of foreign currency amounts into Australian dollars. There are several exclusions from the rules. In particular, authorised deposit taking institutions (‘‘ADIs’’) under the Banking Act 1959 of Australia and non-ADI financial institutions are excluded from the foreign exchange gains and losses rules. The Issuer is an ADI for the purposes of the rules. Accordingly, for so long as the Issuer has that status the foreign exchange gains or losses rules will not apply to it. However, the rules may apply to any holders of the Notes that are not ADIs or non-ADI financial institutions and which are Australian residents or non-residents that hold those Notes in the course of carrying on business in Australia. Any holders that may be affected by the rules should consult their professional advisers for advice as to how to account for any foreign exchange gains or losses arising from the holding of the Notes; and
(ix) neither the issue of the Notes nor the payment of principal and interest by the Issuer will give rise to a liability for goods and services tax in Australia.
107 Australian Taxation
Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 The Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 (“TOFA Act”) received royal assent on 26 March 2009. The TOFA Act contains a comprehensive set of principles and rules for the taxation of financial arrangements (“TOFA regime”). The Notes will be within the definition of financial arrangement. The TOFA regime will apply to financial arrangements a taxpayer first starts to hold in an income year commencing on or after 1 July 2010, except that:
• a taxpayer can choose to apply the TOFA regime to financial arrangements first held in income years commencing on or after 1 July 2009; and
• a taxpayer can choose to apply the TOFA regime to all financial arrangements in existence at the time the TOFA regime commences to apply to it.
Certain taxpayers are (except where significant deferral of tax is involved) excluded from the TOFA regime, unless they elect otherwise. The excluded taxpayers include individuals and entities whose annual turnover and/or value of assets is below certain monetary thresholds.
Broadly, the TOFA Act:
• sets out the methods under which gains and losses from financial arrangements will be brought to account for tax purposes;
• establishes criteria that determine how different financial arrangements are characterised, and treated under, the different methods; and
• treats gains and losses on revenue account, except where specific rules apply.
If interest withholding tax or the exemption in Section 128F of the Australian Tax Act applies to a payment of interest, the TOFA regime will not apply to assess that interest. However, other gains and losses made in respect of financial arrangements may be dealt with under the TOFA regime.
Broadly, the TOFA regime will generally not apply to a Noteholder who is a non-resident of Australia who has not:
• engaged in trade or business at or through a permanent establishment within Australia; or
• derived Australian sourced gains or losses.
Payments under the Deed of Guarantee The Australian Taxation Office has published a Taxation Determination stating that payments by a guarantor in respect of debentures (such as the Guaranteed Notes) are entitled to the benefit of the exemption contained in Section 128F of the Australian Tax Act if payments of interest in respect of those debentures by the Issuer are exempt from interest withholding tax. However, there may be some doubt as to whether the Taxation Determination applies in the context of the Deed of Guarantee (as it is not specifically the subject of the Tax Determination) and whether the reasoning adopted in the Taxation Determination is correct.
In particular, it is unclear whether any payment under the Deed of Guarantee in respect of the Guaranteed Notes would constitute a payment of interest as so defined, but the better view is that such payments (other than interest paid on an overdue amount) do not constitute interest as so defined and, therefore, should not, in any event, be subject to the interest withholding tax provisions of the Australian Tax Act. However, it is possible that a payment under the Deed of Guarantee in respect of the Guaranteed Notes may be subject to interest withholding tax.
If any payment by the Guarantor under the Deed of Guarantee were nonetheless subject to Australian interest withholding tax and the Guarantor were at any time compelled or authorized by law to deduct or withhold an amount in respect of any Australian withholding taxes imposed or levied by the Commonwealth of Australia or other Australian jurisdictions in respect of payments under the Deed of Guarantee, none of the Guarantor, the Issuer, any Paying Agent or any other person is required to pay any additional amounts in respect of such deduction or withholding.
108 Book-Entry Clearance Systems
The information set out below is subject to any change in or reinterpretation of the rules, regulations and procedures of DTC, Euroclear or Clearstream, Luxembourg (together, the ‘‘Clearing Systems’’) currently in effect. The information in this section concerning the Clearing Systems has been obtained from sources that the Issuer believes to be reliable, but none of the Issuer nor any Dealer takes any responsibility for the accuracy thereof. Investors wishing to use the facilities of any of the Clearing Systems are advised to confirm the continued applicability of the rules, regulations and procedures of the relevant Clearing System. None of the Issuer nor any other party to the Agency Agreement will have any responsibility or liability for any aspect of the records relating to, or payments made on account of, beneficial ownership interests in the Notes held through the facilities of any Clearing System or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests.
BOOK-ENTRY SYSTEMS
DTC DTC has advised the Issuer that it is a limited purpose trust company organised under the New York Banking Law, a ‘‘banking organisation’’ within the meaning of the New York Banking Law, a ‘‘clearing corporation’’ within the meaning of the New York Uniform Commercial Code and a ‘‘clearing agency’’ registered pursuant to Section 17A of the Exchange Act. DTC holds securities that its participants (‘‘Participants’’) deposit with DTC. DTC also facilitates the settlement among Participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerised book-entry changes in Participants’ accounts, thereby eliminating the need for physical movement of securities certificates. Direct Participants include securities brokers and dealers, banks, trust companies, clearing corporations and certain other organisations. DTC is owned by a number of its Direct Participants and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc. and the National Association of Securities Dealers, Inc. Access to the DTC System is also available to others such as securities brokers and dealers, banks and trust companies that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (‘‘Indirect Participants’’).
Under the rules, regulations and procedures creating and affecting DTC and its operations (the ‘‘Rules’’), DTC makes book-entry transfers of Registered Notes among Direct Participants on whose behalf it acts with respect to Notes accepted into DTC’s book-entry settlement system (‘‘DTC Notes’’) as described below and receives and transmits distributions of principal and interest on DTC Notes. The Rules are on file with the Securities and Exchange Commission. Direct Participants and Indirect Participants with which beneficial owners of DTC Notes (‘‘Owners’’) have accounts with respect to the DTC Notes similarly are required to make book-entry transfers and receive and transmit such payments on behalf of their respective Owners. Accordingly, although Owners who hold DTC Notes through Direct Participants or Indirect Participants will not possess Registered Notes, the Rules, by virtue of the requirements described above, provide a mechanism by which Direct Participants will receive payments and will be able to transfer their interest in respect of the DTC Notes.
Purchases of DTC Notes under the DTC system must be made by or through Direct Participants, which will receive a credit for the DTC Notes on DTC’s records. The ownership interest of each actual purchaser of each DTC Note (‘‘Beneficial Owner’’) is in turn to be recorded on the Direct and Indirect Participant’s records. Beneficial Owners will not receive written confirmation from DTC of their purchase, but Beneficial Owners are expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the DTC Notes are to be accomplished by entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in DTC Notes, except in the event that use of the book-entry system for the DTC Notes is discontinued.
To facilitate subsequent transfers, all DTC Notes deposited by Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co. The deposit of DTC Notes with DTC and their registration in the name of Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the DTC Notes; DTC’s records reflect only the identity of the Direct Participants to whose accounts such DTC Notes are credited, which may or may not be the Beneficial Owners. The Participants will remain responsible for keeping account of their holdings on behalf of their customers.
109 Book-Entry Clearance Systems
Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all of the DTC Notes within an issue are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.
Neither DTC nor Cede & Co. will consent or vote with respect to DTC Notes. Under its usual procedures, DTC mails an Omnibus Proxy to the Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts the DTC Notes are credited on the record date (identified in a listing attached to the Omnibus Proxy).
Principal and interest payments on the DTC Notes will be made to DTC. DTC’s practice is to credit Direct Participants’ accounts on the due date for payment in accordance with their respective holdings shown on DTC’s records unless DTC has reason to believe that it will not receive payment on the due date. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in ‘‘street name’’, and will be the responsibility of such Participant and not of DTC or the Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest to DTC is the responsibility of the Issuer, disbursement of such payments to Direct Participants is the responsibility of DTC, and disbursement of such payments to the Beneficial Owners is the responsibility of Direct and Indirect Participants.
Under certain circumstances, including if there is an Event of Default under the Notes, DTC will exchange the DTC Notes for definitive Registered Notes, which it will distribute to its Participants in accordance with their proportionate entitlements and which, if representing interests in a Rule 144A Global Note, will be legended as set forth under ‘‘Subscription and Sale and Transfer and Selling Restrictions’’. For these purposes, an Event of Default means a Senior Note Event of Default or a Subordinated Note Event of Default (as each such term is defined in Condition 10).
Since DTC may only act on behalf of Direct Participants, who in turn act on behalf of Indirect Participants, any Owner desiring to pledge DTC Notes to persons or entities that do not participate in DTC, or otherwise take actions with respect to such DTC Notes, will be required to withdraw its Registered Notes from DTC as described below.
Euroclear and Clearstream, Luxembourg Euroclear and Clearstream, Luxembourg each holds securities for its customers and facilitates the clearance and settlement of securities transactions by electronic book-entry transfer between their respective account holders. Euroclear and Clearstream, Luxembourg provide various services including safekeeping, administration, clearance and settlement of internationally traded securities and securities lending and borrowing. Euroclear and Clearstream, Luxembourg also deal with domestic securities markets in several countries through established depository and custodial relationships. Euroclear and Clearstream, Luxembourg have established an electronic bridge between their two systems across which their respective participants may settle trades with each other.
Euroclear and Clearstream, Luxembourg customers are world-wide financial institutions, including underwriters, securities brokers and dealers, banks, trust companies and clearing corporations. Indirect access to Euroclear and Clearstream, Luxembourg is available to other institutions that clear through or maintain a custodial relationship with an account holder of either system.
BOOK-ENTRY OWNERSHIP OF AND PAYMENTS IN RESPECT OF DTC NOTES The Issuer may apply to DTC in order to have any Tranche of Notes represented by a Registered Global Note accepted in its book-entry settlement system. Upon the issue of any such Registered Global Note, DTC or its custodian will credit, on its internal book-entry system, the respective nominal amounts of the individual beneficial interests represented by such Registered Global Note to the accounts of persons who have accounts with DTC. Such accounts initially will be designated by or on behalf of the relevant Dealer. Ownership of beneficial interests in such a Registered Global Note will be limited to Direct Participants or Indirect
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Participants, including, in the case of any Regulation S Global Note, the respective depositaries of Euroclear and Clearstream, Luxembourg. Ownership of beneficial interests in a Registered Global Note accepted by DTC will be shown on, and the transfer of such ownership will be effected only through, records maintained by DTC or its nominee (with respect to the interests of Direct Participants) and the records of Direct Participants (with respect to interests of Indirect Participants).
Payments in U.S. dollars of principal and interest in respect of a Registered Global Note accepted by DTC will be made to the order of DTC or its nominee as the registered holder of such Note. In the case of any payment in a currency other than U.S. dollars, payment will be made to the Exchange Agent on behalf of DTC or its nominee and the Exchange Agent will (in accordance with instructions received by it) remit all or a portion of such payment for credit directly to the beneficial holders of interests in the Registered Global Note in the currency in which such payment was made and/or cause all or a portion of such payment to be converted into U.S. dollars and credited to the applicable Participants’ account.
The Issuer expects DTC to credit accounts of Direct Participants on the applicable payment date in accordance with their respective holdings as shown in the records of DTC unless DTC has reason to believe that it will not receive payment on such payment date. The Issuer also expects that payments by Participants to beneficial owners of Notes will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers, and will be the responsibility of such Participant and not the responsibility of DTC, the Principal Paying Agent, the Registrar or the Issuer. Payment of principal, premium, if any, and interest, if any, on Notes to DTC is the responsibility of the Issuer.
TRANSFERS OF NOTES REPRESENTED BY REGISTERED GLOBAL NOTES Transfers of any interests in Notes represented by a Registered Global Note within DTC, Euroclear and Clearstream, Luxembourg will be effected in accordance with the customary rules and operating procedures of the relevant clearing system. The laws in some States within the United States require that certain persons take physical delivery of securities in definitive form. Consequently, the ability to transfer Notes represented by a Registered Global Note to such persons may depend upon the ability to exchange such Notes for Notes in definitive form. Similarly, because DTC can only act on behalf of Direct Participants in the DTC system who in turn act on behalf of Indirect Participants, the ability of a person having an interest in Notes represented by a Registered Global Note accepted by DTC to pledge such Notes to persons or entities that do not participate in the DTC system or otherwise to take action in respect of such Notes may depend upon the ability to exchange such Notes for Notes in definitive form. The ability of any holder of Notes represented by a Registered Global Note accepted by DTC to resell, pledge or otherwise transfer such Notes may be impaired if the proposed transferee of such Notes is not eligible to hold such Notes through a direct or indirect participant in the DTC system.
Subject to compliance with the transfer restrictions applicable to the Registered Notes described under ‘‘Subscription and Sale and Transfer and Selling Restrictions’’, cross-market transfers between DTC, on the one hand, and directly or indirectly through Clearstream, Luxembourg or Euroclear accountholders, on the other, will be effected by the relevant clearing system in accordance with its rules and through action taken by the Registrar, the Fiscal Agent and any custodian (‘‘Custodian’’) with whom the relevant Registered Global Notes have been deposited.
On or after the Issue Date for any Series, transfers of Notes of such Series between accountholders in Clearstream, Luxembourg and Euroclear and transfers of Notes of such Series between participants in DTC will generally have a settlement date three business days after the trade date (T+3). The customary arrangements for delivery versus payment will apply to such transfers.
Cross-market transfers between accountholders in Clearstream, Luxembourg or Euroclear and DTC participants will need to have an agreed settlement date between the parties to such transfer. Because there is no direct link between DTC, on the one hand, and Clearstream, Luxembourg and Euroclear, on the other, transfers of interests in the relevant Registered Global Notes will be effected through the Registrar, the Fiscal Agent and the Custodian receiving instructions (and, where appropriate, certification) from the transferor and arranging for delivery of the interests being transferred to the credit of the designated account for the transferee. In the case of cross-market transfers, settlement between Euroclear or Clearstream, Luxembourg accountholders and DTC participants cannot be made on a delivery versus payment basis. The securities will be delivered on a free delivery basis and arrangements for payment must be made separately.
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DTC, Clearstream, Luxembourg and Euroclear have each published rules and operating procedures designed to facilitate transfers of beneficial interests in Registered Global Notes among participants and accountholders of DTC, Clearstream, Luxembourg and Euroclear. However, they are under no obligation to perform or continue to perform such procedures, and such procedures may be discontinued or changed at any time. None of the Issuer, the Agents or any Dealer will be responsible for any performance by DTC, Clearstream, Luxembourg or Euroclear or their respective direct or indirect participants or accountholders of their respective obligations under the rules and procedures governing their operations and none of them will have any liability for any aspect of the records relating to or payments made on account of beneficial interests in the Notes represented by Registered Global Notes or for maintaining, supervising or reviewing any records relating to such beneficial interests.
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The Dealers have in an amended and restated programme agreement dated 16 June 2009 (such programme agreement as modified and/or supplemented and/or restated from time to time, the ‘‘Programme Agreement’’), agreed with the Issuer a basis upon which they or any of them may from time to time agree to purchase Notes, ECP or other debt instruments. Any such agreement will extend to those matters stated under ‘‘Form of the Notes’’ and ‘‘Terms and Conditions of the Notes’’ above. In the Programme Agreement, the Issuer has agreed to reimburse the Dealers for certain of their expenses in connection with the establishment of the Programme and the issue of Notes, ECP or other debt instruments under the Programme and to indemnify the Dealers against certain liabilities incurred by them in connection therewith.
In order to facilitate the offering of any Tranche of the Notes, certain persons participating in the offering of the Tranche may engage in transactions that stabilise, maintain or otherwise affect the market price of the relevant Notes during and after the offering of the Tranche. Specifically such persons may over-allot or create a short position in the Notes for their own account by selling more Notes than have been sold to them by the Issuer. Such persons may also elect to cover any such short position by purchasing Notes in the open market. In addition, such persons may stabilise or maintain the price of the Notes by bidding for or purchasing Notes in the open market and may impose penalty bids, under which selling concessions allowed to syndicate members or other broker-dealers participating in the offering of the Notes are reclaimed if Notes previously distributed in the offering are repurchased in connection with stabilisation transactions or otherwise. The effect of these transactions may be to stabilise or maintain the market price of the Notes at a level above that which might otherwise prevail in the open market. The imposition of a penalty bid may also affect the price of the Notes to the extent that it discourages resales thereof. No representation is made as to the magnitude or effect of any such stabilising or other transactions. Such transactions, if commenced, may be discontinued at any time. Under U.K. laws and regulations stabilising activities may only be carried on by a Stabilising Manager named in the applicable Final Terms and must end no later than the earlier of 30 days following the Issue Date of the relevant Tranche of Notes and 60 days following the date of the allotment of the relevant Tranche of Notes.
TRANSFER RESTRICTIONS As a result of the following restrictions, purchasers of Notes in the United States are advised to consult legal counsel prior to making any purchase, offer, sale, resale or other transfer of such Notes.
Each purchaser of Registered Notes (other than a person purchasing an interest in a Registered Global Note with a view to holding it in the form of an interest in the same Global Note) or person wishing to transfer an interest from one Registered Global Note to another or from global to definitive form or vice versa, will be required to acknowledge, represent and agree as follows (terms used in this paragraph that are defined in Rule 144A or in Regulation S are used herein as defined therein):
(i) that either: (a) it is a QIB, purchasing (or holding) the Notes for its own account or for the account of one or more QIBs and it is aware that any sale to it is being made in reliance on Rule 144A or (b) it is outside the United States and is not a U.S. person;
(ii) that the Notes are being offered and sold in a transaction not involving a public offering in the United States within the meaning of the Securities Act, and that the Notes have not been and will not be registered under the Securities Act or any other applicable U.S. State securities laws and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except as set forth below;
(iii) that, unless it holds an interest in a Regulation S Global Note and either is a person located outside the United States or is not a U.S. person, if in the future it decides to resell, pledge or otherwise transfer the Notes or any beneficial interests in the Notes, it will do so, prior to the date which is two years after the later of the last Issue Date for the Series and the last date on which the Issuer or an affiliate of the Issuer was the owner of such Notes, only (a) to the Issuer or any affiliate thereof, (b) inside the United States to a person whom the seller reasonably believes is a QIB purchasing for its own account or for the account of a QIB in a transaction meeting the requirements of Rule 144A, (c) outside the United States in compliance with Rule 903 or Rule 904 under the Securities Act, (d) pursuant to the exemption from registration provided by Rule 144 under the Securities Act (if available) or (e) pursuant to an effective
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registration statement under the Securities Act, in each case in accordance with all applicable U.S. State securities laws;
(iv) it will, and will require each subsequent holder to, notify any purchaser of the Notes from it of the resale restrictions referred to in paragraph (iii) above, if then applicable;
(v) that Notes initially offered in the United States to QIBs will be represented by one or more Rule 144A Global Notes, and that Notes offered outside the United States in reliance on Regulation S will be represented by one or more Regulation S Global Notes;
(vi) that the Notes, other than the Regulation S Global Notes, will bear a legend to the following effect unless otherwise agreed to by the Issuer:
‘‘THIS SECURITY HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE ‘‘SECURITIES ACT’’), OR ANY OTHER APPLICABLE U.S. STATE SECURITIES LAWS AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (A) REPRESENTS THAT IT IS A ‘‘QUALIFIED INSTITUTIONAL BUYER’’ (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) PURCHASING THE SECURITIES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF ONE OR MORE QUALIFIED INSTITUTIONAL BUYERS; (B) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THE SECURITIES EXCEPT IN ACCORDANCE WITH THE AGENCY AGREEMENT AND, PRIOR TO THE DATE WHICH IS ONE YEAR AFTER THE LATER OF THE LAST ISSUE DATE FOR THE SERIES AND THE LAST DATE ON WHICH THE ISSUER OR AN AFFILIATE OF THE ISSUER WAS THE OWNER OF SUCH SECURITIES OTHER THAN (1) TO THE ISSUER OR ANY AFFILIATE THEREOF, (2) INSIDE THE UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (3) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE 903 OR RULE 904 UNDER THE SECURITIES ACT, (4) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND ANY OTHER JURISDICTION; AND (C) IT AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
THIS SECURITY AND RELATED DOCUMENTATION (INCLUDING, WITHOUT LIMITATION, THE AGENCY AGREEMENT REFERRED TO HEREIN) MAY BE AMENDED OR SUPPLEMENTED FROM TIME TO TIME, WITHOUT THE CONSENT OF, BUT UPON NOTICE TO, THE HOLDERS OF SUCH SECURITIES SENT TO THEIR REGISTERED ADDRESSES, TO MODIFY THE RESTRICTIONS ON AND PROCEDURES FOR RESALES AND OTHER TRANSFERS OF THIS SECURITY TO REFLECT ANY CHANGE IN APPLICABLE LAW OR REGULATION (OR THE INTERPRETATION THEREOF) OR IN PRACTICES RELATING TO RESALES OR OTHER TRANSFERS OF RESTRICTED SECURITIES GENERALLY. THE HOLDER OF THIS SECURITY SHALL BE DEEMED, BY ITS ACCEPTANCE OR PURCHASE HEREOF, TO HAVE AGREED TO ANY SUCH AMENDMENT OR SUPPLEMENT (EACH OF WHICH SHALL BE CONCLUSIVE AND BINDING ON THE HOLDER HEREOF AND ALL FUTURE HOLDERS OF THIS SECURITY AND ANY SECURITIES ISSUED IN EXCHANGE OR SUBSTITUTION THEREFOR, WHETHER OR NOT ANY NOTATION THEREOF IS MADE HEREON).’’;
(vii) if it is outside the United States and is not a U.S. person, that if it should resell or otherwise transfer the Notes prior to the expiration of the distribution compliance period (defined as 40 days after the later of the commencement of the offering and the closing date with respect to the original issuance of the Notes), it will do so only (a)(i) outside the United States in compliance with Rule 903 or 904 under the Securities Act or (ii) to a QIB in compliance with Rule 144A and (b) in accordance with all applicable U.S. State securities laws; and it acknowledges that the Regulation S Global Notes will bear a legend to
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the following effect unless otherwise agreed to by the Issuer:
‘‘THIS SECURITY HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE ‘‘SECURITIES ACT’’), OR ANY OTHER APPLICABLE U.S. STATE SECURITIES LAWS AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT IN ACCORDANCE WITH THE AGENCY AGREEMENT AND PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OR PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT.THIS LEGEND SHALL CEASE TO APPLY UPON THE EXPIRY OF THE PERIOD OF 40 DAYS AFTER THE COMPLETION OF THE DISTRIBUTION OF ALL THE NOTES OF THE TRANCHE OF WHICH THIS NOTE FORMS PART.’’; and
(viii) that the Issuer and others will rely upon the truth and accuracy of the foregoing acknowledgements, representations and agreements and agrees that if any of such acknowledgements, representations or agreements made by it are no longer accurate, it shall promptly notify the Issuer; and if it is acquiring any Notes as a fiduciary or agent for one or more accounts it represents that it has sole investment discretion with respect to each such account and that it has full power to make the foregoing acknowledgements, representations and agreements on behalf of each such account.
No sale of Legended Notes in the United States to any one purchaser will be for less than U.S.$100,000 (or its foreign currency equivalent) principal amount and no Legended Note will be issued in connection with such a sale in a smaller principal amount. If the purchaser is a non-bank fiduciary acting on behalf of others, each person for whom it is acting must purchase at least U.S.$100,000 (or its foreign currency equivalent) of Registered Notes.
SELLING RESTRICTIONS
United States The Notes have not been and will not be registered under the Securities Act and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except in certain transactions exempt from the registration requirements of the Securities Act.
The Notes in bearer form are subject to U.S. tax law requirements and may not be offered, sold or delivered within the United States or its possessions or to a United States person, except in certain transactions permitted by U.S. tax regulations. Terms used in this paragraph have the meanings given to them by the U.S. Internal Revenue Code of 1986 and regulations thereunder.
In connection with any Notes which are offered or sold outside the United States in reliance on an exemption from the registration requirements of the Securities Act provided under Regulations (‘‘Regulation S Notes’’), each Dealer has represented and agreed, and each further Dealer appointed under the Programme will be required to represent and agree, that it will not offer, sell or deliver such Regulation S Notes (i) as part of their distribution at any time and (ii) otherwise until 40 days after the completion of the distribution, as determined and certified by the relevant Dealer or, in the case of an issue of Notes on a syndicated basis, the relevant lead manager, of all Notes of the Tranche of which such Regulation S Notes are a part, within the United States or to, or for the account or benefit of, U.S. persons and it will have sent to each dealer to which it sells any Regulation S Notes during the distribution compliance period a confirmation or other notice setting forth the restrictions on offers and sales of the Regulation S Notes within the United States or to, or for the account or benefit of, U.S. persons.
Until 40 days after the commencement of the offering of any Series or Notes, an offer or sale of Notes within the United States by any dealer (whether or not participating in the offering) may violate the registration requirements of the Securities Act if such offer or sale is made otherwise than in accordance with an available exemption from registration under the Securities Act.
Dealers may arrange for the resale of Notes to QIBs pursuant to Rule 144A and each such purchaser of Notes is hereby notified that the Dealers may be relying on the exemption from the registration requirements of the Securities Act provided by Rule 144A. The minimum aggregate principal amount of Notes which may be purchased by a QIB pursuant to Rule 144A is U.S.$100,000 (or the approximate equivalent thereof in any other currency). To the extent that the Issuer is not subject to or does not comply with the reporting requirements of Section 13 or 15(d) of the Exchange Act or the information furnishing requirements of Rule
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12g3-2(b) thereunder, the Issuer has agreed to furnish to holders of Notes and to prospective purchasers designated by such holders, upon request, such information as may be required by Rule 144A(d)(4).
Each issue of Indexed Notes and Dual Currency Notes shall be subject to such additional U.S. selling restrictions as the Issuer and the relevant Dealer or Dealers shall agree as a term of the issue and purchase of such Notes, which additional selling restrictions shall be set out in the applicable Final Terms. Each relevant Dealer has agreed and each further Dealer appointed under the Programme will be required to agree that it will offer, sell or deliver such Notes only in compliance with such additional U.S. selling restrictions.
European Economic Area In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a ‘‘Relevant Member State’’), each Dealer has represented and agreed, and each further Dealer appointed under the Programme will be required to represent and agree, that with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State (the ‘‘Relevant Implementation Date’’) it has not made and will not make an offer of Notes which are the subject of the offering contemplated by this Offering Circular as completed by the final terms in relation thereto to the public in that Relevant Member State, except that it may, with effect from and including the Relevant Implementation Date, make an offer of such Notes to the public in that Relevant Member State:
(a) if the final terms in relation to the Notes specify that an offer of those Notes may be made other than pursuant to Article 3(2) of the Prospectus Directive in that Relevant Member State (a ‘‘Non-exempt Offer’’), following the date of publication of a prospectus in relation to such Notes which has been approved by the competent authority in that Relevant Member State or, where appropriate, approved in another Relevant Member State and notified to the competent authority in that Relevant Member State, provided that any such prospectus has subsequently been completed by the final terms contemplating such Non-exempt Offer, in accordance with the Prospectus Directive, in the period beginning and ending on the dates specified in such prospectus or final terms, as applicable;
(b) at any time to legal entities which are authorised or regulated to operate in the financial markets or, if not so authorised or regulated, whose corporate purpose is solely to invest in securities;
(c) at any time to any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year; (2) a total balance sheet of more than €43,000,000 and (3) an annual net turnover of more than €50,000,000, as shown in its last annual or consolidated accounts;
(d) at any time to fewer than 100 natural or legal persons (other than qualified investors as defined in the Prospectus Directive) subject to obtaining the prior consent of the relevant Dealer or Dealers nominated by the Issuer for any such offer; or
(e) at any time in any other circumstances falling within Article 3(2) of the Prospectus Directive, provided that no such offer of Notes referred to in (b) to (e) above shall require the Issuer or any Dealer to publish a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to Article 16 of the Prospectus Directive.
For the purposes of this provision, the expression an ‘‘offer of Notes to the public’’ in relation to any Notes in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the Notes to be offered so as to enable an investor to decide to purchase or subscribe the Notes, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State and the expression ‘‘Prospectus Directive’’ means Directive 2003/71/EC and includes any relevant implementing measure in each Relevant Member State.
United Kingdom Each Dealer has represented and agreed and each further Dealer appointed under the Programme will be required to represent and agree that:
(i) in relation to any Notes having a maturity of less than one year (a) it is a person whose ordinary activities involve it in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of its business and (b) it has not offered or sold and will not offer or sell any Notes other than to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of
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investments (as principal or as agent) for the purposes of their businesses or who it is reasonable to expect will acquire, hold, manage or dispose of investments (as principal or agent) for the purposes of their businesses where the issue of the Notes would otherwise constitute a contravention of Section 19 of the FSMA by the Issuer;
(ii) it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the FSMA) received by it in connection with the issue of any Notes in circumstances in which Section 21(1) of the FSMA does not apply to the Issuer; and
(iii) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to any Notes in, from or otherwise involving the United Kingdom.
