Council Controlled Organisations Financial Statements for

Transcription

1 67 4. Council Controlled Organisations Financial Statements for Reporting officer Date of meeting 28 October 2015 Alan Adcock (Group Manager Support Services) Vision, mission and values This item is in accord with Council s vision, mission and values statement as it provides financial information for effective decision making. Annual reports for the year ending 30 June 2015 The results of all Council Controlled Organisations have been consolidated into Whangarei District Council s Annual Report. Not all CCO s are required to report their results to Council. However, for transparency, the accounts for Whangarei District Airport, Northland Events Centre Trust and Whangarei Art Museum Trust are included in this agenda. Northland Regional Landfill Limited Partnership is excluded for commercial sensitivity reasons. The accounts for Springs Flat Contractors Limited and Whangarei Quarry Gardens Trust accounts had not been finalised nor had their audit completed at the date the agenda for this meeting closed so their draft results were used for consolidation purposes in the Annual Report. The first four entities Annual Reports are now completed in-house by Council staff using Council s accounting software. Council charges each entity a fee each year for these services, but the overall cost to the group is reduced. Over time it is hoped that by using Council s accounting systems and controls, savings in audit fees will also be able to be made. Whangarei District Airport This CCO made a surplus this year of $120k (2014:$1k), $29k better than budget. While landing fee revenue was lower than budget due to a number of cancelled flights throughout the year, investment interest received was higher than budget due to additional cash held. Depreciation was lower than budget. Lease revenue was also lower than budget due to some lease sites being vacant. Northland Events Centre Trust In terms of the agreement with Northland Regional Council, Council is responsible for underwriting any operating shortfalls in NECT operations. This amounted to $24k (2014:$174k). No capital grants were paid to the Trust. Whangarei Art Museum Trust These financial statements show a surplus of $72k (2014:($201k)). Capital grants totalling $562k (2014:$461k) were paid to the Trust. Springs Flat Contractors Ltd This company remains in existence solely to protect the tax losses which it has accumulated in the past. These losses will be used to offset future taxable income from the Northland Regional Landfill Limited Partnership. For the 2014/15 year the company had revenue of $1.9k and expenses of $2.0k and total equity of $52.4k as at 30 June Whangarei Quarry Gardens Trust A Council Organisation, this small trust is not required to complete a Statement of Intent. Capital grants totalling $296k were paid to the Trust from council and with other grants total revenue was $670k for the year. Expenses were $118k meaning a surplus of $552k. As at 30 June 2015 the trust had accumulated funds of $1.2 million. Finance Committee 1 28 October 2015

2 68 Recommendation That the Financial Statements for the following Council Controlled Organisations for year ended 30 June 2015 be received: Whangarei District Airport Northland Events Centre Trust Whangarei Art Museum Trust. Attachments 1. Whangarei District Airport Financial Statements 2. Northland Events Centre Trust Financial Statements 3. Whangarei Art Museum Trust Financial Statements Finance Committee 2 28 October 2015

3 69

4 70

5 71

6 72

7 73

8 74

9 75

10 76

11 77

12 78

13 79

14 80

15 81

16 82 Northland Events Centre Trust Financial statements for the year ended 30 June 2015

17 83 Northland Events Centre Trust Financial statements - 30 June 2015 Contents Page Entity Information 2 Financial statements Statement of financial performance 3 Statement of financial position 4 Cash flow statement 5 Notes to the financial statements 1 Statement of accounting policies for the year ended 30 June Summary of significant accounting policies 6 3 Council funding 8 4 Revenue from operations 8 5 Other expenses 8 6 Equity 8 7 Bank accounts and cash 9 8 Debtors 9 9 Property, plant and equipment 9 10 Creditors and accrued expenses Contingencies Lease revenue and operating lease commitments Trustee fees Related party transactions Events occurring after the balance date Explanation of major variances against budget 11 Date - 8 October Time - 1:08 p.m.

18 84 Northland Events Centre Trust 30 June 2015 Legal name Northland Events Centre Trust (NECT). Type of entity and legal basis NECT is incorporated in New Zealand under the Charitable Trusts Act NECT is controlled by the Whangarei District Council and is a council controlled organisation as defined in section 6 of the Local Government Act Purpose The primary objective of NECT is the operation and maintenance of a high quality multi purpose events centre. This includes providing a regional sporting, cultural, convention and events centre for use by sports bodies and codes, arts, musical, social and cultural organisations, public bodies and community organisations for the benefit of the public of the region and to enable NECT to be used for a wide range of activities and events. Structure of the Trust s operations, including governance arrangements NECT comprises a Board of five trustees who oversee the governance of NECT. Four trustees are appointed by the Whangarei District Council and one trustee is appointed by the Northland Regional Council. An Operations Manager is responsible for the day-to-day operations of NECT. Main sources of cash and resources Revenue from operations is the primary sources of funding to NECT. Outputs NECT provides opportunities for the Northland region to have a quality, well planned and fully equipped venue for major sporting, entertainment, cultural and family events. The venue has a capacity of 18,500. NECT is also charged to exhibit and provide a sense of social and environmental responsibility having regard to the interests of the community as a whole. Authorisation The Board of Northland Events Centre Trust authorised these financial statements presented on the following pages 3 to 11 For and on behalf of the Board. W Syers J Lynch Chairperson Manager 29 September September 2015 Date - 8 October Time - 1:08 p.m.

19 85 Northland Events Centre Trust Statement of comprehensive revenue and expense For the year ended 30 June 2015 Statement of financial performance For the year ended 30 June 2015 Revenue Actual Actual Note $ $ Revenue from operations 4 693, ,165 Council funding 3 24, ,794 Interest revenue Total revenue 718, ,592 Expenditure Depreciation and amortisation 9 86,522 79,901 Other expenses 5 632, ,584 Total operating expenditure 718, ,485 Operating surplus/(deficit) - 117,107 Summary of significant accounting policies and the accompanying notes form part of these financial statements. -3- Date - 8 October 2015 Time - 1:08 p.m.

20 86 Northland Events Centre Trust Statement of financial position As at 30 June 2015 Statement of financial position As at 30 June Note $ $ ASSETS Current assets Debtors 8 172, ,217 Bank accounts and cash 7 32,888 29,126 Current account - Whangarei District Council 24,953 8,095 Total current assets 229, ,438 Property, plant and equipment 9 665, ,192 Total non-current assets 665, ,192 Total assets 895, ,630 LIABILITIES Creditors and accrued expenses 10 77,468 61,993 Total current liabilities 77,468 61,993 Total liabilities 77,468 61,993 Net assets 817, ,637 EQUITY Contributed equity Accumulated funds 6 580, ,841 Other reserves 6 237, ,786 Total equity 817, ,637 Summary of significant accounting policies and the accompanying notes form part of these financial statements. -4- Date - 8 October 2015 Time - 1:08 p.m.

21 87 Northland Events Centre Trust Cash flow statement For the year ended 30 June 2015 Cash flow statement For the year ended 30 June 2015 Actual Actual $ $ Cash flows from operating activities Receipts from operations (customers and service revenue) 625, ,701 Council funding 8,094 47,425 Interest received Total cash provided from operating activities 633, ,763 Cash was applied to Payments to suppliers 633, ,131 Goods and services tax (net) (16,175) (8,718) Total cash provided to operating activities 617, ,413 Net cash flow from operating activities 16, ,350 Cash was applied to Purchase and development of property, plant and equipment 12, ,692 Net cash flow from investing activities (12,453) (161,692) Cash reconciliation Net (decrease)/increase in cash, cash equivalents, and bank overdrafts 3,762 (342) Bank accounts and cash, and bank overdrafts at the beginning of the year 29,126 29,468 Bank accounts and cash, and bank overdrafts at the end of the year 32,888 29,126 Summary of significant accounting policies and the accompanying notes form part of these financial statements. -5- Date - 8 October 2015 Time - 1:08 p.m.

22 88 Northland Events Centre Trust Notes to the financial statements 30 June Statement of accounting policies for the year ended 30 June Reporting entity NECT is incorporated as a trust under the Charitable Trusts Act 1957, is domiciled in New Zealand and registered under the Charities Act 2005, registration number NECT is an exempt organisation under Section 7 of the Local Government Act Summary of significant accounting policies 2.1 Basis of preparation Statement of compliance The Board has elected to apply PBE SFR-A (PS) Public Benefit Entity Simple Format Reporting Accrual (Public Sector) on the basis that NECT does not have public accountability (as defined) and has total annual expenses of less than $2 million. All transactions in the financial statements are reported using the accrual basis of accounting. The financial statements are prepared on the assumption that NECT will continue to operate in the foreseeable future. Goods and services tax NECT is registered for GST. All amounts in the financial statements are recorded exclusive of GST, except for debtors and creditors, which are stated inclusive of GST. Functional and presentation currency The financial statements are presented in New Zealand dollars. 2.2 Revenue and expense Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services, excluding Goods and Services Tax, rebates and discounts and after eliminating sales within Council. Revenue is recognised as follows: (i) Grants Council, government, and non-government grants are recognised as revenue when the funding is received unless there is an obligation to return the funds if conditions of the grant are not met ( use or return condition ). If there is such an obligation, the grant is initially recorded as a liability and recognised as revenue when conditions of the grant are satisfied. (ii) Donated assets Revenue from donated assets is recognised upon receipt of the asset if the asset has a useful life of 12 months or more, and the value of the asset is readily obtainable and significant. (iii) Interest revenue Interest revenue is recorded as it is earned during the year. iv) Sale of goods Revenue from the sale of goods is recognised when the goods are sold to the customer. (v) Rental revenue Rental revenue is measured at the fair value of consideration received or receivable. Rental revenue is received one month in advance and is recognised for the month it relates to. (vi) Advertising, marketing, administration, overhead, and fundraising costs These are expensed when the related service has been received. 2.2 Bank accounts and cash Cash and cash equivalents include cash on hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Date - 8 October Time - 1:08 p.m.

23 89 Northland Events Centre Trust Notes to the financial statements 30 June 2015 (continued) 2 Summary of significant accounting policies (continued) 2.3 Debtors Debtors are initially recorded at the amount owed. When it is likely the amount owed (or some portion) will not be collected, a provision for impairment is recognised and the loss is recorded as a bad debt expense. 2.4 Property, plant and equipment Property, plant, and equipment are recorded at cost, less accumulated depreciation and impairment losses. (i) Donated assets Donated assets are recognised upon receipt of the asset if the asset has a useful life of 12 months or more, and the current value of the asset is readily obtainable and significant. Significant donated assets for which current values are not readily obtainable are not recognised (ii) Asset sales For an asset to be sold, the asset is impaired if the market price for an equivalent asset falls below its carrying amount. (iii) Use of assets For an asset to be used by the Trust, the asset is impaired if the value to the Trust in using the asset falls below the carrying amount of the asset. Depreciation Depreciation is provided on a straight-line basis at rates that will write off the cost of the assets over their useful lives. The useful lives and associated depreciation rates of major classes of assets have been estimated as follows: Class of PP&E Estimated useful life Depreciation rates Office equipment 2-10 years 10%-50% Plant and equipment 6-60 years 1.6% -17% Computer equipment 2-5 years 20% -50% 2.5 Creditors and accrued expenses Creditors and accrued expenses are measured at the amount owed. 2.6 Lease expense Lease payments are recognised as an expense on a straight-line basis over the lease term. 2.7 Tier 2 PBE Accounting Standards applied NECT has not applied any Tier 2 Accounting Standards in preparing its financial statements. 2.8 Changes in Accounting Policies and Transition to the new PBE SFR-A (PS) Standards This is the first set of financial statements prepared using the new PBE SFR-A (PS) standard, and comparative information for the year ended 30 June 2014 has been restated to comply with the new standard. Date - 8 October Time - 1:08 p.m.

24 90 Northland Events Centre Trust Notes to the financial statements 30 June 2015 (continued) 3 Council funding Actual Actual $ $ Capital grants and Council underwrite 24, ,794 Total council funding 24, ,794 4 Revenue from operations Actual Actual $ $ Gate revenue 22,235 25,119 Other revenue 256, ,090 Office rental 162, ,408 Food and beverages 96,041 84,309 Recoveries 113,005 36,206 Other grants - 5,000 Corporate suites 42,967 42,033 Total revenue from operations 693, ,165 5 Other expenses Actual Actual $ $ Repairs and maintenance 154, ,108 Management fees 138, ,847 Utilities 100,730 89,231 Cleaning 92,287 88,254 Auditors fees for financial statements 15,101 14,972 Bad debts written off - 1,600 Other expenses 131, ,572 Total other expenses 632, ,584 6 Equity $ $ Council capital contribution Retained earnings 580, ,841 Asset replacement reserves 237, ,786 Balance at 30 June , ,637 Asset replacement reserve Balance at 1 July 150,786 - Transfer from retained earnings 86, ,786 Balance 30 June 237, ,786 Accumulated funds Balance at 1 July 666, ,520 Transfer to asset replacement reserces (86,521) (150,786) Surplus/(deficit) for the year - 117,107 Balance 30 June 580, ,841 Date - 8 October Time - 1:08 p.m.

25 91 Northland Events Centre Trust Notes to the financial statements 30 June 2015 (continued) 7 Bank accounts and cash $ $ Cash on hand Bank deposits 32,790 28,826 Total bank accounts and cash 32,888 29,126 8 Debtors $ $ Trade debtors 172, ,217 Total debtors 172, ,217 9 Property, plant and equipment 2014 Plant and equipment Office equipment Computer equipment Total $ $ $ $ Carrying amount 388, ,297 16, ,402 Balance at 1 July , ,297 16, ,402 Year ended 30 June 2014 Additions 162,702 2, ,777 Work in progress (3,085) - - (3,085) Depreciation charge (43,906) (31,942) (4,051) (79,899) Balance at 30 June , ,430 12, , Plant and equipment Office equipment Computer equipment Total $ $ $ $ Year ended 30 June 2015 Opening balance 504, ,430 12, ,195 Additions 8,097 4,354-12,451 Depreciation charge (52,800) (29,670) (4,052) (86,522) Asset class transfers 2,641 (2,641) - - Balance at 30 June , ,474 8, ,124 There are no restrictions over the title of the NECT's property, plant and equipment, nor are any property, plant and equipment pledged as security for liabilities. Date - 8 October Time - 1:08 p.m.

26 92 Northland Events Centre Trust Notes to the financial statements 30 June 2015 (continued) 10 Creditors and accrued expenses $ $ Accrued expenses 42,738 25,263 Trade creditors 24,030 27,363 Rent in advance 9,367 9,367 Income in advance 1,333 - Total creditors and accrued expenses 77,468 61, Contingencies NECT has no contingent liabilities (2014: nil) and no contingent assets (2014: nil) 12 Lease revenue and operating lease commitments a) Capital commitments As at balance day NECT has no capital commitments (2014: $Nil). b) Operating leases as lessee NECT leases property, plant, and equipment in the normal course of its business. The future aggregate minimum lease payments payable under non-cancellable operating leases are as follows: $ $ Not later than one year 85,295 85,925 Later than one year and not later than two years 78,953 85,925 Later than two years and no later than five years - 66,148 Total non-cancellable operating leases 164, , $ $ Not later than one year 130, ,097 Later than one year and not later than two years 46,500 84,876 Later than two years and not later than five years 7,333 14,750 Later than five years - - Total lease revenue 183, ,723 Lease revenue comprises corporate box leases, naming and signage rights, office rental and an outlet support agreement. Corporate boxes are leased to the Northland Rugby Union (NRU) for the period of the ITM Cup by way of licence which expires December NECT has leased some boxes for events other than the ITM Cup by way of licence which expire at various times. One has been renewed for a further year and another for three years. There are occupational restrictions on lessees for major events. Naming and signage lease revenue relates to the naming rights of the stadium and the various lounges and the right to place signage at specific intervals throughout the stadium. The naming rights licences are for 12 to 36 month periods. The majority of these leases have a three year renewal option at the end of the current lease period. There are signage restrictions during a major event. The NRU licence entitles it to the revenue from signage below 1.2 metres for the ITM Cup period. NECT receives some revenue from this signage for the balance of the year. Other office lease rental relates to the rental of Level 1 and 2. The First Advantage lease expires on 15 July 2015 with a four year right to renewal. Te Tari Puna Ora o Aotearoa/ New Zealand Childcare Association Incorporated lease expires on 10 April 2016 with a six year right to renewal. Ngatiwai Investment Holdings lease expires 31 March 2017 with a six year right to renewal. 13 Trustee fees All trustees work on a voluntary basis and receive no fees (2014: nil). Date - 8 October Time - 1:08 p.m.

