Investment Statement For an offer of secured bonds issued by Auckland Council. 5 March 2014

Transcription

1 Investment Statement For an offer of secured bonds issued by Auckland Council 5 March 2014

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3 Important information (The information in this section is required under the Securities Act 1978.) Investment decisions are very important. They often have long-term consequences. Read all documents carefully. Ask questions. Seek advice before committing yourself. Choosing an investment When deciding whether to invest, consider carefully the answers to the following questions that can be found on the pages noted below: What sort of investment is this? Who is involved in providing it for me? How much do I pay? What are the charges? What returns will I get? What are my risks? Can the investment be altered? How do I cash in my investment? Who do I contact with enquiries about my investment? Is there anyone to whom I can complain if I have problems with the investment? What other information can I obtain about this investment? p18 p19 p20 p21 p21 p23 p27 p28 p30 p30 p30 The Financial Markets Authority regulates conduct in financial markets The Financial Markets Authority regulates conduct in New Zealand s financial markets. The Financial Markets Authority s main objective is to promote and facilitate the development of fair, efficient, and transparent financial markets. For more information about investing, go to Financial advisers can help you make investment decisions Using a financial adviser cannot prevent you from losing money, but it should be able to help you make better investment decisions. Financial advisers are regulated by the Financial Markets Authority to varying levels, depending on the type of adviser and the nature of the services they provide. Some financial advisers are only allowed to provide advice on a limited range of products. When seeking or receiving financial advice, you should check: the type of adviser you are dealing with; the services the adviser can provide you with; and the products the adviser can advise you on. A financial adviser who provides you with personalised financial adviser services may be required to give you a disclosure statement covering these and other matters. You should ask your adviser about how he or she is paid and any conflicts of interest he or she may have. Financial advisers must have a complaints process in place and they, or the financial services provider they work for, must belong to a dispute resolution scheme if they provide services to retail clients. So if there is a dispute over an investment, you can ask someone independent to resolve it. Most financial advisers, or the financial services provider they work for, must also be registered on the financial service providers register. You can search for information about registered financial service providers at: You can also complain to the Financial Markets Authority if you have concerns about the behaviour of a financial adviser. Investment Statement

4 Contents Section Page This is an important document Important notice p5 This Investment Statement is an important document and should be read in its entirety. Offer highlights p6 If you have any questions about any part of this document, please contact Auckland Council or your financial or legal adviser. Auckland Council s profile p9 Summary of main terms of the offer p14 Answers to important questions p18 Glossary p34 Application form p39 Directory p43 This Investment Statement is prepared for the purposes of the Securities Act 1978 as at 5 March This Offer is made in reliance on the exemption contained in section 5(3A) of the Securities Act 1978 (the exemption inserted by the Securities (Local Authority Exemption) Amendment Act 2008) which permits a local authority to offer and issue debt securities with an investment statement and without a registered prospectus under the Securities Act 1978.