Australia No prospectus or other disclosure document (as defined in the Corporations Act 2001 of Australia) in relation to the Programme or the Notes has been or will be lodged with the Australian Securities and Investments Commission or ASX Limited ABN 98 008 624 691. Each Dealer has represented and agreed and each further Dealer appointed under the Programme will be required to represent and agree that it:
(a) has not made or invited, and will not make or invite, an offer of the Notes for issue or sale or for subscription or purchase in Australia (including an offer or invitation which is received by a person in Australia); and
(b) has not distributed or published and will not distribute or publish, the Offering Circular or any other offering material or advertisement relating to the Notes in Australia, unless (i) the minimum aggregate consideration payable by each offeree is at least A$500,000 (or its equivalent in an alternate currency) (disregarding moneys lent by the offeror or its associates) or the offer otherwise does not require disclosure to investors in accordance with Part 6D.2 of the Corporations Act 2001 of Australia; (ii) the offer or invitation is not made to a person who is a ‘‘retail client’’ within the meaning of section 761G of the Corporations Act 2001 (Cth) and (iii) such action complies with all applicable laws and regulations.
In addition, each Dealer has agreed and each further Dealer appointed under the Programme will be required to agree that, in connection with the primary distribution of the Notes, it will not sell Notes to any person if, at the time of such sale, the employees of the Dealer aware of, or involved in, the sale knew or had reasonable grounds to suspect that, as a result of such sale, any Notes or an interest in any Notes were being, or would later be, acquired (directly or indirectly) by an associate of the Issuer that is:
(a) a non-resident of Australia that did not acquire the Notes in carrying on a business in Australia at or through a permanent establishment in Australia and did not acquire the Notes in the capacity of a dealer, manager or underwriter in relation to the placement of the Notes; or a clearing house, custodian, funds manager or a responsible entity of a registered scheme; or
(b) a resident of Australia that acquired the Notes in carrying on a business in a country outside Australia at or through a permanent establishment in that country and did not acquire the Notes in the capacity of a dealer, manager or underwriter in relation to the placement of the Notes; or a clearing house, custodian, funds manager or a responsible entity of a registered scheme.
Japan The Notes have not been and will not be registered under the Financial Instruments and Exchange Act of Japan (Law No. 25 of 1948, as amended: the ‘‘FIEA’’) and each Dealer has represented and agreed and each further Dealer appointed under the Programme will be required to represent and agree that it will not offer or sell any Notes, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan (as defined under Item 5, Paragraph 1, Article 6 of the Foreign Exchange and Foreign Trade Control law (Law No. 228 of 1949, as amended)), or to others for re-offering or resale, directly or indirectly, in Japan or to, or for the benefit of, a resident of Japan except in compliance with the FIEA and any other applicable laws and regulations of Japan.
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Hong Kong Each Dealer has represented and agreed that:
(a) it has not offered or sold and will not offer or sell in Hong Kong, by means of any document, any Notes other than (i) to persons whose ordinary business is to buy or sell shares or debentures (whether as principal or agent); or (ii) to ‘‘professional investors’’ as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules made under that Ordinance; or (iii) in other circumstances which do not result in the document being a ‘‘prospectus’’ as defined in the Companies Ordinance (Cap. 32) of Hong Kong or which do not constitute an offer to the public within the meaning of that Ordinance; and
(b) it has not issued or had in its possession for the purposes of issue, and will not issue or have in its possession for the purpose of issue, whether in Hong Kong or elsewhere, any advertisement, invitation or document relating to the Notes, which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to Notes which are or are intended to be disposed of only to persons outside Hong Kong or only to ‘‘professional investors’’ as defined in the Securities and Futures Ordinance and any rules made under that Ordinance.’’
GENERAL Each Dealer has agreed and each further Dealer appointed under the Programme will be required to agree that it will (to the best of its knowledge and belief) comply with all applicable securities laws and regulations in force in any jurisdiction in which it purchases, offers, sells or delivers Notes or possesses or distributes this Offering Circular or any advertisement or other offering material and will obtain any consent, approval or permission required by it for the purchase, offer, sale or delivery by it of Notes under the laws and regulations in force in any jurisdiction to which it is subject or in which it makes such purchases, offers, sales or deliveries and neither the Issuer nor any other Dealer shall have any responsibility therefor.
Neither the Issuer nor any of the Dealers represents that any Notes may at any time lawfully be sold in compliance with any applicable registration or other requirements in any jurisdiction, or pursuant to any exemption available thereunder, or assumes any responsibility for facilitating such sale.
With regard to each Tranche, the relevant Dealer will be required to comply with such other additional restrictions as the Issuer and the relevant Dealer shall agree and as shall be set out in the applicable Final Terms.
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AUTHORISATION The establishment of the Programme and the issue of Notes, ECP and other debt instruments under the Programme have been duly authorised by a resolution of the Board of Directors of the Issuer dated 30 June 2004.
LISTING OF NOTES ON THE OFFICIAL LIST It is expected that each Tranche of Notes which is to be admitted to the Official List and to trading on the London Stock Exchange’s regulated market will be admitted separately as and when issued, subject only to the issue of a Global Note or Notes initially representing the Notes of such Tranche. Application has been made to the UK Listing Authority for Notes issued under the Programme to be admitted to the Official List and to the London Stock Exchange for such Notes to be admitted to trading on the London Stock Exchange’s regulated market. The listing of the Programme in respect of Notes is expected to be granted on or before 19 June 2009.
The Programme Agreement provides, that if the maintenance of the listing of any Notes has, in the opinion of the Issuer, become unduly onerous for any reason whatsoever, the Issuer shall be entitled to terminate such listing subject to its using its best endeavours promptly to list or admit to trading the Notes on an alternative stock exchange, within or outside the European Union, to be agreed between the Issuer and the relevant Dealer or, as the case may be, the Lead Manager.
DOCUMENTS AVAILABLE For the period of 12 months following the date of this Offering Circular, copies of the following documents will, when published, be available for inspection at the registered office of the Issuer and from the specified office of the Paying Agent in London:
(i) the constitution of the Issuer;
(ii) the auditors’ report and the audited annual consolidated financial statements of the Issuer in respect of the financial years ended 30 June 2008 and 30 June 2007;
(iii) the auditors’ report and the reviewed consolidated financial statements of the Issuer in respect of the six months ended 31 December 2008 and 31 December 2007;
(iv) the most recently published auditors’ report and audited annual consolidated financial statements of the Issuer and the most recently published interim financial statements (if any) of the Issuer;
(v) the Programme Agreement, the Agency Agreement, the MTN Deed of Covenant, the Deed Poll, the Deed of Guarantee and the forms of the Global Notes, the Definitive Notes, the Receipts and the Coupons and the Talons;
(vi) a copy of this Offering Circular;
(vii) any future offering circulars, prospectuses, information memoranda and supplements including Final Terms (save that a Final Terms relating to a Note which is neither admitted to trading on a regulated market in the European Economic Area nor offered in the European Economic Area in circumstances where a prospectus is required to be published under the Prospectus Directive will only be available for inspection by a holder of such Note and such holder must produce evidence satisfactory to the Paying Agent as to the identity of such holder) to this Offering Circular and other documents incorporated herein or therein by reference; and
(viii) in the case of each issue of listed Notes subscribed pursuant to a subscription agreement, the subscription agreement (or equivalent document).
119 General Information
CLEARING SYSTEMS The Notes in bearer form have been accepted for clearance through Euroclear and Clearstream, Luxembourg. The appropriate Common Code and ISIN for each Tranche of Bearer Notes allocated by Euroclear and Clearstream, Luxembourg will be specified in the applicable Final Terms. In addition, the Issuer may make an application for any Notes in registered form to be accepted for trading in book-entry form by DTC. The CUSIP and/or CINS numbers for each Tranche of Registered Notes, together with the relevant ISIN and common code, will be specified in the applicable Final Terms. If the Notes are to clear through an additional or alternative clearing system the appropriate information will be specified in the applicable Final Terms.
The address of Euroclear is Euroclear Bank SA/NV, 1 Boulevard du Roi Albert II, B-1210 Brussels and the address of Clearstream, Luxembourg is Clearstream Banking, 42 Avenue JF Kennedy, L-1855 Luxembourg.
CONDITIONS FOR DETERMINING PRICE The price and amount of Notes to be issued under the Programme will be determined be the Issuer and the relevant Dealer at the time of issue in accordance with prevailing market conditions.
SIGNIFICANT OR MATERIAL CHANGE There has been no significant change in the financial or trading position of the Issuer or the Suncorp Group since 31 December 2008 and there has been no material adverse change in the prospects of the Issuer or the Suncorp Group since 30 June 2008.
LITIGATION There are no, nor have there been any, governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which the Issuer is aware) during a period covering at least the previous 12 months which may have, or have had in the recent past, significant effects on the Issuer or the Group’s financial position or profitability.
AUDITORS AND FINANCIAL REPORT The auditor of the Issuer is KPMG, chartered accountants, who have audited the Issuer’s financial report, without qualification, in accordance with auditing standards in Australia for each of the financial periods ended 30 June 2008 and 2007. In addition, the auditors of the Issuer, KPMG, have reviewed the Issuer’s financial report, without qualification, in accordance with auditing standards in Australia for each of the six months ended 31 December 2008 and 2007.
APPROVALS Pursuant to the Charter of the United Nations (Anti-terrorism Measures) Regulations, the specific approval of the Australian Minister for Foreign Affairs must be obtained in relation to transactions in connection with persons and entities identified and listed by the Minister as being associated with terrorism.
EU SAVINGS DIRECTIVE Under EC Council Directive 2003/48/EC on the taxation of savings income, Member States are required to provide to the tax authorities of another Member State details of payments of interest (or similar income) paid by a person within its jurisdiction to an individual resident in that other Member State or to certain limited types of entities established in that other Member State. However, for a transitional period, Belgium, Luxembourg and Austria are instead required (unless during that period they elect otherwise) to operate a withholding system in relation to such payments (the ending of such transitional period being dependent upon the conclusion of certain other agreements relating to information exchange with certain other countries). A number of non-EU countries and territories including Switzerland adopted have similar measures (a withholding system in the case of Switzerland).
On 15 September 2008 the European Commission issued a report to the Council of the European Union on the operation of the Directive, which included the Commission’s advice on the need for changes to the Directive. On 13 November 2008 the European Commission published a more detailed proposal for amendments to the Directive, which included a number of suggested changes. The European Parliament
120 General Information approved an amended version of this proposal on 24 April 2009. If any of the proposed changes are made in relation to the Directive, they may amend or broaden the scope of the requirements described above.
POST-ISSUANCE INFORMATION The Issuer does not intend to provide any post-issuance information in relation to any issues of Notes.
DEALERS TRANSACTING WITH THE ISSUER Certain of the Dealers and their affiliates have engaged, and may in the future engage, in investment banking and/or commercial banking transactions with, and may perform services to, the Issuer and its affiliates in the ordinary course of business.
121 Annex I Commonwealth Disclosure
DESCRIPTION OF THE COMMONWEALTH AND THE COMMONWEALTH GUARANTEE
Dated as of 20 May 2009 Annex I Annex I
TABLE OF CONTENTS
Page
ABOUT THIS DESCRIPTION OF THE COMMONWEALTH AND THE COMMONWEALTH GUARANTEE...... ii Official Documents and Statements ...... ii Forward-Looking Statements ...... ii Presentation of Financial and Other Information ...... iii Certain Defined Terms and Conventions ...... iv
THE COMMONWEALTH OF AUSTRALIA GUARANTEE ...... 1 Enforcement of Judgments...... 2
THE COMMONWEALTH OF AUSTRALIA...... 4 Population and Geography of Australia ...... 4 Form of Government...... 5
THE AUSTRALIAN ECONOMY...... 8 Overview...... 8 Domestic Economic Conditions...... 9
ECONOMIC OUTLOOK...... 15 Updated Methodology for Forward Estimates in 2009-10 Budget...... 19
MAJOR INDUSTRIES ...... 21
EXTERNAL TRADE AND BALANCE OF PAYMENTS...... 29 Merchandise Trade...... 29 Balance of Payments ...... 31 Changes in Official Reserve Assets ...... 32 Exchange Rate...... 33 Foreign Investment Policy...... 36 Foreign Financial Relations...... 36
CURRENCY, MONETARY AND BANKING SYSTEM ...... 38 Australian Currency ...... 38 Monetary Conditions...... 38 Regulation of the Financial System...... 39 The Financial System Regulatory Regime ...... 45
GOVERNMENT FINANCE...... 47 Federal Government Budget ...... 47 Commonwealth Investment in the National Broadband Network...... 51 Pensions and Superannuation...... 52 Paid Parental Leave...... 52 Taxation ...... 53 Commonwealth-State Financial Relations ...... 58 Domestic Issuance of Government Bonds...... 59 Guarantees and Other Contingent Liabilities ...... 60
PUBLIC DEBT ...... 64 Debt Record ...... 66 Credit Ratings...... 66
LEGAL MATTERS ...... 67
i Annex I
ABOUT THIS DESCRIPTION OF THE COMMONWEALTH AND THE COMMONWEALTH GUARANTEE
This Description of the Commonwealth and the Commonwealth Guarantee (a) has been prepared in connection with certain proposed offers of debt securities by eligible Australian Authorised Deposit-taking Institutions, which we refer to as ADIs, that are covered by the Australian Government Guarantee Scheme for Large Deposits and Wholesale Funding, which we refer to as the Guarantee Scheme; (b) may not be disclosed to or relied upon by any other person or for any other purpose and any reproduction of this Description of the Commonwealth and the Commonwealth Guarantee for any other purpose is prohibited; and (c) is not to be construed as legal, business or tax advice. In making an investment decision, you must rely on your own examination of the Commonwealth of Australia, which we also refer to as the Commonwealth, the Guarantee and the offering.
The Commonwealth of Australia has not approved any prospectus or other document in which this Description of the Commonwealth and the Commonwealth Guarantee is included or incorporated by reference and makes no representation with respect to, and does not accept responsibility for, the contents of any such prospectus or other document. No person, including any dealer, salesperson or other individual has been authorised to provide any information or to make any representations on behalf of the Commonwealth of Australia with respect to the Guarantee or the Commonwealth of Australia and, if given or made, such information or representations should not be relied upon as having been made by the Commonwealth of Australia and the Commonwealth of Australia disclaims any responsibility for such information or representations.
Official Documents and Statements
Certain financial and statistical information contained in this Description of the Commonwealth and the Commonwealth Guarantee has been derived from official Australian Government sources, including:
• the 2009-10 Commonwealth Budget dated 12 May 2009, which we refer to as the 2009-10 Budget (available at http://www.budget.gov.au) and the 2008-09 Commonwealth Budget dated 13 May 2008, which we refer to as the 2008-09 Budget (available at http://www.budget.gov.au/2008-09/);
• the Mid-Year Economic and Fiscal Outlook 2008-09 Statement released on 5 November 2008, which we refer to as the 2008-09 MYEFO (available at http://www.budget.gov.au/2008- 09/content/myefo/html/index.htm);
• the February 2009 Updated Economic and Fiscal Outlook Statement released on 3 February 2009, which we refer to as the 2009 UEFO (available at http://www.budget.gov.au/2008- 09/content/uefo/html/index.htm); and
• the Final Budget Outcome 2005-06 released on 29 September 2006, which we refer to as the Final Budget Outcome 2005-06 (available at http://www.budget.gov.au/2005-06/fbo/html/index.htm), the Final Budget Outcome 2006-07 released on 28 September 2007, which we refer to as the Final Budget Outcome 2006-07 (available at http://www.budget.gov.au/2006-07/fbo/html/index.htm) and the Final Budget Outcome 2007-08 released on 26 September 2008, which we refer to as the Final Budget Outcome 2007-08 (available at http://www.budget.gov.au/2007-08/fbo/html/index.htm).
Information available on the websites referenced above is not incorporated by reference in this Description of the Commonwealth and the Commonwealth Guarantee.
The address of the Commonwealth of Australia is c/o The Treasury of the Commonwealth of Australia, Treasury Building, Langton Crescent, Parkes ACT 2600, Australia, and its phone number is +61 2 6263 2111.
Forward-Looking Statements
This Description of the Commonwealth and the Commonwealth Guarantee contains forward-looking statements. These forward-looking statements can be identified by the use of forward-looking terminology, including the terms 'believes', 'forecasts', 'estimates', 'projects', 'expects', 'intends', 'may', 'will', 'seeks', 'would', 'could' or 'should' or, in each case, their negative or other variations or comparable terminology, or in relation to discussions of forecasts, policies, strategy, plans, objectives, goals, future events or intentions.
ii Annex I
Forward-looking statements are statements that are not historical facts. These statements are based on current plans, estimates and projections and, therefore, undue reliance should not be placed on them. Forward-looking statements speak only as of the date they are made. No assurance can be given that the beliefs and expectations reflected in such forward-looking statements will prove to have been correct.
Forward-looking statements involve inherent risks and uncertainties. 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 economy, and in particular the rates of growth (or contraction) of Australia's major trading partners;
• the effects of the global financial crisis;
• changes in commodity prices and/or global demand for Australia's major export commodities;
• increases or decreases in international and domestic interest rates;
• increases or decreases in domestic consumption;
• increases or decreases in Australia's labour force participation and productivity;
• exchange rate fluctuations; and
• increases or decreases in Australia's rate of inflation. Presentation of Financial and Other Information
The fiscal year of the Commonwealth of Australia is 1 July to 30 June. Annual information presented in this Description of the Commonwealth and the Commonwealth Guarantee is based on fiscal years, unless otherwise indicated. In this Description of the Commonwealth and the Commonwealth Guarantee, the fiscal year beginning on 1 July 2007 and ending on 30 June 2008 is referred to as "2007-08" and previous and subsequent fiscal years are referred to using the same convention.
Any discrepancies between totals and sums of components in this Description of the Commonwealth and the Commonwealth Guarantee are due to rounding.
Statistical information reported in this Description of the Commonwealth and the Commonwealth Guarantee has been derived from official publications of, and information supplied by, a number of departments and agencies of the Commonwealth of Australia, including the Treasury of the Commonwealth of Australia, the Department of Finance and Deregulation, the Reserve Bank of Australia (the "RBA") and the Australian Bureau of Statistics ("ABS"). Some statistical information has also been derived from information publicly made available by the International Monetary Fund (the "IMF") and the Organisation for Economic Co-operation and Development (the "OECD"). Similar statistics may be obtainable from other sources, but the underlying assumptions, methodology and, consequently, the resulting data may vary from source to source. In addition, statistics and data published by a department or agency of the Commonwealth of Australia may differ from similar statistics and data produced by other departments or agencies due to differing underlying assumptions or methodology. Certain historical statistical information contained in this Description of the Commonwealth and the Commonwealth Guarantee is based on estimates that the Commonwealth of Australia and/or its departments or agencies believe to be based on reasonable assumptions. The Commonwealth of Australia's official financial and economic statistics are subject to review as part of a regular confirmation process. Accordingly, financial and economic information may be subsequently adjusted or revised. While the Australian Government does not expect revisions to be material, no assurance can be given that material changes will not be made. The Commonwealth of Australia adheres to the IMF's Special Data Dissemination Standards, which guide members in the dissemination of economic and financial data to the public.
The fiscal aggregates in the Federal budget are underpinned by a set of forward estimates consisting of short- term economic forecasts and projections based on medium-term assumptions. In the budget, the Australian Government usually presents two years of economic forecasts and an additional three years of projections. The forecasts are based on detailed assessments of different sectors of the economy derived from the most recent
iii Annex I
data outturns, forecasting models and information gathered from business liaison. Forecasts for the various sectors of the economy are brought together to form a coherent set of forecasts for the macroeconomy. Projections are used in the latter years and are based on long run averages of broad economic aggregates.
In the 2009-10 Budget, two key changes were made to this methodology. First, the forecast period was extended by one year to 2010-11. Second, GDP was assumed to grow above (rather than at) trend in the two projection years. For further information regarding these changes, see "Economic Outlook—Updated Methodology for Forward Estimates in 2009-10 Budget" in this Description of the Commonwealth and the Commonwealth Guarantee.
References in this Description of the Commonwealth and the Commonwealth Guarantee to "Australian dollars," "A$," "dollars" or "$" are to the lawful currency of the Commonwealth of Australia and references in this Description of the Commonwealth and the Commonwealth Guarantee to "U.S. dollars" or "US$" are to the lawful currency of the United States.
References in this Description of the Commonwealth and the Commonwealth Guarantee to statutes followed by "(Cth)" are to legislation enacted by the Federal Parliament of the Commonwealth of Australia. Certain Defined Terms and Conventions
The terms set forth below have the following meanings for purposes of this Description of the Commonwealth and the Commonwealth Guarantee:
ADI is short for Authorised Deposit-taking Institution.
APRA means the Australian Prudential Regulation Authority.
ASIC refers to the Australian Securities and Investments Commission.
Authorised Deposit- means a body corporate that has been granted authority by APRA to carry on banking taking Institution business in Australia (under section 9 of the Banking Act 1959 (Cth)).
Basic price refers to the amount receivable by the producer from the purchaser for a unit of a good or service produced as output, minus any tax payable plus any subsidy receivable on that unit as a consequence of its production or sale; it excludes any transport charges invoiced separately by the producer.
Balance of payments refers to the total of all of the amounts transacted between residents of Australia and residents of the rest of the world (non-residents) over a specific period of time.
Capital account records the values of the non-financial assets that are acquired, or disposed of, by resident institutional units by engaging in transactions, and shows the change in net worth due to saving and capital transfers or internal bookkeeping transactions linked to production (changes in inventories and consumption of fixed capital).
Chain volume refers to measures derived by linking together (compounding) movements in volumes, measures calculated using the average prices of the previous fiscal year, and applying the compounded movements to the current price estimates of the reference year. Chain volume measures were introduced in the national accounts in 1998 because, by annually rebasing, they provide price relativities that reflect the current situation, thereby providing better real estimates than constant price measures, especially in times of rapidly changing relative prices.
iv Annex I
Consumer price measures quarterly changes in the price of a 'basket' of goods and services which index (or headline account for a high proportion of expenditure by the CPI population group (i.e., rate of inflation) metropolitan households) and is commonly referred to as the headline rate of inflation.
Current account includes the balance of trade (exports of goods and services minus imports of goods and services), net factor income (income earned by Australia from the rest of the world minus income earned by the rest of the world from Australia) and net transfer payments (including, for example, net outflows of foreign aid payments). The current account excludes capital transfers.
Current prices refers to estimates valued at the prices of the period to which the observation relates. For example, estimates for 2002–03 are valued using 2002–03 prices. This contrasts to chain volume measures where the prices used in valuation refer to the prices of the previous year.
Fiscal year means each year commencing 1 July and ending 30 June.
Foreign ADI means a foreign corporation authorised to carry on banking business in a foreign country that has been granted authority by APRA to carry on banking business in Australia (under section 9 of the Banking Act 1959 (Cth)).
Free on board (or The value of goods measured on a free on board basis includes all production and other f.o.b.) costs incurred up until the goods are placed on board the international carrier for export. Free on board values exclude international insurance and transport costs. They include the value of the outside packaging in which the product is wrapped, but do not include the value of the international freight containers used for transporting the goods.
Gross domestic means the total market value of goods and services produced in Australia within a product (or GDP) given period after deducting the cost of goods and services used up in the process of production but before deducting allowances for the consumption of fixed capital.
GDP per capita means the ratio of the chain volume estimate of GDP to an estimate of the resident Australian population.
Gross national (formerly gross national product) refers to the aggregate value of gross primary income incomes for all institutional sectors, including net primary income receivable from non- residents.
Gross value added means the value of output at basic prices minus the value of intermediate consumption at purchasers' prices.
Household saving refers to the ratio of household net saving (calculated as household net disposable ratio income less household final consumption expenditure) to household net disposable income (calculated as household gross disposable income less household consumption of fixed capital).
IMF means the International Monetary Fund.
Implicit price is obtained by dividing a current price value by its real counterpart (the chain volume deflator measure).
Inflation refers to a continuous upward movement in the general level of prices.
Labour force means, for any group, persons who were employed or unemployed.
National net savings is calculated as national net disposable income less final consumption expenditure.
Net domestic product is calculated as GDP less consumption of fixed capital.
Net worth represents the difference between the stock of assets (both financial and non-financial) and the stock of liabilities. Because it is derived residually, it can be negative.
v Annex I
OECD means the Organisation for Economic Co-operation and Development.
Participation rate means, for any group, the labour force expressed as a percentage of the civilian population aged 15 years and over in the same group.
RBA means the Reserve Bank of Australia.
Real gross domestic is calculated by: income • taking the volume measure of gross national expenditure;
• adding exports of goods and services at current prices deflated by the implicit price deflator for imports of goods and services;
• deducting the volume measure of imports of goods and services; and
• adding the current price statistical discrepancy for GDP, deflated by the implicit price deflator for GDP.
Real gross national is calculated by adjusting real gross domestic income for the real impact of primary income income flows (property income and labour income) to and from overseas.
Real net national is calculated by: disposable income • taking real gross domestic income;
• deducting real incomes payable to the rest of the world;
• adding real incomes receivable from the rest of the world; and
• deducting the volume measure of consumption of fixed capital.
Real incomes payable and receivable are calculated by dividing the nominal income flows by the implicit price deflator for gross national expenditure.
Real means adjusted for the effects of inflation.
Seasonal adjustment involves estimation of seasonal factors in data and adjustment of the data to remove the seasonal effect.
Total gross fixed refers to expenditure on new fixed assets plus expenditure on second-hand fixed assets, capital formation whether for additions or replacements (but not including repairs), where fixed assets are produced assets that are used repeatedly or continuously in production processes for more than one year. It includes capital formation undertaken by government, public corporations and the private sector.
Unemployment rate means, for any group, the number of unemployed persons expressed as a percentage of the labour force in the same group.
vi Annex I
THE COMMONWEALTH OF AUSTRALIA GUARANTEE
In November 2008, in order to promote financial system stability and ensure the continued flow of credit through the economy at a time of heightened turbulence in international capital markets, the Government of the Commonwealth of Australia implemented the Guarantee Scheme. The Commonwealth of Australia has executed a Deed of Guarantee (the "Deed of Guarantee") and adopted the Australian Government Guarantee Scheme for Large Deposits and Wholesale Funding Scheme Rules (the "Scheme Rules") to give effect to the Guarantee Scheme.
Under the Guarantee Scheme, ADIs may apply to the Reserve Bank of Australia as the administrator of the Guarantee Scheme (the "Scheme Administrator") to have senior unsecured debt instruments with maturities of up to 60 months that satisfy the eligibility criteria set out in the Scheme Rules guaranteed by the Commonwealth of Australia. In its discretion, the Commonwealth of Australia may issue an "Eligibility Certificate", which evidences that the liability specified therein is guaranteed by the Commonwealth of Australia under the Deed of Guarantee, creating what we refer to as the Guarantee.
Under the Scheme Rules, eligible obligations of ADIs (other than foreign ADIs) include: (1) senior unsecured debt instruments with maturities up to 15 months which are not complex and fall into the categories of (A) bank bills, (B) certificates of deposit or transferable deposits, (C) debentures or (D) commercial paper; and (2) senior unsecured debt instruments with maturities of 15 to 60 months which are not complex and fall into the categories of (A) bonds, (B) notes or (C) debentures. Eligible obligations of foreign ADIs include senior unsecured debt instruments with maturities up to 15 months which are not complex and fall into the categories of (A) bank bills, (B) certificates of deposit or transferable deposits, (C) debentures or (D) commercial paper.
The following is a summary of the material terms of the Deed of Guarantee and the Scheme Rules, and is qualified in its entirety by reference to the full text of those documents, which are available for review on a website established by the Australian Government to provide information regarding the Guarantee Scheme, at www.guaranteescheme.gov.au. The contents of the website are not incorporated by reference into this Description of the Commonwealth and the Commonwealth Guarantee.
Under the Deed of Guarantee, the Commonwealth of Australia irrevocably:
• guarantees to the persons to whom such liabilities are owed (each, a "beneficiary") the payment by each ADI of liabilities that are the subject of an Eligibility Certificate (the "Guaranteed Liabilities"); and
• undertakes in favour of such persons that, whenever an ADI does not pay a Guaranteed Liability on the date on which it becomes due and payable, the Commonwealth of Australia shall, upon a claim by a beneficiary made in accordance with the Scheme Rules, and following the expiry of any applicable grace period, pay the Guaranteed Liability in accordance with the Scheme Rules.
The Commonwealth of Australia will not be liable under the Deed of Guarantee in respect of any Guaranteed Liability that has been varied, amended, waived, released, novated, supplemented, extended or restated in any material respect without the written consent of the Commonwealth of Australia.
A holder of securities that benefits from the Guarantee will not receive payment under the Guarantee if they fail to follow the Scheme Rules for submission of claims. A claim by a beneficiary for payment under the Guarantee must be in writing and made in the form of Schedule 8 to the Scheme Rules and delivered to the Scheme Administrator. A claim that is not made in the form of Schedule 8 is not a valid claim and shall be treated as not having been made. A valid claim is one that establishes that the amount claimed:
• is due to the beneficiary;
• remains unpaid despite the beneficiary having made a claim on the ADI;
• is in respect of a Guaranteed Liability with a due date on or before the expiration of the relevant Eligibility Certificate; and
• has not been paid, and is not eligible to be claimed by the beneficiary in accordance with the Financial Claims Scheme in Division 2AA of the Banking Act 1959 (Cth) (which generally applies to claims in relation to deposits of eligible ADIs (other than foreign ADIs) of less than $1,000,000).