27 93 Northland Events Centre Trust Notes to the financial statements 30 June 2015 (continued) 14 Related party transactions Related party disclosures have not been made for transactions with related parties that are within a normal supplier or client/recipient relationship on terms and conditions no more or less favourable than those that it is reasonable to expect NECT would have adopted in dealing with the party at arm s length in the same circumstances. Related party transactions significant to the Trust requiring disclosure NECT was settled by Council and receives operating grants from Council to deliver its objectives as specified by the Trust Deed. Capital grants received from Council totalled $nil (2014: $117,106). Underwriting of $24,954 (2014: $173,789) was provided from Council to NECT. These amounts are disclosed in the Statement of Comprehensive Revenue and Expense. As at 30 June 2015 $81,650 is owed by Council to NECT (2014: $2,641). Council's Venue and Events Department provides management and events services to NECT at a cost of $138,202 (2014: $131,847). Payments made by NECT for services provided including the management fee was $159,063 (2014:135,619). Revenue received by NECT for services to Council was $169,710 (2014: $21,720). As at 30 June 2015 NECT owed Council $2,943 (2014: $nil). No provision has been required, nor any expense recognised, for impairment of receivables from related parties (2014 $nil). Terms and conditions of transactions with related parties Providing of ancillary services to and purchases from related parties are made in arm s length transactions at both normal market prices and normal commercial terms. 15 Events occurring after the balance date There were no events after the balance sheet date 30 June 2015 (2014 nil). 16 Explanation of major variances against budget Section 64 of the Local Government Act requires a Council Controlled Organisation to prepare a Statement of Intent that complies with Clause 9 of Schedule 8. Section 7 gives Local Authorities the power to exempt a small organisation, by way of a council resolution, after taking into account the matters specified in section 7. On 27 May 2015 Northland Events Centre Trust was exempted as a Council Controlled Organisation and accordingly does not prepare a Statement of Intent resulting in no variance reporting against budget. Date - 8 October Time - 1:08 p.m.

28 94

29 95

30 96

31 97

32 98

33 99

34 100

35 101

36 102

37 103

38 104

39 105

40 106

41 107

42 108

43 109

44 Delegated Authority Financial Reporting officer Date of meeting 28 October 2015 Sherryn Davis (Accounting Support Assistant) Vision, mission and values This item is in accord with Council s vision, mission and values statement as it provides quality financial controls. Significance and Engagement Having considered the Significance and Engagement Policy this proposal or decision is not considered significant and the public will be informed via Agenda publication on the website. The following changes to delegated authority are forwarded for approval by Council. Laboratory Co-ordinator Currently Category H $2, Change to Category G $5, Pursuant to the Local Government Act 2002, staff designated in the Schedule above be given authority to enter into contracts on behalf of Whangarei District Council up to the limit stated, which limits are exclusive of GST. Recommendation That the changes to the delegated financial authorisations as listed below be approved and added to the operative list of delegated financial authorities and the delegations manual as from 28 October 2015 until further notice. Laboratory Coordinator Currently Category H $2, Change to Category G $5, Finance Committee 1 28 October 2015

45 Local Government Funding Agency Annual Report Reporting officer Date of meeting 28 October 2015 Alan Adcock (Group Manager Support Services) Vision, mission and values This item is in accord with Council s vision, mission and values statement. Significance and Engagement Having considered the Significance and Engagement Policy this proposal or decision is not considered significant and the public will be informed via Agenda publication on the website. Background The Local Government Funding Agency (LGFA) has been operational for nearly four years, and its Annual Report covering its third full year of operations, is attached. The covering letter sent to LGFA Shareholders with the Annual report is also attached. Some of the most significant achievements for the year were: Making longer dated borrowing options available to an increased number of council borrowers By 30 June 2015, LGFA had lent $4.979 billion to forty-five participating councils. This is an increase of $1.28 billion from a year ago. We have extended the range of borrowing options available for councils via a long dated maturity (April 2027) and bespoke lending. Further reducing the base margin charged to councils The base margin was reduced and combined with strong credit market conditions and low nominal interest rates has helped councils reduce their cost of borrowing over the past year. A strong financial position has ensured a dividend payment of 6.43% for shareholders The financial strength of LGFA has been enhanced with a Net Operating Profit of $9.2 million achieved for the 2014/15 year. As a result of this outcome, a $ million dividend has been declared by the LGFA Board for the year ended 30 June The LGFA Annual General Meeting is to be held on 24 November Recommendation That the information be received. Attachments LGFA Letter to Shareholders LGFA Annual Report Finance Committee 1 28 October 2015

46 September 2015 Dear Shareholder LGFA Annual Report 2014/15 I attach our Annual Report for 2014/15 as required under section 8 of our Statement of Intent (SOI). We are pleased to highlight another strong year for LGFA that included a number of achievements. 1. We have made longer dated borrowing options available to an increased number of council borrowers By 30 June 2015, LGFA had lent $4.979 billion to forty-five participating councils. This is an increase of $1.28 billion from a year ago. We have extended the range of borrowing options available for councils via a long dated maturity (April 2027) and bespoke lending. 2. We have further reduced our base margin charged to councils. The base margin was reduced and combined with strong credit market conditions and low nominal interest rates has helped councils reduce their cost of borrowing over the past year. 3. A strong financial position has ensured a dividend payment of 6.43% for shareholders. The financial strength of LGFA has been enhanced with a Net Operating Profit of $9.2 million achieved for the 2014/15 year. As a result of this outcome, a $ million dividend has been declared by the LGFA Board for the year ended 30 June A copy of the Annual Report is attached, it will also be available on our website from today. If you would like a hard copy version please contact jane.phelan@lgfa.co.nz. We intend holding our Annual General Meeting (AGM) on Tuesday 24 th November 2015 in Wellington. We will send out the Notice of AGM and Agenda by Friday 2 nd October Please do not hesitate to contact me if you have any comments or questions. Kind regards Mark Butcher Chief Executive

47 113 L G fa N E W Z E ALAN D LO C AL GO V E R N M FU N D I N G AG E N C Y E N T annu nu al R e p o r t 3 0 J U ne

48 114

49 115 contents Governance structure Chairman s report Statement of service performance Primary objective Additional objectives Financial statements Directors declaration Statement of comprehensive income Statement of changes in equity Statement of financial position Statement of cash flows Notes to financial statements Auditor s report Board of Directors Directory Cover and left: Len Lye Centre, New Plymouth. Dedicated to pioneering filmmaker and kinetic sculptor, Len Lye. New Plymouth District Council. LGFA annu al report

50 116

51 117 G overnance StrU ctu re Shareholders, governance and management structure for the LGFA as at 30 June LGFA Shareholders Auckland Council Bay of Plenty Regional Council Christchurch City Council Gisborne District Council Greater Wellington Regional Council Hamilton City Council Hastings District Council Hauraki District Council Horowhenua District Council Hutt City Council Kapiti Coast District Council Manawatu District Council Marlborough District Council Masterton District Council New Plymouth District Council Otorohanga District Council Palmerston North City Council Selwyn District Council South Taranaki District Council Tasman District Council Taupo District Council Tauranga City Council Thames-Coromandel District Council Waimakariri District Council Waipa District Council Wanganui District Council Wellington City Council Western Bay of Plenty District Council Whakatane District Council Whangarei District Council New Zealand Government LGFA Shareholders Council Alan Adcock, Whangarei District Council Chairman Paul Conder, Hamilton City Council Mohan De Mel, Tauranga City Council Mike Drummond, Tasman District Council Douglas Marshall, Selwyn District Council Matt Potton, Western Bay of Plenty District Council Martin Read, Wellington City Council Mat Taylor, Bay of Plenty Regional Council. Mike Timmer, Greater Wellington Regional Council Bryn Griffiths, New Zealand Government LGFA Board Craig Stobo, Independent Chairman Paul Anderson, ( Formerly Christchurch City Council) John Avery, Independent Philip Cory-Wright, Independent Abigail Foote, Independent LGFA Executive Mark Butcher, Chief Executive Neil Bain, Chief Financial Officer Left: Kaiapoi Civic Centre, opened February Waimakariri District Council. LGFA annu al report

52 118 ch airman S report Directors of the New Zealand Local Government Funding Agency (LGFA) are pleased to report a strong performance for the financial year to June During the last financial year we have overseen an increase in eligible council borrowers, total council borrowings and operating profits, while reducing the base margin for borrowers and providing a steady dividend for shareholders. Continued investor support over the past year has resulted in a reduction in the interest rate margins over benchmark government bonds for the Agency s bonds, the issuance of $1.5 billion of bonds and enabled the issuance of new 2020 and 2027 maturities. Our investor base continues to diversify as offshore investors have doubled their holdings of LGFA bonds in the past year to $1.4 billion and now represent over 28% of the Agency s investor register. Directors consider the growing support of non-resident investors to be critical to the continued success of the Agency s future borrowing programme, increasing the liquidity of our bonds and leading to further margin reduction. The ongoing strong performance of the Agency reflects the support from the local authority sector. Lending to the sector over the year was $1.443 billion and our total nominal loans outstanding as at 30 June 2015 was $4.979 billion [$3.696 billion ]. We are pleased that we were able to support council borrowers by further reducing the base lending margin and extending the longest dated available borrowing tenor from nine years to twelve years. It has been a busy year for LGFA with a number of milestones including: Introduction of bespoke lending to provide our council borrowers with the flexibility to select their preferred date for borrowing and date of loan drawdown. This has proven successful with ten transactions completed between March and June LGFA annu al report

53 119 Reviewing our capital structure and governance structure to ensure both are keeping up with the significant growth in assets since establishment. The results were shared with shareholders during the year. Refinancing of the April 2015 LGFA bond maturity. Implementation of the new Treasury Management System on time and ahead of budget. Transitioning the front, middle and back office services previously undertaken by the NZ Debt Management Office (NZDMO) to LGFA. The Agency s larger borrowing programme during the year resulted in net interest income of $13.87 million as at year-end [$10.22 million ]. Net operating profits for the year to 30 June 2015 rose to $9.2 million from $6.9 million in the previous financial year. The financial position has enabled an annual dividend of $ million for the year to be declared for our thirty local authority and Crown shareholders. The dividend is calculated as our cost of funds plus a margin of 200 basis point (bps). The Agency s work cannot be implemented without the support of our staff, fellow directors and the NZDMO, all of whose efforts should be acknowledged. I would like to also thank Mark Butcher, our Chief Executive, for his leadership of the organisation over the past year. Directors believe the Agency s future remains positive and look forward to working with all stakeholders in the year ahead. Craig Stobo, Chairman, LGFA Board Below: Raumati South Beach Accessway. Kapiti Coast District Council. LGFA annu al report

54 120 Statement of Service performance The IZONE Southern Business Hub, Rolleston, home to more than 30 businesses. Selwyn District Council.

55 121 Statement of Service performance P e r f o r m an c e Ag a i n s t O b j e c t i v e s an d P e r f o r m an c e T ar 1 Primary objective LGFA operates with the primary objective of optimising the debt funding terms and conditions for participating local authorities. Among other things this includes: 1.1 Providing estimated savings in annual interest costs for all Participating Local Authorities of at least 30 basis points, based on the methodology set out in LGFA s Annual Report LGFA measures the pricing performance of bond tenders against two key benchmarks: LGFA aims to reduce its margin over New Zealand Government bonds (NZGBs) in accordance with its Statement of Intent (SOI) performance target. LGFA also aims to minimise its margin over swap rates to provide cost effective funding to councils. While we have yet to meet our primary objective of 30 bps of savings, we have achieved improvement in the pricing of our four benchmark bonds over the past twelve months and since they were first issued. These bonds are regarded as our benchmark bonds because they have large volumes outstanding, the most liquidity and greatest frequency of issuance. Over the course of the twelve months ended 30 June 2015: LGFA margins to NZGB improved by 25 bps, 28 bps, 22 bps and 20 bps respectively for the December 2017, March 2019, May 2021 and April 2023 maturities. LGFA margins to swap improved by 8 bps, 12 bps, 18 bps and 24 bps respectively for the December 2017, March 2019, May 2021 and April 2023 maturities. These secondary market pricing movements are summarised in the following tables: Margins 15 December 2017 As at 30 June 2014 (bps) As at 30 June 2015 (bps) Pricing movement LGFA margin to NZ Government Bonds (25) NZGB margin to swap (46) (29) 17 LGFA margin to swap 15 7 (8) Margins 15 March 2019 As at 30 June 2014 (bps) As at 30 June 2015 (bps) Pricing movement LGFA margin to NZ Government Bonds (28) NZGB margin to swap (49) (33) 16 LGFA margin to swap (12) LGFA annu al report Margins 15 May 2021 As at 30 June 2014 (bps) As at 30 June 2015 (bps) Pricing movement LGFA margin to NZ Government Bonds (22) NZGB margin to swap (46) (42) 4 LGFA margin to swap (18) 1 0

56 122 Statement of Service performance Margins 15 April 2023 As at 30 June 2014 (bps) As at 30 June 2015 (bps) Pricing movement LGFA margin to NZ Government Bonds (20) NZGB margin to swap (43) (47) (4) LGFA margin to swap (24) There was a substantial improvement in our margin to swap and NZGB over the financial year due to stronger credit market conditions and growing offshore investor interest in LGFA bonds. Margins on all LGFA issues to NZGB or swap are at, or near, historic lows. In the past twelve months, our estimate of annual interest cost savings for AA rated councils have marginally reduced and remain below the 30 bps target for our two LGFA maturities that we have issued since This is because swap margins for our two benchmark councils (Auckland and Dunedin) also improved. These two councils have both been able to issue debt securities at favourable pricing following the series of successful LGFA tenders held over the past year and a general shortage of single name council debt. The positive credit market conditions have also seen a narrowing of credit spreads in general that mean the credit spreads of lesser rated borrowers will outperform the spreads of better rated borrowers. From the charts below we estimate that as at 30 June 2015, LGFA was saving AA rated councils approximately 16 to 19 bps for a 2017 (two year) and 2019 (four year) maturity. LGFA December 2017 secondary market credit margin over swap Margin over swap (basis points) LGFA 6.00% Dec 2017 (AA+) Auckland Council 6.52% Sep 2017 (AA) Dunedin CT 7.81% Oct 2017 (AA) 0 30 Jun May Apr Mar Feb Jan Dec Nov Oct Sep Aug Jul Jun May Apr Mar Feb Jan Dec Nov Oct Sep Aug Jul 13 Source: ANZ, BNZ, Westpac, Bloomberg and LGFA LGFA annu al report

57 123 Statement of Service performance LGFA December 2019 secondary market credit margin over swap 100 LGFA 5.00% Mar 2019 (AA+) Auckland Council 4.41% Dec 2018 (AA) Margin over swap (basis points) Jun May Apr Mar Feb Jan Dec Nov Oct Sep Aug Jul Jun May Apr Mar Feb Jan Dec Nov Oct Sep Aug Jul 13 Source: ANZ, BNZ, Westpac, Bloomberg and LGFA The basis for these estimates is set out in the following table: Margins as at 30 June 2015 December 2017 maturity (bps) March 2019 maturity (bps) AA rated councils margin to swap* 22 to Less: LGFA margin to swap (7) (11) LGFA Gross Funding Advantage 15 to Less: LGFA Base Margin (9) (9) LGFA Net Funding Advantage 6 to 9 7 Add: LGFA Effect ** Total saving for AA rated councils 16 to LGFA annu al report * For the 2017 bond, the benchmark councils are Auckland (22 bps) and Dunedin (25 bps). For the 2019 bond, the benchmark is Auckland. Dunedin does not have a 2019 bond on issue. ** The LGFA effect represents the estimated conservative reduction in AA rated councils margin to swap as a result of LGFA operations. From May to June 2012, the margin to swap for AA rated councils fell by 10 bps, with no corresponding move in swap spreads for other borrowers. This suggests that potential access to cost-effective LGFA funding has enabled these councils to reduce their borrowing margin by around 10 bps. 1 2

58 124 Statement of Service performance Given the LGFA focus on issuance of longer dated debt it is also relevant to consider the interest cost savings for a 7 year and 10 year maturity. We have used for comparative purposes two bonds issued by Dunedin and Auckland councils and the interest cost savings (23 bps to 25 bps) are greater for these longer dated borrowings than the 2017s and 2019s. Margins as at 30 June 2015 Dunedin City Council Nov 2021 maturity (bps) Auckland Council Mar 2025 maturity (bps) AA rated council margin to swap Less: LGFA margin to swap (16) (27) LGFA Gross Funding Advantage Less: LGFA Base Margin (11) (13) LGFA Net Funding Advantage Add: LGFA Effect Total saving for AA rated council Making longer-term borrowings available to participating local authorities Over the past twelve months, LGFA offered two maturity dates for borrowing in excess of eight years to participating councils: 15 April 2023 bond (eight years) and this maturity has comprised 44% of total issuance in the past twelve months and 15 April 2027 (eleven years) and since this maturity was first offered in March 2015 it has comprised 54% of our issuance. Since the August 2014 tender, LGFA has also offered an April 2020 (five year) maturity. The following chart shows the average months to maturity for LGFA bonds issued at each tender, and the average months to maturity for all LGFA bonds outstanding at each tender. Over the past year the average maturity of LGFA bonds has lengthened by three months to 67 months (despite a natural 12-month shortening in time) LGFA Bonds Average total months to maturity Per tender Total cumulative Feb 14 Mar 14 Apr 14 May 14 Jun 14 Jul 14 Aug 14 Sep 14 Oct 14 Nov 14 Dec 14 Jan 15 Feb 15 Mar 15 Apr 15 May 15 Jun LGFA annu al report