5 Important notice The purpose of this Investment Statement is to provide certain key information that is likely to assist a prudent but non-expert person to decide whether or not to subscribe for the Bonds. Offer only in New Zealand This Investment Statement only constitutes an offer of Bonds to New Zealand resident investors and to investors in other jurisdictions where the Bonds may be lawfully offered. No action has been or will be taken by us which would permit an offer of Bonds, or possession or distribution of any offering material, in any country or jurisdiction where action for that purpose is required (other than New Zealand). Bonds may only be offered for sale or sold in conformity with all applicable laws and regulations in any jurisdiction in which they are offered, sold or delivered. You may not, and no other person may, purchase, offer, sell, distribute or deliver Bonds, or have in your or its possession, publish, deliver or distribute to any person, any offering material or any documents in connection with the Bonds, in any jurisdiction other than in compliance with all applicable laws and regulations. By purchasing Bonds, you are deemed to have indemnified us, the Lead Manager, the Co-Manager, the Manager, the Organising Participant, the Trustee, the Security Trustee and the Registrar and each of our and their respective directors, officers and employees for any cost, loss or liability sustained or incurred by any of them by reason of any breach of the above selling restrictions. Non-reliance This Investment Statement does not constitute a recommendation by us, the Lead Manager, the Co- Manager, the Manager, the Organising Participant, the Trustee, the Security Trustee, the Registrar nor any of our or their respective directors, officers, employees or agents to subscribe for, or purchase, any of the Bonds. Neither we or the Lead Manager, the Co-Manager, the Manager, the Organising Participant, the Trustee, the Security Trustee, the Registrar nor any of our or their respective directors, officers, employees or agents accepts any liability whatsoever for any loss arising from this Investment Statement or its contents or otherwise arising in connection with the offer of Bonds. The Lead Manager, the Co-Manager, the Manager, the Organising Participant, the Trustee, the Security Trustee and the Registrar have not independently verified the information contained in this Investment Statement. In accepting delivery of this Investment Statement, you acknowledge that none of the Lead Manager, the Co-Manager, the Manager, the Organising Participant, the Trustee, the Security Trustee or the Registrar nor their respective officers, employees, agents or advisers gives any warranty or representation of accuracy or reliability and they take no responsibility for it. They have no liability for any errors or omissions (including for negligence) in this Investment Statement, and you waive all claims in that regard. This Investment Statement does not constitute specific advice to you or any particular recipient. You and each other recipient of this Investment Statement must decide whether investment in the Bonds is appropriate having regard to your or their own investment objectives, financial situation and particular needs. Tax You should obtain your own tax advice as the commentary contained in this Investment Statement is general in nature and may not apply to your individual circumstances. Definitions A number of terms used in this Investment Statement have defined meanings which appear in the glossary on pages Other capitalised terms have defined meanings given to them in the Trust Documents or within the relevant section of this Investment Statement in which the term is used. All references to $ are to New Zealand dollars unless specified otherwise. Investment Statement

6 Offer highlights Issuer: Description: Types of Bonds: Security: Credit rating: Issue Amount: Opening Date: Closing Date: Issue Date: Maturity Date: Auckland Council. The Bonds will be our direct, secured and unsubordinated debt obligations. One or more types of Bonds described in this Investment Statement may, at our discretion, be on offer at any time while this Investment Statement is current. The type(s) of Bonds on offer at any time will be referred to in the Series Notice for the Bonds. The type of the Bonds to be issued from time to time will, in each case, be determined by and at our discretion. Bonds may be issued at the Principal Amount or at a discount or premium to their Principal Amount, as specified in the Series Notice. Bonds may be issued without interest being payable in respect of them (Zero Coupon Bonds) and any reference in this Investment Statement to Bonds bearing interest excludes any Zero Coupon Bonds. The Bonds (excluding any Zero Coupon Bonds) will bear interest at either a fixed rate (Fixed Rate Bonds) or a floating rate (Floating Rate Bonds) as specified in the Series Notice for the Bonds. The Bonds are secured by a charge over all of our rates from time to time set or assessed by us and all of our rates revenue and certain proceeds of such assets, being proceeds which constitute accounts receivable, negotiable instruments or cash. A detailed description of the security over rates created by the Debenture and enforcement under the Debenture is set out in Answers to important questions on pages of this Investment Statement. None of our other assets are charged under the Debenture, or are able to be resorted to under the Debenture. We have a Standard & Poor s long-term credit rating of AA and a Moody s long-term credit rating of Aa2. The programme described in this Investment Statement has a Standard & Poor s credit rating of AA and a Moody s credit rating of Aa2. Standard & Poor s and/or Moody s will also assign ratings to the Bonds. These ratings will be specified in the Series Notice for the Bonds. A credit rating is not a recommendation to invest in the Bonds and may be subject to revision, suspension or withdrawal at any time. Any downward revision or withdrawal of a rating may have an adverse effect on the market price of the Bonds. Further information about Standard & Poor s credit ratings is available at: and Moody s credit ratings is available at: The aggregate Principal Amount for an offer of the Bonds will be set out in the Series Notice for the Bonds and where we have the ability to accept oversubscriptions this amount will also be specified in the Series Notice for the Bonds. As specified in the Series Notice for the Bonds. As specified in the Series Notice for the Bonds. As specified in the Series Notice for the Bonds. As specified in the Series Notice for the Bonds. 6