1 Annex I
The Commonwealth of Australia shall pay to the beneficiary the amount specified in a valid claim. There is no designated period within which the Commonwealth of Australia is required to make payments after it receives a valid claim. All payments will be made in the currency in which the Guaranteed Liability is denominated.
The Commonwealth of Australia may amend the terms of the Deed of Guarantee or the Scheme Rules at any time in its discretion by publishing the amendment on the website referred to in the Scheme Rules (which is currently www.guaranteescheme.gov.au), provided that (except insofar as such amendment is required by law) such amendment does not reduce the Commonwealth of Australia's obligations to the beneficiaries in a manner which is prejudicial to the interests of the beneficiaries in respect of any subsisting Guaranteed Liability. The contents of the website are not incorporated by reference into this Description of the Commonwealth and the Commonwealth Guarantee.
ADIs whose liabilities are guaranteed under the Guarantee Scheme are subject to a number of obligations under the Scheme Rules, including the obligation to:
• provide a counter-indemnity deed indemnifying the Commonwealth of Australia against all liabilities, costs and expenses that it may incur in consequence of or arising from guaranteeing the ADIs' obligations;
• provide written reports to the Scheme Administrator; and
• pay specified fees to the Commonwealth of Australia for the Guarantee.
However, the Scheme Rules provide that a beneficiary's rights in relation to a Guaranteed Liability shall not be prejudiced by the failure of an ADI to comply with the Scheme Rules.
The Deed of Guarantee is governed by, and shall be construed in accordance with, and any matter related to it is to be governed by, the law of the State of New South Wales, Australia.
The Guarantee is irrevocable and ranks equally with other unsecured debts and financial obligations of the Commonwealth of Australia.
If the Commonwealth of Australia does not perform its obligations under the Guarantee, beneficiaries may be required to commence proceedings in Australia to enforce their rights. See "The Commonwealth of Australia Guarantee—Enforcement of Judgments" in this Description of the Commonwealth and the Commonwealth Guarantee.
For further information about the Guarantee Scheme, see "Government Finance—Guarantees and Other Contingent Liabilities—Commonwealth Initiatives to Enhance the Stability of the Australian Financial System" in this Description of the Commonwealth and the Commonwealth Guarantee.
Enforcement of Judgments
The Commonwealth of Australia is a sovereign state. The Commonwealth of Australia has not agreed to waive any sovereign immunity or immunity from personal jurisdiction in respect to any action brought in the courts of any jurisdiction (except the courts of competent jurisdiction in Australia), nor has it appointed an agent in any foreign jurisdiction upon which process may be served for any purpose.
As a consequence, it may be that the Commonwealth of Australia's obligations under the Deed of Guarantee can only be enforced in an Australian court of competent jurisdiction. In any suit in an Australian court of competent jurisdiction relating to the Deed of Guarantee, the Commonwealth of Australia would not be entitled to any defence based on Crown or sovereign immunity. If investors are able to invoke the jurisdiction of a foreign court in respect of the Guarantee or any other claim against the Commonwealth of Australia under the Deed of Guarantee or otherwise, it may be difficult for investors to obtain or realise upon judgments of foreign courts against the Commonwealth of Australia. Furthermore, it may be difficult for investors to enforce in Australia or elsewhere the judgments of foreign courts against the Commonwealth of Australia. The Deed of Guarantee does not contain any submission to the jurisdiction of the courts of a foreign jurisdiction or any waiver of any immunity that might be available to the Commonwealth of Australia under the law of any foreign jurisdiction or in respect to any claim brought against the Commonwealth of Australia in any such foreign jurisdiction for any reason.
2 Annex I
Under the applicable provisions of the Judiciary Act 1903 (Cth), no execution or attachment may be issued against the property or revenues of the Commonwealth of Australia pursuant to the Guarantee. However, on receipt of the certificate of a judgment against the Commonwealth of Australia the Minister for Finance and Deregulation is obligated to satisfy the judgment out of moneys legally available. Payment could not be made by the Commonwealth of Australia in satisfaction of any judgment except from moneys appropriated by the Australian Parliament. The Australian Parliament has passed legislation appropriating the Consolidated Revenue Fund for the purposes of paying claims under the Deed of Guarantee in accordance with the Scheme Rules.
3 Annex I
THE COMMONWEALTH OF AUSTRALIA
Population and Geography of Australia
Australia is located in the Southern Hemisphere. Excluding its external Territories, Australia has an area of nearly 7.7 million square kilometres. It is the world's sixth largest nation after Russia, Canada, China, the United States and Brazil. The major portion of Australia's population lives in the eastern and southern coastal regions. The vast central area of Australia is arid and largely unsuitable for agriculture. A map showing Australia's States and Territories, major cities and principal geographic features is included on the page following the cover page of this Description of the Commonwealth and the Commonwealth Guarantee.
The preliminary estimated resident population of Australia at 30 September 2008 was 21,542,000 persons. This was an increase of 389,000 persons (1.8%) since 30 September 2007 and 111,000 persons since 30 June 2008.
The preliminary estimated resident populations of the six States, the Australian Capital Territory and Northern Territory at 30 September 2008 were as follows.
Table 1: Preliminary estimated resident population of States and Territories State / Territory Population (as at 30 September 2008) New South Wales 7,017,091 Victoria 5,340,309 Queensland 4,320,088 Western Australia 2,188,462 South Australia 1,607,747 Tasmania 498,887 Australian Capital Territory 346,429 Northern Territory 221,055 Source: ABS Catalogue No. 3101.0.
The majority of the population lives in the metropolitan areas of the capital cities of the six States, and in Canberra, the national capital.
The growth of Australia's population has two components: natural increase (the number of births minus the number of deaths) and net overseas migration.
Preliminary natural increase for the year ended 30 September 2008 was estimated to be 153,400 persons, an increase of 8.7% (or 12,300 persons) on the natural increase for the year ended 30 September 2007 (141,100 persons). The preliminary estimate for births during the year ended 30 September 2008 (295,200) was 5.1% higher than the figure for the year ended 30 September 2007 (281,000). The preliminary estimate for deaths during the year ended 30 September 2008 was 141,700.
For the year ended 30 September 2008, Australia recorded a preliminary net overseas migration ("NOM") estimate of an increase of 235,900 persons. This was the difference between 464,800 overseas arrivals that were added to the population and 229,000 overseas departures that were subtracted from the population. Australia's current migration program allows people from any country to apply to migrate to Australia, regardless of their ethnicity, culture, religion or language, provided that they meet the criteria set out in law. The Australian Government views Australia's cultural diversity as a source of both social and economic wealth. The contribution made to population growth by NOM (60.6%) was higher than that of natural increase (39.4%).
4 Annex I
The following table sets forth the estimated resident population of Australia by age group as of 30 June 2008:
Table 2: Preliminary estimated resident population by age group Population Age group (as at 30 June 2008) (years) Males Females 0-4 706,327 668,940 5-9 690,749 657,446 10-14 719,870 682,444 15-19 756,525 714,624 20-24 782,998 747,592 25-29 765,653 747,311 30-34 736,174 736,811 35-39 793,960 804,385 40-44 753,754 762,108 45-49 767,881 782,493 50-54 698,566 710,864 55-59 638,512 646,402 60-64 564,133 563,262 65-69 412,038 420,058 70-74 319,681 343,766 75-79 253,654 296,495 80-84 178,488 245,372 85-89 89,123 155,725 90-94 26,708 64,434 95-99 5,463 17,862 100 and over 660 2,470 All ages 10,660,917 10,770,864 Source: ABS Catalogue No. 3101.0.
Australia's current total fertility rate (the average number of babies that a woman could expect to bear during her reproductive lifetime, assuming current age-specific fertility rates apply), is 1.935 births per woman in the year ended 30 June 2008, a rate higher than the fertility rates in many OECD countries, including Italy, Germany, Japan and Canada, and higher than the OECD average of 1.63 in 2005. However, Australia's current total fertility rate is below those for New Zealand (2.0 in 2005) and the United States (2.05 in 2005). Based on recent age-specific fertility trends, Australia's total fertility rate is projected to increase initially, then to fall slowly to 1.7 by 2047.
Average Australian mortality rates have fallen strongly over the past century. As a consequence, life expectancies have risen for both men and women. Falling mortality rates add to population growth and imply a higher proportion of aged people in the population. Mortality rates are falling across all age groups and this trend is projected to continue for at least the next four decades.
Australia's NOM helps to reduce population ageing. However, falling fertility and mortality rates are projected to lead to an overall rise in the average age of the population. The pace of ageing of the population is projected to quicken after 2010, as the baby boomer generation starts to reach age 65. While many OECD countries share Australia's demographic challenges, Australia is in a stronger position to meet them than most.
Form of Government
The Commonwealth of Australia was formed as a federal union on 1 January 1901 when the six former British colonies - now the six States of New South Wales, Victoria, Queensland, South Australia, Western Australia and Tasmania - were united in a 'Federal Commonwealth' under the authority of the Commonwealth of Australia Constitution Act enacted by the British Parliament. In addition to the States, there are ten Territories consisting of the Australian Capital Territory, which contains the national capital (Canberra), the Northern Territory, Norfolk Island, the Ashmore and Cartier Islands, the Australian Antarctic Territory, Christmas Island, the Cocos (Keeling) Islands, the Coral Sea Islands, the Jervis Bay Territory and the Territory of Heard Island and McDonald Islands. The Northern Territory, the Australian Capital Territory and Norfolk Island have been granted forms of self-government. The remaining Territories are administered by the Commonwealth Government.
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Federal legislative powers in Australia are vested in the Federal Parliament (the "Parliament"), which consists of the Queen as head of state, the Senate and the House of Representatives. The Governor-General represents the Queen throughout Australia. The Senate and the House of Representatives are both elected by the compulsory vote of all eligible persons (generally, Australian citizens aged 18 years and older). Twelve senators are elected from each of the six States for a term of six years; half the senators from each State are elected every third year. In addition, two senators are elected from each of the Australian Capital Territory and the Northern Territory and hold office until the next general election of the House of Representatives. The House of Representatives consists of 150 members, each elected for a term not exceeding three years. Each State's representation in the House of Representatives is approximately proportionate to its population. This representation is reviewed during the life of every Parliament in response to population shifts. In accordance with established practice, the election for members of the Senate is usually held on the same date as the election for members of the House of Representatives. Under certain circumstances the Governor-General may simultaneously dissolve the Senate and the House of Representatives.
The Senate has equal power with the House of Representatives except in relation to laws appropriating money or imposing taxes, which must originate in the House of Representatives. Laws imposing taxes and laws appropriating money for the ordinary annual services of the Government may not be amended by the Senate, but may be rejected or returned by the Senate to the House of Representatives with a request for amendment. Any member of the House of Representatives or the Senate may introduce a proposed law (a "bill"). To become law, bills must be passed by both the House of Representatives and the Senate.
Under the Constitution, the Parliament is empowered to make laws on certain specified matters such as defence, external affairs, interstate and overseas trade and commerce, foreign corporations and trading or financial corporations formed within the limits of Australia, borrowing money, taxation (including customs and excise taxes), postal, telegraphic and telephonic services, currency and banking, insurance, immigration, pensions and social services. Some of these powers are given to the Parliament to the exclusion of the State Parliaments. Other powers are exercised by the Parliament concurrently with the State Parliaments, but any legislation within the limits of its powers enacted by the Parliament prevails over any inconsistent laws of the States. Powers not conferred on the Parliament remain with the States, subject to certain Constitutional limitations.
The executive power of the Commonwealth of Australia under the Constitution is formally vested in the Queen and is exercisable by the Governor-General as the Queen's representative. There is a Federal Executive Council to advise the Governor-General. This Council is composed of the Prime Minister and other Federal Ministers. These Ministers are members of either the House of Representatives or the Senate and generally belong to the party or coalition of parties which has a majority in the House of Representatives. Such Ministers form the Government with the practical result that executive power is exercised by the Prime Minister and the other Ministers.
The major Australian political parties are the Australian Labor Party, the Liberal Party of Australia and the Nationals. Minor parties include the Australian Greens, the Family First Party and the Country Liberal Party. From March 1996 to November 2007, the Government was formed by a coalition of the Liberal Party of Australia and the Nationals. A Federal election was held on 24 November 2007, following which the Australian Labor Party won a majority of the seats in the House of Representatives and became the Government, with the Hon. Kevin Rudd MP being elected as Prime Minister.
The following tables show the composition of the House of Representatives and the Senate as at 30 April 2009. Table 3: House of Representatives composition Australian Labor Party 83 Liberal Party of Australia 55 The Nationals 9 Independents 3 Total 150
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Table 4: Senate composition Australian Labor Party 32 Liberal Party of Australia 32 Australian Greens 5 The Nationals 4 Family First Party 1 Country Liberal Party 1 Independents 1 Total 76
Judicial power in Australia is vested in the High Court of Australia, other Federal courts and State and Territory courts. The High Court is a superior court of record and consists of the Chief Justice and six other Justices who are appointed by the Governor-General following consultations with the States. The Justices are appointed until they are 70 years of age and can be removed by the Governor-General in Council in certain circumstances on the grounds of misbehaviour or incapacity. In certain limited matters the High Court has original jurisdiction. It also has appellate jurisdiction in relation to Federal courts, including the Federal Court of Australia, and the Supreme Court of each State and the Northern Territory and other courts of the States exercising federal jurisdiction. Appeals from the Supreme Court of a Territory (other than the Northern Territory) may be taken to the Federal Court of Australia. The common law system, as developed in the United Kingdom, forms the basis of Australian jurisprudence.
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THE AUSTRALIAN ECONOMY
Overview
Australia is a stable, culturally diverse and democratic society with a skilled workforce and a strong, competitive economy. Between 1990-91 and 2007-08, Australia's real economy grew by an average of around 3.3% a year. Australia's GDP in 2007-08 (in value terms) was just over $1.1 trillion. The IMF estimates that in 2008 Australia was the world's 18th largest economy by GDP (in purchasing-power-parity terms). Based on OECD data, Australia's real per capita GDP (in purchasing-power-parity terms) ranked 12th among OECD nations in 2007. Principal Economic Indicators
The following table sets forth Australia's principal economic indicators for each of the 2003-04, 2004-05, 2005- 06, 2006-07 and 2007-08 fiscal years. Table 5: Principal Economic Indicators 2003-04 2004-05 2005-06 2006-07 2007-08 GDP, Chain Volume Measure (A$ millions) (a) 956,017 982,786 1,012,269 1,045,674 1,083,661 Percentage change 4.0 2.8 3.0 3.3 3.6 GDP per capita, Chain Volume Measure (A$) (a) 47,834 48,590 49,337 50,220 51,229 Percentage change 2.8 1.6 1.5 1.8 2.0 Unemployment Rate (% of labour force) (b) 5.4 5.1 4.8 4.3 4.2 Consumer Price Index (% change) (c) 2.5 2.5 4.0 2.1 4.5 Wage Price Index (% change) (c) (d) 3.6 4.0 4.1 4.0 4.1 Exports, Chain Volume Measure (A$ millions) 197,382 203,407 207,886 215,695 225,002 Percentage change 2.1 3.1 2.2 3.8 4.3 Imports, Chain Volume Measure (A$ millions) 173,993 195,124 209,246 228,452 258,034 Percentage change 13.0 12.1 7.2 9.2 12.9 Balance of Payments – Current Account (A$ -45,590 -56,325 -52,839 -58,999 -70,297 millions) Official Reserve Assets at end of period (A$ 50,342 56,170 63,815 79,682 35,856 millions) Commonwealth Government Net Debt (A$ 23,948 12,453 -2,250 -27,385 -42,918 millions) (a) Reference year for chain volume measures is 2006-07. (b) As at the June quarter; calculated as an average over the quarter. (c) Percentage change to the June quarter of each period from the previous June quarter. (d) Seasonally adjusted. Source: ABS Catalogue No. 5206.0, 6202.0, 6401.0, 5302.0, 6345.0; Mid-Year Economic and Fiscal Outlook 2008-09 Statement; unpublished ABS and Treasury data.
GDP Growth
Australia's GDP expanded by 3.6% in 2007-08. Growth in 2007-08 was broadly-based, with private business investment growing by 15.4%, total gross fixed capital formation growing by 9.9%, and household consumption expenditure growing by 3.7%. In the 2009-10 Budget released on 12 May 2009, GDP was forecast to contract by ½% in 2009-10 before rising by 2¼% in 2010-11. Major Industries
Australia's major industries include property and business services, mining, manufacturing and construction. Growth during 2007-08 was recorded in most industries, including communication services (7.1%), construction (6.5%), finance and insurance (6.6%), transport and storage (5.4%), property and business services (5.1%), retail trade (4.5%), agriculture, forestry and fishing (up 4.4% following a decline of 17.7% in 2006-07) and manufacturing (3.3%).
During 2007-08, the industry accounting for the largest share of gross value added (at basic prices) was property and business services (excluding ownership of dwellings), with a share of 13.1%. Manufacturing was the second largest industry with a share of 10.7%. Prior to 1999-00, manufacturing was the largest industry.
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Net Worth
Australia's general government sector net worth, reflecting the difference between total assets and total liabilities, as at 30 June 2008 was $71,165 million, an increase of $24,506 million since 30 June 2007. The 2009-10 Budget estimated Australia's general government sector net worth to be $10,756 million and -$38,676 million in 2008-09 and 2009-10 respectively.
Budget Balance
A sustained period of government budget surpluses in the years prior to 2008-09 enabled the Australian Government to retire large amounts of government debt. Net debt was eliminated for the Australian Government during the year ended 30 June 2006. In the 2009-10 Budget released on 12 May 2009, Australian Government general sector net debt for 2008-09 was estimated to be -$4.7 billion (-0.4% of GDP). The 2009-10 Budget projected net debt to increase to 13.6% of GDP in 2012-13.
The Australian Government underlying cash surplus forecast of $21.7 billion (1.8% of GDP) in the 2008-09 Budget was reduced to $5.4 billion (0.4% of GDP) in the 2008-09 MYEFO. Since the release of the 2008-09 MYEFO on 5 November 2008, the Australian Government has announced four additional fiscal stimulus packages. See "Economic Outlook" in this Description of the Commonwealth and the Commonwealth Guarantee. In the 2009-10 Budget, the underlying cash balance forecast for 2008-09 was further reduced to a deficit of $32.1 billion (-2.7% of GDP). Government budget underlying cash deficits of $57.6 billion (-4.9% of GDP) and $57.1 billion (-4.7% of GDP) were forecast for 2009-10 and 2010-11 respectively, and underlying cash deficits of $44.5 billion (-3.4% of GDP) and $28.2 billion (-2.0% of GDP) were projected for 2011-12 and 2012-13 respectively.
Trade
The value of Australia's trade in goods and services totalled $490.0 billion in 2007-08, accounting for about 1% of world trade. Australia's largest trading partners were China, Japan, the United States, Singapore and the United Kingdom.
Domestic Economic Conditions
Gross Domestic Product
The following table shows chain volume GDP and related measures, real income measures and current price measures for each of the 2003-04, 2004-05, 2005-06, 2006-07 and 2007-08 fiscal years.
Table 6: Key National Accounts Aggregates 2003-04 2004-05 2005-06 2006-07 2007-08 Chain volume GDP and related measures(a) GDP (A$ millions) 956,017 982,786 1,012,269 1,045,674 1,083,661 GDP percapita (A$) 47,834 48,590 49,337 50,220 51,229 GDP market sector (A$ millions) 615,213 633,888 651,619 674,897 701,691 Net domestic product (A$ millions) 817,422 840,162 861,376 886,572 915,149
Real income measures(a) Real gross domestic income (A$ millions) 911,529 953,964 1,000,464 1,045,674 1,095,244 Real gross national income (A$ millions) 885,730 918,561 961,530 999,771 1,047,533 Real net national disposable income (A$ 746,669 775,350 809,914 840,330 879,249 millions) Real net national disposable income per capita (A$) 37,359 38,334 39,474 40,358 41,566
Current price measures GDP (A$ millions) 841,351 897,642 967,454 1,045,674 1,131,514 GDP percapita (A$) 42,097 44,380 47,152 50,220 53,491 Gross national income (A$ millions) 817,508 864,310 929,783 999,771 1,083,833 National net saving (A$ millions) 45,844 45,486 62,410 69,250 83,905 Household saving ratio -3.1 -2.1 0 1.9 0.8 Notes: – = nil or rounded to zero. (a) Reference year for chain volume measures and real income measures is 2006-07.
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Source: ABS Catalogue No. 5206.0.
Following a fall in GDP in volume terms in 1990-91 and a flat result in 1991-92, Australia experienced 16 years of consecutive growth. In 2007-08, GDP increased by 3.6% and GDP per capita increased by 2.0% (chain volume measures). In the 2009-10 Budget released on 12 May 2009, GDP for 2008-09 was forecast to be 0%. The 2009-10 Budget forecast GDP to contract by ½% in 2009-10 before rising by 2¼% in 2010-11.
The table below details the expenditure components of GDP on a chain volume measurement basis for each of the 2003-04, 2004-05, 2005-06, 2006-07 and 2007-08 fiscal years. Table 7: Expenditure Components of Gross Domestic Product (Chain Volume Measures(a)) 2003-04 2004-05 2005-06 2006-07 2007-08 (A$ millions) Final consumption expenditure General government National—defence 16,038 16,762 16,853 17,203 17,959 National—non-defence 50,745 53,926 54,835 57,157 58,827 Total national 66,792 70,687 71,691 74,360 76,786 State and local 103,259 105,758 109,149 111,846 115,825 Total general government 170,057 176,447 180,839 186,205 192,611 Households 524,706 548,016 562,227 584,874 606,284 Total final consumption expenditure 694,687 724,435 743,043 771,080 798,895 Private gross fixed capital formation Private business investment Machinery and equipment New 58,116 66,921 77,007 79,487 92,196 Net purchases of second hand assets -3,015 -2,856 -3,551 -3,969 -3,619 Total machinery and equipment 55,086 64,077 73,460 75,518 88,576 Non-dwelling construction New building 27,306 28,535 31,847 34,601 39,081 New engineering construction 18,302 21,136 27,749 32,440 35,583 Net purchases of second hand assets -635 -958 -642 -1,286 -478 Total non-dwelling construction 45,013 48,781 58,993 65,755 74,187 Livestock 2,523 2,617 2,658 1,867 1,815 Intangible fixed assets Computer software 7,520 7,982 8,411 9,247 10,790 Mineral and petroleum exploration 1,922 2,335 2,641 3,940 5,084 Artistic originals 469 522 558 601 646 Total intangible fixed assets 10,035 10,921 11,671 13,788 16,520 Total private business investment 112,715 126,875 147,012 156,928 181,099 Dwellings New and used dwellings 36,377 35,812 33,873 33,881 34,193 Alterations and additions 29,834 29,849 28,989 30,165 30,905 Total dwellings 66,202 65,656 62,860 64,046 65,097 Ownership transfer costs 21,269 17,733 18,134 17,973 18,017 Total private gross fixed capital formation 198,166 209,561 227,867 238,948 264,214 Public gross fixed capital formation Public corporations Commonwealth 3,112 3,678 4,409 2,326 1,011 State and local 10,694 11,880 14,044 16,430 18,925 Total public corporations 13,877 15,659 18,579 18,756 19,935 General government National—defence 1,798 1,606 1,701 3,077 2,846 National—non-defence 3,099 3,238 4,010 3,588 3,893 Total national 4,892 4,828 5,684 6,666 6,739
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2003-04 2004-05 2005-06 2006-07 2007-08 (A$ millions)
State and local 16,818 18,246 18,072 20,337 21,992 Total general government 21,734 23,054 23,782 27,003 28,731 Total public gross fixed capital formation 35,314 38,400 42,042 45,758 48,666
Total gross fixed capital formation 233,564 247,997 269,936 284,707 312,880
Domestic final demand 928,399 972,547 1,012,988 1,055,784 1,111,775
Changes in inventories Private non-farm 6,428 5,959 1,428 2,922 4,833 Farm 116 189 535 -327 654 Public authorities -414 -75 346 55 -883 Total changes in inventories 6,209 6,102 2,298 2,652 4,602
Gross national expenditure 934,108 977,598 1,014,965 1,058,436 1,116,377
Exports of goods and services 197,382 203,407 207,886 215,695 225,002 less Imports of goods and services 173,993 195,124 209,246 228,452 258,034 Statistical discrepancy 0 0 0 0 316 Gross domestic product 956,017 982,786 1,012,269 1,045,674 1,083,661 (a) Reference year for chain volume measures is 2006-07. Source: ABS Catalogue No. 5206.0.
Gross fixed capital formation was a major contributor to GDP growth in 2007-08, increasing by 9.9% and contributing 2.7% to GDP growth.
Household final consumption expenditure increased 3.6%, and contributed 2.0% to GDP growth in 2007-08. Within household final consumption expenditure, recreation and culture (up 6.1%) and rent and other dwelling services (up 2.6%) were the largest contributors.
Growth in private business investment, after slowing to 6.7% in 2006-07, accelerated to 15.4% in 2007-08, similar to growth in the four years prior to 2006-07. Private business investment contributed 2.3% to GDP growth in 2007-08, up from 1.0% in 2006-07. Investment in machinery and equipment, and non-dwelling construction increased 17.3% and 12.8%, respectively, and contributed 1.2% and 0.8% to growth in GDP in 2007-08, respectively.
From an industry perspective, growth during 2007-08 was recorded in most industries including communication services (7.1%), construction (6.5%), finance and insurance (6.6%), transport and storage (5.4%), property and business services (5.1%), retail trade (4.5%) and agriculture, forestry and fishing (up 4.4% following a decline of 17.7% in 2006-07). Manufacturing recorded moderate growth overall of 3.3%, but within the industry there was strong growth in metal products manufacturing (11.1%) and other manufacturing (11.4%).
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The following table identifies the income components of GDP on a current price basis for each of the 2003-04, 2004-05, 2005-06, 2006-07 and 2007-08 fiscal years. Table 8: Income Components of Gross Domestic Product (Current Prices) 2003-04 2004-05 2005-06 2006-07 2007-08 (A$ millions) Compensation of employees Wages and salaries 357,002 383,856 412,807 445,206 479,144 Employers' social contributions(a) 43,119 47,256 51,708 55,805 59,876 Total compensation of employees 400,121 431,112 464,515 501,011 539,020 Gross operating surplus Non-financial corporations Private non-financial corporations 142,661 156,486 178,180 199,494 220,374 Public non-financial corporations 20,874 20,951 20,655 16,551 15,563 Total non-financial corporations 163,535 177,437 198,835 216,045 235,937 Financial corporations 24,919 26,580 28,266 30,408 32,454 Total corporations 188,454 204,017 227,101 246,453 268,391
General government 14,661 15,646 16,770 17,938 19,252 Dwellings owned by persons 60,963 64,805 68,545 74,236 86,273 Total gross operating surplus 264,078 284,467 312,415 338,626 373,917
Gross mixed income 78,358 80,260 83,064 93,151 97,409
Total factor income 742,557 795,840 859,995 932,788 1,010,346
Taxes less subsidies on production and imports 98,791 101,800 107,458 112,886 122,324 Statistical discrepancy 0 0 0 0 -1,156
Gross domestic product 841,351 897,642 967,454 1,045,674 1,131,514 (a) Includes contributions to superannuation made by employers and payments of workers' compensation premiums. Source: ABS Catalogue No. 5206.0.
For the income components of GDP in 2007-08, there was growth in compensation of employees of 7.6% and growth in gross operating surplus ("GOS") of 10.4%. The growth in GOS was driven by growth in private non- financial corporations GOS (up 10.5%), partly offset by a fall in public non-financial corporations GOS (-6.0%). Prices
Headline inflation was 2.5% through the year to the March quarter 2009, down from 3.7% through the year to the December quarter 2008 and 5.0% through the year to the September quarter 2008. Over the year to the March quarter 2009, the increase in prices was mainly due to increases in the prices of housing, food, alcohol and tobacco, health services and education, partially offset by falls in the prices of automotive fuel and deposit and loan facilities. For further information about the Reserve Bank of Australia's medium-term inflation target, see "Currency, Monetary and Banking System—Monetary Conditions" in this Description of the Commonwealth and the Commonwealth Guarantee.
The following table details the through the year change for the consumer price index and the implicit price deflator for non-farm gross domestic product to the final (June) quarter of each of the fiscal years 2003-04, 2004-05, 2005-06, 2006-07 and 2007-08.
The implicit price deflator for non-farm gross domestic product corresponds to a broader set of prices in the economy than the consumer price index, including non-consumption goods and services such as those used by businesses, and exports.
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Table 9: Prices Implicit Price Deflator for All Groups Non-farm Gross Domestic Consumer Price Index Product (original) (seasonally adjusted) (Percentage change through the year) Year (a): 2003-04 2.5 4.2 2004-05 2.5 4.6 2005-06 4.0 4.4 2006-07 2.1 3.9 2007-08 4.5 6.7 (a) Percentage change to the June quarter of each period from the previous June quarter. Source: ABS Catalogue No. 6401.0, 5206.0; unpublished ABS and Treasury data.
Wages
The preferred measure of wages in Australia is the wage price index, which measures changes in the price of a unit of labour unaffected by changes in the quality or quantity of work performed.