59 125 Statement of Service performance The following chart shows the total LGFA bond outstandings by maturity as at 30 June 2015: LGFA bond outstandings ($ million) December March April May April April 2027 Over the year LGFA issued $1.5 billion of debt with a weighted average maturity of 7.9 years. LGFA Bond issuance by maturity ($ million) Dec 17 Mar 19 Apr 20 May 21 Apr 23 Apr 27 Total Enhancing the certainty of access to debt markets for Participating Local Authorities, subject always to operating in accordance with sound business practice LGFA held eight tenders during the past year, with an average tender volume of $188 million. The volume offered at each tender ranged from $120 million to $285 million and all tenders were successful and fully subscribed. Total issuance during the financial year was $1.5 billion. LGFA bond issuance by tender ($ million) 5,000 4, , , ,500 3,000 2, Total Issuance by Tender (RHS) Total Cumulative Bonds on Issue (LHS) LGFA annu al report ,000 1,500 1, Feb 14 Mar Apr May Jun 14 Jul 14 Aug 14 Sep 14 Oct Nov Dec 14 Jan Feb Mar Apr 15 May Jun

60 126 Statement of Service performance Over the twelve month period, total bids received across the eight tenders was $4.4 billion for the $1.5 billion of LGFA bonds offered resulting in a coverage ratio of 2.96 times. The LGFA cover ratio for each tender and the cumulative ratio for all tenders is shown in the following chart. Tender cover ratio Per tender Cumulative Jun 15 May 15 Apr 15 Mar 15 Feb 15 Jan 15 Dec 14 Nov 14 Oct 14 Sep 14 Aug 14 Jul 14 Jun 14 May 14 Apr 14 Mar 14 Feb 14 While the coverage ratio for the past year is lower than the average coverage ratio of 3.36 times since LGFA first commenced issuing in February 2012, this is not surprising given the longer duration of LGFA bonds being tendered, the smaller tranche sizes being offered in the shorter dated LGFA maturities and recent tightening in spreads to both NZGB and swap. Furthermore, offshore investor demand for LGFA securities has been noted in the secondary market rather than at LGFA tenders. While LGFA issues fixed coupon debt to investors, councils were provided the choice of either fixed or floating rate borrowing for their borrowing from LGFA. Improved certainty of access for councils was achieved with the commencement of bespoke lending. LGFA first offered bespoke lending in February 2015 where council borrowers could select their preferred borrowing maturity date and their preferred date of borrowing drawdown. By June 2015 LGFA had undertaken ten bespoke lending transactions totalling $79 million. 2 Additional objectives LGFA has a number of additional objectives which complement the primary objective. These additional objectives are to: 2.1 Operate with a view to making a profit sufficient to pay a dividend in accordance with its stated Dividend Policy set out in section 6 of the Statement of Intent The LGFA s policy is to pay a dividend that provides an annual rate of return to shareholders equal to LGFA cost of funds plus 2% over the medium term. Due to higher lending volumes and expenditure being contained close to budget, net operating profit for the year ended 30 June 2015 was $9.204 million (before dividend). On 23 September 2015, the directors of LGFA declared a dividend for the year to 30 June 2015 of $1,607,500 ($ per share). This is calculated on the LGFA cost of funds for the year of 4.43% plus the 2% margin. LGFA annu al report

61 127 Statement of Service performance 2.2 Provide at least 50% of aggregate long-term debt funding for Participating Local Authorities Councils have strongly supported LGFA and by 30 June 2015, 44 (out of 46) participating councils have borrowed from LGFA. The strong council support for LGFA is demonstrated in the following chart which shows council participation in LGFA s issuance from February Participating councils Per tender Total cumulative Jun 15 May 15 Apr 15 Mar 15 Feb 15 Jan 15 Dec 14 Nov 14 Oct 14 Sep 14 Aug 14 Jul 14 Jun 14 May 14 Apr 14 Mar 14 Feb 14 The following chart shows LGFA s share of new local government debt issuance in the past three calendar years. Our share of new long-term borrowing by the sector including nonmembers of LGFA was estimated to be 63% for the twelve month period to December The reduction from our estimated 75% market share in the 2013 calendar year is due to Auckland Council issuing a greater proportion of its debt in the domestic market than in the prior year, and councils wanting to borrow into maturity dates that LGFA could not offer prior to bespoke lending being introduced. If we exclude Auckland Council external borrowing from the data, our estimated market share is 76% for 2014, 87% for 2013 and 86% for LGFA Share of Local Government Debt Issuance (as at December 2014) 80% 70% 60% 50% LGFA annu al report % 30% 20% 10%

62 128 Statement of Service performance 2.3 Ensure its products and services are delivered at a cost that does not exceed the forecast for issuance and operating expenses set out in section 4 of the Statement of Intent Issuance and Operating Expenses for the twelve months to June 2015 were $4.67 million compared to a full year SOI forecast of $4.67 million. Over the past year higher Approved Issuer Levy (AIL) payments, legal costs and additional travel expenses were incurred due to servicing the increased offshore investor interest in LGFA bonds. This was offset by a lower than forecast expenditure for the treasury system. 2.4 Maintain LGFA s credit rating equal to the New Zealand Government sovereign rating where both entities are rated by the same Rating Agency On 20 October 2014, Standard & Poor s (S&P) affirmed LGFA s local currency credit rating at AA+ and foreign currency credit rating at AA. The outlook on both ratings is stable. On 18 November 2014, Fitch affirmed LGFA s local currency credit rating at AA+ and foreign currency credit rating at AA. The outlook on both ratings was revised from stable to positive. Both the S&P and Fitch ratings are the same as, and are capped by, New Zealand s Sovereign credit ratings. Fitch has defined LGFA as a dependent Public Sector Entity and our Fitch credit rating is now explicitly linked to the New Zealand government credit rating. 2.5 Achieve the Financial Forecasts set out in section 4 of the Statement of Intent LGFA s financial results for key items set out in section 4 of the SOI for the year to 30 June 2015 are: In $ million 30 June 2015 Actual 30 June 2015 SOI Forecast Total Net Income (net of borrower notes) Overheads (4.67) (4.67) Net Profit Due to the larger than forecast borrowing by councils from LGFA the Total Net Income and Net Profit was higher than forecast for the financial year. 2.6 Meet or exceed the Performance Targets outlined in section 5 Current performance targets Target Result as at 30 June 2015 Outcome 1 Average cost of funds relative to NZGS <0.50% 0.83% No (i) 2 Average base on-lending margin above LGFA s cost of funds <0.15% 0.13% Yes 3 Annualised issuance and operating expenses <$4.67 million $4.67 million Yes 4 Lending to participating councils >$4,400 million $4,979 million Yes (i) The average cost of funds of all issuance since February 2012 relative to NZGS has reduced by 1 bps from June 2014 to 0.83%. The margin contraction has occurred despite the disproportionate amount of longer dated LGFA bonds issued (and hence a wider margin) over the past twelve months. The historical average cost of funds calculation is also influenced by securities issued in 2012 at issuance margins in excess of 1.00% which have yet to mature. LGFA annu al report

63 129 Statement of Service performance A weighted average of LGFA margins to NZGS was 0.52% based on the secondary market levels as at 30 June The average margin for issuance in the year was 0.69%. 2.7 Comply with its Treasury Policy, as approved by the Board LGFA was compliant with the Treasury Policy except for the period July 2014 to November 2014 when our two largest borrowing councils had borrowings in a single LGFA maturity that were greater than both $100 million and 25% of their total borrowing from LGFA. These councils borrowings were non-compliant with the Treasury Policy that stated No more than the greater of NZD 100 million or 25% of a LG s borrowings from the LGFA will mature in any 12-month period. This non-compliance was due to LGFA having, until April 2014, only four borrowing maturities available to councils. LGFA shareholders approved a change to the Foundation Policy in November 2014 to increase this limit to 33% of borrowings. Both councils are compliant as at 30 June LGFA annu al report

64 130 financial n a StatementS t S Taupo water treatment plant, located on the Taupo lake front. Taupo District Council.

65 131 contents LGFA annu al report Directors declaration Financial statements Statement of comprehensive income Statement of changes in equity Statement of financial position Statement of cash flows Notes to financial statements Statement of accounting policies a) Reporting entity b) Statement of compliance c) Basis of preparation d) Financial instruments e) Other assets f) Other liabilities g) Revenue and expenses h) Lease payments i) Segment reporting j) Judgements and estimations Analysis of financial assets and financial liabilities a) Categories of financial instruments b) Financial risk management c) Hedge accounting d) Offsetting Issuance and on-lending expenses Operating expenses Loans to local government Bonds issued Borrower notes Reconciliation of net profit/(loss) to cash flow from operating activities Share capital Operating leases Property, plant and equipment Capital commitments Contingencies Related parties Subsequent events Auditor s report Board of Directors Directory

66 132 D irectors D ecl aration In the opinion of the directors of the New Zealand Local Government Funding Agency Limited, the financial statements and notes on pages 22 to 45: comply with New Zealand generally accepted accounting practice and give a true and fair view of the financial position of the Company as at 30 June 2015, and have been prepared using appropriate accounting policies, which have been consistently applied and supported by reasonable judgements and estimates. The directors believe that proper accounting records have been kept which enables, with reasonable accuracy, the determination of the financial position of the Company and facilitates the compliance of the financial statements with the Financial Reporting Act The directors consider that they have taken adequate steps to safeguard the assets of the Company, and to prevent and detect fraud and other irregularities. Internal control procedures are also considered to be sufficient to provide a reasonable assurance as to the integrity and reliability of the financial statements. For and on behalf of the Board of Directors: C. Stobo, Director 23 September 2015 A. Foote, Director 23 September 2015 LGFA annu al report

67 133 Statement of compreh ensive income For the year ended 30 June 2015 in $000s Note Year ended 2015 Year ended 2014 Interest income from Cash and cash equivalents 1,472 1,251 Loans to local government 201, ,201 Marketable securities Deposits 3,467 1,248 Derivatives 16,207 24,415 Fair value hedge ineffectiveness 2(c) - - Total interest income 222, ,115 Interest expense on Bonds 205, ,117 Borrower notes 3,000 1,779 Total interest expense 208, ,896 Net interest income 13,873 10,219 Operating expenses Issuance and on-lending expenses 3 2,526 1,464 Operating expenses 4 2,143 1,781 Total expenses 4,669 3,245 Net operating profit 9,204 6,974 Total comprehensive income for the year 9,204 6,974 Statement of ch ang es in eq U ity LGFA annu al report For the year ended 30 June 2015 in $000s Note Share Capital Retained earnings These statements are to be read in conjunction with the notes to the financial statements Total equity Equity as at 30 June ,000 (1,611) 23,389 Net operating profit - 6,974 6,974 Total comprehensive income for the year - 6,974 6,974 Transactions with owners: Dividend paid - (1,515) (1,515) Equity as at 30 June ,000 3,848 28,848 Net operating profit - 9,204 9,204 Total comprehensive income for the year - 9,204 9,204 Transactions with owners: Dividend paid 9 - (1,765) (1,765) Equity as at 30 June ,000 11,287 36,287

68 134 Statement of financial position As at 30 June 2015 in $000s As s e t s Note Financial assets Cash and cash equivalents 31,708 55,126 Trade and other receivables Loans to local government 5 5,031,942 3,742,471 Marketable securities 5,345 - Deposits 70,896 46,542 Derivatives in gain 2 270,503 73,779 Non-financial assets Prepayments Other assets 11 1,081 2 Total assets 5,411,838 3,918,187 Equity Share capital 25,000 25,000 Retained earnings 11,287 3,848 Total equity 36,287 28,848 Li ab i l i t i e s Financial liabilities Trade and other payables Accrued expenses Bonds 6 5,274,319 3,825,301 Borrower notes 7 85,120 61,892 Derivatives in loss 2 15,324 1,699 Total liabilities 5,375,551 3,889,339 Total equity and liabilities 5,411,838 3,918,187 These statements are to be read in conjunction with the notes to the financial statements LGFA annu al report

69 135 Statement of cash fl ow S For the year ended 30 June 2015 in $000s Note Year ended 2015 Year ended 2014 Cash flow from operating activities Cash applied to loans to local government (1,284,042) (1,223,789) Interest paid on bonds issued (231,648) (159,066) Interest paid on borrower notes (292) - Interest received from cash and cash equivalents 1,472 1,252 Interest received from loans to local government 195, ,464 Interest received from marketable securities Interest received on deposits 3,114 1,028 Net interest on derivatives 44,657 47,843 Payments to suppliers and employees (4,426) (3,346) Net cash flow from operating activities (1,274,778) (1,217,615) Cash flow from investing activities Maturity (Purchase) of marketable securities (5,525) - Purchase of deposits (24,000) (22,000) Purchase of plant and equipment and intangible assets (1,081) - Net cash flow from investing activities (30,606) (22,000) Cash flow from financing activities Dividend paid (1,765) (1,515) Cash proceeds from borrower notes 20,520 19,440 Cash proceeds from bonds issued 1,296,179 1,260,763 Cash applied to derivatives (32,968) (25,879) Net cash flow from financing activities 1,281,966 1,252,809 Net (Decrease) / Increase in Cash (23,418) 13,194 Cash, Cash Equivalents and Bank overdraft at beginning of year 55,126 41,932 Cash, Cash Equivalents and Bank overdraft at end of year 31,708 55,126 LGFA annu al report These statements are to be read in conjunction with the notes to the financial statements

70 136 notes to th e financial StatementS 1 S t a t e m e n t o f ac c o u n t i n g p o l i c i e s a) Reporting Entity The New Zealand Local Government Funding Agency Limited (LGFA) is a company registered under the Companies Act 1993 and is subject to the requirements of the Local Government Act LGFA is controlled by participating local authorities and is a council-controlled organisation as defined under section 6 of the Local Government Act LGFA is a limited liability company incorporated and domiciled in New Zealand. The primary objective of LGFA is to optimise the debt funding terms and conditions for participating local authorities. The registered address of LGFA is Level 8, City Chambers, 142 Featherston Street, Wellington Central, Wellington The financial statements are as at and for the year ended 30 June These financial statements were authorised for issue by the Directors on 23 September b) Statement of compliance LGFA is an issuer in terms of the Financial Reporting Act The financial statements comply with the Financial Reporting Act 1993, in accordance with the transitional provisions under Section 55 of the Financial Reporting Act 2013 and Schedule 4 of the Financial Markets Conduct Act LGFA is a profit orientated entity as defined under the New Zealand Equivalents to International Financial Reporting Standards (NZ IFRS). The financial statements have been prepared in accordance with New Zealand Generally Accepted Accounting Practice ( NZ GAAP ). They comply with NZ IFRS and other applicable Financial Reporting Standards, as appropriate for Tier 1 for-profit entities. The financial statements also comply with International Financial Reporting Standards ( IFRS ). c) Basis of Preparation Measurement base The financial statements have been prepared on a historical cost basis modified by the revaluation of certain assets and liabilities. The financial statements are prepared on an accrual basis. Functional and presentation currency The financial statements are presented in New Zealand dollars rounded to the nearest thousand, unless separately identified. The functional currency of LGFA is New Zealand dollars. Foreign currency conversions Transactions denominated in foreign currency are translated into New Zealand dollars using exchange rates applied on the trade date of the transaction. Changes in accounting policies There have been no changes in accounting policies. LGFA annu al report