7 Offer highlights Issue Price: The issue price of each Bond will be specified in the Series Notice for the Bonds. Principal Amount: Each Bond will have a principal amount of $1.00. In the case of an indexed-linked Bond, the principal amount may be calculated by reference to an index, as specified in the Series Notice for those Bonds. As a result, the principal amount of such Bonds may increase or decrease. Interest Rate: Fixed Rate Bonds will bear interest on their respective Principal Amounts at the fixed interest rate specified in the Series Notice for the Bonds. Where the Fixed Rate Bonds are subject to a minimum interest rate, this will be specified in the Series Notice for the Bonds. We will pay you interest in arrears in equal quarterly, semi-annual, annual or other instalments as specified in the Series Notice for the Bonds on the Interest Payment Dates specified in the Series Notice for the Bonds. Floating Rate Bonds will bear interest on their respective Principal Amounts at a variable interest rate determined as the Base Rate plus or minus the Margin as specified in the Series Notice for the Bonds. Where the Floating Rate Bonds are subject to a minimum interest rate, this will be specified in the Series Notice for the Bonds. We will pay you interest on Floating Rate Bonds by reference to specified Interest Periods, being periods of one, two, three, four, five or six months duration, or such other duration, as specified in the Series Notice for the Bonds, in arrears on the Interest Payment Dates specified in the Series Notice for the Bonds. The interest rate on each Floating Rate Bond will be reset on each Interest Payment Date for that Bond. The Registrar will determine the interest rate for the Floating Rate Bonds and calculate the amount of interest payable by us on each Floating Rate Bond for the relevant Interest Period. Interest will be calculated on the Principal Amount of each Floating Rate Bond on the basis of the number of days in the relevant Interest Period and on the basis of a 365 day year. Accordingly, the interest rate for the Fixed Rate Bonds and Floating Rate Bonds is not known at the date of printing this Investment Statement. Margin: As specified in the Series Notice for the Bonds. Investment Statement

8 Offer highlights Interest Payment Dates: Minimum subscription: Interest on Subscriptions: NZDX Quotation: Use of proceeds: Further Indebtedness: How to apply: We will pay you interest on the Fixed Rate Bonds and the Floating Rate Bonds as specified, and on the dates specified, in the Series Notice for the Bonds. The first Interest Payment Date will be specified in the Series Notice for the Bonds. If the Interest Period ending on that first Interest Payment Date is not a full Interest Period, the interest payable on that first Interest Payment Date will be adjusted accordingly. We will pay interest on each Interest Payment Date to the Bondholders as at the Record Date immediately preceding the relevant Interest Payment Date. A more detailed description of how the interest rate for the Fixed Rate Bonds and Floating Rate Bonds is determined is set out under the heading What returns will I get? on page 21. $5,000 is the minimum Principal Amount of Bonds that may be subscribed for and thereafter in multiples of $1,000. Where interest is to be paid on accepted applications before the Issue Date this will be specified in the Series Notice for the Bonds. The applicable interest rate will also be specified in the Series Notice for the Bonds. Where interest is payable it will accrue on a daily basis and be calculated on the application money paid in respect of an accepted application from the date that money is paid into our bank account to (but excluding) the Issue Date. Interest will be paid (less any withholding tax or approved issuer levy required to be deducted) within 10 business days of the Issue Date. No interest will be paid on money refunded. Application may be made to NZX in the future to quote Bonds offered pursuant to this Investment Statement and each Series Notice. The Series Notice for the Bonds will detail whether any such application has been made in respect of the Bonds for that Series. We make no representation that any Bonds offered pursuant to this Investment Statement and the relevant Series Notice have been approved for trading, or are, or will be, tradable on any securities market. NZX accepts no responsibility for any statement in this Investment Statement. NZX is a registered exchange, and the NZDX is a registered market, under the Securities Markets Act The net proceeds from the issue of Bonds will be used for our general purposes which may include application towards our, and any council controlled organisation s, debt refinancing and capital expenditure. We reserve the right to make further borrowings or offers of debt securities in New Zealand and/or overseas, without the need for your consent (or the consent of any Bondholder), on such terms and conditions as we may from time to time determine, and while any Bonds remain owing. Instructions on how to apply for the Bonds are contained on page 20 under the heading How much do I pay? 8