Annual wages growth has been elevated since the beginning of 2005 but has remained below 4½% throughout this period. This is despite the fact that wage growth has been strong in industries (mining and construction) and states (Western Australia and Queensland) associated with the resources boom.
The following table details the through the year change for the wage price index to the final (June) quarter of each of the fiscal years 2003-04, 2004-05, 2005-06, 2006-07 and 2007-08.
Table 10: Wages Wage Price Index (Percentage change through the year, seasonally adjusted) Year (a): 2003-04 3.6 2004-05 4.0 2005-06 4.1 2006-07 4.0 2007-08 4.1 (a) Percentage change to the June quarter of each period from the previous June quarter. Source: ABS Catalogue No. 6345.0.
In line with the easing in labour market conditions, wages growth is expected to slow gradually. Growth in the Wage Price Index is forecast to moderate from 4¼% through the year to the June quarter 2009 to 3¼% through the year to the June quarters of both 2010 and 2011.
Labour market
Labour market conditions were positive in 2007-08, with strong growth in employment, a low unemployment rate and a high participation rate of 65.4%. The participation rate refers to the labour force expressed as a percentage of the civilian population aged 15 years and over.
The following table identifies key labour force statistics as at the June quarter in each of the referenced years.
Table 11: Labour force statistics(a) June June June June June quarter quarter quarter quarter quarter 2004 2005 2006 2007 2008 Total Employment ('000) 9,632 9,984 10,213 10,516 10,770 Total Unemployment ('000) 552 532 520 472 476 Unemployment Rate (%) 5.4 5.1 4.8 4.3 4.2 (a) As at the June quarter; calculated as an average over the quarter. Source: ABS Catalogue No. 6202.0.
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The worsening global financial crisis has impacted on Australia's growth prospects, with adverse consequences for the labour market. Australia's labour market conditions are expected to weaken in line with the significant slowdown in the domestic economy.
The 2009-10 Budget forecast employment to fall by 1½% through the year to the June quarter 2010 as the global recession impacts on the domestic economy. The 2009-10 Budget forecast employment to recover through 2010-11, rising by ½% through the year to the June quarter 2011. This would see the unemployment rate rise to 8¼% by the June quarter 2010, peaking at 8½% in 2010-11. The 2009-10 Budget forecast the participation rate to decline by 1¼% from its recent record high, reaching 64¼% by the June quarter 2011. The expected fall in the participation rate partly reflects an expected 'discouraged workers' effect, with some potential job seekers choosing not to participate because of worsening employment prospects.
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ECONOMIC OUTLOOK
The world economic outlook has deteriorated significantly since the 2009 UEFO released on 3 February 2009, with the 2009-10 Budget now forecasting the first annual contraction in six decades in world GDP.
The 2009-10 Budget forecast the world economy to contract by 1½% in 2009, a substantial 2 percentage point downward revision from the forecast in the 2009 UEFO. Forecasts for Australian GDP in the 2009-10 Budget were revised down significantly from the 2009 UEFO to a contraction of ½% in 2009-10.
The Government of Australia and the Reserve Bank of Australia have engaged in substantial fiscal and monetary policy responses.
Between September 2008 and April 2009, the Reserve Bank of Australia reduced its target cash rate by a cumulative 425 basis points. For further information regarding the Reserve Bank of Australia's target cash rate, see "Currency, Monetary and Banking System—Monetary Conditions" in this Description of the Commonwealth and the Commonwealth Guarantee.
The Australian Government has announced a number of fiscal stimulus measures including:
• the Government's Economic Security Strategy, a $10.4 billion discretionary fiscal stimulus package announced on 14 October 2008, focused on household consumption and dwelling investment;
• the Council of Australian Governments' $15.1 billion job creation stimulus package announced on 29 November 2008;
• the Government's $4.7 billion Nation Building package announced on 12 December 2008, providing for investment in road, rail and education infrastructure, as well as tax changes encouraging capital investment by Australian businesses;
• the Government's $42 billion Nation Building and Jobs Plan announced on 3 February 2009, providing for payments to low- and middle-income Australians, investment in schools, housing, energy efficiency, community infrastructure and roads and support to small businesses; and
• the Government's $22 billion Nation Building Infrastructure package announced on 12 May 2009, investing in the quality, adequacy and efficiency of transport, communications, energy, education and health infrastructure across Australia.
Policy actions by the Australian Government and the Reserve Bank of Australia are expected to help to support the Australian economy. However, the magnitude and ferocity of the global recession mean that policy can mitigate only the worst effects of global conditions. A recession in Australia has become inevitable, with unavoidable consequences for Australian jobs.
In addition, on 7 April 2009, the Australian Government announced that the Commonwealth of Australia would establish a new company to build and operate a new National Broadband Network. The newly established company, of which the Commonwealth of Australia will be the majority shareholder, will invest up to $43 billion over eight years to build the National Broadband Network. For further information regarding the National Broadband Network, see "Major Industries—Communication Services—Telecommunications" and "Government Finance—Commonwealth Investment in the National Broadband Network" in this Description of the Commonwealth and the Commonwealth Guarantee.
Other action the Australian Government has taken to promote financial system stability and ensure the continued flow of credit throughout the economy includes implementation of:
• the Financial Claims Scheme establishing:
< measures under Division 2AA of the Banking Act 1959 (Cth) to:
: protect account holders' deposits made with eligible ADIs (other than foreign ADIs), and interest accrued on such deposits, to a total maximum value of $1,000,000 per customer per ADI; and
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: facilitate prompt access by account holders to deposits protected under the Financial Claims Scheme in the event that an ADI fails; and
< measures under Part VC of the Insurance Act 1973 (Cth) to facilitate the payment of moneys payable under valid claims made by eligible claimants against a general insurer that has become insolvent; and
• the Guarantee Scheme for Large Deposits and Wholesale Funding, a voluntary scheme allowing:
< ADIs (other than foreign ADIs) to apply to have deposit balances of greater than $1,000,000 per customer per ADI and certain non-complex senior unsecured debt instruments with maturities of up to 60 months; and
< foreign ADIs to apply, subject to satisfaction of certain conditions, to have certain deposits held by Australian residents at call or with maturities up to and including 31 December 2009 and certain non-complex senior unsecured short-term debt instruments having maturities up to 15 months,
in each case that satisfy the eligibility criteria set out in the Scheme Rules, guaranteed by the Commonwealth of Australia.
For further information regarding the Guarantee Scheme and the Financial Claims Scheme, see "The Commonwealth of Australia Guarantee", "Government Finance—Guarantees and Other Contingent Liabilities—Commonwealth Initiatives to Enhance the Stability of the Australian Financial System" and "Currency, Monetary and Banking System—Regulation of the Financial System—Australian Prudential Regulation Authority—APRA's Main Powers" in this Description of the Commonwealth and the Commonwealth Guarantee.
In addition, in order to ensure that State and Territory ("State") governments have access to the debt market, on 25 March 2009, the Australian Government announced that it would be introducing a voluntary guarantee of State borrowing. For further information with respect to the guarantee of State borrowing, see "Government Finance—Guarantees and Other Contingent Liabilities—Commonwealth Guarantee of State and Territory Borrowing" in this Description of the Commonwealth and the Commonwealth Guarantee.
The outlook for household consumption softened further between the release of the 2009 UEFO on 5 February 2009 and the release of the 2009-10 Budget on 12 May 2009. After slowing sharply in 2008-09, household consumption was forecast in the 2009-10 Budget to contract by ¼% in 2009-10. While the household sector has been buffeted by a series of negative shocks stemming from the global recession, government stimulus packages were providing considerable support to household consumption. The Economic Security Strategy and the Nation Building and Jobs Plan were expected to collectively add $19.7 billion to household incomes, and the pension increase announced in the 2009-10 Budget was also anticipated to add significantly to household incomes and help support consumption.
The 2009-10 Budget forecast household consumption growth to strengthen to a still below-trend 1¾% in 2010- 11. With large falls in household wealth and slower income growth, coupled with still rising unemployment, household consumption is likely to be subdued for some time to come. As households rebuild their savings, this is expected to facilitate a recovery in household consumption.
The 2009-10 Budget forecast the near-term outlook for dwelling investment to be dominated by low levels of household confidence and persistent funding difficulties for medium-density dwellings. As a result, the 2009-10 Budget forecast dwelling investment to remain flat in 2009-10 before staging a solid recovery in 2010-11 with growth of 11½%. Following this near-term weakness, activity in the sector is expected to be supported by firm population growth, the effects of the substantial easing in monetary policy and continued solid rental yields helping to encourage investors back into the market.
The Government's First Home Owners Boost, a Government initiative to stimulate housing activity by supplementing the $7,000 grant available to first home buyers with a further $7,000 for purchases of established homes and a further $14,000 for purchases of newly constructed homes until 30 September 2009 and by a further $3,500 and $7,000 respectively until 31 December 2009, has contributed to a significant increase in demand by first home buyers, and thereby supported dwelling prices and auction clearance rates at the lower
16 Annex I
end of the housing market. Loans to first home buyers have risen sharply to the highest level as a proportion of the market since 1991. This demand is expected to continue to flow through to increased investment in new dwellings, and the extension of the First Home Owners Boost is expected to support activity during 2009.
The collapse in global and domestic demand, and lower commodity prices and profits stemming from the global recession, has reduced the impetus for business investment. The 2009-10 Budget forecast total new business investment to fall by 18½% in 2009-10, before stabilising in 2010-11 with growth of 3½%.
The Government is providing investment incentives through the Small Business and General Business Tax Break described under "Government Finance—Taxation—Business tax arrangements—Investment Allowances" in this Description of the Commonwealth and the Commonwealth Guarantee. The Australian Business Investment Partnership is also expected to provide liquidity support to the commercial property sector.
Strong growth in public final expenditure during 2009-10 and 2010-11 is driven by public investment flowing from the Government's economic stimulus packages, including the $22 billion Nation Building Infrastructure package, the $42 billion Nation Building and Jobs Plan and other financial packages including the November 2008 Council of Australian Governments initiatives and the December 2008 Nation Building package. This investment is on top of already high levels of state and local investment. These funding packages represent a significant boost to total public investment and were forecast in the 2009-10 Budget to see public investment rise by 25% in 2009-10, the largest annual increase on record.
In line with the collapse in world trade resulting from the global recession, Australia's exports are expected to fall significantly in 2009-10. The 2009-10 Budget forecast exports to fall 4% in 2009-10, before rising by 4½% in 2010-11 as global demand strengthens. The 2009-10 Budget forecast imports to contract by 6½% in 2009-10, driven by the weaker outlook for domestic demand, and the depreciation of the Australian dollar increasing prices of imported goods. The fall in imports is expected to be broad-based, but is led by a sharp fall in capital goods, reflecting the contraction in business investment which has a high imported component. The 2009-10 Budget forecast imports to rise solidly in 2010-11 as the recovery in the domestic economy flows through to a pick up in demand.
The global recession has seen a turnaround in demand for commodities, with industrial production falling sharply around the world and global trade collapsing. As such, the 2009-10 Budget forecast the terms of trade to fall by 13¼% in 2009-10, taking them back to around 2006-07 levels.
The current account deficit narrowed to a seven year low of 2.2% of GDP at the end of 2008, driven by a trade surplus. The 2009-10 Budget forecast the current account deficit to widen over 2009-10 and 2010-11, as the trade account moves back into deficit with commodity prices falling. The net income deficit is expected to remain relatively stable. The 2009-10 Budget forecast the current account deficit to average 5¼% of GDP in 2009-10 and 5¾% of GDP in 2010-11.
The sharp slowdown in economic activity stemming from the global recession is expected to weigh heavily on labour demand during 2009-10 and 2010-11. The 2009-10 Budget forecast employment to contract through to mid-2010, falling by 1½% through the year to the June quarter 2010, resulting in a rise in the unemployment rate to a peak of 8½% in 2010-11.
Inflationary pressures have moderated significantly over the past year as the deepening global recession has lowered previous demand pressures. Price pressures are expected to ease further over 2009-10 and 2010-11 as the effects of the global recession continue to impact on the domestic economy. The 2009-10 Budget forecasts headline and underlying inflation to fall to 1¾% through the year to the June quarter 2010 and 1½% through the year to the June quarter 2011.
17 Annex I
Table 12: Domestic economy forecasts(a) 2007-08 2008-09 2009-10 2010-11 (Outcomes)(b) Estimates Forecasts UEFO Budget UEFO Budget (Percentages) Panel A - Demand and output(c) Household consumption 3.7 1¾ 1 ½ -¼ 1¾ Private investment Dwellings 1.6 -2 -2½ 40 11½ Total business investment(d) 14.2 ½ 2½ -15½ -18½ 3½ Non-dwelling construction(d) 11.4 -2 ½ -18 -26 3 Machinery and equipment(d) 16.0 2 3 -16½ -16½ 4 Private final demand(d) 5.5 ¾ ½ -2½ -4 2¾ Public final demand(d) 4.6 5½ 5 7¼ 7¾ -½ Total final demand 5.3 1¾ 1½ -¼ -1¼ 2 Change in inventories(e) 0.2 -¼ -1½ 0 ¼ ¾ Gross national expenditure 5.5 1½ ¼ -¼ -1¼ 2½ Exports of goods and services 4.3 ½ -½ ½ -4 4½ Imports of goods and services 12.9 2½ -1½ 3 -6½ 6½ Net exports(e) -1.9 -½ ¼ ¾ ¾ -½ Real gross domestic product 3.6 1 0 ¾ -½ 2¼ Non-farm product 3.6 1 -¼ ½ -½ 2¼ Farm product 4.5 11 13 5 1 0 Nominal gross domestic product 8.2 6¾ 5¾ 0 -1½ 3¾ Panel B - Other selected economic measures External accounts Terms of trade 5.2 9 8¾ -12¾ -13¼ 0 Current account balance (% of GDP) -6.2 -3¾ -3 -5½ -5¼ -5¾ Labour market Employment (labour force survey basis)(f) 2.4 -¼ -¼ 0 -1½ -½ Unemployment rate (%)(g) 4.2 5½ 6 7 8¼ 8½ Participation rate (%)(g) 65.5 64¾ 65¼ 64½ 64¾ 64¼ Prices and wages Consumer Price Index(f) 4.5 2 1¾ 2 1¾ 1½ Gross non-farm product deflator 4.3 5¾ 5¾ -½ -1 1½ Wage Price Index(f) 4.1 3¾ 4¼ 3¼ 3¼ 3¼ (a) Percentage change on preceding year unless otherwise indicated. (b) Calculated using original data from ABS Catalogue No. 5206.0 (which does not include revisions from ABS Catalogue No. 5204.0). (c) Chain volume measures except for nominal gross domestic product, which is in current prices. (d) Excluding second-hand asset sales from the public sector to the private sector, and adjusted for privatisation of Telstra. (e) Percentage point contribution to growth in GDP. (f) Through the year growth rate to the June quarter 2008 and 2009. (g) Estimate for the June quarter 2008 and 2009. Source: ABS Catalogue No. 5206.0, 5302.0, 6202.0, 6345.0, 6401.0; unpublished ABS and Treasury data.
The above estimates are based on forecasts of the economic outlook by the Treasury of the Commonwealth of Australia. Treasury generally conducts two major rounds of forecasting each year, in connection with the budget each May and the mid-year economic and fiscal outlook issued between October and January. In 2009, an additional forecast update, the 2009 UEFO, was released in response to rapid changes in the global economy.
Treasury's forecasting approach encompasses a broad range of information. The national accounts form the framework for the forecasting exercise. Insight is also gathered from liaison visits with large, medium and small businesses, industry organisations and State Treasuries and Treasury's International Economy Division's latest assessment of the world outlook. Any changes to fiscal policy are also incorporated.
The forecasts are based on several technical assumptions. It is assumed that interest rates will move broadly in line with prevailing market expectations at the time of forecasting, and that exchange rates and oil prices will remain around recent average levels.
Treasury's Domestic Economy Division assesses the implications of these inputs using a mix of single-equation econometric models, partial indicators, leading indicators, business surveys and advice from specialist agencies.
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Forecasting judgments are informed by economic theory and assessments of recent economic analysis. Forecasts are discussed both within Treasury and with other government agencies.
Updated Methodology for Forward Estimates in 2009-10 Budget
The fiscal aggregates in the budget are underpinned by a set of forward estimates consisting of short-term economic forecasts and projections based on medium-term assumptions. Since the mid-1990s, the budget has been based on forecasts for the current and budget year and an assumption that the economy grows at its long- run trend rate over the three-year projection period. This approach was suitable during a period of stable growth when the economy did not deviate far from trend, but is not appropriate in the current circumstances.
The magnitude of the global recession means that the Australian economy is expected to be operating below trend in 2008-09 and over the next two years, pushing the unemployment rate well above its longer-term sustainable rate (the non-accelerating inflation rate of unemployment). Maintaining the previous approach in the 2009-10 Budget would have unrealistically locked into the projections a level of GDP significantly below potential, and would not have provided a credible view of the likely growth path of the economy as it emerges from recession. As a result, this approach would have provided a misleading picture of revenue and expenditure estimates.
In order to provide a better view of the likely growth path of the economy, two substantive changes were made to the forward estimates methodology in the 2009-10 Budget. The forecast period was extended by one year to 2010-11, when the economy is expected to grow below trend. Further, GDP was assumed to grow above (rather than at) trend in the projection years. Both of these changes are broadly based on the historical experience of the economy as it emerged from the 1980s and 1990s recessions.
Extending the forecasts to 2010-11 better reflects the expected growth path of the economy, notwithstanding the difficulties involved in forecasting that far in the future. Given the nature and severity of the global recession, the current downturn in the Australian economy is therefore expected to extend to three years of below-trend growth, compared with one year for the 1980s recession and two years for the 1990s recession (see Figure 1 below).
This period of below-trend growth will result in substantial spare capacity becoming available, and in the 2009- 10 Budget the economy was assumed to grow above trend in the projection period as this spare capacity is brought into use. Strong business investment in the period leading up to the recession has resulted in a substantial build-up in capacity, particularly in mining production and transport infrastructure. This will enable resource exports to respond quickly as global demand recovers, supporting GDP growth.
Real GDP was assumed to grow by 4½% per annum in the projection period, above the medium-term trend rate of 3%. Growth over the first three years of the forecast recovery was forecast to average 3¾%. This compares with an average of 4.8% after the 1980s recession and 4% after the 1990s recession (see Figure 1 below).
This period of above-trend growth has the effect of bringing down the unemployment rate by 1% in each year of the projections, reaching 6½% by the end of the forward estimates. Again, after peaking in the 1980s and 1990s recessions, the unemployment rate declined by around 2% over the following two years.
This approach is also in line with that taken in budgets in the early 1990s, when above-trend rates of growth were assumed as the economy recovered from recession. This approach is also similar to what is being done in other OECD countries, including the United States, the United Kingdom, New Zealand and Sweden.
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Figure 1: Real GDP
Per cent Per cent 8 8
6 6 30-year average
4 4
2 2
0 0 80s recovery 90s recovery
-2 -2 Forward estimates -4 -4 1977-78 1982-83 1987-88 1992-93 1997-98 2002-03 2007-08 2012-13
Source: ABS Catalogue No. 5206.0; Treasury.
20 Annex I
MAJOR INDUSTRIES
In 2007-08, the industry with the largest share of gross value added (at basic prices) was property and business services (excluding ownership of dwellings), with a share of 13.1%. Manufacturing ranked second with a share of 10.7%.
The following table identifies the percentage of gross value added by industry at basic prices for each of the 2003-04, 2004-05, 2005-06, 2006-07 and 2007-08 fiscal years.
Table 13: Percentage of Gross Value Added (Basic Prices) Industry (a) 2003-04 2004-05 2005-06 2006-07 2007-08 (Percentages) Agriculture, forestry and fishing 3.0 3.0 3.0 2.4 2.4 Mining 8.1 8.3 8.1 8.5 8.4 Manufacturing 11.7 11.3 10.9 10.7 10.7 Electricity, gas and water supply 2.5 2.4 2.4 2.3 2.2 Construction 6.9 7.0 7.4 7.5 7.7 Wholesale trade 5.0 5.0 5.0 4.9 4.9 Retail trade 5.9 5.9 5.8 5.9 5.9 Accommodation, cafes and restaurants 2.1 2.2 2.2 2.1 2.1 Transport and storage 4.8 4.9 4.9 5.0 5.1 Communication services 2.3 2.3 2.4 2.6 2.6 Finance and insurance 7.3 7.4 7.6 8.0 8.2 Property and business services(b) 13.3 13.1 13.1 13.0 13.1 Government administration and defence 4.2 4.2 4.2 4.2 4.1 Education 4.7 4.6 4.6 4.5 4.4 Health and community services 6.3 6.3 6.5 6.4 6.3 Cultural and recreational services 1.5 1.6 1.6 1.6 1.6 Personal and other services 2.0 2.0 2.0 2.0 2.0 Ownership of dwellings 8.3 8.4 8.5 8.5 8.4 Gross value added at basic prices 100.0 100.0 100.0 100.0 100.0 (a) Based on the Australian and New Zealand Standard Industrial Classification 1993. (b) Excludes ownership of dwellings. Source: ABS Catalogue No. 5206.0.
The table below identifies employment share by industry for each of the 2003-04, 2004-05, 2005-06, 2006-07 and 2007-08 fiscal years.
Table 14: Employment share by industry Industry (a) 2003-04 2004-05 2005-06 2006-07 2007-08 (Percentages) Agriculture, forestry and fishing 3.9 3.7 3.5 3.5 3.4 Mining 1.0 1.1 1.3 1.3 1.4 Manufacturing 11.2 11.1 10.6 10.3 10.4 Electricity, gas and water supply 0.8 0.8 0.9 0.8 0.8 Construction 8.1 8.5 8.7 9.1 9.1 Wholesale trade 4.7 4.5 4.3 4.6 4.3 Retail trade 15.1 15.2 14.9 14.5 14.8 Accommodation, cafes and restaurants 4.9 5.1 4.8 4.9 4.8 Transport and storage 4.5 4.6 4.6 4.6 4.7 Communication services 1.8 1.8 1.8 1.8 1.7 Finance and insurance 3.6 3.7 3.7 3.9 3.8 Property and business services 11.8 11.5 11.9 12.0 12.0 Government administration and defence 4.7 4.6 4.6 4.7 4.6 Education 7.3 6.9 7.2 7.0 7.2 Health and community services 10.0 10.2 10.4 10.5 10.5 Cultural and recreational services 2.5 2.7 2.7 2.7 2.7 Personal and other services 3.9 4.0 4.0 3.8 3.9 Total 100.0 100.0 100.0 100.0 100.0 (a) Based on the Australian and New Zealand Standard Industrial Classification 1993. Source: ABS Catalogue No. 6291.0.55.003.
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Property and Business Services
The property and business services industry includes all units mainly engaged in renting and leasing assets as well as units engaged in providing a wide variety of business services. Property and business services (excluding ownership of dwellings) contributed 13.1% of gross value added (at basic prices) in 2007-08. Gross value added of the property and business services industry grew by 15.9% (in volume terms) between 2002-03 and 2007-08, representing average annual growth of 3.0%.
In 2007-08, the property and business services industry was the second-largest employer, employing 1.3 million people (12% of total employment).
Manufacturing
The manufacturing industry has historically been the largest industry in Australia. However, the gross value added contribution of manufacturing (at basic prices) has been decreasing over the past three decades. In the early 1970s, manufacturing value added contributed almost 25% of gross value added (at basic prices), while in 2007–08 the manufacturing industry contributed 10.7% of gross value added (at basic prices). Although the manufacturing industry currently contributes a smaller percentage of gross value added (at basic prices) than it did twenty years ago, output in the industry has had an upward trend over the same time period.
The manufacturing sector accounted for around 10.4% of total employment in 2007-08.
The following table provides a breakdown of gross value added (chain volume measures) by the manufacturing industry for each of the 2003-04, 2004-05, 2005-06, 2006-07 and 2007-08 fiscal years. Table 15: Industry Value Added (Chain Volume Measures) Industry Subdivision (a) 2003-04 2004-05 2005-06 2006-07 2007-08 (A$ millions) Food, beverage and tobacco 19,635 19,812 19,668 19,846 19,769 Textiles, clothing and footwear 4,156 3,381 3,152 3,103 2,961 Wood and paper products 7,274 7,331 7,044 6,875 6,592 Printing, publishing and recorded media 10,871 10,600 10,399 10,646 10,948 Petroleum, coal, chemical, etc. 15,528 15,528 14,895 14,703 15,061 Non-metallic mineral products 4,402 4,618 5,148 5,258 5,533 Metal products 17,240 16,751 16,582 18,322 20,350 Machinery and equipment 19,577 19,682 20,560 20,510 21,020 Other manufacturing 4,850 4,464 4,032 4,030 4,490 Total 103,093 101,846 101,320 103,292 106,724 (a) Based on the Australian and New Zealand Standard Industrial Classification 1993. Source: ABS Catalogue No. 5206.0.
Ownership of Dwellings
Ownership of dwellings consists of landlords and owner-occupiers of dwellings. Owner-occupiers are regarded as operating a business that generates a gross operating surplus. The imputation of a rent to owner-occupied dwellings enables the services provided by dwellings to their owner-occupiers to be treated consistently with the marketed services provided by rented dwellings to their tenants. Owner-occupiers are regarded as receiving rents (from themselves as consumers), paying expenses and making a net contribution to the value of production which accrues to them as owners. Ownership of dwellings contributed 8.4% of gross value added (at basic prices) in 2007-08.
Mining
In 2007-08, mining accounted for 8.4% of gross value added (at basic prices). However, in 2007-08, exports of mining (non-rural) commodities accounted for around 49% of total exports by value.
The gross value of mine production for 2007-08 was $111.6 billion, a 10.0% increase over the previous year. Mineral and petroleum exploration expenditure increased to $5.5 billion in 2007-08 (at current prices).
In 2007, Australia was the world's largest exporter of metallurgical coal, the second largest exporter of thermal coal, iron ore, lead, zinc ores and concentrates and zinc metal and the third largest exporter of aluminium.
22 Annex I
Australia's export earnings from non-rural commodities are estimated to have been $114.8 billion in 2007-08 (at current prices).
Private (real) new capital expenditure in the mining sector was $26.4 billion in 2007-08, around 19.2% higher than in 2006-07. In 2007-08, the mining sector, including services, employed around 146,000 people directly, around 1.4% of the work force. These sectors generate further manufacturing jobs downstream in smelting and refining, basic metal fabrication, non-metallic mineral products, petroleum, coal and basic chemical products and electricity and gas.
Over recent years strong commodity prices have provided significant stimulus to Australian economic growth and national incomes. Strong investment activity in the mining sector resulted in business investment recently reaching a four decade high as a share of GDP.
The adverse effect of the broad-based weakness in the global economy is being reflected in lower commodity prices. In line with the sharp reduction in global demand, commodity prices have fallen substantially, with the prices of key bulk commodities expected to lose much of their gains of recent years. Prices are expected to remain under pressure until the global economy, and China in particular, begins to recover.
The collapse in global commodity prices, and weaker global and domestic demand, are expected to result in business investment returning rapidly to its pre-commodity boom share of GDP over 2009-10 and 2010-11. Momentum from a number of large engineering projects is expected to provide some support to the sector. Construction
The construction industry contributed 7.7% of gross value added (at basic prices) in 2007-08. Over the last 20 years, value added in volume terms has grown by around 4.3% each year. The industry tends to experience peaks and troughs due to factors such as changing interest rates, property speculation and fiscal policy.
In 2000-01, there was a large fall in output as a substantially large amount of building activity was brought forward to avoid the introduction of the GST. Since 2001-02, value added has grown strongly, buoyed by the terms of trade boom and strong growth in house prices.
Employment in the construction industry was approximately 1 million persons in November 2008. Since 2000- 01, employment in construction has grown strongly, with its share in total employment rising from 7.6% to 9.1% in 2007-08, making it the fifth largest employer among industries. Finance and Insurance
Companies in the finance and insurance industry provide a range of services, from the provision of credit and financial advice to insurance. The sector contributed 8.2% of gross value added (at basic prices) in 2007-08, a proportion that has remained generally stable over the past 15 years following deregulation during the 1980s.
However, the stability of the sector's share of gross value added hides rapid change within the industry. The advent of internet banking, ATM machines and credit scoring have prompted massive investment in computer software and machinery and equipment (computers), and far less construction (new branches and outlets). These innovations most likely explain a trend decline in the wage share of total finance and insurance income over the past two decades.
Key trends and developments in the insurance sector in recent years include significant improvements in the risk management capabilities of both the prudential regulator and industry participants, and significant industry consolidation, with the largest four insurance groups now accounting for around 70% of insurance premiums. Health and Community Services
The health and community services industry comprises hospitals, nursing homes, medical and dental services, child care services and community care services. Health and community services contributed 6.3% of gross value added (at basic prices) in 2007-08.
23 Annex I
Retail Trade
Retail trade is one of the larger industries in Australia. The industry comprises food retailing, personal and household goods retailing and motor vehicle retailing and services. Retail trade is a labour intensive industry, and the average labour income share of 75% reflects this. The link between the deregulation of shopping hours and measured hours worked is one of the key issues affecting productivity in this industry. Retail trade contributed 5.9% of gross value added (at basic prices) in 2007-08.