71 137 notes to th e financial StatementS LGFA annu al report Early adoption standards and interpretations The following accounting standard has been early adopted by LGFA. NZ IFRS 9: Financial Instruments. The first two phases of this new standard were approved by the Accounting Standards Review Board in November 2009 and November These phases address the issues of classification and measurement of financial assets and financial liabilities. Standards not yet adopted LGFA does not consider any standards or interpretations in issue but not yet effective to have a significant impact on its financial statements. Those which may be relevant to LGFA are as follows: NZ IFRS 9: Financial Instruments (2014) Effective for periods beginning on or after 1 January This standard aligns hedge accounting more closely with the risk management activities of the entity and adds requirements relating to the accounting for an entity s expected credit losses on its financial assets and commitments to extend credit. d) Financial instruments Financial assets Financial assets, other than derivatives, are recognised initially at fair value plus transaction costs and subsequently measured at amortised cost using the effective interest rate method. Cash and cash equivalents include cash on hand; cash in transit, bank accounts and deposits with an original maturity of no more than three months. Purchases and sales of all financial assets are accounted for at trade date. At each balance date an assessment is made whether a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired when objective evidence demonstrates that a loss event has occurred after the initial recognition of the asset(s), and that the loss event has an impact on the future cash flows of the asset(s) that can be estimated reliably. Financial liabilities Financial liabilities, other than derivatives, are recognised initially at fair value less transaction costs and subsequently measured at amortised cost using the effective interest rate method. Derivatives Derivative financial instruments are recognised both initially and subsequently at fair value. They are reported as either assets or liabilities depending on whether the derivative is in a net gain or net loss position respectively. Fair value hedge Where a derivative qualifies as a hedge of the exposure to changes in fair value of an asset or liability (fair value hedge) any gain or loss on the derivative is recognised in profit and loss together with any changes in the fair value of the hedged asset or liability. The carrying amount of the hedged item is adjusted by the fair value gain or loss on the hedged item in respect of the risk being hedged. Effective parts of the hedge are recognised in the same area of profit and loss as the hedged item. e) Other assets Property, plant and equipment (PPE) Items of property, plant and equipment are initially recorded at cost. Depreciation is charged on a straight-line basis at rates calculated to allocate the cost or valuation of an item of property, plant and equipment, less any estimated residual value, over its remaining useful life. 2 6

72 138 notes to th e financial StatementS Intangible Assets Intangible assets comprise acquired and internally developed computer software costs incurred for the implementation of the treasury management system. Capitalised computer software costs are amortised on a straight line basis over the estimated useful life of the software (3 to 7 years). Costs associated with maintaining computer software are recognised as expenses when incurred. f) Other liabilities Employee entitlements Employee entitlements to salaries and wages, annual leave and other similar benefits are recognised in the profit and loss when they accrue to employees. g) Revenue and expenses Revenue Interest income Interest income is accrued using the effective interest rate method. The effective interest rate exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset s net carrying amount. The method applies this rate to the principal outstanding to determine interest income each period. Expenses Expenses are recognised in the period to which they relate. Interest expense Interest expense is accrued using the effective interest rate method. The effective interest rate exactly discounts estimated future cash payments through the expected life of the financial liability to that liability s net carrying amount. The method applies this rate to the principal outstanding to determine interest expense each period. Income tax LGFA is exempt from income tax under Section 14 of the Local Government Borrowing Act Goods and services tax All items in the financial statements are presented exclusive of goods and service tax (GST), except for receivables and payables, which are presented on a GST-inclusive basis. Where GST is not recoverable as input tax, then it is recognised as part of the related asset or expense. The net amount of GST recoverable from, or payable to, the IRD is included as part of receivables or payables in the statement of financial position. The net GST paid to, or received from the IRD, including the GST relating to investing and financing activities, is classified as a net operating cash flow in the statement of cash flows. Commitments and contingencies are disclosed exclusive of GST. h) Lease payments Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease. LGFA annu al report

73 139 notes to th e financial StatementS i) Segment reporting LGFA operates in one segment being funding of participating local authorities in New Zealand. j) Judgements and estimations The preparation of these financial statements requires judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. For example, the present value of large cash flows that are predicted to occur a long time into the future depends critically on judgements regarding future cash flows, including inflation assumptions and the risk free discount rate used to calculate present values. Refer note 2b for fair value determination for financial instruments. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised, if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. Where these judgements significantly affect the amounts recognised in the financial statements they are described below and in the following notes. LGFA annu al report Analysis of financial assets and financial liabilities a) Categories of financial instruments Financial instruments recognised in the Statement of Financial Position at fair value Derivative financial instruments are the only instrument recognised in the Statement of Financial Position at fair value. Derivative financial instruments are valued under fair value hierarchy level 2, determined according to the following hierarchy: Level 1 Quoted market prices: Fair value based on quoted prices in active markets for identical assets or liabilities. Level 2 Valuation techniques using observable market inputs: Fair value based on a valuation technique using other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices). Level 3 Valuation techniques using significant non-observable market inputs: Fair value based on a valuation technique using inputs for the asset or liability that are not based on observable market data (unobservable inputs). The fair value of derivative financial instruments is determined using a discounted cash flow analysis. Interest rates represent the most significant assumption used in valuing derivative financial instruments. The interest rates used to discount estimated cash flows are based on the New Zealand dollar swap curves at the reporting date. Financial instruments recognised in the Statement of Financial Position at amortised cost Fair values of financial instruments not recognised in the Statement of Financial Position at fair value are determined for note disclosure as follows: Cash and bank, trade & other receivables, trade & other payables The carrying value of cash and bank, trade & other receivables, trade & other payables approximate their fair value as they are short-term instruments. 2 8

74 140 notes to th e financial StatementS Marketable securities and bonds The fair value of bonds is determined using the quoted price for the instrument (Fair value hierarchy level 1). Deposits The fair value for deposits is determined using a discounted cash flow analysis. The interest rates used to discount the estimated cash flows are based on current market interest rates (Fair value hierarchy level 2). Loans to local government The fair value of loans to local government authorities is determined using a discounted cash flow analysis. The interest rates used to discount the estimated cash flows are based on LGFA bond yields at the reporting date plus an appropriate credit spread to reflect the counterparty s credit risk (Fair value hierarchy level 2). Borrower notes The fair value of borrower notes is determined using a discounted cash flow analysis. The interest rates used to discount the estimated cash flows are based on LGFA bond yields at the reporting date (Fair value hierarchy level 2). Fair value of financial assets and financial liabilities The fair value of financial assets and financial liabilities, together with the carrying amounts shown in the Statement of Financial Position, are as follows: As at 30 June 2015 in $000s Financial liabilities at amortised cost Financial assets at amortised cost Financial assets measured at fair value in accordance with NZIFRS 9 Fair value Financial assets Cash and bank - 31,708-31,708 Trade & other receivables Loans to local government - 5,031,942-5,163,921 Marketable securities 5,345 5,383 Deposits - 70,896-70,986 Derivatives , ,503 5,139, ,503 5,542,539 Financial liabilities Trade & other payables Bonds 5,274, ,379,311 Borrower notes 85, ,776 Derivatives ,324 15,324 5,359,883-15,324 5,480,855 LGFA annu al report

75 141 notes to th e financial StatementS As at 30 June 2014 in $000s Financial liabilities at amortised cost Financial assets at amortised cost Financial assets measured at fair value in accordance with NZIFRS 9 Fair value Financial assets Cash and bank - 55,126-55,126 Trade & other receivables Loans to local government - 3,742,471-3,786,785 Marketable securities Deposits - 46,542-46,516 Derivatives ,779 73,779 3,844,180 73,779 3,962,246 Financial liabilities Trade & other payables Bonds 3,825, ,853,808 Borrower notes 61, ,403 Derivatives - 1,699 1,699 3,887,446-1,699 3,917,163 b) Financial risk management The Board of Directors has overall responsibility for carrying out the business of LGFA in accordance with risk management policies, including those relating to investing, lending, borrowing and treasury activities. The use of financial instruments exposes LGFA to a number of financial risks, the most significant being market risk, credit risk, and liquidity risk. The exposure and management of these risks is outlined below. Market risk Market risk is the risk that changes in market prices will affect LGFA s income or value of financial instruments. The most significant market risk which LGFA is exposed to is interest rate risk. LGFA has no significant exposure to foreign exchange risk. Interest rate risk Interest rate risk is the risk that future cash flows or the fair value of financial instruments will decrease because of a change in market interest rates. LGFA is exposed to interest rate risk through its interest-bearing financial assets and liabilities. Interest rate risk is managed by matching the interest rate repricing profile of its assets against the repricing profile of its liabilities. Where mismatches occur, interest rate swaps are used to economically convert the repricing profile of financial liabilities. LGFA annu al report

76 142 notes to th e financial StatementS The table below indicates the effective interest rate and the earliest period in which interestbearing financial instruments reprice. As at 30 June 2015 in $000s Financial assets Cash and bank balances Loans to local government Marketable securities Face value Less than 6 months 31,708 31,708 6 months to 1 year 1 year to 2 years 2 years to 5 years More than 5 years 4,978,500 4,037, , ,000 5, ,000 - Deposits 70,000 70, Financial liabilities Bonds (4,955,000) (2,490,000) (2,465,000) Borrower notes (79,656) (64,592) - - (7,032) (8,032) Derivatives - (4,015,700) - - 2,045,450 1,970,250 Total 50,552 58, (7,082) (782) As at 30 June 2014 in $000s Financial assets Cash and bank balances Loans to local government Marketable securities Face value Less than 6 months 6 months to 1 year 1 year to 2 years 2 years to 5 years More than 5 years 55,126 55, ,696,000 2,805,500 28, , , Deposits 46,000 46, Financial liabilities Bonds (3,695,000) - (240,000) - (2,030,000) (1,425,000) Borrower notes (59,136) (44,888) (448) - (6,920) (6,880) Derivatives - (2,812,700) 212,000-1,601, ,500 Total 42,990 49,038 (448) - (3,220) (2,380) Interest rate sensitivity Changes in interest rates impact the fair value of fixed rate assets and liabilities, cash flows on floating rate assets and liabilities, and the fair value and cash flows of interest rate swaps. A change of 100 basis points in interest rates at the reporting date would have increased/ (decreased) profit or loss and equity by the amounts shown in the following table. This analysis assumes that all other variables remain constant. LGFA annu al report

77 143 notes to th e financial StatementS For the year ended 30 June 2015 in $000s 2015 Profit and loss 2014 Profit and loss 100 bps increase 100 bps decrease 100 bps increase 100 bps decrease Fair value sensitivity analysis Fixed rate assets Fixed rate liabilities 188,425 (201,409) (116,912) 123,459 Derivative financial instruments (188,425) 201, ,912 (123,459) Cash flow sensitivity analysis Variable rate assets 40,370 (40,370) 28,055 (28,055) Variable rate liabilities (646) 646 (449) 449 Derivatives (40,157) 40,157 (28,127) 28,127 (433) 433 (521) 521 Credit risk Credit risk is the risk of financial loss if a counterparty to a financial instrument fails to meet its contractual obligations. LGFA is exposed to credit risk through its lending and investing activities. Credit risk associated with lending activities is managed by requiring local authorities that borrow from LGFA to meet specific credit lending criteria and to provide security against the borrowing. The LGFA s credit risk framework restricts credit exposures to specific counterparties. Credit risk associated with investing activities, excluding on-lending, is managed by only investing with New Zealand Government Agencies or counterparties that meet a minimum credit rating of A (Standard & Poor s equivalent). The LGFA s credit risk framework limits concentrations of credit risk for any particular counterparty. Exposure to credit risk LGFA monitors the concentration of credit risk by the type of counterparty. The carrying value and maximum exposure to credit risk at the reporting date, before taking account of collateral or other credit enhancements, for significant counterparty types are shown in the table below. LGFA annu al report

78 144 notes to th e financial StatementS As at 30 June 2015 in $000s NZ Government agencies NZ local authorities NZ registered banks Other counterparties Total carrying value Financial assets Cash and bank balances 31, ,708 Trade & other receivables Loans to local government - 5,031, ,031,942 Marketable securities 5, ,345 Deposits ,896-70,896 Derivatives 270, , ,926 5,031,942 71, ,410,432 As at 30 June 2014 in $000s NZ Government agencies NZ local authorities NZ registered banks Other counterparties Total carrying value Financial assets Cash and bank balances 54, ,126 Trade & other receivables Loans to local government - 3,742, ,742,471 Marketable securities Deposits ,542-46,542 Derivatives 73, , ,345 3,742,471 47, ,917,959 Collateral and credit enhancements LGFA holds collateral against borrowings from local authorities in the form of debenture securities and guarantees. Credit quality of financial assets All financial assets are neither past due or impaired. The carrying value of the financial assets is expected to be recoverable. Liquidity risk Liquidity risk is the risk that LGFA will encounter difficulty in meeting the obligations of its financial liabilities. LGFA manages liquidity risk by holding cash and a portfolio of liquid assets to meet obligations when they fall due. The New Zealand Debt Management Office (NZDMO) also provide a committed liquidity facility that LGFA can draw upon to meet any exceptional and temporary liquidity shortfall. As at 30 June 2015, the undrawn committed liquidity facility was $400 million (2014: $400 million). LGFA annu al report

79 145 notes to th e financial StatementS Contractual cash flows of financial instruments The contractual cash flows associated with financial assets and liabilities are shown in the table below. As at 30 June 2015 in $000s On demand Up to 3 months 3 months to 1 year 1 to 5 years More than 5 years Total contract cash flows Total carrying value Financial assets Cash 31, ,708 31,708 Trade & other receivables Loans to local government Marketable securities - 48, ,884 3,148,926 2,859,955 6,218,392 5,031, ,450-5,750 5,345 Deposits - 40,813 30, ,668 70,896 Financial liabilities Trade & other payables - (444) (444) (444) Bonds - (27,750) (238,175) (3,345,950) (2,791,625) (6,403,500) (5,274,319) Borrower notes (47,647) (55,358) (103,005) (85,120) Derivatives - (18,294) 86, ,705 25, , ,180 31,708 42,990 40,077 (53,516) 38,576 99,835 35,226 As at 30 June 2014 in $000s On demand Up to 3 months 3 months to 1 year 1 to 5 years More than 5 years Total contract cash flows Total carrying value Financial assets Cash 55, ,126 55,126 Trade & other receivables Loans to local government - 35, ,460 2,740,879 1,664,510 4,778,742 3,742,471 Marketable securities Deposits - 36,730 10, ,950 46,542 Financial liabilities Trade & other payables - (253) (253) (253) LGFA annu al report Bonds - (26,750) (422,475) (2,722,900) (1,631,500) (4,803,625) (3,825,301) Borrower notes - - (3,384) (41,497) (32,640) (77,521) (61,892) Derivatives (7,045) 44,638 39,597 3,566 80,756 72,080 55,126 38,616 (33,540) 16,079 3,936 80,215 28,

80 146 notes to th e financial StatementS c) Hedge accounting LGFA is exposed to interest rate risk from fixed rate borrowing and variable rate lending to Councils. LGFA manages this interest rate risk through the use of interest rate swaps. For hedge accounting purposes, LGFA has designated these swaps in fair value relationships to its fixed rate borrowing. The gain or loss on the hedging instrument and the hedged item attributable to the hedged risk for fair value hedge relationships is shown in the table below. For the year ended 30 June 2015 in $000s 2015 Gain/(loss) 2014 Gain/(loss) Hedging instruments interest rate swaps 178,578 (37,102) Hedged item attributable to the hedged risk fixed rate bonds Ineffectiveness recognised in profit or loss from fair value hedges (178,578) 37, The gains or losses on the hedging instrument (interest rate swaps) and the hedged item (bonds) are mapped to the same fair value account. For this reason, the Statement of Comprehensive Income will only report any ineffectiveness arising from the fair value hedge. d) Offsetting NZ IAS 32: Financial Instruments Presentation allows financial assets and liabilities to be offset only when there is a current legally enforceable right to set off the amounts and there is an intention either to settle on a net basis, or to realise the asset and settle the liability simultaneously. LGFA does not offset any amounts. The following table shows amounts subject to an enforceable master netting arrangement or similar agreement that are not offset in the statement of financial position: As at 30 June 2015 in $000s Derivative assets Derivative liabilities Gross amounts 270,503 15,324 Amounts offset - - Carrying amounts 270,503 15,324 Amounts that don t qualify for offsetting Financial assets & liabilities (15,324) (15,324) Collateral - - Net amount 255,179 - As at 30 June 2014 in $000s Derivative assets Derivative liabilities Gross amounts 73,779 1,699 Amounts offset - - Carrying amounts 73,779 1,699 Amounts that don t qualify for offsetting Financial assets & liabilities (1,699) (1,699) Collateral - - Net amount 72,080 - LGFA annu al report