9 Auckland Council s profile Overview Auckland Council is the local government authority for the Auckland region. We have responsibility for a wide range of activities, including regulatory functions such as the issuing of permits and consents for building activity within the Auckland region, and the enforcement of legislation, parking, licensing and the environment. We and our council controlled organisations (CCOs) provide infrastructure such as city streets and essential public services such as water supply, sewerage, refuse collections and street lighting. We also operate libraries and community facilities and provide and maintain parks and reserves and sports fields. Our reorganisation and constitution On 1 November 2010, the previous eight councils in the Auckland region amalgamated to form Auckland Council. The disestablished councils were Auckland City Council, Auckland Regional Council, Franklin District Council, Manukau City Council, North Shore City Council, Papakura District Council, Rodney District Council and Waitākere City Council. As a result of the reorganisation, the functions, duties and powers of the former councils became Auckland Council s functions, duties and powers. All property belonging to the former councils passed to us. All money payable to or by the former councils became payable to or by us, and all rights, liabilities, contracts, entitlements, and engagements of the disestablished councils became our rights, liabilities, contracts, entitlements, and engagements. There was one main exception to the reorganisation: the assets and liabilities of the Franklin District Council were divided between us, the Waikato District Council and the Hauraki District Council in accordance with our new geographic boundaries that were approved by the Local Government Commission. In addition, some of the functions of the Auckland Regional Council passed to Environment Waikato in line with these boundary changes. We are established under the Local Government (Auckland Council) Act 2009 and the amalgamation and dissolution process of the predecessor councils were effected under the Local Government (Tāmaki Makaurau Reorganisation) Act In addition to the Local Government (Auckland Council) Act 2009, we are also subject to the Local Government Act 1974 and the Local Government Act 2002 (LGA), which apply to all local authorities. Our plans We are required to consult publicly on important decisions, and to prepare a hierarchy of planning documents which include: the Auckland Plan (a 30-year vision and strategy for Auckland); the Long-term Plan (a 10-year plan and budget focusing on implementing objectives of the Auckland Plan); an Annual Plan (plan and budget for each year); and the Unitary Plan (our key tool to manage development on land and water to shape Auckland s built and natural environment). Long-term Plan Every three years, we must prepare a Long-term Plan (LTP) covering a 10-year period. This is a 10-year audited prospective document which describes the intended activities, services and projects that will be delivered over the 10-year period and outlines projected costs and funding. The current LTP is for the 10-year period from 1 July 2012 to 30 June Our LTP can be found at: Investment Statement

10 Auckland Council s profile Annual Plan The first year of the LTP is regarded as the Annual Plan for that year. For each of the other two years between LTPs, we are required to prepare a separate Annual Plan that describes our activities, services and projects for that year. The Annual Plan 2013/2014 is effective for the current financial year ending 30 June The Annual Plan 2013/2014 can be found at: We are currently in the process of drafting the Annual Plan for the 2014/2015 financial year. Our activities We deliver and report our business through 12 themes covering activities, services, projects and programmes along with a performance management framework and forecasted financial information. The themes are outlined below: Governance Elected members help represent the interests of the citizens of Auckland through our democratic process. As part of this new governance structure, CCOs have expanded in both size and importance. Twenty one local boards work to engage with their communities and organisations, making decisions on local matters, aiming to build strong local communities. Local boards provide local input to the governing body and CCO strategies, plans, policies and bylaws. Community Through our community activities, we aim to help build strong communities that take pride in their region and provide Aucklanders with a sense of belonging to their neighbourhoods. We provide cemeteries and crematoria, community services, emergency management services, and libraries. Our facilities and services provide a range of opportunities for all community groups and individuals to get involved in recreation, leisure, arts and cultural activities, heritage, and supporting community volunteers and groups. We provide community centres and halls, community houses, discount leases for community groups and we develop facilities in specific areas. Information, advice and support services help communities better meet their own needs and ensure that community organisations can continue to deliver the valuable services they currently provide. These include Citizens Advice Bureau, settlement support services, advice and funding to assist community organisations, and provision of community notice boards to inform people what is happening in their community. Keeping the city safe is another important way we work with communities. Programmes and initiatives such as camera surveillance and community health, or contributing to the on-going costs of recreation organisations such as Surf Life Saving Northern Region Incorporated, Coastguard Northern Regional Incorporated, Auckland Regional Rescue Helicopter Trust and Watersafe Auckland Incorporated. We provide residential housing for older persons who are eligible, supporting them to be active, healthy, safe and independent. Lifestyle and culture We are involved in coordinating a wide range of lifestyle and cultural activities to ensure Auckland is a dynamic, exciting and distinctive region in which to live, work and visit. We have two CCOs that operate lifestyle and culture activities. Regional Facilities Auckland Limited (RFA) manages and oversees key facilities with a focus on making better use and coordination of Auckland s major venues and attractions. Auckland Tourism Events and Economic Development Limited (ATEED) sponsors or attracts major events to Auckland and provides them with logistical and operational support for their duration. 10