Transport and Storage
The efficiency and competitiveness of the Australian economy is significantly influenced by the transport system, which is a strategic network industry. The transport and storage sector accounted for approximately 5.1% of gross value added (at basic prices) in 2007-08. The Bureau of Infrastructure, Transport and Regional Economics estimates that the Australian freight task will almost double between 2005 and 2020. Passenger transport is also expected to increase significantly, particularly in urban areas. This will require investment in additional transport infrastructure and improvements in the utilisation of existing and new infrastructure.
The public sector in Australia provides those transport services (operations and infrastructure) that involve public good characteristics and are generally not commercially attractive. The public sector also provides the regulatory frameworks to support a safe, fair and efficient transport sector. The major airports have all been privatised. The private sector also has a significant infrastructure role in rail and ports sectors.
Wholesale Trade
The wholesale trade industry consists of basic material wholesaling, machinery and motor vehicle wholesaling, which includes computer wholesaling, and personal and household good wholesaling. The 1990s saw strong growth in industry value added. This increase in value added came from substantial rationalisation within the industry, a wider uptake of technology amongst firms, and the increased use of new inventory management techniques, such as 'just-in-time' processing. Wholesale trade contributed 4.9% of gross value added (at basic prices) in 2007-08.
Education
The education industry is a labour intensive, service based sector, with a large and well educated workforce. The education industry's share of gross value added (at basic prices) was 4.4% in 2007-08 and has remained fairly stable over the past five years. The education industry is dominated by the public sector, with both Commonwealth and State governments responsible for key education services across the economy, including the provision of primary, secondary and tertiary education, and, increasingly, early childhood education.
Government Administration and Defence
The government administration and defence industry includes central, state and local government units mainly engaged in government administration and regulatory activities, as well as judicial authorities and commissions, representatives of overseas governments, and the Army, Navy and Air defence forces and civilian units mainly engaged in defence administration. Government administration and defence contributed 4.1% of gross value added (at basic prices) in 2007-08.
Agriculture, Forestry and Fishing
The agriculture, forestry and fishing industry contributed 2.4% of gross value added (at basic prices) in 2007-08. Historically, the contribution of this industry to the Australian economy has been trending downwards, though the absolute size of the industry continues to grow. The industry is dominated by agriculture, with forestry and fishing making up only around 5% of industry output in 2007-08 based on gross value added (chain volume measures). Production in the past three years has been negatively impacted by drought conditions and recent other severe climate events. These impacts are likely to flow through to exports in coming months.
Agriculture
The following table presents production data of Australia's principal rural commodities for each of the 2003-04, 2004-05, 2005-06, 2006-07 and 2007-08 fiscal years.
24 Annex I
Table 16: Principal Rural Commodities - Gross values and volumes of Australian production 2003-04 2004-05 2005-06 2006-07 2007-08 Commodities A$m kt A$m kt A$m kt A$m kt A$m kt Wool 2,397 509 2,166 520 2,054 520 2,282 502 2,612 438 Meat 10,896 3,732 12,033 3,934 11,960 3,909 12,336 4,147 12,191 4,067 Wheat 5,636 26,132 4,317 21,905 5,099 25,150 2,619 10,822 5,113 13,039 Sugar cane(a) 854 36,993 980 37,822 1,032 37,128 1,221 36,397 870 33,973 Cottonseed and lint 689 843 1,222 1,557 995 1,441 542 689 253 321 Milk(b) 2,809 10,076 3,194 10,127 3,341 10,089 3,178 9,583 4,575 9,223 Notes: kt = kilotonne. NA = Not available. (a) Cut for crushing. (b) Units of measurement: ML. Source: Australian Bureau of Agricultural and Resource Economics, Australian Commodities, Vol. 15 No. 4, December quarter 2008 (pages 762, 763, 765 and 766), Australian Commodities, Vol. 16 No. 1, March quarter 2009 (pages 240, 241, 243 and 244).
Electricity, Gas and Water Supply
The electricity, gas and water supply industry contributed 2.2% of gross value added (at basic prices) in 2007– 08. Electricity is the largest part of this industry and contributes 63% to industry value added (chain volume measures). Water, sewerage and drainage services account for 30% of gross value added (chain value measures) and gas contributes 7% to gross value added (chain value measures). Prior to 1990, the industry was highly regulated and most utilities operated as monopolies. The electricity industry was vertically integrated in most, if not all jurisdictions, with single companies responsible for generation, transmission, distribution and retail. Significant reforms occurred in the three sectors over the 1990s. However, different jurisdictions approached deregulation on different time frames. Some of the reforms included corporatisation, privatisation and the structural separation of electricity utilities. These reforms have continued into the current decade. Value-added in volumes terms grew by 1.7% per year on average between 1985–86 and 2007–08. Electricity
The energy market in Australia has undergone significant reform since the 1990s, which has increased investment and improved productivity. The reforms have included: disaggregating elements of the electricity supply chain; introducing competition in electricity generation and retailing; and corporatising, and, in some States, privatising electricity assets. The creation of the National Electricity Market has also allowed electricity trading between Queensland, New South Wales, Victoria, South Australia, Tasmania and the Australian Capital Territory through a wholesale electricity pool.
In 2006, the Council of Australian Governments ("COAG") agreed to energy market reforms to enhance governance, improve transmission planning and assist the development of more effective energy financial markets. In 2007, COAG also agreed to establish a national energy market operator for electricity and gas with a national planning function.
Australia's electricity prices, although having risen in recent years, remain low by world standards largely due to substantial natural resources. In 2006, average electricity prices in capital cities were generally lower than in many OECD countries, including the United Kingdom, Spain, France and Italy.
Australia has about 244 large electricity generators, of which around 190 are in the National Electricity Market jurisdictions in eastern and southern Australia. The National Electricity Market supplies electricity to approximately 8.7 million residential and business customers using an extensive electricity distribution network covering approximately 700,000 kilometres. In 2007-08, the market generated around 208 terawatt hours of electricity with a turnover of almost $11.1 billion. The generation sector uses a variety of fuel sources to produce electricity. Black and brown coal accounted for around two-thirds of total generation capacity across the National Electricity Market in 2007-08, followed by hydroelectric generation (17%) and gas-fired generation (15%).
Electricity generation in Australia is emissions intensive due to the predominance of coal. The Government has committed to policies aimed at addressing climate change. In 2007, the Government committed to ensuring 20% of Australia's electricity supply is derived from renewable sources by 2020. On 15 December 2008, the Australian Government indicated its intention to introduce emissions trading through the Carbon Pollution Reduction Scheme from 1 July 2010. On 4 May 2009, the Australian Government deferred the commencement of the Carbon Pollution Reduction Scheme until 1 July 2011 to help Australian companies manage the impacts of the global recession.
25 Annex I
The Carbon Pollution Reduction Scheme will cover around 75% of national emissions, including the stationary energy sector. It will be a 'cap and trade' scheme under which significant emitters of greenhouse gases will need to acquire and surrender a carbon pollution permit for each tonne of greenhouse gas that they emit during the compliance year. A one year fixed price phase will apply from the commencement of the Carbon Pollution Reduction Scheme on 1 July 2011 until 30 June 2012. During the fixed price phase, an unlimited number of carbon pollution permits will be issued to liable businesses at the cost of $10 per tonne. From 1 July 2012, businesses covered by the Carbon Pollution Reduction Scheme will be required to purchase carbon pollution permits at the prevailing market price (subject to a price cap, which will apply from commencement of the Scheme). Permits will be tradable, which will ensure that emissions are reduced at the lowest possible cost.
A global recession buffer consisting of additional free permits for emissions-intensive trade-exposed ("EITE") activities will be provided for EITE industries for the first five years of the Scheme. The Australian Government has also allocated up to $200 million to the Climate Change Action Fund in 2009-10 to support businesses and community organisations that do not receive EITE assistance, but do have significant energy costs, to take action to reduce carbon pollution through energy efficiency before the Scheme starts.
The Australian Government has announced its medium-term target to reduce Australia's greenhouse gas emissions by between 5% and 25% below 2000 levels by the end of 2020. The top of this range (5% below 2000 levels) represents an unconditional commitment to reduce emissions by 2020, irrespective of the actions of other countries. The middle of this range (15% below 2000 levels) is conditional on a global agreement where all major economies substantially restrain emissions and all developed countries take on comparable reductions to that of Australia, but which falls short of an outcome of stabilising atmospheric concentrations of greenhouse gases at 450 parts per million of carbon dioxide equivalent. The bottom of this range (25% below 2000 levels) is conditional on an ambitious global agreement to stabilise atmospheric concentrations of greenhouse gases at 450 parts per million of carbon dioxide equivalent or lower. The Australian Government's long-term target is to reduce emissions by 60% below 2000 levels by 2050. Should the world reach an ambitious agreement, the Government will seek a new election mandate for an increased 2050 target.
These policies are expected to lead to significant new investment in electricity generation and transmission. Communication Services
The communication services industry, which comprises postal, courier and telecommunications services, contributed 2.6% of gross value added (at basic prices) in 2007-08. Telecommunications
The Australian telecommunications market has been open to full competition since 1 July 1997. Since that time, the telecommunications sector has developed into a more dynamic and innovative market, with businesses and households benefiting from lower prices and more variety of carriers.
The telecommunications sector is subject to a number of regulatory mechanisms at the retail level. A Universal Service Obligation ("USO") is placed on the telecommunications industry to ensure that all people in Australia have reasonable access to basic telephone services, on an equitable basis. Funding of the USO is provided by all licensed telecommunications carriers.
Telecommunications-specific competition provisions are contained in Parts XIB and XIC of the Trade Practices Act 1974 (Cth) (the "TPA"). These provisions are based on, but do not exactly mirror, generic competition laws.
• Part XIB of the TPA establishes an anti-competitive conduct regime for telecommunications markets, which applies in addition to the general competition provisions under Part IV of the TPA.
• Part XIC of the TPA establishes an industry specific regime for regulated access to bottleneck carriage services and provides the core access arrangements for the telecommunications industry.
26 Annex I
This competition framework has had a number of important benefits for consumers. For example, access to Telstra's copper local loop network by its competitors has been a key driver of the growth of broadband in Australia. Telstra, formerly a Government-owned monopoly, was privatised between 1997 and 2006. Tranches of approximately 33% and 16% of Telstra were sold in 1997 and 1999. In 2006, the Government sold a further 34% stake in Telstra, with the remaining 17% shareholding transferred to the Future Fund in February 2007. For further information with respect to the Future Fund, see "Government Finance—Pensions and Superannuation" in this Description of the Commonwealth and the Commonwealth Guarantee.
On 7 April 2009, the Australian Government announced that the Commonwealth of Australia would establish a new company to build and operate a new super fast National Broadband Network. The newly established company will invest up to $43 billion over eight years to build the National Broadband Network. The Commonwealth of Australia will be the majority shareholder of the company, but significant private sector investment in the company is anticipated. For further information with respect to the ownership and financing of the company to be established to carry out the National Broadband Network project, see "Government Finance—Commonwealth Investment in the National Broadband Network" in this Description of the Commonwealth and the Commonwealth Guarantee.
The new National Broadband Network will be the single largest nation building infrastructure project in Australian history.
The objective is for the National Broadband Network to connect 90% of all Australian homes, schools and workplaces with optical fibre (fibre to the premises), providing broadband services with speeds of up to 100 megabits per second. The network will enable all other premises in Australia to connect with next generation wireless and satellite technologies that will deliver broadband speeds of at least 12 megabits per second. The National Broadband Network will be Australia's first national wholesale-only, open access broadband network.
The Australian Government is fast-tracking negotiations with the Tasmanian Government to begin the rollout of a fibre to the premises network and next generation wireless services in Tasmania as early as July 2009. The Australian Government will also implement measures in the short-term to address backhaul 'black spots' through the timely roll out of fibre optic transmission links connecting cities, major regional centres and rural towns.
In connection with its announcement of the National Broadband Network initiative, the Australian Government has commenced a consultative process on reform of the existing telecommunications regulatory regime to improve competition and strengthen consumer safeguards. A Regulatory Reform discussion paper released by the Australian Government on 7 April 2009 canvasses public comment from stakeholders on a range of options for reform. Submissions on the regulatory reform options are required by 3 June 2009. Accommodation, Cafes and Restaurants
The accommodation, cafes and restaurants industry consists of firms primarily engaged in the provision of hospitality services. This includes accommodation, clubs, pubs, taverns and bars, along with cafes and restaurants. The industry's contribution of gross value added (at basic prices) from 2003-04 to 2007-08 has been around 2.1%. The largest proportion of value added in this industry is from pubs and clubs, while the largest employer is cafes and restaurants. Personal and Other Services
The personal and other services industry includes all units mainly engaged in providing personal services, and services provided by religious organisations and other public interest groups. Personal and other services contributed 2.0% of gross value added (at basic prices) in 2007-08. Cultural and Recreational Services
The cultural and recreational services industry comprises libraries, museums, parks and gardens, sporting facilities, gambling services, radio and television services, and production, distribution and exhibition of film. Cultural and recreational services contributed 1.6% of gross value added (at basic prices) in 2007-08.
27 Annex I
Television Services
Free to air television broadcasts reach 100% of the Australian population. Subscription television can reach 100% of Australia through a mixture of hybrid fibre coaxial cable in major cities and satellite transmission in rural areas.
The Government has announced that all free-to-air television broadcasters in Australia will complete the switch from analog transmission to digital-only transmission by the end of 2013. The switchover process will commence in 2010, and will be progressively carried out on a regional basis across the country.
28 Annex I
EXTERNAL TRADE AND BALANCE OF PAYMENTS
Merchandise Trade
The value of goods measured on a free on board ("f.o.b.") basis includes all production and other costs incurred up until the goods are placed on board an international carrier for export from the relevant exporting country.
Australia's merchandise exports (f.o.b.) and imports (f.o.b.) for the past five fiscal years in current prices, calculated on a balance of payments basis, are shown in the table below. Table 17: Merchandise exports and imports 2003-04 2004-05 2005-06 2006-07 2007-08 (A$ millions) Exports Rural Exports Meat and Meat Preparations 5,758 6,933 6,709 7,078 6,540 Cereal grains and cereal preparations 5,093 5,160 4,852 4,171 4,976 Wool and Sheepskins 2,778 2,838 2,544 3,065 2,796 Other Rural 10,887 10,707 11,161 10,761 11,168 Total Rural 24,516 25,638 25,266 25,075 25,480
Non-rural Exports Metal Ores and Minerals 14,863 19,852 28,934 35,315 41,671 Mineral Fuels - 19,786 28,394 37,570 37,570 43,396 Coal, coke and briquettes 11,000 17,240 24,352 21,928 24,599 Other mineral fuels 8,786 11,154 13,218 15,642 18,797 Metals (excl non-monetary gold) 7,753 8,670 11,271 14,820 14,038 Machinery 6,830 7,466 8,066 8,422 8,792 Transport equipment 5,156 4,944 5,314 4,648 5,719 Other manufactures 13,338 14,109 14,996 16,268 17,000 Other non-rural (incl sugar and beverages) 9,257 10,942 12,059 14,770 12,764 Total Non-Rural 76,983 94,377 118,210 131,813 143,380
Goods for processing 97 241 368 417 276 Repairs on goods 75 67 74 90 103 Goods procured in ports by carriers 771 1,072 1,420 1,379 1,547 Non-monetary gold 7,031 6,472 9,087 10,740 12,272
Total Merchandise Exports 109,473 127,867 154,425 169,514 183,058
Imports Consumption goods 42,784 47,030 50,221 54,913 59,368 Capital goods 32,134 36,072 40,077 41,765 45,352 Intermediate and other merchandise goods 54,381 63,735 72,737 79,923 90,573 Goods for processing 64 243 445 507 233 Repairs on goods 219 182 115 131 117 Goods procured in ports by carriers 802 1,049 1,406 1,468 1,775 Non-monetary gold 2,634 2,562 4,715 5,317 7,628
Total Merchandise Imports 133,018 150,873 169,716 184,024 205,046
Balance on Merchandise Trade -23,545 -23,006 -15,291 -14,510 -21,988 Source: ABS Catalogue No. 5302.0.
29 Annex I
The following table shows the shares of Australian exports and imports directed to and sourced from various countries and country groups for each of the 2003-04, 2004-05, 2005-06, 2006-07 and 2007-08 fiscal years. These shares are calculated from values data and on a merchandise trade basis, rather than a balance of payments basis.
Table 18: Geographical distribution of Australia's recorded merchandise trade 2003-04 2004-05 2005-06 2006-07 2007-08 (Percentages) Exports China 9.1 10.3 11.9 13.6 14.9 Japan 18.2 19.7 20.4 19.4 19.3 Korea, Republic of 7.8 7.7 7.7 7.8 7.9 New Zealand 7.4 7.2 5.7 5.6 5.3 United Kingdom 4.7 3.8 5.1 3.7 4.6 United States 8.7 7.5 6.4 5.8 5.9 India 4.5 4.8 4.8 6.0 5.2 Singapore 2.8 2.7 2.8 2.8 2.9 Thailand 2.3 3.1 2.8 2.5 2.6 Indonesia 2.7 2.7 2.6 2.5 2.2 Malaysia 2.0 2.0 1.7 1.8 1.9 Other European Union(a) 7.3 7.2 7.3 7.7 6.7 Other(b) 22.5 21.5 20.8 20.7 20.7 Total 100.0 100.0 100.0 100.0 100.0
Imports China 11.7 13.3 13.9 15.0 15.3 Japan 12.3 11.5 10.3 9.6 9.7 Korea, Republic of 3.7 3.3 3.9 3.3 3.0 New Zealand 3.9 3.6 3.3 3.1 3.5 United Kingdom 4.1 4.0 3.6 4.1 4.2 United States 15.2 14.2 13.6 13.8 12.0 Singapore 3.9 4.8 6.3 5.6 6.8 Thailand 2.8 2.8 3.2 4.0 4.4 Indonesia 2.9 2.2 2.7 2.6 2.3 Malaysia 3.6 4.0 4.0 3.7 4.0 Other European Union(a) 19.9 19.5 18.1 17.5 17.2 Other(b) 16.0 16.8 17.1 17.8 17.6 Total 100.0 100.0 100.0 100.0 100.0 (a) Other European Union refers to trade with all current 27 member states, other than the UK. (b) Care should be taken in interpreting the Other category, as it includes confidential items that are not classified by country. Thus it is possible that the export and import shares of the countries or country groups listed above could be understated. Source: ABS Catalogue No. 5368.0; unpublished ABS and Treasury data.
Australia's goods and services exports were valued at $234.4 billion in 2007-08. Australia's top five merchandise export markets were Japan ($35.0 billion), China ($27.0 billion), Republic of Korea ($14.2 billion), United States ($10.6 billion) and New Zealand ($9.5 billion). Merchandise exports to the East-Asia region were valued at $106.0 billion (58.6% of Australia's merchandise exports); to the European Union, $20.5 billion (11.3% of Australia's merchandise exports); and to North America, $12.8 billion (7.1% of Australia's merchandise exports). Major merchandise and service exports were coal, iron ore, education services, gold and personal travel.
Australia's goods and services imports were valued at $255.6 billion in 2007-08. China was Australia's largest source of merchandise imports (valued at $31.0 billion or 15.3% of Australia's merchandise imports), followed by the United States ($24.3 billion or 12.0% of Australia's merchandise imports) and Japan ($19.7 billion or 9.7% of Australia's merchandise imports). Australia's major import items were crude petroleum, passenger motor vehicles, personal travel, refined petroleum and freight services.
30 Annex I
Balance of Payments
Australia has traditionally been a net importer of capital. This has facilitated the development of its rich endowment of natural resources at a faster pace than would have been possible if domestic savings were the only source of investment funds. Australia has traditionally run a current account deficit, reflecting the use of a net inflow of capital to obtain real resources from the rest of the world.
The table below provides Australia's balance of payments details for each of the 2003-04, 2004-05, 2005-06, 2006-07 and 2007-08 fiscal years. Table 19: Balance of payments 2003-04 2004-05 2005-06 2006-07 2007-08 (A$ millions) CURRENT ACCOUNT -45,590 -56,325 -52,839 -58,999 -70,297
Goods and Services -21,495 -22,626 -14,520 -12,757 -21,147 Credits 147,219 167,562 196,274 215,695 234,403 Debits -168,714 -190,188 -210,794 -228,452 -255,550
Goods -23,545 -23,006 -15,291 -14,510 -21,988 Credits 109,473 127,867 154,425 169,514 183,058 Debits -133,018 -150,873 -169,716 -184,024 -205,046
Services 2,050 380 771 1,753 841 Credits 37,746 39,695 41,849 46,181 51,345 Debits -35,696 -39,315 -41,078 -44,428 -50,504
Income -23,840 -33,330 -37,670 -45,903 -48,837 Credits 17,001 21,741 26,474 35,988 41,734 Debits -40,841 -55,071 -64,144 -81,891 -90,571
Current transfers -255 -369 -649 -339 -313 Credits 4,191 4,268 4,602 5,155 5,285 Debits -4,446 -4,637 -5,251 -5,494 -5,598
CAPITAL AND FINANCIAL ACCOUNT 46,059 57,389 52,643 59,103 70,711
Capital account 1,372 1,594 1,726 2,380 2,176
Capital transfers 1,444 1,523 1,729 1,957 2,168 Credits 2,571 2,674 2,673 2,995 3,382 Debits -1,127 -1,151 -944 -1,038 -1,214
Net acquisition/disposal of non-produced, non-financial assets -72 71 -3 423 8
31 Annex I
2003-04 2004-05 2005-06 2006-07 2007-08 (A$ millions) Financial account 44,687 55,795 50,917 56,723 68,535
Direct investment -15,927 51,495 -10,942 8,926 18,915 Abroad -26,225 59,307 -31,758 -31,232 -38,880 In Australia 10,299 -7,813 20,817 40,156 57,796
Portfolio investment 82,458 544 63,764 63,814 4,731 Financial derivatives -2,800 961 -1,328 3,575 -9,450 Other investment -13,918 10,919 5,027 537 10,046 Reserve assets -5,127 -8,123 -5,605 -20,127 44,292
NET ERRORS AND OMISSIONS -469 -1,064 196 -104 -414 Source: ABS Catalogue No. 5302.0; unpublished ABS and Treasury data.
In original terms, the balance on current account for 2007-08 was a deficit of $70.3 billion, a 19% increase on the deficit of $59.0 billion recorded for 2006-07.
The goods and services deficit for 2007-08 was $21.1 billion, an increase of $8.4 billion on the deficit of $12.8 billion recorded in 2006-07. Goods credits increased $13.5 billion or 8% (due to increases in volumes and prices) and goods debits increased $21.0 billion or 11% (due to an increase in volumes) during 2007-08.
The services surplus of $0.8 billion for 2007-08 was a decrease of $0.9 billion on the surplus of $1.8 billion in 2006-07.
The net income deficit for 2007-08 rose $2.9 billion (6%), with an increase in income credits of $5.7 billion (16%) and an increase in income debits of $8.7 billion (11%).
The balance on financial account recorded a net inflow of $68.5 billion for 2007-08, with a net inflow on debt of $95.0 billion and a net outflow on equity of $26.5 billion. This result was up $11.8 billion on the net inflow recorded for the previous year as a result of:
• a turnaround of $64.4 billion to a net inflow on reserve assets;
• a decrease of $59.1 billion on the net inflow on portfolio investment;
• a turnaround of $13.0 billion to a net outflow on financial derivatives;
• an increase of $10.0 billion on the net inflow on direct investment; and
• an increase of $9.5 billion on the net inflow on other investment.
Changes in Official Reserve Assets
The Australian Government meets its foreign exchange requirements from the Reserve Bank of Australia. The RBA holds Official Reserve Assets ("ORA") primarily to facilitate foreign exchange intervention. The vast majority of Australia's reserves are held as foreign exchange and are invested primarily in high quality government securities. The value of ORA held by the RBA changes in response to transactions undertaken in the foreign exchange market by the RBA, both on its own account and on behalf of its customers (primarily Australian Government agencies), as well as fluctuations in the value of the foreign currencies and underlying assets in which the reserves are invested. ORA also includes foreign currency that has been borrowed under swap to assist the RBA to manage domestic liquidity for monetary policy purposes.
32 Annex I
The following table shows the composition of Australia's ORA over the past five years. For several years prior to 2007-08, the RBA's gross holdings of foreign currency rose sharply as foreign currency was borrowed under foreign exchange swaps against Australian dollars. The Australian dollars lent to the market under these swaps helped to offset the domestic liquidity impact of deposits placed with the RBA by the Australian Government. Over 2007-08, the Australian Government drew down these deposits to seed the investment program of the Future Fund. As deposits were drawn down, the related swaps were unwound and the gross level of foreign currency held by the RBA declined. Net holdings of foreign currency rose over the period.
Table 20: Official Reserve Assets As at 30 June 2004 2005 2006 2007 2008 (A$ millions) Gold 1,473 1,468 2,117 1,967 2,481 Other 2,753 1,985 1,062 667 604 Foreign Currency 46,117 52,718 60,635 77,049 32,772 Total (gross) 50,343 56,171 63,814 79,682 35,857 Total (net) 24,791 26,405 30,215 32,175 35,862 Source: Reserve Bank of Australia Bulletin.
Exchange Rate
Australia has a free-floating dollar with substantially no exchange controls. Approved non-bank financial institutions, in addition to banks, are licensed as foreign exchange dealers. Since the floating of the Australian dollar on 12 December 1983, Australia's exchange rate has been determined by the overall supply of and demand for A$ in the foreign exchange market. The floating of the Australian dollar was part of the deregulation of the financial system.
There has been considerable variability in the exchange rate. The RBA is prepared to accept substantial fluctuations in the exchange rate, both day-to-day and over the course of the economic cycle. Transactions to influence the exchange rate or market conditions more generally, usually known as intervention, are relatively infrequent. They are undertaken only when the value of the Australian dollar is judged to have moved to levels that are inconsistent with underlying economic developments or when conditions in the foreign exchange market are thin and disorderly.
The depreciation in the Australian dollar since July 2008 likely reflects the impacts of the global financial crisis such as falls in commodity prices, and a narrowing interest rate differential between the U.S. and Australia resulting from reductions in the RBA's official cash rate. The following table sets out the Australian dollar exchange rate against the U.S. dollar for each of the 2003-04, 2004-05, 2005-06, 2006-07 and 2007-08 fiscal years and each month end since June 2008.
33 Annex I
Table 21: Units of US$ per A$(a) Period At Period End Average Rate High Low
Year ended: 30 June 2004 0.6982 0.7133 0.8008 0.6339 30 June 2005 0.7624 0.7530 0.7989 0.6850 30 June 2006 0.7422 0.7474 0.7792 0.7013 30 June 2007 0.8486 0.7861 0.8521 0.7396 30 June 2008 0.9578 0.8964 0.9667 0.7672 Month ended: 31 July 2008 0.9417 0.9617 0.9849 0.9395 31 August 2008 0.8580 0.8810 0.9417 0.8492 30 September 2008 0.7941 0.8176 0.8580 0.7800 31 October 2008 0.6676 0.6866 0.8019 0.6004 30 November 2008 0.6548 0.6564 0.7013 0.6073 31 December 2008 0.7073 0.6727 0.7139 0.6289 31 January 2009 0.6350 0.6774 0.7266 0.6343 28 February 2009 0.6398 0.6494 0.6849 0.6245 31 March 2009 0.6918 0.6666 0.7093 0.6283 30 April 2009 0.7251 0.7154 0.7383 0.6854 13 May 2009(b) 0.7528 0.7511 0.7713 0.7240 (a) Exchange rate data are provided by Thomson Reuters in respect of each trading day. Period averages are derived from these rates. Highs and lows for these periods refer to intra-day data. (b) Data as at close of business on 13 May 2009. Source: Thomson Reuters.
The table below details the Australian dollar exchange rate against the UK pound sterling for each of the 2003- 04, 2004-05, 2005-06, 2006-07 and 2007-08 fiscal years and each month end since June 2008.
Table 22: Units of £ per A$(a) Period At Period End Average Rate High Low
Year ended: 30 June 2004 0.3837 0.4099 0.4300 0.3696 30 June 2005 0.4254 0.4052 0.4280 0.3818 30 June 2006 0.4016 0.4202 0.4418 0.3971 30 June 2007 0.4223 0.4065 0.4293 0.3920 30 June 2008 0.4805 0.4475 0.4926 0.3897 Month ended: 31 July 2008 0.4747 0.4834 0.4903 0.4740 31 August 2008 0.4710 0.4669 0.4748 0.4533 30 September 2008 0.4453 0.4546 0.4766 0.4318 31 October 2008 0.4154 0.4061 0.4498 0.3689 30 November 2008 0.4255 0.4291 0.4501 0.4106 31 December 2008 0.4835 0.4523 0.4880 0.4204 31 January 2009 0.4377 0.4671 0.4940 0.4371 28 February 2009 0.4469 0.4504 0.4599 0.4377 31 March 2009 0.4830 0.4691 0.4870 0.4427 30 April 2009 0.4903 0.4858 0.4978 0.4765 13 May 2009(b) 0.4967 0.4971 0.5078 0.4876 (a) Exchange rate data are provided by Thomson Reuters in respect of each trading day. Period averages are derived from these rates. Highs and lows for these periods refer to intra-day data. (b) Data as at close of business on 13 May 2009. Source: Thomson Reuters.