81 147 notes to th e financial StatementS 3 I s s u a n c e an d o n - l e n d i n g e x p e n s e s For the year ended 30 June 2015 in $000s NZDMO facility fee (1) NZDMO processing fees Rating agency fees Legal fees for issuance (2) Regulatory, registry, other fees Trustee fees Approved issuer levy (3) 1, Promotion/roadshow 11 - Information Services (4) 64-2,526 1,464 (1) The facility fee agreement with NZDMO provided for a contractual increase in cost from.05% pa to.10% pa at the end of LGFA s first three years of operation. (2) The increase in legal fees is attributable to advice on the Financial Markets Conduct Act 2013 and Approved Issuer Levy. (3) The increase in Approved Issuer Levy is attributable to increased holdings of LGFA bonds by offshore investors. (4) Information services costs is attributable to the migration of outsourced services from NZDMO to LGFA. Previously this cost was incorporated within the NZDMO processing fee. 4 O p e r a t i n g e x p e n s e s LGFA annu al report For the year ended 30 June 2015 in $000s Consultants Directors fees Insurance Legal fees Other expenses (1) Auditor s remuneration Statutory audit Personnel Recruitment ,143 1,781 (1) The increase in operating costs is attributable to treasury system selection, website development and costs associated with establishing new Wellington and Auckland premises. 3 6

82 148 notes to th e financial StatementS 5 Lo an s t o l o c al g o v e r n m e n t As at 30 June 2015 in $000s Unamortised premium/ Accrued Face value (discount) interest Total Ashburton District Council 15, ,941 Auckland Council 1,725,000 16,818 11,396 1,753,214 Christchurch City Council 932,500 3,219 5, ,183 Far North District Council 10, ,055 Gisborne District Council 17, ,051 Greater Wellington Regional Council 155, ,741 Grey District Council 20, ,754 Hamilton City Council 225, ,771 Hastings District Council 50, ,204 Hauraki District Council 34, ,184 Horizons Regional Council 10, ,018 Horowhenua District Council 47, ,985 Hurunui District Council 12, ,067 Hutt City Council 49, ,682 Kapiti Coast District Council 130, ,480 Manawatu District Council 41, ,330 Marlborough District Council 28,000 (129) ,046 Masterton District Council 40, ,194 Matamata Piako District Council 24, ,598 Nelson City Council 25, ,150 New Plymouth District Council 56, ,221 Opotiki District Council 3, ,574 Otorohanga District Council 9, ,308 Palmerston North City Council 77, ,376 Porirua City Council 20, ,140 Queenstown Lakes District Council 60,000 1, ,539 Rotorua District Council 55, ,172 Selwyn District Council 35, ,066 South Taranaki District Council 62, ,234 Tararua District Council 9, ,045 Tasman District Council 90, ,428 Taupo District Council 100, ,423 Tauranga City Council 215, , ,587 Thames-Coromandel District Council 35, ,089 Timaru District Council 51, ,378 Upper Hutt City Council 18, ,072 Waikato District Council 50, ,215 Waimakariri District Council 55, ,733 Waipa District Council 13, ,022 Wanganui District Council 41, ,182 Wellington City Council 138, ,712 Western Bay of Plenty District Council 70, ,127 Whakatane District Council 28, ,101 Whangarei District Council 98, ,550 4,978,500 25,170 28,272 5,031,942 LGFA annu al report

83 149 notes to th e financial StatementS LGFA annu al report As at 30 June 2014 in $000s Unamortised premium/ Accrued Face value (discount) interest Total Ashburton District Council 15, ,062 Auckland Council 1,175,000 20,816 6,610 1,202,426 Christchurch City Council 571,500 2,045 2, ,931 Far North District Council 10, ,053 Gisborne District Council 10, ,013 Greater Wellington Regional Council 125, ,475 Grey District Council 20, ,830 Hamilton City Council 230, ,880 Hastings District Council 45, ,184 Hauraki District Council 23, ,112 Horizons Regional Council 10, ,018 Horowhenua District Council 33, ,889 Hurunui District Council 8, ,019 Hutt City Council 26, ,617 Kapiti Coast District Council 115, ,314 Manawatu District Council 29, ,492 Marlborough District Council 14,000 (149) ,007 Masterton District Council 35, ,110 Matamata Piako District Council 24, ,561 Nelson City Council 15, ,059 New Plymouth District Council 46, ,131 Opotiki District Council Otorohanga District Council 9, ,370 Palmerston North City Council 62, ,256 Porirua City Council Queenstown Lakes District Council 50,000 1, ,569 Rotorua District Council 55, ,333 Selwyn District Council 35, ,065 South Taranaki District Council 42, ,109 Tararua District Council 7, ,032 Tasman District Council 85, ,254 Taupo District Council 80, ,330 Tauranga District Council 220, , ,662 Thames-Coromandel District Council 35, ,083 Timaru District Council 51, ,366 Upper Hutt City Council 11, ,028 Waikato District Council 35, ,078 Waimakariri District Council 25, ,574 Waipa District Council 13, ,022 Wanganui District Council 24, ,077 Wellington City Council 83, ,256 Western Bay of Plenty District Council 70, ,126 Whakatane District Council 28, ,085 Whangarei District Council 96, ,614 3,696,000 29,102 17,370 3,742,

84 150 notes to th e financial StatementS 6 B o n d s i s s u e d As at 30 June 2015 in $000s Face value Unamortised premium Accrued interest Fair value hedge adjustment Total 15 December % coupon 1,015,000 40,097 2, March % coupon 1,110,000 33,719 16, April % coupon 365,000 (21,839) 2, May % coupon 1,170,000 72,162 8, April % coupon 1,010,000 41,034 11, April % coupon 285,000 8,683 2,663 Total 4,955, ,856 43, ,583 5,274,319 As at 30 June 2014 in $000s Face value Unamortised premium Accrued interest Fair value hedge adjustment Total 15 April % coupon 240,000 4,257 2, December % coupon 960,000 51,251 2, March % coupon 1,070,000 40,424 15, May % coupon 1,070,000 73,598 8, April % coupon 355,000 4,781 4,054 Total 3,695, ,311 32,986 (76,996) 3,825,301 7 B o r r o w e r n o t e s Borrower notes are subordinated debt instruments (which are required to be held by each local authority that borrows from LGFA in an amount equal to 1.6% of the aggregate borrowings by that local authority). LGFA may convert borrower notes into redeemable shares if it has made calls for all unpaid capital to be paid in full and the LGFA Board determines it is still at risk of imminent default. LGFA annu al report

85 151 notes to th e financial StatementS LGFA annu al report As at 30 June 2015 in $000s Face value Accrued interest Total Ashburton District Council Auckland Council 27,600 1,999 29,599 Christchurch City Council 14, ,840 Far North District Council Gisborne District Council Greater Wellington Regional Council 2, ,633 Grey District Council Hamilton City Council 3, ,911 Hastings District Council Hauraki District Council Horizons Regional Council Horowhenua District Council Hurunui District Council Hutt City Council Kapiti Coast District Council 2, ,241 Manawatu District Council Marlborough District Council Masterton District Council Matamata Piako District Council Nelson City Council New Plymouth District Council Opotiki District Council Otorohanga District Council Palmerston North City Council 1, ,295 Porirua City Council Queenstown Lakes District Council ,034 Rotorua District Council Selwyn District Council South Taranaki District Council ,045 Tararua District Council Tasman District Council 1, ,541 Taupo District Council 1, ,717 Tauranga City Council 3, ,699 Thames-Coromandel District Council Timaru District Council Upper Hutt City Council Waikato District Council Waimakariri District Council Waipa District Council Wanganui District Council Wellington City Council 2, ,323 Western Bay of Plenty District Council 1, ,246 Whakatane District Council Whangarei District Council 1, ,670 79,656 5,464 85,

86 152 notes to th e financial StatementS As at 30 June 2014 in $000s Face value Accrued interest Total Ashburton District Council Auckland Council 18,800 1,054 19,854 Christchurch City Council 9, ,512 Far North District Council Gisborne District Council Greater Wellington Regional Council 2, ,099 Grey District Council Hamilton City Council 3, ,884 Hastings District Council Hauraki District Council Horizons Regional Council Horowhenua District Council Hurunui District Council Hutt City Council Kapiti Coast District Council 1, ,922 Manawatu District Council Marlborough District Council Masterton District Council Matamata Piako District Council Nelson City Council New Plymouth District Council Opotiki District Council Otorohanga District Council Palmerston North City Council ,021 Porirua City Council Queenstown Lakes District Council Rotorua District Council Selwyn District Council South Taranaki District Council Tararua District Council Tasman District Council 1, ,403 Taupo District Council 1, ,373 Tauranga City Council 3, ,663 Thames-Coromandel District Council Timaru District Council Upper Hutt City Council Waikato District Council Waimakariri District Council Waipa District Council Wanganui District Council Wellington City Council 1, ,373 Western Bay of Plenty District Council 1, ,197 Whakatane District Council Whangarei District Council 1, ,618 59,136 2,756 61,892 LGFA annu al report

87 153 notes to th e financial StatementS 8 Reconciliation of net profit/(loss) to net cash flow f r o m o p e r a t i n g ac t i v i t i e s For the year ended 30 June 2015 in $000s Net profit/(loss) for the year 9,204 6,974 Cash applied to loans to local government (1,284,042) (1,223,789) Non-cash adjustments Amortisation and depreciation (185) (733) Working capital movements Net change in trade debtors and receivables 192 (157) Net change in prepayments (98) 12 Net change in accruals Net cash flows from operating activities (1,274,778) (1,217,615) 9 Share capital Share capital As at 30 June 2015 LGFA had 45 million ordinary shares on issue, 20 million of which remain uncalled. All ordinary shares rank equally with one vote attached to each ordinary share. Ordinary shares have a face value of $1 per share. Shareholder information Registered holders of equity securities as at 30 June LGFA annu al report

88 154 notes to th e financial StatementS As at 30 June 2015 in $000s New Zealand Government 5,000, % 5,000, % Auckland Council 3,731, % 3,731, % Christchurch City Council 3,731, % 3,731, % Hamilton City Council 3,731, % 3,731, % Bay of Plenty Regional Council 3,731, % 3,731, % Greater Wellington Regional Council 3,731, % 3,731, % Tasman District Council 3,731, % 3,731, % Tauranga City Council 3,731, % 3,731, % Wellington City Council 3,731, % 3,731, % Western Bay of Plenty District Council 3,731, % 3,731, % Whangarei District Council 1,492, % 1,492, % Hastings District Council 746, % 746, % Marlborough District Council 400, % 400, % Selwyn District Council 373, % 373, % Gisborne District Council 200, % 200, % Hauraki District Council 200, % 200, % Horowhenua District Council 200, % 200, % Hutt City Council 200, % 200, % Kapiti Coast District Council 200, % 200, % Manawatu District Council 200, % 200, % Masterton District Council 200, % 200, % New Plymouth District Council 200, % 200, % Otorohanga District Council 200, % 200, % Palmerston North City Council 200, % 200, % South Taranaki District Council 200, % 200, % Taupo District Council 200, % 200, % Thames-Coromandel District Council 200, % 200, % Waimakariri District Council 200, % 200, % Waipa District Council 200, % 200, % Wanganui District Council 200, % 200, % Whakatane District Council 200, % 200, % 45,000, % 45,000, % LGFA annu al report

89 155 notes to th e financial StatementS Capital management LGFA s capital is equity, which comprises share capital and retained earnings. The objective of managing LGFA s equity is to ensure LGFA achieves its goals and objectives for which it has been established, whilst remaining a going concern. Dividend During the year LGFA paid a dividend of $1,765,000 ($0.0706) per paid up share. (2014: $1,515,000 ($ per paid up share)). 1 0 O p e r a t i n g l e as e s The future aggregate minimum lease payments to be made under non-cancellable operating leases are as follows: As at 30 June 2015 in $000s Less than one year Between one and five years Total non-cancellable operating leases The non-cancellable operating lease expense relates to the leases of level 8, City Chambers, 142 Featherston Street, Wellington and level 12, West Plaza Tower, Cnr Albert & Customs Street, Auckland. For the year-ended 30 June 2015, total payments under the leases were $92, Other assets As at 30 June 2015 in $000s Property, plant and equipment 46 2 Intangible Assets 1,035 - Total Other Assets 1,081 2 The increase in property, plant and equipment is attributable to capitalised software and development costs for the treasury management system. 1 2 C ap i t al c o m m i t m e n t s As at 30 June 2015, there are no capital commitments. 1 3 C o n t i n g e n c i e s LGFA annu al report There are no material contingent liabilities at balance date. 4 4

90 156 notes to th e financial StatementS 1 4 R e l a t e d p ar t i e s Identity of related parties The Company is related to the local authorities set out in the Shareholder Information in note 9. The Company operates under a Statement of Intent with the respective local authorities that requires the Company to provide debt to them at the lowest possible interest rates and to enhance their certainty of access to debt markets. Shareholding local authorities, and non-shareholder local authorities who borrow more than $20 million, are required to enter into a guarantee when they join or participate in LGFA. The guarantee is in respect of the payment obligations of other guaranteeing local authorities to the LGFA (cross guarantee) and of the LGFA itself. Related party transactions LGFA was established for the purpose of raising funds from the market to lend to participating councils. The lending to individual councils is disclosed in note 5, and interest income recognised on this lending is shown in the Statement of Comprehensive Income. The purchase of LGFA borrower notes by participating councils is disclosed in note 7, and the interest expense on these is shown in the Statement of Comprehensive Income. Up until 30 June 2015, LGFA contracted the NZDMO, an operating unit of the Treasury, to provide outsourced treasury services for LGFA. Services included operational processing associated with debt issuance, lending to local authorities, accounting, settlement services, investments, hedging and measuring risk. Proccessing fees are disclosed in Note 3. Transactions with key management personnel Salaries $563,231 (2014: $559,331) Fees paid to Directors are disclosed in operating overheads in Note S u b s e q u e n t e v e n t s There have been no significant events after balance date that have affected the accuracy of these financial statements. Subsequent to balance date, LGFA has issued $325 million in bonds through two tenders. Subsequent to balance date, on 23 September 2015, the Directors of LGFA declared a dividend of $1,607,500 ($ per share). LGFA annu al report

91 157 INDEPENDENT AUDITOR S REPORT TO THE READERS OF NEW ZEALAND LOCAL GOVERNMENT FUNDING AGENCY LIMITED S FINANCIAL STATEMENTS AND PERFORMANCE INFORMATION FOR THE YEAR ENDED 30 JUNE 2015 LGFA annu al report The Auditor-General is the auditor of New Zealand Local Government Funding Agency Limited (the company). The Auditor-General has appointed me, Graeme Edwards, using the staff and resources of KPMG, to carry out the audit of the financial statements and the performance information of the company on her behalf. We have audited: - the financial statements of the company on pages 22 to 45, that comprise the statement of financial position as at 30 June 2015, the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year ended on that date and the notes to the financial statements that include accounting policies and other explanatory information; and - the performance information of the company on pages 10 to 18. Opinion Financial statements and performance information In our opinion: - the financial statements of the company: - comply with generally accepted accounting practice in New Zealand and have been prepared in accordance with New Zealand equivalents to International Financial Reporting Standards; - comply with International Financial Reporting Standards; - give a true and fair view of the company s: - financial position as at 30 June 2015; and - financial performance and cash flows for the year ended on that date. - the performance information of the company gives a true and fair view of the company s achievements measured against the performance targets adopted for the year ended 30 June Other legal requirements In accordance with the Financial Reporting Act 1993 we report that, in our opinion, proper accounting records have been kept by the company as far as appears from an examination of those records. Our audit was completed on 23 September This is the date at which our opinion is expressed. The basis of our opinion is explained below. In addition, we outline the responsibilities of the Board of Directors and our responsibilities, and explain our independence. Basis of opinion We carried out our audit in accordance with the Auditor-General s Auditing Standards, which incorporate the International Standards on Auditing (New Zealand). Those standards require that we comply with ethical requirements and plan and carry out our audit to obtain reasonable assurance about whether the financial statements and the performance information are free from material misstatement. Material misstatements are differences or omissions of amounts and disclosures that, in our judgement, are likely to influence readers overall understanding of the financial statements and the performance information. If we had found material misstatements that were not corrected, we would have referred to them in our opinion. 4 6

92 158 An audit involves carrying out procedures to obtain audit evidence about the amounts and disclosures in the financial statements and in the performance information. The procedures selected depend on our judgement, including our assessment of risks of material misstatement of the financial statements and the performance information, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the preparation of the company s financial statements and performance information in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the company s internal control. An audit also involves evaluating: - the appropriateness of accounting policies used and whether they have been consistently applied; - the reasonableness of the significant accounting estimates and judgements made by the Board of Directors; - the adequacy of the disclosures in the financial statements and in the performance information; and - the overall presentation of the financial statements and the performance information. We did not examine every transaction, nor do we guarantee complete accuracy of the financial statements and the performance information. Also, we did not evaluate the security and controls over the electronic publication of the financial statements and the performance information. In accordance with the Financial Reporting Act 1993, we report that we have obtained all the information and explanations we have required. We believe we have obtained sufficient and appropriate audit evidence to provide a basis for our audit opinion. Responsibilities of the Board of Directors The Board of Directors is responsible for the preparation and fair presentation of financial statements for the company that comply with generally accepted accounting practice in New Zealand. The Board of Directors is also responsible for the preparation of the performance information for the company. The Board of Directors responsibilities arise from the Local Government Act 2002 and the Financial Reporting Act The Board of Directors is responsible for such internal control as it determines is necessary to enable the preparation of financial statements and performance information that are free from material misstatement, whether due to fraud or error. The Board of Directors is also responsible for the publication of the financial statements and the performance information, whether in printed or electronic form. Responsibilities of the Auditor We are responsible for expressing an independent opinion on the financial statements and the performance information and reporting that opinion to you based on our audit. Our responsibility arises from section 15 of the Public Audit Act Independence When carrying out the audit, we followed the independence requirements of the Auditor-General, which incorporate the independence requirements of the External Reporting Board. Other than the audit, we have no relationship with or interests in the company. Graeme Edwards KPMG On behalf of the Auditor-General Wellington, New Zealand LGFA annu al report