11 Auckland Council s profile We provide programmes and facilities that attract visitors to the region and enhance the lifestyle and cultural choices for residents and visitors, including the Auckland Art Gallery Toi o Tāmaki, Auckland Zoo, museums, recreation facilities, and arts programmes and facilities. We also deliver a range of events, invest in facilities to attract world-class events to Auckland, and partner with other organisations to help deliver arts and recreation outcomes. We protect and enhance Auckland s natural environment and ecology through developing and maintaining its parks, and by preserving and protecting the region s natural features such as its volcanic landscape and the Hauraki Gulf islands. Economic development Our economic activities contribute to developing Auckland as an internationally competitive region in which to live, work, visit, invest and do business. ATEED plays a key role in delivering economic development activities and is responsible for attracting new business investment and retaining business investment in Auckland, providing advice and support to help businesses and industry sectors grow, and delivering programmes to foster entrepreneurship and innovation. Planning Planning occurs from high-level strategy of the Auckland Plan and the financial strategy laid out in the LTP, through to detailed planning for local areas and local issues. We are involved in a wide range of planning and regulation activities to protect and enhance Auckland s natural and built environment, as well as public health and safety, while also ensuring Auckland is an attractive and desirable city that can respond effectively to pressures from growth. environment and ecology with programmes for land and water, air quality, sustainability, natural heritage (biodiversity and biosecurity), cultural heritage, marine and coastal management, and urban design. We are committed to minimising adverse effects of development on the environment while also contributing to protecting Auckland s geological features and landscapes, historic buildings, and rural and cultural heritage. Solid waste We aim to make Auckland a clean, safe and beautiful place by providing high quality refuse collection and disposal. Through the waste minimisation plan, we will encourage residents and businesses to take responsibility for their waste, reducing the amount going to landfill. We provide all waste and recycling services to the Auckland region. This is complemented by a new solid waste bylaw introduced in Water supply and sewerage We provide safe, healthy drinking water and high-quality wastewater services through Watercare Services Limited, which is 100 per cent owned by Auckland Council. Safe drinking water, clean waterways and beaches are key measures of a region s liveability. Under the LGA, we are required to make broad assessments of the needs of our community for water, wastewater and sanitary services. The LGA also requires us to provide water services and maintain the capacity to provide those services. Built and natural environment We aim to protect and enhance Auckland s natural Investment Statement

12 Auckland Council s profile Stormwater We aim to ensure that people, property, and the environment are protected from the adverse effects of flooding, erosion, stream degradation, and water pollution. We manage and operate stormwater infrastructure (including treatment facilities) to minimise the impact of stormwater discharges on the region s streams, beaches, harbours and surrounding habitats. Transport Transport is one of Auckland s most significant issues and the transport network will continue to come under increasing pressure as the region s population grows. We aim to provide Auckland with a safe and efficient transport network to meet Auckland s transport needs by investing in significant new infrastructure and expanding the public transport network that will connect people and places with easy and affordable access to safe and sustainable transport choices. Auckland Transport Limited is a substantive CCO and carries out all transport functions and operations for Auckland, apart from development and management of the state highway network and railway tracks. Commercial and investment We ensure our commercial and investment activities are managed in a way that optimises financial returns while supporting the achievement of our broader strategies. We use three CCOs (Auckland Council Property Limited, Auckland Waterfront Development Agency Limited and Auckland Council Investments Limited) to assist in carrying out these activities. The activities are grouped under commercial and investment as they are generally operated on a commercial basis and aim to ensure an appropriate financial return, notwithstanding any public good objectives. Corporate support We are now the largest council in Australasia with over 8,000 staff, located in 17 local service centres across Auckland city, providing a wide range of support services for the community. Our sources of revenue Rates are the primary source of our revenue. However, we have various other sources of revenue from the provision of services (e.g. water and wastewater user charges and parking fees), contributions, consents and licensing fees, grants and capital subsidies, interest income, rental income and facility hire charges and dividend income from equity investments. Rates revenue The power of local authorities (including our power) to rate is found in the Local Government (Rating) Act 2002 (Rating Act) and, in our case, the Local Government (Auckland Transitional Provisions) Act The Rating Act allows a local authority to set and assess a general rate on each of the rateable properties in its district or region. Rates are principally assessed on a rateable property s rateable value, but there are also various powers to set and assess rates based on a variety of factors. Rates within the Auckland region are assessed on a differential basis according to the type or location of the property. All rates made in respect of any land constitute a charge on the land (section 59 of the Rating Act). Although the owner (as recorded in the rates records) is primarily liable for the rates, local authorities also have the statutory power to recover the rates outstanding from persons with an interest in the property, including any first mortgagee. If necessary, a local authority has the power to apply to the Registrar of the High Court to have a judgment for rates enforced by the sale or lease of the property (section 70 of the Rating Act). 12