The following table displays the Australian dollar exchange rate against the Euro for each of the 2003-04, 2004- 05, 2005-06, 2006-07 and 2007-08 fiscal years and each month end since June 2008.
34 Annex I
Table 23: Units of € per A$(a) Period At Period End Average Rate High Low
Year ended: 30 June 2004 0.5727 0.5976 0.6375 0.5607 30 June 2005 0.6299 0.5917 0.6435 0.5616 30 June 2006 0.5802 0.6139 0.6411 0.5759 30 June 2007 0.6265 0.6017 0.6338 0.5790 30 June 2008 0.6078 0.6096 0.6460 0.5725 Month ended: 31 July 2008 0.6036 0.6100 0.6170 0.6017 31 August 2008 0.5846 0.5890 0.6038 0.5758 30 September 2008 0.5624 0.5694 0.5853 0.5478 31 October 2008 0.5242 0.5164 0.5674 0.4722 30 November 2008 0.5156 0.5157 0.5405 0.4859 31 December 2008 0.5055 0.4968 0.5193 0.4752 31 January 2009 0.4965 0.5091 0.5372 0.4949 28 February 2009 0.5047 0.5071 0.5258 0.4901 31 March 2009 0.5223 0.5097 0.5253 0.4976 30 April 2009 0.5482 0.5417 0.5559 0.5184 13 May 2009(b) 0.5537 0.5580 0.5717 0.5467 (a) Exchange rate data are provided by Thomson Reuters in respect of each trading day. Period averages are derived from these rates. Highs and lows for these periods refer to intra-day data. (b) Data as at close of business on 13 May 2009. Source: Thomson Reuters.
The table below details the trade-weighted index value of the Australian dollar for each of the 2003-04, 2004- 05, 2005-06, 2006-07 and 2007-08 fiscal years and each month end since June 2008. The trade-weighted index is a weighted average of a basket of currencies of Australia's major trading partners, with the weight of each foreign currency equal to its share in trade. The most significant currencies in the trade-weighted index as re- weighted on 1 October 2008 are the Chinese renminbi, the Japanese yen, the Euro and the U.S. dollar. The trade-weighted index is often used as an indicator of Australia's international competitiveness and is a useful gauge of the value of the Australian dollar when bilateral exchange rates exhibit diverging trends.
Table 24: Trade-Weighted Index value of the A$(a)(b) Period At Period End Average Rate High Low
Year ended: 30 June 2004 59.1 61.4 66.3 57.1 30 June 2005 64.5 62.7 65.3 58.9 30 June 2006 62.2 63.3 65.1 59.9 30 June 2007 68.9 64.8 69.0 62.1 30 June 2008 73.4 69.7 73.4 63.3 Month ended: 31 July 2008 72.2 73.3 74.1 72.2 31 August 2008 67.7 68.6 71.7 67.3 30 September 2008 63.4 64.9 67.2 62.7 31 October 2008 54.7 56.1 63.5 51.0 30 November 2008 54.6 54.4 56.4 52.1 31 December 2008 55.6 54.6 55.9 53.7 31 January 2009 53.2 55.4 58.6 53.2 28 February 2009 54.8 54.2 55.3 52.4 31 March 2009 57.4 56.0 58.3 54.2 30 April 2009 59.7 59.1 60.2 57.6 13 May 2009(c) 62.1 61.2 62.2 59.9 (a) The trade-weighted index is provided by the Reserve Bank of Australia in respect of each trading day. Period averages are derived from these rates. (b) The weights for the trade-weighted index are revised annually to capture changing trade patterns. Changes to the weights are usually calculated in September, with the re-defined index joined onto the existing trade-weighted index on the first business day in October. (c) Data as at close of business on 13 May 2009. Period average, high and low are derived from data from 1 May 2009 to 13 May 2009. Source: Reserve Bank of Australia Bulletin.
35 Annex I
Foreign Investment Policy
The Australian Government's policy approach to foreign investment is to encourage investment flows consistent with economic development and performance and community interests. The Government's foreign investment policy provides the framework for Government consideration of proposed foreign acquisitions of Australian businesses and real estate. The vast majority of proposals are approved, with the last proposed business acquisition that was not approved being in 2001. Where a proposal raises national interest concerns, the Government has the power under the Foreign Acquisitions and Takeovers Act 1975 (Cth) (the "FATA") to reject the proposal or to approve it with conditions designed to mitigate the national interest concerns. The FATA and the Foreign Acquisitions and Takeovers Regulations 1989 provide monetary thresholds below which the FATA does not apply, with separate thresholds applying for U.S. investors. Screening under the FATA is not required for acquisitions in businesses valued below the thresholds or of less than substantial or non-controlling interests.
In the majority of industry sectors smaller proposals are not subject to screening, being exempt from the FATA or notification under the policy. Specific screening requirements and limited restrictions on foreign investment apply in certain sensitive sectors such as the media, telecommunications, airlines and in relation to acquisitions of residential real estate.
The screening process is intended to provide advice to the Australian Treasurer, including from the independent advisory body, the Foreign Investment Review Board, on whether individual foreign investment proposals may be contrary to the national interest. It involves consultation with relevant Government agencies and in some cases with stakeholders. Under the FATA and the policy, the Treasurer determines what is considered 'contrary to the national interest'.
Foreign Financial Relations
Australia is a member of the International Monetary Fund (the "IMF"). As at 31 March 2009, Australia's quota in the IMF was 3.24 billion Special Drawing Rights ("SDR"). Australia is a participant in the SDR Department and, as at 31 March 2009, had net cumulative allocations of SDR 470.55 million and actual holdings of SDR 112.66 million. In line with G-20 Leaders' commitments, Australia will join with other countries to increase an existing US$1.2 billion (approximately A$1.8 billion) line of credit Australia has made available to the IMF by way of a US$7.0 billion (approximately A$10.2 billion) contingent loan. See "Government Finance— Guarantees and Other Contingent Liabilities—Other Contingent Liabilities and Undertakings" in this Description of the Commonwealth and the Commonwealth Guarantee.
Australia is also a member of the International Bank for Reconstruction and Development ("IBRD") and its affiliates in the World Bank Group: the International Finance Corporation (the "IFC"); the International Development Association (the "IDA"); the Multilateral Investment Guarantee Agency (the "MIGA"); and the International Centre for Settlement of Investment Disputes (the "ICSID").
As at 31 March 2009, Australia held 24,464 shares in the IBRD, with the value of the paid-in portion of these shares amounting to $259 million.
Australia also held 47,329 fully paid shares in the IFC, valued at $69.1 million, and 3,019 shares in MIGA, with the value of the paid-in portion of these shares totalling $10.7 million. Each member country is equally represented in the ICSID, with no system of shareholding.
In December 2007, Australia committed to contribute $583 million to the fifteenth replenishment of the IDA.
Australia is also a member of the Asian Development Bank (the "ADB"), holding 204,740 shares. As at 31 March 2009, the value of the paid-in portion of these shares amounted to $287 million. The Australian Government will contribute to the ADB's recently announced general capital increase. Australia's contribution of paid-in capital will be US$198 million and will be paid over a ten year period from 2010-11. Australia will also subscribe to a further US$5.6 billion in callable capital. See "Government Finance—Guarantees and Other Contingent Liabilities—Other Contingent Liabilities and Undertakings" in this Description of the Commonwealth and the Commonwealth Guarantee. In addition, Australia contributes to the ADB's concessional lending arm, the Asian Development Fund (the "ADF"). In May 2008, Australia committed to contribute $333 million to the ninth replenishment of the ADF.
Australia is also a member of the European Bank for Reconstruction and Development (the "EBRD"), holding 20,000 shares. As at 31 March 2009, the value of the paid-in portion of these shares was $84.8 million.
36 Annex I
Australia is a member of the Organisation for Economic Co-operation and Development (the "OECD"), the Asia-Pacific Economic Co-operation Forum ("APEC") and the East Asia Summit. Australia is also a member of the Group of Twenty ("G-20") forum.
In addition, Australia is a member of various other regional and international organisations, including the United Nations and many of its affiliated agencies.
37 Annex I
CURRENCY, MONETARY AND BANKING SYSTEM
Australian Currency
Australia's unit of currency is the Australian dollar. Australia's currency comprises both coins and notes. Coins are issued by the Treasurer of the Commonwealth of Australia under the Currency Act 1965 (Cth); those intended for circulation include denominations of 5, 10, 20 and 50 cents and $1 and $2. Numismatic (un- circulating collector) legal tender coins are also approved for sale by the Treasurer from time to time. Under the Reserve Bank Act 1959 (Cth), Australia's currency notes are issued by the Reserve Bank of Australia (the "RBA") in five denominations: $5, $10, $20, $50 and $100.
Monetary Conditions
The RBA's monetary policy operates within the framework of a medium-term inflation target of 2 to 3% on average over the cycle. Given the lags involved in the operation of monetary policy, the RBA sets monetary policy in a forward-looking manner in order to achieve its medium-term inflation target. Maintaining low inflation, and therefore low inflation expectations, is vital to ensuring that economic growth is sustained, thereby supporting productive investment and employment.
The RBA carefully monitors a range of domestic and international economic and financial indicators in gauging inflationary pressures. These indicators cover economic conditions, prices, wages, the labour market and financial conditions.
In Australia, the stance of monetary policy is expressed in terms of a target for an overnight interest rate. The rate used by the Reserve Bank of Australia is the cash rate (also known as the interbank overnight rate). The Reserve Bank of Australia's measure of the cash rate is the interest rate which banks pay or charge to borrow funds from or lend funds to other banks on an overnight unsecured basis. The Reserve Bank of Australia calculates and publishes the cash rate each day on the basis of data collected directly from banks. When the Board of the Reserve Bank of Australia determines that a change in monetary policy should occur, it specifies a new target (known as the target cash rate) for the cash rate. The Reserve Bank of Australia's open market operations are designed to ensure that the actual cash rate remains close to the target cash rate.
Movements in interest rates over the 2003-04, 2004-05, 2005-06, 2006-07 and 2007-08 fiscal years and the monthly periods since June 2008 are provided in the table below.
Table 25: Key interest rates Target Cash Rate 90 Day Bank Bill 10 Year Bond Period (%) Yield (%) Yield (%)
Year ended: 30 June 2004 5.25 5.50 5.87 30 June 2005 5.50 5.66 5.11 30 June 2006 5.75 5.97 5.79 30 June 2007 6.25 6.43 6.26 30 June 2008 7.25 7.80 6.45 Month ended: 31 July 2008 7.25 7.69 6.23 31 August 2008 7.25 7.23 5.75 30 September 2008 7.00 7.01 5.40 31 October 2008 6.00 5.75 5.18 30 November 2008 5.25 4.51 4.58 31 December 2008 4.25 4.08 3.99 31 January 2009 4.25 3.34 4.10 28 February 2009 3.25 3.14 4.40 31 March 2009 3.25 3.12 4.41 30 April 2009 3.00 3.06 4.57 13 May 2009(a) 3.00 3.12 4.93 (a) Data as at close of business on 13 May 2009. Source: Reserve Bank of Australia.
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The following table sets out monetary aggregate data for each of the 2003-04, 2004-05, 2005-06, 2006-07 and 2007-08 fiscal years.
Table 26: Monetary aggregates 2003-04 2004-05 2005-06 2006-07 2007-08 A$b %(a) A$b %(a) A$b %(a) A$b %(a) A$b %(a) M1(b) 163.4 4.1 176.1 7.8 194.2 10.3 226.0 16.4 233.3 3.2 M3(c) 623.1 11.6 678.4 9.2 747.3 9.7 868.0 16.2 1,032.9 18.0 Broad Money(d) 686.3 10.5 764.5 11.4 841.2 9.3 962.5 14.4 1,118.8 14.1 (a) 12-month ended percentage change. Where available, growth rates are reported in seasonally adjusted terms and adjusted for the effects of breaks in the series, as recorded in the technical notes to the tables in the Reserve Bank of Australia Bulletin. (b) M1 is defined as currency plus bank current deposits of the private non-bank sector. (c) M3 is defined as M1 plus all other authorised deposit-taking institution deposits of the private non-ADI sector. (d) Broad money is defined as M3 plus non-deposit borrowings from the private sector by all financial intermediaries, less the holdings of currency and bank deposits by registered financial corporations and cash management trusts. Source: Reserve Bank of Australia Bulletin.
Regulation of the Financial System
Australia's financial regulation framework is based on three separate agencies operating on functional lines. These institutions have prime responsibility for maintaining the safety and soundness of financial institutions, protecting consumers and promoting systemic stability through implementing and administering the regulatory regimes that apply to the financial sector. Specifically,
• the Australian Prudential Regulation Authority ("APRA") is responsible for prudential regulation and supervision of authorised deposit-taking institutions, general and life insurance companies and superannuation funds;
• the Australian Securities and Investments Commission ("ASIC") is responsible for market conduct and investor protection; and
• the Reserve Bank of Australia has responsibility for monetary policy, overseeing financial system stability and oversight of the payments system.
Figure 2: Key regulatory agencies in Australia
Responsibility for the operational or day-to-day supervision of financial institutions and markets lies with these individual regulators, while accountability for the broad framework for the regulation of the financial sector rests with the Australian Government, aided by the Council of Financial Regulators and the Australian Treasury.
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The Council of Financial Regulators consists of high-level representatives of the RBA, Treasury, APRA and ASIC. Given the central role played by each of these entities in the formulation of financial sector policy, in interacting with foreign counterparts and standard setters and in monitoring and evaluating trends in domestic and international markets, the Council of Financial Regulators is an important forum for addressing emerging trends and policy issues. This coordination is crucial especially in the event of a crisis, when the Council would serve as the key coordinating body for developing an official response. The role of the Council in crisis coordination is facilitated by a Memorandum of Understanding ("MOU") dealing specifically with financial crisis management arrangements signed in September 2008. The MOU reflects the strong commitment of Australia's regulatory agencies to the open exchange of information and to a co-ordinated response to potential threats to the stability of Australia's financial system. The MOU covers the objectives of financial distress management and the principles that guide decisions and actions during times of financial distress, and also sets out the responsibilities of the individual Council members during such times.
The regulation of the financial sector operates under the following Commonwealth legislation:
• Australian Securities and Investments Commission Act 2001 (Cth);
• Corporations Act 2001 (Cth);
• Australian Prudential Regulation Authority Act 1998 (Cth);
• Payment Systems (Regulation) Act 1998 (Cth);
• Payment Systems and Netting Act 1998 (Cth);
• Financial Sector (Shareholdings) Act 1998 (Cth);
• Financial Sector (Business Transfer and Group Restructure) Act 1999 (Cth);
• Retirement Savings Accounts Act 1997 (Cth);
• Life Insurance Act 1995 (Cth);
• Superannuation Industry (Supervision) Act 1993 (Cth);
• Insurance Acquisitions and Takeovers Act 1991 (Cth);
• Insurance Act 1973 (Cth);
• Banking Act 1959 (Cth); and
• Reserve Bank Act 1959 (Cth).
In addition, the Australian Competition and Consumer Commission (the "ACCC") has responsibility for competition policy under the Trade Practices Act 1974 (Cth). That responsibility extends across the entire economy, including the financial sector. Reserve Bank of Australia
The RBA is responsible for maintaining stability of the overall financial system, promoting the safety and efficiency of the payments system, managing the issuance of banknotes, providing banking services for the Australian Government, and managing Australia's Official Reserve Assets.
The RBA is also responsible for monetary policy, which is determined by the Board of the Bank and is set in terms of the level of the cash rate (the interest rate on unsecured overnight funds). The RBA undertakes daily operations in the short-term money markets to ensure that the actual cash rate remains close to the monetary policy target.
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The RBA's market operations are very flexible, permitting it to deal daily with a wide range of counterparties across a wide range of maturities, and allowing it to respond rapidly to any tensions in the domestic money market. The RBA has made a number of changes to its arrangements since late 2007 as the financial turmoil has unfolded. These have included widening the pool of collateral the RBA will accept in its repurchase transactions, dealing on a regular basis at long maturities and introducing a term deposit facility. In addition, the RBA has significantly increased the pool of balances held by financial institutions in their exchange settlement accounts at the RBA.
In exceptional circumstances, the RBA may provide liquidity support to an individual authorised deposit-taking institution, if the institution was solvent and its failure to make payments would have systemic implications. In assessing solvency, the RBA would rely on APRA's judgment.
The statement of financial position of the Reserve Bank of Australia as of each of 30 June 2006, 2007 and 2008 is set out in the table below. Table 27: Statement of financial position – Reserve Bank of Australia 30 June 2006 30 June 2007 30 June 2008 (A$ millions)
ASSETS Cash and cash equivalents 575 586 862 Australian dollar securities 30,306 34,955 54,702 Foreign exchange 71,689 93,538 42,505 Gold 2,151 2,001 2,509 Property, plant and equipment 329 421 456 Loans, advances and other 397 393 438 Total Assets 105,447 131,894 101,472
LIABILITIES Deposits 43,204 65,830 39,006 Distribution payable to Australian Government 1,477 1,085 1,403 Other 11,493 16,072 9,786 Australian notes on issue 38,065 40,289 42,064 Total Liabilities 94,239 123,276 92,259
Net Assets 11,208 8,618 9,213
Capital and Reserves Reserves: Unrealised profitsreserves 2,528 53 80 Asset revaluation reserves 2,354 2,239 2,807 Reserve Bank Reserve Fund 6,286 6,286 6,286 Capital 40 40 40 Total Capital and Reserves 11,208 8,618 9,213 Source: Reserve Bank of Australia Annual Report 2008 and Annual Report 2007.
Australian Prudential Regulation Authority
The Government established APRA on 1 July 1998 as the single prudential regulator in the Australian financial system. APRA oversees authorised deposit-taking institutions, such as banks, building societies and credit unions, life and general insurance companies (including reinsurers and friendly societies) and most members of the superannuation industry (other than self-managed superannuation funds). The aim was to create a prudential regulation framework that would not only meet safety and stability objectives, but would increase the competitiveness and efficiency of the financial system by ensuring that regulation is applied consistently for similar functions.
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APRA Regulated Institutions
As detailed in the table below, APRA-regulated institutions hold approximately $3.4 trillion in assets for 21 million Australian depositors, policyholders and superannuation fund members.
Table 28: APRA-Regulated Institutions Number of Institutions Assets (A$ billions) 30 June 30 June % 30 June 30 June % APRA-Regulated Institutions 2007 2008 Change 2007 2008 Change ADIs 220 211 -4.1 1,945.5 2,409.0 23.8 Representative offices of foreign banks 19 18 -5.3 - - - General insurers 131 130 -0.8 90.5 91.0 0.6 Life insurers 34 32 -5.9 251.4 232.9 -7.4 Friendly societies 25 24 -4.0 6.9 6.6 -4.3 Licensed trustees 306 292 -4.6 - - - Superannuation entities 6,823 6,252 -8.4 707.9 673.6 -4.8 Non-operating holding companies 14 18 28.6 - - - Total 7,572 6,977 -7.9 3,002.2 3,413.1 13.7 Source: APRA Annual Report 2008.
Funding
APRA is funded largely by the industries that it supervises through a levy on regulated entities. The Government has provided APRA with the necessary resources to enable it to manage the effects of the global financial crisis. In October 2008, the Government agreed to provide additional funding to APRA of $9 million in 2008-09, $18.5 million in 2009-10 and $9 million in 2010-11 and 2011-12 to ensure that APRA continues to have sufficient resources to fulfil its role in light of global developments. This funding will be provided from the 2008-09 Budget, rather than being recovered from levies on the financial sector. Before this budget measure, APRA's budget was approximately $100 million (recovered mainly from levies on the financial sector) for around 570 staff.
Governance
APRA's governance structure comprises a full-time Executive Group of at least three and no more than five Members. The Executive Group is responsible and accountable for the operation and performance of APRA. It currently has a Chairman, a Deputy Chairman and a Member.
APRA's Main Powers
Australian legislation provides APRA with strong powers to regulate and intervene in the operations of financial institutions to protect depositors, policy holders and fund members and to maintain the stability of the financial system.
APRA's main powers are provided by acts relating to each industry sector that it regulates: the Banking Act 1959 (Cth), the Insurance Act 1973 (Cth), the Life Insurance Act 1995 (Cth) and the Superannuation Industry (Supervision) Act 1993 (Cth). These acts provide APRA with the following main types of powers in regulating financial institutions:
• authorisation or licensing powers;
• powers to make, apply and enforce prudential standards;
• powers to collect information, to conduct on-site examinations of supervised entities and to require third-party audits; and
• powers to act in circumstances of financial difficulties to protect depositors, policy holders and superannuation fund members and to maintain the stability of the financial system, including powers related to investigating, giving directions and assuming control of supervised entities in difficulty. APRA can appoint a statutory manager to assume full control of an authorised deposit-taking
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institution and can apply to the courts for the appointment of a judicial manager to assume control of a general or life insurer.
In broad terms, the powers available under each Act are similar but they vary somewhat reflecting the specific characteristics of each industry sector.
In relation to the ADI sector, APRA has wide-ranging powers under the Banking Act 1959 (Cth) to investigate the affairs of an ADI and/or issue a direction to an ADI. For example, APRA can direct an ADI:
• to comply with a prudential requirement;
• to conduct an audit of its affairs;
• to remove a director, executive officer or employee; or
• not to undertake a particular transaction.
APRA also has the power to revoke an ADI's authorisation if it fails to meet its authorisation requirements.
In a situation where an ADI may be unable to meet its obligations or where the interests of depositors or financial system stability are at risk, APRA has the power under the Banking Act 1959 (Cth) to replace an ADI's Board of Directors with a statutory manager, which must manage the ADI in a manner that is consistent with interests of depositors and financial system stability. In addition to the powers of the Board, the statutory manager has powers to alter the share capital of the ADI, such as by issuing new shares, and can alter the ADI's governance arrangements including its constitution. The statutory manager can also sell or dispose of the assets of the ADI.
APRA also has the power to compulsorily transfer the business of the ADI to another entity using the Financial Sector (Business Transfer and Group Restructure) Act 1999 (Cth). The receiving entity must consent to the transfer.
APRA also has responsibility for administering the Financial Claims Scheme established in October 2008 in respect of ADIs and general insurers. The Financial Claims Scheme provides protection from loss for depositors in ADIs and policyholders and other claimants in general insurers in the event an ADI or general insurer becomes insolvent. The Financial Claims Scheme establishes:
• measures under Division 2AA of the Banking Act 1959 (Cth) to:
< protect account holders' deposits made with eligible ADIs (other than foreign ADIs), and interest accrued on such deposits, to a total maximum value of $1,000,000 per customer per ADI; and
< facilitate prompt access by account holders to deposits protected under the Financial Claims Scheme in the event that an ADI fails; and
• measures under Part VC of the Insurance Act 1973 (Cth) to facilitate the payment of moneys payable under valid claims made by eligible claimants against a general insurer that has become insolvent.
Prudential Regulation
APRA has developed a regulatory framework for ADIs that is based on the banking supervision principles published by the Basel Committee on Banking Supervision. The framework for prudential regulation includes requirements regarding capital adequacy, credit risk, market risk, funds management and securitisation, liquidity, credit quality, large exposures, associations with related entities, outsourcing, business continuity management, risk management of credit card activities, audit and related arrangements for prudential reporting, governance and fit and proper management.
Prudential regulation is concerned fundamentally with the quality of a financial institution's systems for identifying, measuring and managing the various risks in its business and, in most cases, with the adequacy of its capital as a buffer against unexpected losses. It promotes prudent behaviour by regulated entities with the
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objective of reducing the likelihood of institutional insolvency and consequential losses to policyholders, depositors or members and financial system instability.
Implementation of Basel II in Australia
APRA implemented the Basel II framework on 1 January 2008. This new framework is designed to strengthen risk management and provide more risk-sensitive capital requirements for deposit-taking institutions.
All ADIs in Australia are subject to Basel II. Subject to APRA approval, ADIs can choose to implement the standard approaches or more advanced approaches for credit risk and operational risk. The great majority of ADIs have chosen to use the standardised Basel II approaches in determining their regulatory capital charge. The largest ADIs have chosen more sophisticated approaches under Basel II, which allow them to use some of their own quantitative risk estimates in calculating regulatory capital.
The new prudential rules under Basel II provide the Australian banking system with an enhanced regulatory framework for the protection of depositors and the maintenance of systemic stability.
Although the intention of the Basel Committee on Banking Supervision was to maintain consistency of capital adequacy regulation across countries and avoid a significant source of competitive inequality among internationally active banks, international comparisons need to take into account the particularities of the implementation of the Basel framework in each country. These include:
• the use of national discretions within the Basel Framework;
• the implementation of advanced models;
• supervisory adjustments imposed under Pillar 2 by local regulators;
• other regulatory requirements (e.g., accounting or tax); and
• transitional arrangements.
In implementing Basel II, APRA has exercised a number of discretions to make the framework more robust and relevant in the Australian market. These discretions include:
• The risk-weights for residential mortgage lending in the standardised approach were made considerably more granular, adding to the risk-sensitivity of capital. The Basel II approach is that home loans are subject to a 35% risk weight. APRA instead introduced a grid of risk-weights based upon loan to value ratio, lenders' mortgage insurance status and product type (e.g., whether the loan is a standard or non- standard housing loan), which starts at 35% and runs to 100%.
• APRA chose not to adopt a lower risk-weight for 'other retail assets' under the standardised approach, believing it would not provide a sufficient buffer against credit risk and concentration risk.
• For banks using the advanced approaches to measure capital adequacy, APRA has established a minimum capital requirement for interest rate risk in the banking book under Pillar 1. Australian Securities and Investments Commission
ASIC is an independent statutory body established under the Australian Securities and Investments Commission Act 2001 (Cth).
ASIC administers the Corporations Act 2001 (Cth) (the "Corporations Act"), including the provisions governing the operation of companies in Australia, corporate fundraising, financial reporting, takeovers and compulsory buy outs and external administration/insolvency.
ASIC is also responsible for registering and supervising the operation of managed investment schemes. The regulatory framework governing collective investment vehicles was reformed in 1998 through the passage of the Managed Investments Act 1998 (Cth).
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ASIC has responsibility for the investor protection regime that applies to the provision of financial services. The regime includes licensing, conduct and disclosure provisions that apply to financial services providers, as well as product disclosure provisions applicable to financial products.
Financial markets and clearing and settlement facilities are licensed by the relevant Minister. ASIC is responsible for monitoring compliance by market and clearing and settlement facility licensees with the relevant legislative frameworks. The RBA is responsible for issuing financial stability standards for clearing and settlement facilities and it monitors compliance with those standards. Australia's major licensed financial markets and clearing and settlement facilities are operated by ASX Limited and its subsidiaries.
ASIC is also responsible for administering the market misconduct provisions of the Corporations Act, which cover market manipulation, insider trading and misleading or deceptive conduct.
Other Regulatory Entities
Australian Competition and Consumer Commission
The Australian Competition and Consumer Commission (the "ACCC") has responsibility for competition policy under the Trade Practices Act 1974 (Cth) (the "TPA"). This responsibility extends across the entire economy, including the financial sector.
The TPA prohibits anti-competitive arrangements between competitors, such as price fixing, market sharing and boycotts.
Industry regulation
The Australian Bankers' Association (the "ABA") is the national organisation of licensed banks in Australia. Any body corporate duly authorised to carry on banking business in Australia and carrying on such banking business may become a member of ABA.
ABA is funded by its 26 member banks ranging from traditional retail, trading bank-style organisations to regional banks, foreign bank and wholesale banks. Contributions to its operational expenditure are based on individual member bank's liabilities in Australia.
The ABA's revised Code of Banking Practice is the banking industry's customer charter on best banking practice standards. The Code sets out the banking industry's key commitments and obligations to customers on standards of practice, disclosure and principles of conduct for banking services. The Code applies to personal and small business bank customers.
Abacus–Australian Mutuals, the industry association for Australian credit unions, mutual building societies and friendly societies, also keeps industry codes to which its members are signatories. Abacus members subscribe to codes establishing standards of service to customers. Abacus is in the process of developing a consolidated Mutual Banking Code of Practice that will apply to building societies and credit unions from 1 July 2009.
Signatories to the codes are obliged to respond to complaints about non-compliance, and the relevant external dispute resolution scheme can also hear and resolve such complaints.
The Financial System Regulatory Regime
The Australian Government is committed to increasing competition and contestability across the broad spectrum of financial products, without sacrificing the basic goals of safety and stability in the financial system. The regulatory system enables the non-bank deposit-taking sector to provide a more effective source of competition for the banks in the retail market by operating under the same regulatory framework as banks. These institutions are able to maintain commercial flexibility by retaining different corporate structures, including mutuality, and the terms 'building society' and 'credit union'. The Government is also paving the way for greater future participation by non-traditional suppliers in financial services markets, where there is demonstrable congruity between financial and non-financial activities. One example of this is 2002 reforms to credit card schemes, which established a new category of ADI, broadening the range of organisations authorised to provide credit card services. This increased competition on incumbents from both credit card specialists and large payments- processing institutions. Prudential controls, to ensure these new players do not increase systemic risk, apply.
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Australia maintains a stable, competitive and efficient financial system that is not only positioned to compete strongly in the global economy, but also offers opportunities for those seeking to do business in Australia or to use Australia as a focal point for regional activities.