93 159 B oard of D irectors Interests Register Name of Director Craig Stobo (Chair) Paul Anderson John Avery Philip Cory-Wright Abigail Foote Nature and extent of interest Director Precinct Properties New Zealand Ltd OCG Consulting Ltd* Elevation Capital Management Ltd Saturn Portfolio Management Ltd Stobo Group Ltd AIG Insurance NZ Ltd Fliway Group Ltd Officer CEO, NZSki Ltd Formerly Christchurch City Council Director Spider Tracks Ltd Fund Managers Auckland Ltd Regional Facilities Auckland Ltd Strategic Pay Ltd Office Products Depot Strategic Pay, Trustee Service Ltd Director South Port New Zealand Ltd Matariki Forests Ltd Director BNZ Life Insurance Ltd Transpower New Zealand Ltd* Z Energy Ltd Diligent Corporation Livestock Improvement Corporation Ltd General Disclosure Chair, Establishment Board, Local Government Risk Agency Director Ecocentral Ltd General disclosure The New Zealand School of Dance (Trustee) Stinger Trust (Trustee) Other Gambling Commissioner* * Position held during the year, no longer current Remuneration Non-Executive Directors 2015 ($) Craig Stobo (Chair) $78,000 Staff Total remuneration Staff Numbers 2015 $170,000 to $179,999 1 LGFA annu al report Paul Anderson $44,200 John Avery $44,200 Philip Cory-Wright $44,200 Abigail Foote $46,800 Total $257,400 $240,000 to $249,999 1 $320,000 to $329,999 1 Total staff receiving $100,000 or more

94 160 Left to Right: John Avery, Philip Cory-Wright, Abigail Foote, Craig Stobo, Paul Anderson, Mark Butcher (Chief Executive) D irectory Postal address PO Box 5704 Lambton Quay Wellington 6145 Street address WELLINGTON Level 8 City Chambers 142 Featherston Street Wellington 6011 AUCKLAND Level 12 West Plaza Tower Corner Albert and Custom Street Auckland 1010 Office hours Monday through Friday, hrs Except Public Holidays Phone Personnel addresses firstname.lastname@lgfa.co.nz Website lgfa.co.nz Follow us twitter.com/nzlgfa LGFA annu al report

95 161 LGFA annu al report Right: Recently completed upgrade to the Blenheim Sewage Treatment Plant. Commencement of excavation on the landward section of the outfall pipe. Marlborough District Council. Back Cover: Elginshire Street extension to allow easier access to State Highway 1, improving the efficiency of traffic flow in the expanding Washdyke industrial area. Timaru District Council. 5 0

96 162

97 163 L G fa N E W Z E ALAN D LO C AL GO V E R N M FU N D I N G AG E N C Y T E N

98 Local Government Funding Agency AGM Matters Reporting officer Date of meeting 28 October 2015 Alan Adcock (Group Manager Support Services) Vision, mission and values This item is in accord with Council s vision, mission and values statement. Purpose To establish Council s position on the matters being put forward for consideration at the Local Government Funding Agency (LGFA) Annual General Meeting (AGM) on 24 November Significance and Engagement Having considered the Significance and Engagement Policy this proposal or decision is not considered significant and the public will be informed via Agenda publication on the website. Discussion Shareholders are entitled to attend and vote at the AGM, with a proxy form for voting to be sent to LGFA at least 48 hours prior to the AGM. There are now 30 shareholding councils together with the Crown. Whangarei District Council s ownership share is 3.3% of paid up capital. The following matters are being considered at the AGM: To receive and consider the financial statements for the year ended 30 June (The Annual Report for the year ended 30 June 2015 is included as a separate agenda item). Election of Directors. Election of Nominating Local Authorities to Shareholders Council. Directors remuneration. Attachment 1 is Local Government Agency Limited Notice of Annual Meeting and also includes a brief profile of Directors. The associated Proxy Form is at Attachment 2. Annual Report Financial statements for the year ended 30 June 2015 together with the directors and auditor s report to shareholders will be tabled at the AGM. This is the third full year of operation for LGFA. As at 30 June 2015 LGFA had lent $4,979 million to forty-five participating councils. This is an increase of $1,280 million from a year ago. LGFA Board has declared a dividend of $1.61 million for the year ended 30 June 2015, of which WDC s share is $47,993. Election of Directors In accordance with the Shareholders Agreement (SHA), John Avery retires by rotation at the AGM and offers himself for re-election. Paul Anderson has formally resigned from the Board effective from the AGM and the increase in the number of board members back to six requires two positions to be filled. A subcommittee of Alan Adcock (LGFA Shareholders Council Chair) and Craig Stobo (LGFA Board Chair) undertook a process to shortlist and interview suitable candidates during August Following this process, Linda Robertson (as Independent Director) and Mike Timmer (Greater Wellington Regional Council) have been nominated to fill these two vacant director positions. There are no other nominations. Finance Committee 1 28 October 2015

99 165 Election of Nominating Local Authorities Shareholders Council is represented by 9 local authorities and the Crown to monitor performance of LGFA and make recommendations to shareholders on matters that require decisions. In accordance with the SHA, the shareholders shall ensure that two Nominating Local Authorities retire on a rotation basis at the AGM each year. Both Greater Wellington Regional Council (GWRC) and Tasman District Council (TDC) have agreed to retire. As Mike Timmer of GWRC is seeking a director appointment, GWRC is not seeking reelection. Therefore only TDC has offered itself for re-election and Auckland Council has put itself forward to stand for election. Directors Remuneration Shareholders approval is sought for directors remuneration increases with effect from 1 July Shareholders Council engaged Board Dynamics to provide a report on current director remuneration and recommend any appropriate changes to the current remuneration based on market data. Board Dynamic s recommendation was an increase of 23%, based on a robust process that examined remuneration levels of comparable finance organisations in NZ of similar size based on assets under management and shareholder funds. This built on analysis completed previously that looked at remuneration levels for Council controlled organisations and small SOE s (as the Crown is the largest shareholder). After considering the conclusions of this analysis, the final recommendation from the SC to shareholders was for a smaller increase of 15% spread over two years. This was influenced by several unique aspects of the LGFA, including its CCO status. Annual General Meeting Shareholders Council are supportive of all matters proposed by the Board for consideration at the AGM (see Attachment 3). It is proposed that Alan Adcock attend the AGM as the shareholder representative of Whangarei District Council. Conclusion The Local Government Funding Agency (LGFA) has been operational for nearly four years and has established itself as a highly effective organisation that provides an important service to the sector. It is recommended that WDC votes in support of all matters being considered at the AGM. Recommendation 1. That the information be received. 2. That the Finance Committee authorise Alan Adcock to attend the AGM as shareholder representative and for Whangarei District Council to vote by way of proxy to: Approve the re-election of John Avery and election of Linda Robertson and Mike Timmer as directors; Approve the re-election of Tasman District Council and election of Auckland Council as Nominating Local Authorities ; Approve the proposed increase to directors remuneration. Attachments 1. LGFA Notice of Annual General Meeting 2. LGFA AGM Proxy Form 3. Letter from LGFA Shareholders Council Finance Committee 2 28 October 2015

100 166 NEW ZEALAND LOCAL GOVERNMENT FUNDING AGENCY LIMITED NOTICE OF ANNUAL MEETING Notice is given that the 2015 annual meeting of shareholders of New Zealand Local Government Funding Agency Limited ("Company") will be held at the Bolton Hotel, 12 Bolton Street, Wellington on 24 November 2015 commencing at 2:45pm. BUSINESS 1. FINANCIAL STATEMENTS AND REPORTS: To receive and consider the financial statements of the Company for the year ended 30 June 2015 together with the directors' and auditor's reports to shareholders. 2. ELECTION OF DIRECTORS In accordance with clause 3.3 of the Company shareholders' agreement ("SHA"), John Avery retires by rotation and, being eligible, offers himself for re-election. Accordingly, to: Re-elect John Avery, as a director of the Company, by way of ordinary resolution. (See Explanatory Note 2) In accordance with clause 3.5 of the SHA the following have been nominated to fill two vacant director positions - Linda Robertson nominated by Whangarei District Council and Mike Timmer, nominated by Greater Wellington Regional Council Accordingly, to: Elect Linda Robertson and Elect Mike Timmer as directors of the Company, each by way of separate ordinary resolutions. (See Explanatory Note 2) 3. ELECTION OF NOMINATING LOCAL AUTHORITIES In accordance with clause 4.6 of the SHA, Greater Wellington Regional Council and Tasman District Council retire by rotation. Tasman District Council being eligible, offer themselves for re-election. Auckland Council has put themselves forward to stand for election. Accordingly, to: Re-elect Tasman District Council as a "Nominating Local Authority under the SHA, by way of ordinary resolution. (See Explanatory Note 3) In accordance with clause 4.8 of the SHA, Auckland Council offer themselves for election. Accordingly, to: Elect Auckland Council as a "Nominating Local Authority" under the SHA, by way of separate ordinary resolution. (See Explanatory Note 3) 4. DIRECTORS' REMUNERATION In accordance with clause 3.6 of the SHA, to approve, by way of ordinary resolution, an increase in the directors' fees payable to: (a) With effect from 1 July 2015, the director acting as chairman of the board of directors of $6,000 per annum, from $78,000 per annum to $84,000 per annum and with effect from 1 July 2016 an increase of $6,000 per annum to $90,000 per annum.

101 (b) (c) With effect from 1 July 2015, each of the other directors of $3,400 per annum, from $44,200 per annum to $47,600 per annum and with effect from 1 July 2016 an increase of $3,400 per annum to $51,000 per annum. With effect from 1 July 2015, the director acting as chairman of the audit and risk committee of $3,600 per annum, from $46,800 per annum to $50,400 per annum; and with effect from 1 July 2016 an increase of $3,600 per annum to $54,000 per annum (See Explanatory Note 4); 5. GENERAL BUSINESS To consider such other business as may properly be raised at the meeting. Please refer to the explanatory notes that accompany this notice of meeting. By order of the board: Craig Stobo, Chairman 2 October 2015 ORDINARY RESOLUTIONS: Ordinary resolutions are required to be approved by a simple majority of more than 50% of the votes of the shareholders entitled to vote and voting at the annual meeting. SHAREHOLDERS ENTITLED TO ATTEND AND VOTE: Pursuant to section 125 of the Companies Act 1993, for the purposes of voting at the annual meeting, those registered shareholders of the Company as at 9.00am on Tuesday 24 November 2015 shall be entitled to exercise the right to vote at the meeting.

102 168 EXPLANATORY NOTES 3 EXPLANATORY NOTE 1 - PROXY VOTE A shareholder entitled to attend and vote at the meeting is entitled to appoint a proxy to attend and vote instead of the shareholder. The proxy need not be a shareholder. To be effective, a copy of the proxy form must be received by the Company at Level 8, City Chambers, 142 Featherston Street, Wellington 6145 not later than 48 hours before the start of the meeting. A corporation may appoint a person to attend the meeting as its representative in the same manner as that in which it could appoint a proxy. EXPLANATORY NOTE 2 - ELECTION OF DIRECTORS The SHA provides that, beginning at, and including, the annual meeting for 2013, two directors comprising one director who is an "Independent Director" (as defined in the SHA) and one director who is not an "Independent Director" shall retire from office at the annual meeting of the Company in each year. The directors to retire shall be that "Independent Director", and that director who is not an "Independent Director", who have been longest in office since their last election. If two or more relevant directors were last elected on the same day, the directors to retire shall (unless they otherwise agree among themselves) be determined by lot. A retiring director is eligible for reelection. In this case, John Avery and Philip Cory-Wright are deemed to have been last elected on the same day (i.e. upon incorporation of the Company) and are the "Independent Directors" who have been longest in office since their last election (Craig Stobo having been re-elected on 19 November 2013 and Abby Foote on 25 November 2014). Accordingly, the directors have, in accordance with the SHA, agreed amongst themselves, that John Avery (being an "Independent Director") shall retire by rotation at this annual meeting. John Avery, being eligible, offers himself for re-election. Following the impending retirement of Paul Anderson at the 2015 AGM and the resignation of Mark Butcher in 2014 there are two vacancies as directors of the Company. The Chairs of the Shareholder Council and Board have undertaken a recruitment process for two new directors and propose Linda Robertson and Mike Timmer as directors. John Avery Biography John is a professional director with extensive experience across a range of business and industry sectors. He is a very experienced director, chair and committee chair. He has particular experience with both Council Controlled Organisations and Co- Operative style companies. Currently along with LGFA he is a director of an Auckland Council CCO, Regional Facilities Auckland, and a director of Office Products Depot Ltd, Strategic Pay Ltd, Spider Tracks Ltd and Fund Managers Auckland Ltd Former directorships include; The Warehouse Group Ltd, Independent Timber Merchants Ltd (ITM), NSM Contracting Ltd (a North Shore City Council CCO), Aotea Centre Board (an Auckland City Council CCO), Americas Cup Village Ltd (an Auckland City Council CCO ), The New Zealand Guardian Trust Company Ltd, The Lawlink Group Ltd and The Royal New Zealand Ballet. He is also involved with a number of charities including The New Zealand School of Dance. Prior to becoming a fulltime director nine years ago, John was a commercial lawyer and former Managing Partner and Chair of an Auckland based law firm. He is a Chartered Fellow of the Institute of Directors in New Zealand, a Barrister and Solicitor of the High Court and remains an associate member of the New Zealand Law Society. Linda Robertson Biography Linda is a professional director with over 30 years experience in the NZ finance sector having worked both in both banking and the corporate environment. In the corporate environment she has worked predominately in the energy sector and has held various senior management roles encompassing, treasury, credit management, audit, risk management and insurance. She was most recently Group Manager Treasury & Procurement at Meridian Energy Ltd. Linda also has extensive governance experience serving on Boards and Audit & Risk Committees including previous roles on the Board of New Zealand Post, Kiwi Bank, Speirs Group and the

103 169 4 Earthquake Commission. She was also a member of Audit & Risk Committee of Inland Revenue and Chaired the Audit & Risk Committee of Statistics New Zealand. Her current governance positions include; Member of Audit & Risk Committee of Ministry of Social Development, Director of Hunter Downs Development Company Ltd, Dunedin City Holdings Ltd, Dunedin City Treasury Ltd and Dunedin Venues Ltd; a Member of the Technical Advisory Committee of the New Zealand Export Credit Office, and a Director of NZ Registry Services Ltd, King Country Energy Ltd and the NZPM Group Ltd. She is a Certified Treasury Professional, a Fellow of the Institute of Finance Professionals New Zealand (INFINZ), a Fellow of Governance New Zealand (previously Institute of Chartered Secretaries and Administrators); a Chartered Fellow of the New Zealand Institute of Directors and a Graduate Member of the Australian Institute of Company Directors. Linda has a Bachelor of Commerce Degree and a Diploma in Banking Mike Timmer Biography Mike joined Wellington Regional Council as Treasurer in January His present responsibilities include treasury activities, risk management, insurance, and managing the Councils CCO s. He has also been acting Chief Financial Officer for the council for extended periods. His prior roles were Treasurer and Finance Manager at Wellington Hospital. Formally he worked for Citibank for 5 years in its dealing room. Mike has been involved with the establishment of the LGFA being one of the tight 9 representatives and has been on the Shareholders Council since its inception where he is presently vice chairman. He is currently a member of the Institute of Directors, a director of the Finance Committee of Physiotherapy New Zealand Incorporated, a certified Charted Accountant and an INFINZ (cert) professional. He holds a Batchelor of Agricultural Science and a Batchelor of Business Studies, both from Massey University. EXPLANATORY NOTE 3 - ELECTION OF NOMINATING LOCAL AUTHORITIES Pursuant to a shareholders' resolution dated 2 October 2013, the SHA was amended to provide for, amongst other things, a new process for determining the members of the Shareholders' Council. "Principal Shareholders" (as defined in the SHA), other than the New Zealand Government, are now elected as "Nominating Local Authorities" (again as defined in the SHA), and those Nominating Local Authorities have the right to each appoint one member of the Shareholders' Council. The SHA provides that, beginning at, and including, the annual meeting for 2013, the shareholders shall ensure that two Nominating Local Authorities retire from office at the annual meeting of the Company in each year. The Nominating Local Authorities to retire shall be those who have been longest in office since their last election, and if two or more of those Nominating Local Authorities were last elected on the same day, the Nominating Local Authority to retire shall (unless they otherwise agree among themselves) be determined by lot. A retiring Nominating Local Authority is eligible for re-election. In this case, Whangarei District Council, Hamilton City Council, Tasman District Council, Western Bay of Plenty District Council, Wellington City Council, and Bay of Plenty Regional Council, and Greater Wellington Regional Council are deemed to have been last elected on the same day (7 December 2011) and are the Nominating Local Authorities who have been longest in office since their last election (Tauranga City Council and Selwyn District Council having been re-elected as Nominating Local Authorities on 19 November 2013 and Greater Wellington Regional Council and Western Bay of Plenty District Council having been re-elected as Nominating Local Authorities on 25 November 2014). Accordingly, the Nominating Local Authorities have, in accordance with the SHA, agreed amongst themselves, that Tasman District Council and Greater Wellington Regional Council shall retire by rotation at this annual meeting. Due to Mike Timmer standing for election as a director of the company, Greater Wellington Regional Council will not offer themselves for re-election as a Nominating Local Authority. The Shareholders Council is comprised of between five and ten members. The New Zealand Government can appoint a member and the remaining members comprise up to nine Nominating

104 170 5 Local Authorities. Following the retirement of Greater Wellington Regional Council and Tasman District Council there are currently two positions available. Tasman District Council offer themselves for re-election as a Nominating Local Authority. Auckland Council is seeking election as a Nominating Local Authority. EXPLANATORY NOTE 4 - DIRECTORS' REMUNERATION This resolution seeks shareholders approval for an increase in directors remuneration with effect from 1 July 2015.The proposed fee increases for directors (as set out in the notice of meeting) have been calculated based on a 15% increase over the two period comprising a 7.7% increase for the year and a 7.1% increase for the year. The Shareholders Council have provided to shareholders a background document outlining the proposed fee increases.

