Credit Derivatives Reference Rates

AFMA Credit Derivative summary definitions for independent revaluation rates for a standard “Credit Default Swap” (CDS).

A Credit Derivative for the purposes of these revaluation rates is defined as a CDS having the agreed market standard terms as set out in AFMA’s OTC Financial Product Conventions for Credit Derivatives available on http://www.afma.com.au/ in the Practices, Standards & Documentation section.

With a CDS, one counterparty (the “protection seller”) agrees to compensate another counterparty (the “protection buyer”) if a particular company (the “reference entity”) experiences one of a number of defined events (“credit events”) during the term of the contract. The protection seller is paid a fee or premium over the life of the contract, ordinarily equivalent to an annualised percentage of the notional face value of the transaction in basis points, paid quarterly in arrears.

Eligible Credit Derivative Reference Entities are defined as the most liquid names in the broker market. Reference Entities are defined by the AFMA Credit Derivatives committee and are reviewed on a quarterly basis.

CONTRIBUTING FINANCIAL INSTITUTIONS:

Institutions contributing to the credit derivative reference rate process will nominated by the AFMA Credit Derivative Committee. The list of contributors will be reviewed annually or as and when required.

Currently the Contributing Institutions are:

REVALUATION:

These CDS revaluation rates are currently produced on a daily basis.

The revaluation rates are available on all approved information vendor systems.

CALCULATION:

Contributing Financial Institutions submit all revaluation rates on the basis that they will not be disclosed to any party other than AFMA or the calculation agent. AFMA will monitor all revaluation rates quoted to ensure they are reasonable and consistent over time.

The AFMA Credit Derivatives Committee will consider a “no-name” report on the performance of Contributing Financial Institutions at each of its meetings. If in the opinion of the AFMA Credit Derivatives Committee there is any significant irregularity in rates that are submitted, AFMA will consult with the relevant Contributing Financial Institutions and if the irregularity continues the relevant Contributing Financial Institutions may be removed by AFMA from the revaluation rate process.

Calculation Method:

1. Contributing banks (listed above) supply their “BID” and “ASK” prices, in USD terms, for each data pair for the time periods - 1 year; 3 years ; 5 years; 7 years and 10 years and the “MID rate” is then calculated.

2. The “MEAN” of the “MID rates” is calculated based on 1. above.

3. The “STANDARD DEVIATION” (STDEV) is calculated on 1. above.

4. The calculation of contributors whose “MEAN” is > or < than 1 STDEV from the MEAN and they are then rejected as OUTLIERS.

5. A new MEDIAN and SRDEV are calculated using the remaining contributors

6. All rates are calculated to 2 decimal places.

7. All rates are supplied as ‘whole numbers’ without any decimal points.

REFERENCE ENTITIES:

The following is the current list of the Reference Entities on which revaluation contributions are received.

AFMA Credit Derivative Reference Rate Fixings (in US Dollar terms)
Short Name	Reference Entity	1 Year	3 Year	5 Year	7 Year	10 Year	RED™ Codes (*)
		Bid / Ask	Bid / Ask	Bid / Ask	Bid / Ask	Bid / Ask
AGL	Australian Gas Light Company						0F77CO
AMC	Amcor Limited						0C575S
AMP	AMP Group Holdings Limited						GG3682
ANZ	Australia & New Zealand Banking Group Limited						0F777A
ANZ–Sub LT2	ANZ Bank–Subordinated Lower Tier 2						0F777A
AGL	Australian Gas Light Company (The)						0F77CO
AUSOV	Commonwealth of Australia						-
BHP	BHP Billiton Limited						08GE66
CCL	Coca Cola Amatil Limited						1AA18D
CML	Coles Myer Limited						1ACBF7
CSR	CSR Limited						1D89CF
CBA	Commonwealth Bank of Australia						2C2983
CBA–Sub LT2	Commonwealth Bank–Subordinated Lower Tier 2						2C2983
FAIRFAX	Fairfax (John) Holdings Limited						QV5884
FGL	Fosters Group Limited						3I527D
GPT	GPT RE Limited as responsible entity for the General Property Trust						QU4079
LLC	Lend Lease Limited						5H8625
MBL	Macquarie Bank Limited						5AB67W
NAB	National Australia Bank Limited						6J5777
NAB–Sub LT2	National  Aust Bank – Subordinated Lower Tier 2						6J5777
PBL	Publishing and Broadcasting Limited						7B8ABP
QAN	Qantas Airways Limited						7BB98S
QBE	QBE Insurance Group Limited						7BB9AO
RIN	Rinker Group Limited						QY9560
RIO	Rio Tinto Limited						7DD922
STO	Santos Limited						-
SGB	St George Bank Limited						7FHE97
SGB–Sub LT2_	St George Bank – Subordinated Lower Tier 2						7FHE97
SGT Optus	SingTel Optus Pty Limited						8ABCIG
SRP	Southcorp Limited						8C53BE
STOCKLAND	Stockland Trust Management as responsible entity for Stockland Trust						-
SME	Suncorp-Metway Limited						8ED955
SME SUB	Suncorp-Metway Limited – Subordinated Lower Tier 2						8ED955
SYB	Symbion Health Limited						-
TABCORP	TABCORP Holdings Ltd						-
TEL NZ	Telecom Corporation of New Zealand Limited						8FGB9F
TLS	Telstra Corporation Limited						8FGFFW
WES	Wesfarmers Limited						QZEDF7
WESTFIELD	Westfield Management Limited as responsible entity for the Westfield Trust						QZG858
WBC	Westpac Banking Corporation						9F7335
WBC–Sub LT2	Westpac Bank – Subordinated Lower Tier 2						9F7335
WMR	WMC Resources Limited						9BBBAZ
WOW	Woolworths Limited						9H88GG
WPL	Woodside Petroleum Limited						9H824A
* RED(™) Codes as provided by Markit Group Ltd - Markit RED(™) is the industry standard for identifying Reference Entities in the global credit derivative market.

Updated May 2006

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