There is no restriction on the number of foreign banks that may apply for banking licenses. The blanket ban on the takeover of domestic institutions has been removed although such applications are still assessed on a case by case basis under the Foreign Acquisitions and Takeovers Act 1975 (Cth) and the Financial Sector (Shareholdings) Act 1998 (Cth).
Foreign banks wishing to establish a retail bank in Australia may enter as a licensed subsidiary, subject to full prudential supervision. They may also establish as a licensed foreign bank branch to conduct wholesale banking, as branches are restricted from accepting retail deposits below $250,000. They may also establish as an unlicensed money market corporation or merchant bank. Furthermore, the establishment of new merchant banks involving investments of less than $10 million is exempt from foreign investment screening. As at 30 April 2009, there were 43 foreign owned banks operating in Australia, comprising 9 locally incorporated subsidiaries and 34 branches of foreign banks.
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GOVERNMENT FINANCE
The basic provisions relating to the receipt and payment of public moneys of the Australian Government are set out in the Constitution and the Financial Management and Accountability Act 1997 (Cth) (the "FMA Act"). The FMA Act sets out requirements relating to the collection and custody of public money; accounting, reporting and audit; and borrowing and investment. The Commonwealth Authorities and Companies Act 1997 (Cth) sets out separate financial and corporate governance requirements for corporations controlled by the Australian Government. The general administration of Australian Government finances is the responsibility of the Minister for Finance and Deregulation.
Under the Constitution, all moneys or revenues received by the Australian Government form one Consolidated Revenue Fund, to be appropriated for the purposes of the Commonwealth of Australia. All disbursements made from the Consolidated Revenue Fund must be made under appropriation made by the Parliament.
The financial statements and accounting records of each Australian Government agency and the consolidated financial statements of the Government must be audited by the Australian Auditor-General. The Australian National Audit Office ("ANAO") supports the Auditor-General in conducting financial statement and performance audits. All financial statements must be tabled in the Parliament by the responsible Minister within the relevant agency's annual report. These financial statements are audited by the Auditor-General, who may also report to the Parliament on a wide range of other matters relating to public administration.
Federal Government Budget
As part of each annual budget, the Treasurer presents annual Appropriation Bills to the Parliament. The Bills detail the purposes for which funds are to be expended by Government agencies. Additional Appropriation Bills may be enacted by Parliament during the course of a financial year to provide funds for new expenditures approved by the Government after the passage of the annual budgetary Appropriation Bills.
The major part of the budget is appropriated under 'special' or 'standing' appropriations contained in special legislation that does not require annual re-enactment. For example, the payment of social security benefits and pensions are provided for in this manner.
The Australian Government's main fiscal indicators are the 'underlying cash balance' and the 'fiscal balance' (respectively cash and accrual measures of government finance statistics net lending), with the predominant focus on the underlying cash balance for assessing the Government's fiscal strategy. The move to accrual budgeting now means that the budget papers contain a complete set of accrual financial statements (i.e., an operating statement, a statement of assets and liabilities, and a statement of cash flows).
The framework within which fiscal policy is conducted is set out in the Charter of Budget Honesty Act 1998 (Cth). The Charter provides a framework for the conduct of Government fiscal policy. The purpose of the Charter is to improve fiscal policy outcomes. The Charter provides for this by requiring fiscal strategy to be based on principles of sound fiscal management and by facilitating public scrutiny of fiscal policy and performance.
The key elements of the Australian Government's medium-term fiscal policy are:
• achieving budget surpluses, on average, over the economic cycle;
• keeping taxation as a share of GDP on average below the level for 2007-08; and
• improving the Government's net financial worth over the medium-term.
These medium-term objectives anticipate that fiscal policy will support economic growth and jobs by allowing the budget to move into temporary deficit during an economic downturn.
To ensure that growth is supported in a way that is consistent with the medium-term fiscal strategy, the Government committed in the 2009 UEFO to a two-stage fiscal strategy:
1. Support the economy during the global recession
During periods of economic slowdown of uncertain extent and duration, it is critical that the Government continues to support the economy and jobs by:
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• allowing the variations in receipts and payments, which are naturally associated with slower economic growth, to drive a temporary underlying cash budget deficit; and
• using additional spending to deliver timely, targeted and temporary stimulus, with the clear objective of other budget priorities and new policy proposals being met through a reprioritisation of existing policies.
2. Deficit exit strategy as the economy recovers
As the economy recovers, and grows above trend, the Government will take action to return the budget to surplus by:
• allowing the level of tax receipts to recover naturally as the economy improves, while maintaining the Government's commitment to keep taxation as a share of GDP below the 2007-08 level on average; and
• holding real growth in spending to 2% a year until the budget returns to surplus.
In 2006-07 and 2007-08, the underlying cash balance was $17.2 billion and $19.7 billion, respectively. As at 30 June 2008, the Commonwealth of Australia had no overall net debt. The 2009-10 Budget forecast net debt to increase to $53.7 billion (4.6% of GDP) in 2009-10.
The 2009-10 Budget released on 12 May 2009 forecast the Australian Government's underlying cash balance for 2008-09 to be a deficit of $32.1 billion (-2.7% of GDP). Government budget underlying cash deficits of $57.6 billion (-4.9% of GDP) and $57.1 billion (-4.7% of GDP) were forecast for 2009-10 and 2010-11 respectively, and underlying cash deficits of $44.5 billion (-3.4% of GDP) and $28.2 billion (-2.0% of GDP) were projected for 2011-12 and 2012-13 respectively. The 2009-10 Budget forecast the Australian Government general government sector net debt for 2008-09 to be -$4.7 billion (-0.4% of GDP), and projected net debt to increase across the forward estimates to 13.6% of GDP in 2012-13.
The Government will finance the projected budget deficits by issuing Commonwealth Government Securities. See "Government Finance—Domestic Issuance of Government Bonds" in this Description of the Commonwealth and the Commonwealth Guarantee.
Commonwealth Budget Position as at 30 June 2008
In 2007-08, the Australian Government general government sector recorded an underlying cash surplus of $19.7 billion, or 1.7% of GDP. The fiscal balance was in surplus by $21.0 billion, or 1.9% of GDP.
The following table sets out general government sector budget aggregates for each of the 2005-06, 2006-07 and 2007-08 fiscal years.
Table 29: Australian Government general government sector budget aggregates 2005-06(a) 2006-07(a) 2007-08(a) Accrual aggregates Revenue (A$ billions) 261.2 278.4 303.7 Per cent of GDP 27.0 26.6 26.8 Expenses (A$ billions) 242.2 259.2 280.1 Per cent of GDP 25.0 24.8 24.8 Net operating balance (A$ billions) 19.1 19.3 23.6 Net capital investment (A$ billions) 2.5 2.3 2.6 Fiscal balance (A$ billions) 16.6 16.9 21.0 Per cent of GDP 1.7 1.6 1.9
Cash aggregates Underlying cash balance (A$ billions) 15.8 17.2 19.7 Per cent of GDP 1.6 1.6 1.7
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2005-06(a) 2006-07(a) 2007-08(a)
Balance sheet measures Net debt (A$ billions) -3.7 -29.2 -44.8 Per cent of GDP -0.4 -2.8 -4.0 Net worth (A$ billions) 18.3 46.7 71.2 Per cent of GDP 1.9 4.5 6.3 (a) Data for 2005-06, 2006-07 and 2007-08 fiscal years has been adjusted for accounting changes to ensure consistency where relevant. For further information on these adjustments, see the following: 2008-09 Budget, Budget Paper No. 1, Statement 10; Final Budget Outcome 2007-08, Appendix B; Mid-Year Economic and Fiscal Outlook 2008-09 Statement, Appendix D; 2009-10 Budget, Budget Paper No. 1, Statement 10. Source: 2009-10 Budget, Budget Paper No. 1, Statement 10.
Total Australian Government general government sector net worth improved by $24.5 billion in 2007-08 to around $71.2 billion, largely reflecting the strong budget surplus. Net debt also improved, falling by $15.5 billion in 2007-08 to around -$42.9 billion or -3.8% of GDP.
The following table sets out general government sector revenue for each of the 2005-06, 2006-07 and 2007-08 fiscal years.
Table 30: Australian Government general government sector revenue 2005-06 2006-07 2007-08 (A$ millions) Individuals and other withholding taxes Gross income tax withholding 103,811 107,809 114,700 Gross other individuals income tax 25,859 26,952 31,036 less: Individuals refunds 15,239 17,147 19,601 Total individuals and other withholding taxes 114,431 117,614 126,135 Fringe benefits tax 4,084 3,754 3,796 Company tax 48,987 58,538 64,790 Superannuation funds 6,705 7,879 11,988 Petroleum resource rent tax 1,991 1,594 1,871 Total income taxation revenue 176,198 189,378 208,579
Sales taxes 40,086 42,284 45,486 Excise duty Petroleum and other fuel products and crude oil 14,073 14,653 15,085 Other excise 7,854 8,082 8,441 Total excise duty 21,927 22,734 23,526 Customs duty 4,988 5,644 6,070 Other indirect taxes 2,518 2,470 2,567 Total indirect taxation revenue 69,518 73,132 77,650
Total taxation revenues 245,716 262,510 286,229
Interest received 2,870 4,313 5,558 Dividends and other non-taxation revenue 12,652 11,587 11,942 Total non-taxation revenue 15,522 15,900 17,500
Total revenue 261,238 278,410 303,729 Source: Data for 2005-06, 2006-07 and 2007-08 fiscal years sourced from 2009-10 Budget, Budget Paper No. 1, Statement 5, Table C1, adjusting for accounting changes to ensure consistency where relevant, and unpublished Treasury data.
Total accrual revenue in 2007-08 was around $303.7 billion.
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The table below provides information on general government sector expenses by function for each of the 2005- 06, 2006-07 and 2007-08 fiscal years.
Table 31: Australian Government general government sector expenses by function 2005-06 2006-07 2007-08 (A$ millions) General public services Legislative and executive affairs 768 870 961 Financial and fiscal affairs 3,958 4,832 6,102 Foreign affairs and economic aid 3,045 3,409 3,881 General research 2,346 2,476 2,146 General services 560 667 925 Governmental superannuation benefits 2,203 2,679 2,600 Defence 14,748 16,729 17,670 Public order and safety 2,558 3,318 3,506 Education 15,685 16,913 18,433 Health 37,549 39,948 44,397 Social security and welfare 86,240 92,083 97,842 Housing and community amenities 2,248 2,909 2,910 Recreation and culture 2,585 2,561 3,207 Fuel and energy 4,046 4,635 5,361 Agriculture, forestry and fishing 2,780 2,831 3,834 Mining, manufacturing and construction 1,905 1,920 1,410 Transport and communications 3,075 3,296 4,129 Other economic affairs Tourism and area promotion 209 196 207 Labour and employment affairs 3,825 4,041 4,506 Other economic affairs 840 934 1,213 Other purposes Public debt interest 3,628 3,592 3,544 Nominal superannuation interest 5,602 5,487 6,011 General purpose intergovernmental transactions 41,531 42,133 45,277 Natural disaster relief 211 115 28 Contingency reserve(a) 36 589 8 Total expenses 242,177 259,161 280,109 (a) Asset sale related expenses are treated as a component of the contingency reserve. Source: Data for 2005-06 fiscal year sourced from Final Budget Outcome 2005-06, adjusting for accounting changes to ensure consistency where relevant. Data for 2006-07 fiscal year sourced from Final Budget Outcome 2006-07, adjusting for accounting changes to ensure consistency where relevant. Data for 2007-08 fiscal year sourced from Final Budget Outcome 2007-08.
Total accrual expenses were around $280.1 billion in 2007-08.
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General government sector net capital investment by function is set out in the table below.
Table 32: Australian Government general government sector net capital investment by function 2005-06 2006-07 2007-08 (A$ millions) General public services 251 332 372 Defence 1,644 1,069 1,478 Public order and safety 90 166 139 Education 11 10 4 Health 72 104 46 Social security and welfare 86 217 175 Housing and community amenities 98 40 159 Recreation and culture 68 83 53 Fuel and energy 1 3 2 Agriculture, forestry and fishing 19 17 49 Mining, manufacturing and construction 24 19 9 Transport and communications -1 1 5 Other economic affairs 118 236 99 Other purposes 16 35 2 Total net capital investment 2,498 2,333 2,593 Source: Data for 2005-06 fiscal year sourced from the Final Budget Outcome 2005-06, adjusting for accounting changes to ensure consistency where relevant. Data for 2006-07 fiscal year sourced from Final Budget Outcome 2006-07, adjusting for accounting changes to ensure consistency where relevant. Data for 2007-08 fiscal year sourced from Final Budget Outcome 2007-08.
Total net capital investment for 2007-08 was around $2.6 billion.
Commonwealth Investment in the National Broadband Network
On 7 April 2009, the Australian Government announced that the Commonwealth of Australia would establish a new company to build and operate a new National Broadband Network. For further information regarding the specifications of the National Broadband Network, see "Major Industries—Communication Services — Telecommunications" in this Description of the Commonwealth and the Commonwealth Guarantee.
The newly established company will invest up to $43 billion over eight years to build the National Broadband Network. The Commonwealth of Australia will be the majority shareholder of the company, but significant private sector investment in the company is anticipated. The Commonwealth of Australia intends to sell down its interest in the company within five years after the National Broadband Network is built and fully operational, consistent with market conditions, and national and identity security considerations.
The Australian Government will make an initial investment in the National Broadband Network of $4.7 billion, funded through the Building Australia Fund and the issuance of Aussie Infrastructure Bonds, which will provide an opportunity for households and institutions to invest in the National Broadband Network. Further Government investment will be subject to the outcomes of an Implementation Study and the level of private sector participation. Additional Government investment would be funded by the issuance of Aussie Infrastructure Bonds.
The Australian Government will commence an Implementation Study to determine the operating arrangements, detailed network design and ways to attract private sector investment in the company. Specific funding levels for the National Broadband Network will also be finalised at the conclusion of the Implementation Study in early 2010.
Budget implications
The Commonwealth of Australia's intention is for the company to operate as a Public Non-Financial Corporation ("PNFC") charging economically significant prices. Financial investments by the Commonwealth of Australia in PNFCs do not have a direct impact on the underlying cash balance. However, investments funded from borrowings have an indirect impact through public debt interest costs, which the Australian Government has taken into account in preparation of its 2009-10 Budget.
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Pensions and Superannuation
Australia's Retirement Income System
Australia's retirement income system consists of three 'pillars':
• a taxpayer-funded means-tested age pension for people who are unable to fully support themselves in retirement;
• a minimum level of compulsory employer superannuation contributions made in respect of those in the workforce; and
• voluntary private superannuation and other savings.
The age pension has been the cornerstone of Australia's retirement income system since 1909. The age pension provides a modest retirement for those people who are unable to fully support themselves. Currently, the maximum single rate age pension is $14,615 per annum and the maximum couple rate age pension is $24,414 per annum. From 20 September 2009, the maximum assistance for single pensioners will increase by $32.49 per week to $17,507 per annum and the maximum assistance for pensioner couples will increase by $10.14 per week to $26,390 per annum. The actual amount an eligible person receives depends on their other income and assets.
Employers are currently required to provide a prescribed minimum level of superannuation support each year for each of their eligible employees. The prescribed minimum level of support is 9% of the employee's earnings. This minimum prescribed amount is known as the Superannuation Guarantee. Payments under the Superannuation Guarantee are contributed to a complying superannuation fund or retirement savings account to be accessed by the employee upon retirement.
Voluntary superannuation savings are encouraged through concessional taxation treatment and other incentives.
As of 31 December 2008, APRA estimated that total Australian superannuation assets amounted to $1.05 trillion. Superannuation for Commonwealth Employees
The Commonwealth of Australia operates and administers three main civilian superannuation schemes for Commonwealth sector employees. The current scheme is the Public Sector Superannuation Accumulation Plan (the "PSSAP") which was established by a trust deed under the provisions of the Superannuation Act 2005 (Cth). PSSAP is a fully funded accumulation scheme. PSSAP commenced on 1 July 2005 upon the closure of the Public Sector Superannuation Scheme (the "PSS") to new entrants.
The PSS commenced on 1 July 1990 upon the closure of the Commonwealth Superannuation Scheme (the "CSS") to new entrants.
At 30 June 2008, there were 22,162 contributors to the CSS and 132,274 contributors to the PSS and benefits were being paid to 115,431 CSS and 16,453 PSS pensioners.
The Commonwealth of Australia's estimated unfunded liability at 30 June 2008 for the CSS and PSS schemes was $108 billion.
In 2006, the Commonwealth established an investment fund known as the Future Fund to assist future Australian governments meet the cost of public sector superannuation liabilities by delivering investment returns on contributions to the Fund. As of 31 March 2009, the value of the assets held by the Future Fund was $58.09 billion. Paid Parental Leave
To boost participation and productivity in the long-term, improve work-family balance and as part of its rebalancing of the family payment system, the Australian Government announced as part of the 2009-10 Budget that it will invest $731 million over five years to deliver a Paid Parental Leave Scheme. The Paid Parental Leave Scheme aims to increase future workforce participation to combat the ageing population of Australia by contributing to the development of flexible work arrangements to help parents balance their work and family
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commitments. The scheme will commence operation from 1 January 2011 and will be available to parents for births and adoptions occurring on or after that date.
The Paid Parental Leave Scheme is designed to enable parents to maintain attachment to their workplace by allowing them to retain personal links with their employer, maintain skills and expertise, and receive an income whilst nurturing their child. This is expected to encourage greater long-run female workforce participation by helping to address lifetime economic impacts of mothers' childbearing and caring roles.
Under the Paid Parental Leave Scheme, an eligible primary carer will receive taxable payments at the weekly rate of the prevailing Federal Minimum Wage — currently $543.78 — for a continuous period of up to 18 weeks. To be eligible for the Paid Parental Leave Scheme, the primary carer must satisfy a work test during the 13 months prior to the expected birth and have an adjusted taxable income of $150,000 a year or less.
The availability of a statutory Paid Parental Leave Scheme will increase the leave available to women after childbirth to care for their child in the first months of life. Coupled with other leave arrangements, it is estimated that almost all parents will be able to stay with their infants for the first six months. Taxation
Commonwealth, State and Local Governments levy taxes in Australia. Australia has no estate or gift taxes, or separate social security levy, although taxpayers pay a Medicare levy of 1.5% on taxable income (and may also be subject to an additional Medicare levy surcharge if they exceed certain income thresholds and do not take out complying private health insurance (see "Government Finance—Taxation—Personal Income Tax" in this Description of the Commonwealth and the Commonwealth Guarantee)). Australia's Future Tax System
On 13 May 2008, the Treasurer announced a review of Australia's tax and transfer system to recommend how Australia could deal with the demographic, social, economic and environmental challenges of the 21st century. The review encompasses Australian Government and state taxes, but must reflect Government policy not to increase the rate or broaden the base of the goods and services tax ("GST"), and interactions with the transfer system. A review panel oversees the review, consults with the public and is due to report by the end of 2009. The Government asked the review panel to bring forward its consideration of retirement income to March 2009 and report to Government, following a report to Government on pensions handed down in February 2009. Both reports were publicly released with the 2009-10 Budget.
The pension report found that current pension rates do not fully recognise the costs faced by single pensioners living alone. The Government responded to these findings in the 2009-10 Budget. See "Government Finance— Pensions and Superannuation—Australia's Retirement Income System" in this Description of the Commonwealth and the Commonwealth Guarantee.
The key finding of the retirement income report was to retain the three-pillar architecture of the retirement income system. For further information with respect to Australia's retirement income system, see "Government Finance—Pensions and Superannuation—Australia's Retirement Income System" in this Description of the Commonwealth and the Commonwealth Guarantee. The report also recommended an increase to the qualifying age for the age pension. The Government announced in the 2009-10 Budget that the qualifying age for the age pension would be gradually increased to age 67 by 1 July 2023. The proposed change remains subject to Australian Parliamentary procedures. Personal income tax
The Australian Government levies personal income tax, generally using the individual as the unit of assessment for the system. Income subject to tax assessment includes salary and wage income, allowances, dividends, interest, capital gains, business income, pensions, rents, royalties, partnership income and distributions from trusts.
The personal income tax system is based on self assessment. Under the pay-as-you-go system, individuals pay instalments of their expected tax liability on their income from employment, business, or investment for the current income year through withholdings and instalment payments. Australian residents for tax purposes pay tax on income derived from within Australia and overseas. However, previously taxed income from overseas either is exempt from Australian tax or attracts a tax credit.
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From 1 July 2008, personal income tax cuts came into effect, worth $46.7 billion over the next four years. These income tax cuts target low- and middle-income earners. Income tax rates and thresholds vary for 2008- 09, 2009-10 and 2010-11 (Table 33). Table 33: Personal income tax rates and thresholds for residents 1 July 2008 to 30 June 2009 1 July 2009 to 30 June 2010 1 July 2010 to 30 June 2011 Taxable income (A$) Rate (%) Taxable income (A$) Rate (%) Taxable income (A$) Rate (%) 0 - 6,000 0 0 - 6,000 0 0 - 6,000 0 6,001 – 34,000 15 6,001 – 35,000 15 6,001 – 37,000 15 34,001 – 80,000 30 35,001 – 80,000 30 37,001 – 80,000 30 80,001 – 180,000 40 80,001 – 180,000 38 80,001 – 180,000 37 180,001 + 45 180,001 + 45 180,001 + 45 Source: 2008-09 Budget, Budget Paper No. 1.
Most residents also pay a Medicare levy rate of 1.5% of taxable income. Residents may also be subject to an additional Medicare levy surcharge if they exceed certain income thresholds and do not take out complying private health insurance. The Medicare levy surcharge is currently 1.0%. In the 2009-10 Budget, the Australian Government proposed the introduction of a three-tiered Medicare levy surcharge, under which a Medicare levy surcharge of 1.0%, 1.25% or 1.5% would apply, depending on a taxpayer's income. The proposed changes to the Medicare levy surcharge remain subject to Australian Parliamentary procedures. The Opposition Liberal- National coalition has indicated that it will oppose the proposed measure.
Australian resident taxpayers may be eligible for the low income tax offset (the "LITO") to reduce tax paid by low- and middle-income earners. As part of the tax cuts, the LITO increased from $750 in 2007-08 to $1,200 from 1 July 2008. From 1 July 2009, the LITO will increase to $1,350 and from 1 July 2010 it will increase to $1,500. Taxpayers eligible for the full LITO will not pay income tax until their annual income exceeds $14,000 for 2008-09, $15,000 for 2009-10 and $16,000 for 2010-11.
Taxpayers ineligible for the full LITO also benefit from its increase. The LITO begins to phase out at a rate of four cents for each dollar of income over $30,000, so some taxpayers with income over $30,000 may still benefit from some LITO. For example, taxpayers will be able to receive some LITO on incomes of $60,000 for 2008-09, $63,750 for 2009-10 and $67,500 for 2010-11, thereby reducing their income tax liability.
Superannuation benefits paid from a taxed fund are tax-free for people aged 60 and over.
In general, employers also pay tax (at 46.5%) on the grossed-up (i.e., tax inclusive) value of fringe benefits they provide to employees.
Foreign residents are taxed differently to Australian residents. See "Government Finance—Taxation— Australia's jurisdiction to tax: source and residence" in this Description of the Commonwealth and the Commonwealth Guarantee.
Business tax arrangements Corporate tax rate
The corporate tax rate is 30%. This applies also to the corporate profits of a branch of an overseas company. Dividend imputation
The dividend imputation system ensures company income distributed to resident individual shareholders is not double taxed. Franked dividends, effectively paid from previously taxed company income, carry an imputation credit for shareholders. Capital Gains Tax
Where assets are held for at least 12 months, capital gains tax applies to 50% of capital gains on the assets for individuals and trusts, and 66Ҁ% for superannuation funds. A range of business restructures, including scrip- for-scrip takeovers between companies and between trusts, can roll-over their capital gain and several capital gains tax concessions apply to capital gains on the disposal of active small business assets. The capital gains tax discount does not apply to gains made on assets that are held on revenue account or as trading stock.
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Research and Development
Eligible research and development ("R&D") expenditure attracts a 125% deduction and, for eligible companies, a 175% tax concession for additional R&D expenditure undertaken above the average level for the previous three years.
Primary production
Special provisions for primary producers include income averaging.
Capital allowances
A uniform capital allowance system, based on the effective life of assets, applies except where specific treatments apply (for example, for primary producers, Australian films, computer software and R&D).
Amortisation at 4% per year applies to the capital costs of income-producing buildings for eligible industrial activities; hotels, motels and guest houses containing at least ten bedrooms; and apartments, units or flats where the taxpayer owns at least nine other units in the building.
Amortisation at 2.5% per year applies to the capital cost of other income-producing buildings and structural improvements, including roads, dams, bridges and buildings used for R&D activities.
Investment allowances
As announced in the 2009 UEFO, under the Nation Building and Jobs Plan, a temporary investment allowance in the form of an additional tax deduction of 10% of the asset's cost is expected to be available for investments in tangible assets costing at least $10,000 (or at least $1,000, in the case of small businesses) where the taxpayer starts to hold or starts to construct the asset between 13 December 2008 and 31 December 2009 and has the asset installed ready for use by 31 December 2010. Where the taxpayer starts to hold or construct the asset before 30 June 2009 and has the asset installed ready for use by 30 June 2010, the tax deduction is expected to be at the higher rate of 30% of the asset's cost. The investment allowance is also expected to be available for expenditure above the threshold on existing assets.
The Tax Laws Amendment (Small Business and General Business Tax Break) Bill 2009, providing for the tax deductions, was introduced into Parliament on 19 March 2009.
In the 2009-10 Budget, the Australian Government announced an expansion to the Small Business and General Business Tax Break announced in the 2009 UEFO to provide additional assistance to small businesses. A bonus tax deduction of 50% will be available to small businesses that acquire an eligible asset between 13 December 2008 and 31 December 2009 and install it ready for use by 31 December 2010. The previously announced 30% and 10% tax deductions will continue to apply to all other businesses.
The Government moved amendments to legislation to implement the expanded tax break for small business. The amended Bill passed the Parliament on 14 May 2009 and is awaiting Royal Assent.
Small businesses
Small businesses, with an aggregated annual turnover of less than $2 million, can access concessions covering income tax (including capital gains tax and simplified capital allowances rules), goods and services tax, pay-as- you-go instalments and fringe benefits tax.
Taxation of Financial Arrangements Stages 3 and 4
The Taxation of Financial Arrangements ("TOFA") Stages 3 and 4 cover, among other matters, accruals and other tax-timing rules as well as character-hedging rules. Indirect tax
Goods and Services Tax
Goods and services tax ("GST") is a broad based value-added tax on most goods and services consumed in Australia. It applies at a uniform rate of 10% on the supply or importation of taxable goods and services, based on the selling price.
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The Australian Government collects GST revenue and distributes it to the States and Territories. The GST rate and base can only be changed with unanimous support from State and Territory governments.
GST is levied on businesses at all stages of the production process. Businesses are generally able to claim a credit for GST paid on business inputs.
Exemptions from GST include health, education and basic food. GST is not levied on residential rents and financial services, but suppliers of these products and services generally cannot claim a credit for GST paid on production inputs. Excise and customs duty
Excises are specific taxes on goods, including liquid fuel, alcohol (except wine products) and tobacco.
An excise equivalent customs tariff applies to imports of excisable goods and is collected at the border usually from importers or owners of the goods. Additionally, customs tariffs apply to a range of imported textiles, clothing and footwear, passenger motor vehicles and other imported goods including foods, chemicals, industrial supplies, machinery and equipment, and household electrical items. Businesses are not credited for tariffs paid on their imports.
Excise rates for tobacco and alcohol (except wine products) are indexed twice a year to the consumer price index.
Tobacco is taxed on a per stick basis for cigarettes and cigars, or by overall weight of tobacco for other products. Beer and spirits are taxed on alcohol volume, with different beers attracting different rates. Spirits attract a higher rate than full strength beer.
Liquid fuels, primarily petrol and diesel, attract an excise of 38.143 cents per litre, which is not indexed. Other fuels attract different rates. Fuel tax credits apply to fuel used for certain off-road uses and for on-road use in heavy vehicles.
With the introduction of the Carbon Pollution Reduction Scheme, the rate of fuel tax will be cut on 1 July 2011 based on the effect of pricing the emissions of diesel. The cut will apply to fuels like petrol and diesel that currently attract an excise of 38.143 cents per litre. Wine equalisation tax
Wine is not subject to excise, but attracts a separate wine equalisation tax ("WET"), which applies as a percentage of the value of wine products. The producer, importer or wholesaler normally pays 29% of the wholesale price of wine at the last wholesale sale of the wine.
A $500,000 WET producer rebate reduces the WET paid by small wine producers to zero. Luxury car tax
The luxury car tax generally applies to the value of a domestic or imported passenger vehicle exceeding a threshold, $57,180 (in the year ending 30 June 2009), at a rate of 33% from 1 July 2008.
Luxury car tax concessions are available to certain fuel efficient cars and four wheel drives acquired by primary producers and eligible tourist operators. Resource taxes and royalties
Specific resource taxes and royalties apply to the extraction of oil and gas. Other taxes
A range of Australian government departments administer a broad range of smaller taxes, including charges for notional cost recovery, penalties, levies and licence fees.