105 171 NEW ZEALAND LOCAL GOVERNMENT FUNDING AGENCY LIMITED PROXY FORM I/We of being a shareholder of New Zealand Local Government Agency Limited appoint of or failing him/her of as my/our proxy to vote for me/us at the annual meeting to be held on 24 November 2015 and at any adjournment thereof. Unless otherwise instructed, the proxy will vote as he or she thinks fit. If you wish to direct the proxy how to vote please indicate with a in the appropriate box below. For Against 1. To re-elect John Avery as a director of the Company 2. To elect Linda Robertson as a director of the Company 3. To elect Mike Timmer as a director of the Company 4. To re-elect Tasman District Council as a Nominating Local Authority 5. To elect Auckland Council as a Nominating Local Authority 6. To approve the following increases in director fees payable (a) (b) (c) With effect from 1 July 2015 the director acting as chairman of the board of directors of $6,000 per annum, from $78,000 per annum to $84,000 per annum and with effect from 1 July 2016 an increase of $6,000 per annum to $90,000 per annum. With effect from 1 July 2015, each of the other directors of $3,400 per annum, from $44,200 per annum to $47,600 per annum and with effect from 1 July 2016 an increase of $3,400 per annum to $51,000 per annum. With effect from 1 July 2015, the director acting as chairman of the audit and risk committee of $3,600 per annum, from $46,800 per annum to $50,400 per annum; and with effect from 1 July 2016 an increase of $3,600 per annum to $54,000 per annum (Please refer to the notice of meeting for details of the resolutions) Signature of Shareholder Dated: 2015

106 Notes: If you wish you may appoint as your proxy "The Chairperson of the Meeting". 2. If you are a body corporate, this proxy form must be signed on behalf of the body corporate by a person acting under the body corporate's express or implied authority. 3. For this proxy form to be valid, you must complete it and produce it to the Company at least 48 hours before the time for holding the meeting. You can produce it to the Company by delivering it to Level 8, City Chambers, 142 Featherston Street, Wellington It must be received at least 48 hours before the time for holding the meeting. 4. If this proxy form has been signed under a power of attorney, a copy of the power of attorney (unless already deposited with the Company) and a signed certificate of nonrevocation of the power of attorney must be produced to the Company with this proxy form. 5. If you return this form without directing the proxy how to vote on any particular matter, the proxy will vote as he or she thinks fit.

107 October 2015 Dear Shareholder LGFA has achieved an incredible level of success over the past almost four years with loans to the sector in excess of $5.4 billion and LGFA has provided councils with lower borrowing costs and longer dated debt. The size of LGFA and associated benefits to the Local Government sector are expected to continue to grow in the future. While the original objectives of LGFA remain unchanged, the business model is becoming increasingly complex as LGFA responds to a rapid growth in its asset base and is required to manage additional risk as it becomes a more flexible lender to the Local Government sector. The LGFA Board plays an important role in the governance and oversight of the organisation on your behalf as both a shareholder and guarantor (with the exception of the New Zealand Government who is a shareholder only). The Shareholders Council role amongst other duties is to recommend to shareholders the appointment, removal, replacement and remuneration of directors. An independent review of the LGFA board composition and remuneration was undertaken by Board Dynamics Limited this year to ensure that we have the right board size, skill set and remuneration that will ensure the continued success of LGFA. This board review has involved the active participation of the LGFA Shareholder Council and the exercise involved: an evaluation of current board performance; assessment of the skill set of the current board; future skill requirements (taking into consideration the LGFA priorities and strategic direction); and a review of board remuneration against the market. Appointment of Directors The LGFA Shareholder Council recommends the re-election of John Avery and the election of Linda Robertson and Mike Timmer as directors and asks that you vote in favour of the resolutions at the AGM. A committee of myself and Craig Stobo sought applications for the vacant director positions and after an extensive process, we shortlisted and interviewed five candidates before selecting Linda and Mike as our preferred new directors.

108 174 Remuneration of Directors The outcome of the remuneration section of the board review was a determination that the current LGFA board remuneration levels were approximately 23% below the market for directorships at comparable organisations. The setting of board remuneration is a complex exercise and after careful consideration and constructive debate at the Shareholders Council it was decided that an increase in director s fees of 15% was warranted. The recommended increase is proposed to be spread over the next two years (7.7% in 2015/16 and 7.1% in 2016/17). The LGFA Shareholder Council is recommending the above changes to director remuneration and asks that you vote in favour of the resolutions at the AGM. Regards Alan Adcock Chair, LGFA Shareholders Council

109 Positive Growth Group Report on Recent Activity Reporting officer Date of meeting 28 October 2015 Jude Thompson (Group Manager Positive Growth) Vision, mission and values This item is in accord with Council s vision, mission and values statement. Significance and Engagement Having considered the Significance and Engagement Policy this proposal or decision is not considered significant and the public will be informed via agenda publication on the website. Attached is a Report on Recent Activity from the Positive Growth Group. Recommendation That the information be received. Attachment Positive Growth Report on Recent Activity Finance Committee 1 28 October 2015

110 176 Positive Growth Group Report on Recent Activity October 2015

111 177 Positive Growth Group Report on Recent Activity Reporting Officer Date October 2015 Jude Thompson (Group Manager Positive Growth) This report outlines the recent activities within the major portfolios of the Positive Growth Group Venues and Events, Economic Development, Māori Relationships, Property and District Promotions and Tourism. Venues and Events Overview After a very active final quarter to the year it was straight into another busy period with winter sports, heavy bookings at both the Forum North and Toll Stadium venues and end of year requirements for both Council and the Northland Events Centre Trust. External events we are involved in were a little quieter this period although one major one was the National Hockey League. This was hugely successful and extremely well organised by our local hockey organisation and NZ Hockey. This event over a 9 day period more than met the expectations of both ourselves and NZ Hockey and in the next month we are getting back around the table to fully evaluate all the numbers around what was envisaged. Early indications are we have more than met the economic benefit targets and we have already agreed to the Nationals coming back in 2016 and have the Trans-Tasman Masters locked in for early The next three months sees the Venues and Events team concentrate on preparing and organising several major projects and events for the summer months. These include Christmas Festival, Endless Summer Festival, Six60 Concert, Vodafone Warriors vs Gold Coast Titans and the Whangarei Fritter Festival. In addition to our usual day to day bookings and activities, this is a demanding period. Significant Events There have been a number of significant events the team have been involved in or preparing for during the first three months of the new financial year. Some of these are highlighted below. ITM Cup Toll Stadium Forum North The 2015 ITM Cup has now finished and it was not a season to remember for the Northland Rugby Team and Union or Toll Stadium. Performance of the Taniwha team and some adverse weather has meant an extremely poor result for the business. Final figures for the season are still being reconciled but there will be some ground to make up. Fortunately for Toll Stadium rugby is a small percentage of business and events such as the Six60 concert and Warriors will assist in addressing variances for the Trust. Other than the ITM Cup, the events of significance at Toll Stadium during the quarter included the Bidvest Foodshow, CAANZ Presidential Dinner, Te Kapehu Whetu Fundraiser, I-Site Conference Dinner and the Social Service Providers Association Conference. There were a large number of other meetings and trainings etc also and several overnight set ups required of staff. Forum North has been busy with shows, exhibitions, conferences and other bookings over the past 3 months. Events have included the Elvis Show, Zonta Book Sale, Bernina Fashion Awards, Swan Lake, Laughing Samoans, NZ Symphony Orchestra, I-Site Conference, South Pacific and several school productions. Bookings are strong looking forward and enhancements over recent times are certainly helping with the attractiveness of the venue. 15/85932 October

112 178 Future Events Highlighted earlier are projects requiring major involvement from our team over the next period. These are significant and most have become regular features on the Whangarei calendar. Additionally to this we are working on other events that occur in the last quarter of the financial year but involve months of planning and coordination to ensure they are operationally well managed and marketed and promoted throughout our district and beyond. Planning is well advanced for the The -SITE New Zealand Conference 2015 welcome function inaugural Wild Kiwi Multi-sport event in April next year which will involve approximately 1,000 competitors of which 75% are expected to come from Auckland and other parts of the country. This event is being held in the Bream Head area and will showcase this beautiful part of our district. Work has also started on the Rally Whangarei event with several operational enhancements happening and together with the organisers we are working to build on the success of the event over the past 10 years. An addition to the Rally this year will be a 2 week Festival of Motorsport that will bring together a range of motorsport and educational activities involving several clubs and will be promoted similarly to the Endless Summer Festival and Matariki Festival campaigns. Whangarei has been invited to express an interest in hosting games during the 2017 Rugby League World Cup. We have received documentation and attended a briefing in Wellington last week and are now fully evaluating the information is an extremely busy and committed year already with the Lions Tour and Trans Tasman Masters and this will be factored into the evaluation. Capex Toll Stadium and Forum North Although minimal capex has been spent at the stadium in the last 3 months a new sound system was recently installed in the Capitaine Bougainville Theatre. This system is designed for the theatre environment and will significantly enhance the sound and acoustics within the theatre and therefore attractiveness to hireage customers. New black drapes that will fully black box the Expo Hall have been purchased and the track system is to be installed in the next month. This will enable us to offer a completely different experience within the hall with essentially no set up required, just pull the curtains. This will make the hall much more inviting for commercial activity. 15/85932 October

113 179 Economic Development Overview There have been some good positive gains for Whangarei in the most recent quarter. The exchange rate slide was good news for the tourism sector reducing the cost for international visitors to come to New Zealand; and also for exporters by making our products and services cheaper internationally and reducing import/input costs. Whangarei, Northland and New Zealand fared well in tourism with a strong recovery from the Global Financial Crisis (GFC); a great summer peak and shoulder season; and an industry confident for the future. There have been recent upward trends in dairy prices and the sheep and beef markets along with horticulture specifically avocados which is positive. All other indicators of GDP showed growth across the board with the exception of non residential consents which after an extraordinary period in the previous year have leveled off to a typical plane. The Economic Development Association of New Zealand (EDANZ) has elected a new chair, David Wilson, CEO of Northland Inc. at its recent AGM. Recently Government announced a competitive process, to seek establishment of one to three Regional Research Institutes across New Zealand. An upcoming workshop with the Ministry of Business, Innovation and Employment (MBIE) will provide an opportunity for district and regional stakeholders to talk directly to MBIE officials, and to establish the level of interest and commitment to such a facility here. Commercial Developments The Quest Apartments are now completed and operating. Two other significant major developments remain in the planning and due diligence stage. Totara Parklands sub division is another major development currently in progress which the Economic Development Manager is assisting to facilitate across the organisation. Development on Stage Two has now commenced and sales are proceeding very favourably. This will also have a substantial positive boost for the building industry sector as section sales take off and building consents are being lodged. FIFA The successful FIFA U20 World Cup tournament was held in New Zealand, including Whangarei as a Host City over the 22 day period of 30 May to 20 June The economic impact reports have now been received from FIFA LOC and SportNZ and are highlighted in a separate agenda item. 15/85932 October

114 180 Broadband Project - Expression of Interest The Government recently announced its intention to extend its two flagship broadband initiatives with additional funding, and establish a new initiative to expand mobile coverage. The UFB extension plans to connect an even greater number of New Zealanders, by increasing the percentage of New Zealanders able to access fibre technologies from 75 per cent to at least 80 per cent. The additional funding for this programme will be between $152 and $210 million and will come from the Future Investment Fund. The four Northland Councils, Iwi CEO Consortium with input from Whangarei hapū worked with Northland Inc in preparing an Expression of Interest (EOI) to secure funding to address: extending Ultrafast Broadband extending Rural Broad band Addressing Mobile Black Spots The initial EOI was finalised and submitted on 1 July 2015 with Council represented by the Positive Growth Manager and the Economic Development Manager on the region-wide project. The second stage of the EOI process was the four Northland Councils facilitated by Northland Inc completing the Digital Enablement Plan (DEP) and identifying suitable priority projects to optimise better and faster internet coverage. The DEP was submitted in September, Tai Tokerau Northland Economic Action Plan The Tai Tokerau Northland Growth Study identified the region s strengths and opportunities for growth. The resulting draft Tai Tokerau Northland Action Plan prioritises the opportunities for action. This 10 year plan will assist stakeholders and partners identify roles and contribution; and how we can collaborate to achieve further economic transformation in Northland. The plan is for youth (to help them understand future areas for employment), business (to make sure that their aspirations and needs are understood and supported through regional processes and to provide the right signals for investment), hapū/iwi/māori (to support the process of how resources and skills can be used to grow their assets and realize their aspirations), local and central government (to see where, how and what role can be taken to best support outcomes). There si a Workshop planned for Council later in the quarter. 15/85932 October

115 181 Māori Relationships Department Overview The Te Kārearea and Te Huinga hapū forums have been active, as Council reviews the District Plan and Rural and Coastal Plan Changes. In terms of building capacity and capability, Council has attended a number of hui at the request of Te Huinga representatives so hapū can better understand the proposed changes and contribute positively to the review processes. Te Kārearea Marae meetings have recently been held at Pehiaweri (Glenbervie) and Te Tarai o Rahiri (Pakotai) Marae. Issues raised included roading, signage, pedestrian safety, rating, marae funding, papakainga, flooding, consenting and infrastructure. Communities have been very appreciative of Councillors meeting face to face with them. Engagement between Whangarei hapū and NZTA has increased significantly especially in relation to the Mangakahia Road project. NZTA s attendance and participation in the Pakotai meeting was valuable for all concerned. Te Huinga members have also been active on the Whangarei Airport project Manawhenua Advisory Group. During this quarter the Ngāpuhi Mandate Inquiry Report was released, and discussed at Te Kārearea. Te Huinga continue to keep Council informed of the wider discussions in the pre-settlement phase for Northland. Despite the challenges of the review of Te Ture Whenua Māori Act, discussions remain active around Papakainga with several hapū and whanau progressing with their planning for their papakainga. Week 16 of the Waitangi Tribunal hearings were recently completed in the Taiamai Waimate area of the Paparahi o Te Raki (Ngapuhi Tribal Area). Whangarei s next hearings are planned for February. Council staff are currently preparing responses to Crown queries/questions that have been raised by various claimants during earlier hearings. Water Quality improvement Waiora Otuihau is a project that sets the standard for collaboration between the Northland Regional Council, Whangarei District Council and the local hapū of Ngati Hau. As a major tourism attraction, the Whangarei Falls attracts visitors from around the world so this endeavour is aimed at significantly improving water quality. To achieve this goal, the project is aiming to reduce the negative effects of avian and bovine matter in the headwaters of the Otuihau. Many local children and youth use the river as their preferred swimming hole and the project also aims to markedly reduce potential for health risks. 27B Memorialized lands Council staff have completed this project which maps all 27B memorialized lands on the Council GIS maps. Hapū and Iwi can now view these sites on the Council website and have indicated how useful the information is in their own processes. Sites of Significant to Maori The Sites of Significance to Maori Project (PC 100) which is managed by Andre Hemara and sponsored by Paul Waanders (Policy and Monitoring Department) is progressing bit by bit with the following Hapū registers in various stages of development. As the registers are lodged the information will be progressively added to the Council GIS mapping systems. Registers that have been lodged with Council: 1. Patuharakeke 2. Te Waiariki, Ngati Korora, Ngati Taka Pari 3. Te Kahu o Torongare The following registers have been completed but not formally lodged with Council: 1. Ngati Hine 2. Ngatiwai Registers that are still to be completed include: 15/85932 October

