Glossary of Terms

LIBOR – London Inter-Bank Offered Rate. The LIBOR is fixed on a daily basis by the British Bankers’ Association and is the interest rate that a contributor panel bank could borrow funds, where it to do so by asking for and then accepting inter-bank offers in reasonable market size, just prior to 11:00 London time.

Investment grade – The term “investment grade” has been established over time as shorthand to describe categories of bonds with the ratings ‘AAA’ to ‘BBB’. The term “investment grade” is a market convention, and does not imply any recommendation or endorsement of a specific security for investment purposes. “Investment grade” categories indicate relatively low to moderate credit risk.

Non-investment grade – “Non-investment grade” bonds are commonly referred to as “high yield” securities or “junk bonds” and refer to those securities that are rated ‘BB’ to ‘D’. “Non-investment grade” bonds involve a greater degree of risk (in particular, a greater risk of default) than, and special risks in addition to the risks associated with, investment grade debt obligations. While offering a greater potential opportunity for capital appreciation and higher yields, non-investment grade bonds typically entail greater potential price volatility and may be less liquid than higher-rated securities. “Non-investment grade” bonds may be regarded as predominantly speculative with respect to the issuer’s continuing ability to make timely principal and interest payments. They also may be more susceptible to real or perceived adverse economic and competitive industry conditions than higher-rated securities. Debt securities in the lowest investment grade category also may be considered to possess some speculative characteristics by one or more ratings agencies.