Agricultural products attract more than 60 separate levies; this revenue funds services and research in specific agricultural industries.
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Australia's jurisdiction to tax: source and residence
The taxation of income in Australia is principally determined on the basis of whether the entity is an Australian resident or a foreign resident for tax purposes. Australian residents are taxed on their worldwide income whereas foreign residents are taxed only on income sourced in Australia.
Double taxation
Double taxation is caused by overlapping tax jurisdictions arising from the application of the source and residence principles noted above. For example, two countries may seek to tax the same income. Relief from double taxation is typically provided under domestic law by either: (i) exempting the income from domestic tax, or (ii) crediting the foreign tax paid on that income against domestic tax. Australia also allows a deduction for foreign tax paid under certain limited circumstances. In addition to domestic law, bilateral tax treaties contain rules designed to eliminate double taxation.
Australia's tax treaties allocate taxing rights between the residence (of the person) and source (of the income) countries and require the former to eliminate double taxation when there are competing taxing rights. They also provide an agreed basis for allocating the income and expenses of multinational groups operating in both countries. In addition, they authorise administrative cooperation to prevent fiscal evasion and to assist in the collection of tax debts. Australia has 42 bilateral tax treaties, based on the OECD Model Tax Convention on Income and on Capital.
Integrity rules
Thin capitalisation
Thin capitalisation rules aim to prevent undue exploitation by Australian and foreign multinational enterprises of the different tax treatment that applies to the payment of interest versus dividends; taxpayers can deduct interest but not dividends. The rules prevent excessive debt financing (as opposed to equity financing) of Australian entities, by disallowing the interest expense if the debt finance exceeds certain limits. The rules apply to:
• Australian entities that operate internationally and some of their associates;
• Australian entities that are foreign controlled; and
• foreign entities that operate in Australia.
The rules do not apply to entities: (i) with an annual debt deduction of $250,000 or less; (ii) that are outward investing Australian entities at least 90% of whose assets are Australian assets; or (iii) that are qualifying special purpose (securitisation) entities.
Transfer pricing
The transfer pricing rules are designed to ensure that Australian and foreign multinational enterprises price their related party international dealings in accordance with the arm's length principle. The aim is to prevent profit shifting between associated enterprises located in different jurisdictions to ensure taxable Australian profits are commensurate with the economic value added in Australia.
Foreign source income anti-tax-deferral (attribution) regimes
Australia's attribution regimes consist of:
• the controlled foreign company ("CFC") rules;
• the foreign investment fund ("FIF") rules;
• the transferor trust rules; and
• the deemed present entitlement rules.
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These rules are designed to ensure residents cannot defer or avoid Australian tax by accumulating income offshore. They tax residents on an accruals basis on their share of income accumulating offshore.
On 12 May 2009, the Australian Government announced its intention to reform the foreign source income attribution rules. The reforms will better balance the integrity objective of the rules with other objectives such as efficiency, equity, simplicity and low compliance costs.
The announced reforms maintain the CFC rules as the primary set of rules designed to counter tax-deferral arrangements. Under the reforms, the FIF and deemed present entitlement rules will be repealed.
Tax information exchange agreements
A tax information exchange agreement ("TIEA") is a bilateral agreement to establish a legal basis for the exchange of taxpayer information, for both civil and criminal tax purposes. Australia has signed five TIEAs with low-tax jurisdictions: Bermuda, Antigua and Barbuda, the Netherlands Antilles, the British Virgin Islands and the Isle of Man. Commonwealth-State Financial Relations
Commonwealth-State financial relations involve the provision of Australian Government financial assistance to the States and Territories, which we refer to as the States, and oversight by the Australian Loan Council of government borrowings.
The States receive significant financial support from the Commonwealth of Australia. As at the 2009-10 Budget released on 12 May 2009, Commonwealth payments to the States for 2009-10 were estimated to total $91.9 billion, comprising general revenue assistance, including all GST revenue, of $41.8 billion and payments for specific purposes of $50.1 billion. As at the 2009-10 Budget, payments to the States for specific purposes in 2009-10 were estimated to increase by $8.0 billion (19.1%) compared with the payments for specific purposes the States will receive in 2008-09. This increase is primarily due to the Government's economic stimulus package spending. See "Economic Outlook" in this Description of the Commonwealth and the Commonwealth Guarantee.
General revenue assistance is a broad category of payments, including GST payments, which are provided to the States without conditions to spend according to their own budget priorities. At Budget 2009-10, general revenue assistance to the States in 2009-10 was estimated to comprise $41.3 billion in GST payments and $494 million of other general revenue assistance. As agreed by all States in the Intergovernmental Agreement, GST payments are distributed among the States in accordance with the principle of horizontal fiscal equalisation. Under this principle, States receive funding from the Commonwealth of Australia such that, if each made the same effort to raise revenue from its own sources and operated at the same level of efficiency, each would have the capacity to provide services at the same standard level.
The Commonwealth of Australia provides payments to the States for specific purposes in order to pursue important national policy objectives in areas that may be administered by the States. The Australian Loan Council
The Australian Loan Council is a Commonwealth-State ministerial council that coordinates public sector borrowing. The Loan Council consists of the Prime Minister of Australia and the Premier/Chief Minister of each State and Territory. However, in practice each member is represented by a nominee, usually the Treasurer of that jurisdiction, with the Australian Treasurer as Chairman.
Current Loan Council arrangements operate on a voluntary basis and emphasise transparency of public sector financing rather than adherence to strict borrowing limits. These arrangements are designed to enhance financial market scrutiny of public sector borrowing and facilitate informed judgments about each government's financial performance.
The Loan Council traditionally meets annually in March to consider jurisdictions' nominated borrowings for the forthcoming year. As part of the agreed arrangements, the Loan Council considers these nominations, having regard to each jurisdiction's fiscal position and the macroeconomic implications of the aggregate figure.
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In March 2009, the Australian Government nominated, and the Loan Council endorsed, a Loan Council Allocation deficit of $34,073 million. In the 2009-10 Budget, the Australian Government estimated a Loan Council Allocation deficit of $60,965 million. Domestic Issuance of Government Bonds
While persistent fiscal surpluses in years prior to 2008-09 removed the need to borrow for budget funding purposes, the Australian Government continued to issue Treasury Bonds in order to maintain an active Treasury Bond market and to support the market in Treasury Bond futures contracts. These two markets are used in the pricing and hedging of a wide range of financial instruments and in the management of interest rate risks by market participants. These markets provide additional diversity to the financial system and contribute to a lower cost of capital in Australia.
On 3 February 2009, the Australian Government released the 2009 UEFO. Consistent with the forecasts contained in the 2009 UEFO, on 4 February 2009 the Australian Office of Financial Management, which we refer to as the AOFM, increased its issuance of Treasury Bonds.
Since the release of the 2009 UEFO, the AOFM has conducted two Treasury Bond tenders most weeks (generally on a Wednesday and a Friday) with the amount offered at each tender in the range of $500 million to $700 million. Between 4 February 2009 and 14 May 2009, total Treasury Bond issuance was $17.15 billion. In selecting bond lines to be offered at tender the AOFM has consulted with bond market participants.
On 12 May 2009, updated economic and fiscal forecasts were released by the Government in its 2009-10 Budget. In line with the release of this publication, the Treasury Bond tenders offered by the AOFM over the remainder of 2008-09 will be for up to $800 million each.
The total face value amount of Treasury Bonds on issue at end-June 2009 is expected to be around $79 billion, an increase of around $30 billion on end-June 2008.
Treasury Bond issuance in 2009-10 is expected to be around $60 billion. The stock of Treasury Bonds on issue at end-June 2010 is projected to be around $133 billion. The bulk of the issuance in 2009-10 is expected to be into existing bond lines and to take account of the relative demand for lines of different maturities. This is anticipated to enhance the liquidity and efficiency of the Treasury Bond market.
There will continue to be a large within-year financing requirement as a result of differences in the timing of Budget receipts and expenditures. In the period ahead, Treasury Notes will be used to assist with the management of short-term financing requirements. In addition, the AOFM may also use repurchase arrangements on its holdings of term financial assets for this purpose.
Treasury Note issuance was recommenced by the AOFM on 5 March 2009. Total issuance of Treasury Notes between 5 March 2009 and 15 May 2009 was $10.9 billion. Over the remainder of 2008-09, the AOFM plans conduct a tender for the issue of Treasury Notes each week. The total face value amount of Treasury Notes on issue at end-June 2009 will be around $17 billion.
Issuance of Treasury Notes in 2009-10 will depend on the size and profile of the within-year funding flows. The volume of Treasury Notes will therefore vary over the course of the year. At least $10 billion of Treasury Notes will be kept on issue at all times to maintain a liquid market in the notes.
The AOFM will continue to explore the use of other financing instruments, such as Treasury Indexed Bonds, in consultation with market participants.
As at 14 May 2009, the Australian Government had not borrowed directly in foreign currencies since 1987, and has only $9 million of outstanding borrowings denominated in foreign currencies.
On 7 April 2009, the Australian Government announced that the Commonwealth of Australia would establish a new company, of which the Commonwealth of Australia would be the majority shareholder, to build and operate a new National Broadband Network. The newly established company will invest up to $43 billion over eight years to build the National Broadband Network. The Commonwealth of Australia's investment in the company is contemplated to be partially funded by the issuance of Aussie Infrastructure Bonds, which will provide an opportunity for households and institutions to invest in the National Broadband Network. The structure and form of Aussie Infrastructure Bonds will be finalised in conjunction with the Implementation Study for the National Broadband Network. For further information regarding the National Broadband
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Network, see "Major Industries—Communication Services—Telecommunications" and "Government Finance—Commonwealth Investment in the National Broadband Network" in this Description of the Commonwealth and the Commonwealth Guarantee.
Guarantees and Other Contingent Liabilities Loan Guarantees by the Commonwealth
It is current practice for Commonwealth-owned instrumentalities to borrow directly rather than for the Australian Government to borrow on their behalf. The Financial Management and Accountability Act 1997 (Cth) (the "FMA Act") allows all Government Ministers to issue loan guarantees on behalf of the Australian Government using executive authority under the Australian Constitution, subject to the authorisation of the Minister for Finance and Deregulation. However, the governing legislation of some Commonwealth statutory authorities provides the Treasurer specifically with the discretionary power to guarantee their borrowings, reflecting legislative arrangements prior to the introduction of the FMA Act.
The number of new loan guarantees provided by the Australian Government has declined in recent years, reflecting a policy that Commonwealth instrumentalities engaged in business enterprises should approach capital markets on a basis more comparable with private businesses.
The Australian Government guarantees the due payment by Australia's export credit agency, the Export Finance and Insurance Corporation ("EFIC"), of money that is, or may at any time become, payable by EFIC to any body other than the Australian Government. The Australian Government also has in place a $200 million callable facility available to EFIC on request to cover liabilities, losses and claims.
The following table shows, in summary form, information relating to borrowings supported by specific Commonwealth guarantee and other indemnities and contingencies as at 30 June 2006, 2007 and 2008.
Table 34: Quantifiable Contingent Losses At 30 June 2006 At 30 June 2007 At 30 June 2008 (A$ millions) Guarantees 1,735 302 284 Indemnities 1,772 581 588 Uncalled shares/capital subscriptions 7,368 6,462 5,720 Claims for damages/costs 326 417 150 Other contingencies 112 96 116 Total quantifiable contingent losses 11,313 7,858 6,858 Less quantifiable contingent gains 138 77 70 Net quantifiable contingencies 11,175 7,781 6,788 Source: Commonwealth Consolidated Financial Statements for the years ended 30 June 2008 and 30 June 2007.
Commonwealth Initiatives to Enhance the Stability of the Australian Financial System
In order to promote financial system stability and ensure the continued flow of credit throughout the economy at a time of heightened turbulence in the international capital markets, the Australian Government has implemented:
• the Financial Claims Scheme establishing:
< measures under Division 2AA of the Banking Act 1959 (Cth) to:
: protect account holders' deposits made with eligible ADIs (other than foreign ADIs), and interest accrued on such deposits, to a total maximum value of $1,000,000 per customer per ADI; and
: facilitate prompt access by account holders to deposits protected under the Financial Claims Scheme in the event that an ADI fails; and
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< measures under Part VC of the Insurance Act 1973 (Cth) to facilitate the payment of moneys payable under valid claims made by eligible claimants against a general insurer that has become insolvent; and
• the Guarantee Scheme for Large Deposits and Wholesale Funding, a voluntary scheme allowing:
< ADIs (other than foreign ADIs) to apply to have deposit balances of greater than $1,000,000 per customer per ADI and certain non-complex senior unsecured debt instruments with maturities of up to 60 months; and
< foreign ADIs to apply, subject to satisfaction of certain conditions, to have certain deposits held by Australian residents at call or with maturities up to and including 31 December 2009 and certain non-complex senior unsecured short-term debt instruments having maturities up to 15 months,
in each case that satisfy the eligibility criteria set out in the Scheme Rules, guaranteed by the Commonwealth of Australia.
The key elements of the schemes are as follows:
Financial Claims Scheme
• The Commonwealth of Australia is:
< guaranteeing new and existing deposits in eligible ADIs (other than foreign ADIs), and interest accrued on such deposits, up to a limit of $1,000,000 per customer per ADI; and
< facilitating prompt access by account holders to deposits protected under the Financial Claims Scheme in the event that an ADI fails
for a period of three years ending 12 October 2011 with no direct charge to account holders;
• The Commonwealth of Australia is facilitating the payment of moneys payable under valid claims made by eligible claimants against a general insurer that has become insolvent;
Guarantee Scheme for Large Deposits and Wholesale Funding
• The Commonwealth of Australia is guaranteeing new and existing deposits in ADIs (other than foreign ADIs) of greater than $1,000,000 during the continuance of the Guarantee Scheme upon application and for a fee;
• The Commonwealth of Australia will guarantee on an issue by issue basis certain non-complex senior unsecured short-term (maturities up to 15 months) and term funding (maturities of 15 months up to 60 months) debt instruments of ADIs (other than foreign ADIs) upon application and for a fee;
• With respect to foreign ADIs, subject to satisfaction of certain conditions, the Commonwealth of Australia will guarantee certain deposits held by Australian residents at call or with maturities up to and including 31 December 2009 and certain non-complex senior unsecured short-term debt instruments having maturities up to 15 months upon application and for a fee.
Reporting under the Guarantee Scheme for Large Deposits and Wholesale Funding
The Reserve Bank of Australia will establish and maintain a website, currently www.guaranteescheme.gov.au, to provide information with respect to the operations of the Guarantee Scheme by identifying Guaranteed Liabilities by ADI, issue size, date of extension of the Guarantee, liability class, currency, program/product name, security identifier and maturity. The Reserve Bank of Australia will prepare monthly reports with respect to the operations of the Guarantee Scheme. The Government will also provide six-monthly reports to the Australian Parliament detailing:
• the aggregate amount of Guaranteed Liabilities;
61 Annex I
• any calls made under the Guarantee Scheme for payment; and
• any payments by the Commonwealth of Australia under the Guarantee Scheme.
As of 1 May 2009, total Guaranteed Liabilities of all ADIs under the Guarantee Scheme were estimated at $123.8 billion. This comprised an estimated $19.7 billion of large deposits, an estimated $16.3 billion of short- term debt and an estimated $87.8 billion of long-term debt.
Commonwealth Guarantee of State and Territory Borrowing
In order to ensure that State and Territory ("State") governments have access to the debt market, on 25 March 2009, the Australian Government announced that it would be introducing a voluntary guarantee of State borrowing. This guarantee has not yet commenced, and will require the execution of a Deed of Guarantee and the passage of an Appropriation Bill before coming into effect.
The Australian Government has announced that it intends the key elements of the guarantee of State borrowing to be as follows:
• The Commonwealth of Australia will guarantee State-issued securities including semi-government bonds and commercial paper upon application and for a fee. The guarantee will cover securities with maturities of up to 15 years;
• The guarantee will not cover foreign currency issuances;
• The States will be able to apply for a guarantee over both existing stock of eligible State securities and future issuances;
• A counter-indemnity will be put in place with the States;
• A fee will be payable for the provision of the guarantee. The fee for new issuances will be set at 30 basis points for States with a AAA credit rating and 35 basis points for States with a AA+ credit rating. The fee for existing stock will be set at 15 basis points for States with a AAA credit rating and 20 basis points for States with a AA+ credit rating. The Commonwealth of Australia can vary the fee;
• The States have approximately $120 billion worth of existing securities on issue.
As at 14 May 2009, no liabilities were guaranteed under the proposed guarantee of State borrowing.
Reporting under the Guarantee of State and Territory Borrowing
The Australian Government intends to establish a website to provide information with respect to the operations of the guarantee of State borrowing by identifying guaranteed liabilities by State, issue size, liability class, program/product name, security identifier and maturity. The contents of this website will not be incorporated by reference into this Description of the Commonwealth and the Commonwealth Guarantee.
Other Commonwealth Initiatives in Response to the Global Financial Crisis
The Australian Government has also announced its proposal to establish the Australian Business Investment Partnership ("ABIP"), a temporary, contingency measure to provide liquidity support for viable commercial property assets where financiers have withdrawn from debt financing arrangements as a result of the global financial crisis. The Government intends to establish ABIP under the Corporations Act 2001 (Cth) as a public company limited by shares. The members (shareholders) of ABIP will be the Commonwealth of Australia and Australia's four major domestic banks. ABIP will be initially financed at $4 billion, with the Australian Government's contribution of $2 billion matched by a $0.5 billion contribution from each of the four major banks. This could be extended via the issuance of Government guaranteed debt of up to $26 billion to create up to $30 billion in financing. ABIP remains subject to Parliamentary approval. The Australian Business Investment Partnership Bill 2009, which would provide for the establishment and operation of the ABIP, was introduced into Parliament on 19 March 2009.
As a transitional funding arrangement, the Australian Government has also established a financing trust to provide liquidity to car dealer financiers through the securitisation of eligible wholesale floorplan financing
62 Annex I
loans. The facility is expected to provide up to $850 million in wholesale floorplan finance to eligible dealerships. The Australian Government provides support in the form of a guarantee on the subordinated notes issued by the financing trust to ensure that Australia's four major banks are able to provide sufficient capital for the financing trust.
Other Contingent Liabilities and Undertakings
The Australian Government has contingent liabilities with various international financial institutions. As at 31 March 2009, Australia's uncalled capital subscriptions totalled US$2.8 billion for the IBRD, US$2.4 billion for the ADB, US$26.5 million for the MIGA and A$268 million for the EBRD. In addition, the undrawn portion of promissory notes issued and payable on demand in respect of maintenance-of-value obligations to the capital of the IBRD amounted to US$42.6 million as at 31 March 2009. Promissory notes have also been issued by the Australian Government as successive quota subscriptions to the IMF and in order to maintain the value of the IMF's holdings of Australian dollars in SDR terms. At 31 March 2009, the undrawn portion of lodged promissory notes issued for these purposes amounted to $3.8 billion.
Australia has made a line of credit available to the IMF under its New Arrangements to Borrow ("NAB") since 1998. This is currently for an amount of US$1.2 billion (approximately A$1.8 billion). In line with G-20 Leaders' commitments, Australia will join with other countries to increase its credit line under an expanded NAB. Australia's contribution to the expanded NAB will be by way of a US$7.0 billion (approximately A$10.2 billion) contingent loan. This will help ensure that the IMF has the resources available to maintain stability and support recovery in the global economy. The funds would be drawn upon by the IMF only if needed and would be repaid in full with interest.
As at 31 March 2009, the Australian Government had liabilities of $1.2 billion to existing replenishments of the ADF, the IDA (including with respect to the Heavily Indebted Poor Countries initiative) and the Global Environment Facility. These liabilities are covered by the instruments of commitment that were signed at the time of pledging. Promissory notes will be lodged regularly over the life of the replenishment to enable the draw-downs to occur in line with the agreement timetable for cash disbursements.
The Australian Government will contribute to the ADB's recently announced general capital increase. Australia's contribution of paid-in capital will be US$198 million and will be paid over a ten year period from 2010-11. Australia will also subscribe to a further US$5.6 billion in callable capital.
The Australian Government will also make up to US$1 billion available to the Government of Indonesia in the form of a standby loan facility, to be drawn down should Indonesia be unable to raise sufficient funds on global capital markets due to the impact of the global recession. Possible drawdown of the facility will be dependent on a request from the Indonesian Government and subject to applicable criteria being satisfied. Any funds provided will be repaid in full with interest.
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PUBLIC DEBT
The following table provides an account of all Commonwealth Government Securities on issue as of 31 March 2009.
Table 35: Government securities repayable in Australian dollars Interest Rate Outstanding Date of (% 31 March 2009 Date of Issue Maturity Per Annum) (A$ '000) Treasury Fixed Coupon Bonds(a) Oct 1996 15 Sep 2009 7.50 6,009,049 Jan 2005 15 Aug 2010 5.25 6,202,500 Aug 1998 15 Jun 2011 5.75 7,698,687 Dec 2006 15 Apr 2012 5.75 6,352,000 May 2000 15 May 2013 6.50 7,099,400 Jul 2008 15 June 2014 6.25 4,401,000 May 2002 15 Apr 2015 6.25 6,648,000 June 2004 15 Feb 2017 6.00 6,348,000 July 2006 15 Mar 2019 5.25 5,596,500 Sep 2007 15 May 2021 5.75 5,601,000 Total Treasury Fixed Coupon Bonds(b) 61,956,136
Treasury Indexed Bonds 1985 - 2004 20 Aug 2010 (c) 1,452,000 20 Aug 2015 2,095,800 20 Aug 2020 2,472,200 Total Treasury Indexed Bonds 6,020,000(d)
Treasury Notes(a) Various Various (e) 3,400,000
Miscellaneous Securities(f) Various Various Various 0 Total Repayable in Australian Dollars 71,376,136 (a) Treasury Bonds and Treasury Notes issued since 1 July 1984 are available only as Inscribed Stock; before then Commonwealth securities were also available in bearer form. (b) Since 5 August 1982, Treasury Bonds have been sold by a tender system. (c) Interest payable is dependent upon the rate of inflation. (d) Original face value. (e) Treasury Notes are issued at a discount and are redeemed at par on maturity. (f) Includes debt assumed by the Commonwealth and various miscellaneous securities. Source: Australian Office of Financial Management.
The tables below show the external debt of the Australian Government, on issue at 31 March 2009. The bonds issued by Australia which are listed below require the Australian Government, in accordance with their terms, to secure such bonds pari passu with new bonds, loans or borrowings which would otherwise rank in priority to such bonds.
Table 36: Government securities repayable in Pounds Sterling Interest Rate Outstanding Date of Final (% 31 March 2009 Date of Issue Maturity Per Annum) (£ Sterling '000) Commonwealth Government issues Various Matured—bonds notyet Nil 51 presented for payment(a) State Government issues Various At Treasurer's option 3.0 504 Total Repayable in Pounds Sterling 555 (a) Elapsed bonds reclaimed from fiscal agent. Source: Australian Office of Financial Management.
64 Annex I
Table 37: Government securities repayable in United States Dollars Interest Rate Outstanding Date of Final (% 31 March 2009 Date of Issue Maturity Per Annum) (US$ '000) March 1987 15 Mar 2017 8.375 5,321 Total Repayable in United States Dollars 5,321 Source: Australian Office of Financial Management.
Table 38: Government securities repayable in Euro Interest Rate Outstanding (% 31 March 2009 Date of Final Maturity Per Annum) (Euro '000) Matured – Bonds not yet presented for payment(a) Nil 6 Total Repayable in Euro(b) 6 (a) Elapsed bonds reclaimed from fiscal agent. (b) Bonds originally repayable in Deutsche Marks, converted to Euro at the 31 December 1998 rate of 1.95583 Deutsche Marks = 1.0 Euro irrevocably fixed by the European Central Bank. Source: Australian Office of Financial Management.
Table 39: Government securities repayable in Japanese Yen Interest Rate Outstanding (% 31 March 2009 Date of Final Maturity Per Annum) (¥ '000) Matured – Bonds not yet presented for payment(a) Nil 416 Total Repayable in Japanese Yen 416 (a) Elapsed bonds reclaimed from fiscal agent. Source: Australian Office of Financial Management.
Table 40: Government securities repayable in Swiss Francs Interest Rate Outstanding (% 31 March 2009 Date of Final Maturity Per Annum) (SF '000) Matured – Bonds not yet presented for payment(a) Nil 51 Total Repayable in Swiss Francs 51 (a) Elapsed bonds reclaimed from fiscal agent. Source: Australian Office of Financial Management.
The following table shows estimated payments of principal (including contractual prepayments and payments at maturity) to be made on the direct debt of the Australian Government outstanding on 30 June 2008.
Table 41: Summary of funded debt payment (as at 30 June 2008) 2010-11 2012-13 2017-18 2008-09 2009-10 - 2011-12 - 2016-17 - 2020-21 (A$ millions) Repayable: In Australian Dollars(a) 5,094 5,709 18,047 16,889 10,470 Repayable overseas:(b) In United States Dollars 0 0 0 7 0 Total 5,094 5,709 18,047 16,896 10,470 (a) Excludes Treasury Notes and Treasury Bonds held as investment by the Commonwealth of Australia. (b) Converted into Australian dollars at rates of exchange prevailing on 30 June 2008. Source: Australian Office of Financial Management; unpublished AOFM data.
On 4 February 2009, the Australian Office of Financial Management increased its issuance of Treasury Bonds. Between 4 February 2009 and 14 May 2009, total Treasury Bond issuance was $17.1 billion. The total face value amount of Treasury Bonds on issue at end-June 2009 is expected to be around $79 billion, an increase of around $30 billion on end-June 2008. Treasury Bond issuance in 2009-10 is expected to be around $60 billion. The stock of Treasury Bonds on issue at end-June 2010 is projected to be around $133 billion.
65 Annex I
The AOFM also recommenced the issuance of Treasury Notes on 5 March 2009 to assist with the management of short-term financing requirements. The AOFM may also use repurchase arrangements on its holdings of term financial assets for this purpose. Total issuance of Treasury Notes between 5 March 2009 and 15 May 2009 was $10.9 billion. The total face value amount of Treasury Notes on issue at end-June 2009 is expected to be around $17 billion.
See "Government Finance—Domestic Issuance of Government Bonds" in this Description of the Commonwealth and the Commonwealth Guarantee.
Debt Record
The Commonwealth of Australia has paid promptly, when due, the full amount of principal and interest on every direct external obligation issued by it and has met every indirect external obligation on which it has been required to implement its guarantee in the lawful currency, and in the country where payable, at the time of payment.
Credit Ratings
The Australian Government has a AAA rating for both foreign and domestic currency denominated debt from Standard and Poor's and Moody's. Fitch rates Australia's domestic currency borrowings as AAA and foreign currency borrowings as AA+. On 12 May 2009, Standard and Poor's, Moody's and Fitch each stated that the 2009-10 Budget did not affect the AAA ratings for Australia's foreign and domestic currency denominated debt (in the case of Standard and Poor's and Moody's) or the AAA and AA+ ratings for Australia's domestic currency borrowings and foreign currency borrowings, respectively (in the case of Fitch).
66 Annex I
LEGAL MATTERS
The validity of the Deed of Guarantee was passed upon for the Commonwealth of Australia by the Australian Government Solicitor, Lionel Murphy Building, 50 Blackall Street, Barton ACT 2600, Australia.
67 REGISTERED AND HEAD OFFICE OF THE ISSUER Level 17, Suncorp Centre 36 Wickham Terrace Brisbane QLD 4000
ARRANGER UBS Limited 1 Finsbury Avenue London EC2M 2PP
DEALERS Banc of America Securities Limited Barclays Bank PLC Citibank International plc 5 Canada Square 5 The North Colonnade Citigroup Centre London E14 5AQ Canary Wharf Canada Square London E14 4BB Canary Wharf London E14 5LB
Citigroup Global Markets Limited Deutsche Bank AG, London Branch J.P. Morgan Securities Ltd. Citigroup Centre Winchester House 125 London Wall Canada Square 1 Great Winchester Street London EC2Y 5AJ Canary Wharf London EC2N 2DB London E14 5LB
Merrill Lynch International Nomura International plc Suncorp-Metway Limited Merrill Lynch Financial Centre Nomura House Level 24, Suncorp Plaza 2 King Edward Street 1 St Martin’s-le-Grand Cnr Turbot and Albert Streets London EC1A 1HQ London EC1A 4NP Brisbane QLD 4000
UBS Limited 1 Finsbury Avenue London EC2M 2PP
PRINCIPAL PAYING AGENT Deutsche Bank AG, London Branch Winchester House 1 Great Winchester Street London EC2N 2DB
REGISTRAR Deutsche Bank Trust Company Americas Trust & Securities Services 60 Wall Street – 27th Floor New York NY 10005
PAYING AGENT AND TRANSFER AGENT Deutsche Bank Luxembourg S.A. 2 Boulevard Konrad Adenauer L-1115 Luxembourg
122 LEGAL ADVISERS to the Dealers to the Issuer as to English law as to Australian law Allen & Overy LLP Clayton Utz One Bishops Square Level 28 London E1 6AD Riparian Plaza 71 Eagle Street Brisbane QLD 4000
AUDITORS to the Issuer KPMG Chartered Accountants Level 16 Riparian Plaza 71 Eagle Street Brisbane Q4000
123
sterling 117139