116 Ngati Hau 2. Parawhau Nga Kaitiaki o Nga Wai Maori NKONWM (Guardians of the Fresh Water Rivers) During the quarter the Hapū consortium - Nga Kaitiaki o Nga Wai Maori made up of representatives from the Hapū listed below have continued to build trusting relationships with each other and other major government stakeholder groups in the district. Working together on projects such as riparian planting, eel management projects and the sharing of critical information has encouraged the stakeholders to continue to work together. The Hapū consortium is made up of: Ngati Hau (Lead Hapū) Te Kahu o Torongare Parawhau Te Uri Roroi Ngati Hine Currently the Nga Kaitiaki o Nga Wai Maori group have formed a partnership with the Kaipara Integrated Management Group to identify organizations that place significant pressure on the water quality in the waterways both in the Whangarei District and on down into the Kaipara region. The first significant organization that has agreed to work closely with the Hapū /Iwi groups is the Fonterra site at Kauri. Nga Kaitiaki o Nga Wai Maori continues to lobby all the stakeholder groups to ensure that there are plans in place to mitigate against further pollution of the waterways. Inter-departmental collaboration During the quarter, more collaboration between the Maori Relationships Department has taken place with other departments to reduce project risks by incorporating a Maori paradigm into their respective projects. This inclusion has further raised positive departmental profiles in the Maori communities. Feedback via Te Huinga is that consenting processes continue to frustrate hapū. Poroti Springs and the proposed subdivision in Riverside are two that have come to the attention of the members. Workshops are currently being planned to better understand Council processes and procedures that have provision for such consents to proceed, some non-notifiable, some with limited or no consultation elements with Maori. Other Projects and Activities include Whangarei District Airport project. Maori Hapū /Iwi development project Enabling Maori Land Development Sites of Significance to Maori project Otuihau catchment water quality project Parihaka Summit Redevelopment project Wastewater storage facility at Tarewa Park Te Tiriti and Cultural Awareness Training Otangarei Marae Fraser Collection General customer enquiries 15/85932 October

117 183 Property Overview The first Quarter of the new financial year and the onset of winter saw maintenance programmes and capital works fully underway. Commercial Ground Leases routine rent reviews continue as per the schedule. There are a mix of ground lease reviews being progressed including some significant 21 year reviews. Commercial leases rent reviews and renewals continue and are tracking according to schedule. The market appears to have moved very little from the previous 12 months, reflected in minor rent movements. Town Basin With spring fast approaching, maintenance continues as per our asset management plan. Painting of the Town Basin service lane, Victoria Bridge canopy and building wash- downs to name a few are part of the winter programme. New signage to reflect the connection with the CBD and to update internal tenancy changes is underway. Property staff are working with the likes of Claphams clocks to ensure consistent and clear messages. The upgrades to the public toilets are now complete. First impressions do count, especially with regard to visitors and public toilets. The ex-tahuna Reef premise is now officially the Love Mussel Restaurant and Bar and started trading Friday 11 September The final product looks impressive and certainly has injected additional vibrancy into the Town Basin. Pensioner Housing Full maintenance and capital project programmes continue including painting, roof replacement, unit refurbishments, including kitchen and bathroom and insulation. Tenants who will be affected have been contacted and plans are in place to manage the impact of the works scheduled. The ground maintenance contract has been advertised through tender link and closes in mid November. Minor changes to the existing scope have been added to mange additional hard surface, paths and driveway cleaning. Security and security doors have been an area of recent review. Through tenant surveys and third party assistance the installation of a further 54 doors has been programmed including windows stays at all units, an increased sensor lighting. As part of legislative requirements an asbestos register is being compiled for all Council assets. As a result of the age and construction materials of our pensioner housing stock, a coarse assessment is being completed to identify possible inert materials. To date results have indicated a low risk to tenancies and contractors.. Airport Passenger numbers have increased for the quarter with September figures of 7982 up for the same period last year. The total since 1 February is now 60,689 with a projected total of 90,000 over the next 3 months. This is quite a leap on years prior to the Q300 service. During the last quarter aircraft landings have increased with 306 landings/takeoffs and a further 76 touch and go movements for August alone. Air NZ represents 216 of those landings/takeoffs equating to a total of 648 for the quarter, well below the allowed 700 movements trigger point for crash fire requirements. New CAA rules now require 3 monthly reporting of landing data to the CAA. Terminus Upgrade Expansion to the terminal is well under way. Work on terminus upgrade has begun with a staged upgrade to the toilets. The accessible toilets are expected to be completed early October, followed by the gents then ladies toilet upgrades to be completed by Christmas. This will be a significant amenity improvement over the current conveniences. There have been some initial inconveniences for airport users and tenancies. A weekly update is in place to ensure clear updates and expected issues are managed ahead of time. 15/85932 October

118 184 Work is progressing on the design for inside the terminus which includes some modernisation of Air New Zealand facilities. The Car park expansion is nearing completion with only some tidy up work and transitional changes to carry out, including new markings and signage. This is a great opportunity to address some minor historical issues over car park management and in the future car parking charges. Already rental car companies wish to rent additional spaces from the new rental car designated area and additional more practical accessible parking is able to be re-located closer to the terminus. The apron and main taxiway reseal are scheduled to be completed in early November with new markings for the apron /taxiway and the existing runway as part of planned maintenance. Ballistic Blondes Sky Dive Company has recently acquired a hangar on the airport and purchased a building on Whimp Ave. The move creates an opportunity to tidy up and inject some new life into the south side of the airfield. 15/85932 October

119 185 District Promotions and Tourism Tourism Overview Growth in the tourism industry marches steadily on with an increase in overseas visitors seeking a winter break, resulting in an additional 10,000 holiday arrivals to New Zealand in August (latest available data). Statistics New Zealand data shows that total visitor arrivals for the August 2015 year were up 7.8 per cent and holiday arrivals up 11.1 per cent year-on-year, continuing the momentum after New Zealand reached 3 million annual international visitors in July. Tourism New Zealand has shifted resources to drive seasonality change, and now allocate 80% of their budgets to shoulder and off-season promotion, recognising the strain now being placed on infrastructure and sector capacity in the peak season, and inventory availability in winter months. All indications are that a third successive buoyant 2015/2016 peak season will be experienced throughout New Zealand including Northland and Whangarei. Guest night growth in Whangarei declined for the fourth consecutive month in August, reflecting a return to more usual winter accommodation usage after the massive increases recorded in Year ended guest nights continue to show good growth, up 3.9% as at August 2015, but in August the annual growth rate dropped below the national growth rate of 5.4%. At this time of year corporate and business travel dominates the Whangarei accommodation scene which is at lower levels than 2014, with leisure travel normally starting to impact on guest night statistics as from Labour Weekend. AUGUST 2015 GUEST NIGHTS NEW ZEALAND NORTHLAND WHANGAREI FAR NORTH KAIPARA MONTH ,208,922 69,664 24,066 41,084 4,514 YEAR END ,300,740 66,464 19,312 44,467 2,686 volume +/- 91,818-3,200-4,754 3,383-1,828 % change 4.2% -4.6% -19.8% 8.2% -40.5% ,876,803 1,642, ,976 1,018, , ,691,511 1,742, ,348 1,093, ,857 volume +/- 1,814,708 99,207 19,372 75,488 4,349 % change 5.4% 6.0% 3.9% 7.4% 3.5% Twin Coast Discovery Review Phase One of the review was completed by Northland Inc during the reporting period. The development of By-ways (or short excursion drives off the main Twin Coast Highway route) which add additional rationale for slowing down visitors so they stay longer, see more, do more and spend more is the overall strategy being employed. Development of 6-8 By-ways via community consultation will be progressed in the last quarter of 2015, with the second interpretation phase to commence early Early indications are that the Whangarei Heads route will be one of the first new By-ways to be developed. 15/85932 October

120 186 Short Break Domestic Campaign The Short Breaks Campaign targeting Whangarei s major visitor market, Auckland, was undertaken from June to August. The online and PR Campaign targeted Auckland due to it s geographical proximity and as Aucklanders account for 43% of Whangarei s visitor spend, totalling $65 million per annum. A secondary target was the wider domestic market throughout New Zealand. Objectives were to increase brand awareness and shift external perceptions of Whangarei in a positive way, generate traffic to Whangarei online channels and through the campaign, influence growth in guest nights and visitor spend between May and September. The campaign created an umbrella theme, All in a Day in Whangarei and communicated a range of calls to action and compelling reasons to travel to Whangarei District for a short break during the winter months. Campaign messaging was focused on events and other activities, e.g. walks as suitable experiences for cooler times of the year, and structurally, used an over-arching branded message with regularly changing submessages with various calls to action. In addition to online advertising and social media content generation and messaging, there was a PR component which generated a significant response through a wide range of media; an example was a visit in September by a Herald writer attending the Festival of Light and Art at the Quarry Arts Centre 26/26 September. Examples of media releases published online during the campaign Campaign Results Number of website Users located in Auckland increased by % or 8,884 during the campaign when compared to the same timeframe in Online Display Media investment of $43,150 generated consumer communication worth at least $51,550, delivering an additional value of $8,400 At an overall Click Through Rate (CTR) of 0.15% this campaign s performance falls two times above the standard benchmark of 0.08 for display campaigns. Premium news site, NZ Herald delivered the best engagement rate at 0.18% reflecting a terrific environment for branding. In terms of reach and awareness, over million impressions were delivered at a very low cost of $4.22 per thousand impressions. 15/85932 October

121 187 WhangareiNZ.com June Aug 2015 results compared to June Aug % Users (Users have had at least one session within the selected date range. Includes both new and returning users.) % Sessions (Total number of Sessions within the date range. A session is the period time a user is actively engaged with your website, app, etc.) % Pageviews (Pageviews is the total number of pages viewed. Repeated views of a single page are counted.) Website visitors for Year End September 2015 total 120,219, up 69% on previous year. Facebook A series of posts ran weekly from June 23 to August 28 and were promoted to people with relevant interests in the destination or event. Results exceeded expectation, reaching 66,493 Aucklanders across nine posts, exceeding our target reach by 6,493, and contributed to almost 300 new fans for the Facebook page. To follow are comments received on Campaign Posts: Kathleen Whittaker, Yep gotta say all of Whangarei is growing on me... Adrienne Wright, Great place for a break away! Wonderful friends, caring family and lots of activities to go and do X Larry Andrews, Mt Albrie I think it's called go from the Reotahi toilets towards McGregor bay up the hill and down to McLeods one of the best walks around then go to the shop for a coffee Katrina Casey, Aubrey Ian, Sally Dhue...we were here on weekend. Will take you when you fly over. X Lifetime Total Likes for the Whangarei Love It Here! Facebook page as at September 30 th totalled 7, Whangarei Visitor Guide The Whangarei Visitor Guide has been refreshed and will be available for display and distribution before Labour Weekend. The Whangarei Visitor Guide is the Official Guide that focuses on Whangarei s accommodation, activities and attractions. It is a key influencer in bringing visitors to Whangarei and has a significant impact on spend decisions once they are here where to go, where to stay, what to do, what to see. 15/85932 October

122 188 Approximately 45,000 copies of the Guide are produced each year, and are on display at Whangarei Information Centres, other Northland and key Auckland Information Centres including Auckland International Airport, Sky City and Quay Street, as well as other key sites throughout Whangarei and Northland. The Guide generated $35,350 of advertising revenue from tourism operators this year, which pays for design, print and advertising sales through Big Fish Media, so is cost neutral to WDC. Claphams National Clock Museum Visitor Numbers Updated Stats to end of September is showing Year End door count up 15%, Month End museum admission is up 15% and Total Revenue up 9%. Our view is that the Museum is benefiting from investment and development in the Town Basin and the Hatea Loop walkway. We are receiving lots of positive feedback from our visitors. Claphams Clocks Auckland 11% Northland 13% Rest of NZ 12% Whangarei 16% Australia 10% Asia other 11% UK 6% China 7% USA/Canada 7% Germany 3% Europe 4% Te Papa visit The National Museum Services Division of Te Papa were invited to lend a hand via their expert knowledge programme where the museum was assessed over for two days during September, with a follow-up report provided providing recommendations in key areas; humidity control, lighting collection storage and management. We also hosted a visit by Chris Currie the original designer for Claphams Museum and more recently developer of the new Mangawhai Museum, to advise us and report back on potential changes to Claphams to improve the efficiency and relevancy of our layout and displays. Information gathered from these two reports will be integrated into a new 5-year development plan to ensure we are keeping the visitor experience, the collection and its interpretation up to date. The Wilkinson Collection A private collection of 140 clocks has been offered to us by Auckland Council. We are waiting on final confirmation of the gifting and this will potentially be a great asset to the museum. 15/85932 October

123 189 Whangarei Information Centres A comparatively quieter month at the i-site, but overall year-end trends are still showing increases for both visitors and revenue. Large increases showing in visitor numbers to The Hub, with refurbishment of the Town Basin public toilets seeing higher usage of the toilets into the centre; also more bus passengers due to the increased use of the budget passenger service Naked/Mana bus which uses The Hub as their Whangarei stop. ORIGIN OF VISITORS Northlan d 2% Other 2% Asia other 5% Rest of NZ 4% Whangar ei 13% Auckland 15% China 4% i-site Australia 23% Germany 13% Europe 9% UK 6% USA/Can ada 4% Northlan d 2% Rest of NZ 4% Auckland 8% Whangar ei 47% The HUB Australia 10% USA/Can UK ada 3% 1% Germany 13% Europe 6% Other 4% China 1% Asia other 1% i-sites play a key role in unlocking visitor spending New research undertaken by Colmar Brunton for i-site New Zealand released in September has highlighted the key role i-site visitor centres play in unlocking visitor spending in New Zealand s lucrative tourism sector. The Economic Impact Analysis of the i-site Network report shows that i-sites improve visitor experiences, which in turn increases local spending and generates local benefits The Report also showed that for every $1 provided in funding, the network returns on average $8.70 in GDP and also shows the network processes $73.6m of sales. The largest volume (40 per cent) being in accommodation, at $29.8m, followed by activities at $24.8m (34 per cent), and travel at $19.1m (26 per cent). i-site New Zealand Conference Delegates from the 80 i-sites around New Zealand attended the 2015 Conference held in Whangarei 9-11 September. The conference was held at Forum North, and the venue was a great facility for accommodating the needs of the conference, sponsors displays, and associated workshops. Speakers attended from Tourism New Zealand (TNZ), the Tourism Industry Association of New Zealand (TIANZ), the New Zealand Maori Tourism Council, Qualmark and the Department of Conservation. Post conference feedback from the network delegates has been overwhelmingly positive on all aspects of Whangarei s role in hosting the conference. 15/85932 October

124 190 Whangarei i-site took the opportunity to host a range of pre and post-conference familiarisation visits (also known as famils ) to show these influential front-line staff the attractions and activities available on offer in Whangarei District. The feedback from these familiarisation opportunities has been overwhelmingly positive, with delegates commenting they had no idea of the beauty and attractions in the Whangarei district. To follow, are comments from the i-site Conference Feedback survey From the first time we registered Cheryl Lee and her team were amazing. They really were appreciative to all delegates who arrived, such a great welcome. The welcome dinner was spectacular, outstanding!!! C NZ National Hockey League The i-site provided an Information Desk and Consultant at the recent National Hockey League Tournament held in Whangarei. This service was very well received by those involved with the tournament, helping these visitors make the most of their stay in Whangarei doing more, spending more, and with the hope of a longer stay next visit. Hockey Northland s hosting of the tournament was so successful they have been awarded the hosting rights next year also. This is a big win for economic gain in our community. Thanks from Hockey Northland The i-site personnel were a huge success having them present at Hockey and gave our visitors that personal touch of an excellent service. Lots of comments from our visitors and visiting teams. Black Sticks team members enjoying Whangarei 15/85932 October