13 Auckland Council s profile For the rating year commencing 1 July 2013, the Rating Act allows us to set and assess a general rate based on the property s rateable capital value on each of the rateable properties within our district. We use the powers under the Rating Act to set and assess uniform charges, and targeted rates in certain circumstances. Rates are also assessed on a differential basis according to the type, location or use of a property. We have created a charge over all of our rates and rates revenue and certain proceeds of such assets and you have the benefit of such security created by the Debenture. Further information regarding the security, the charged assets and the ability of creditors to enforce against us is set out in Answers to important questions on pages Litigation One of our functions is to grant building consents and to issue code compliance certificates, which certify that the relevant building is compliant with the building consent granted for that building. In the last decade, as a result of defective building products and construction methods, certain buildings in Auckland, both residential and nonresidential, have been issued with such certificates but have experienced issues, which have meant that those buildings have not been weathertight (for example, water penetration into walls resulting in timber rot). Where we have issued a code compliance certificate that has subsequently developed weathertightness issues, claims have been brought against us and other building parties. There is a limitation period in the Building Act for bringing building related claims. This is 10 years from the date of the issue of the code compliance certificate. This limitation applies to both residential and nonresidential buildings. To address weathertightness issues in the residential sector the New Zealand government established the Weathertight Homes Resolution Service (WHRS) as an alternative forum to resolve claims in a cost effective and expeditious manner. Claims however may still be brought in either the District Court or High Court. We are party to weathertight claims on residential buildings in the WHRS and also residential and non-residential claims that have been brought in either the District Court or High Court (active claims). We are also aware of claims that are pending and about to start in either forum but are not yet active (reported claims). We may also be liable for claims in future years relating to weathertightness building defects that are not yet identified (unreported claims). In respect of potential claims for both residential and non-residential buildings, we have made a provision in our financial accounts dated 30 June 2013 for NZ$361,000,000 for the likely costs to be incurred as a result of active, reported and unreported claims. Active claims are accrued based on the best estimate of what we expect to pay on a case-by-case basis. The costs for the reported and unreported claims are based on an actuarial valuation as at 30 June This provision includes both estimates of the repair costs as well as the estimated legal costs and other professional fee expenses. The provision has been discounted for the time value of money. The length of time that the weathertightness issue has now been prevalent, the historical data and trends available, and the use of an actuary to utilise this information to reach an estimated claims figure means the unreported claims can be estimated with sufficient reliability to include as a provision rather than as a contingent liability. Investment Statement

14 Summary of main terms of the offer For a more complete description of the Bonds, see the Answers to important questions section beginning on page 18. Issuer Auckland Council. We are the local government authority for the Auckland region and are duly constituted as a territorial authority under the Local Government (Auckland Council) Act A description of us is set out on pages 9-13 of this Investment Statement. Type of Bonds The Bonds will be our direct, secured and unsubordinated debt obligations. Bonds may be issued at the Principal Amount or at a discount or premium to their Principal Amount, as specified in the Series Notice. Bonds may be issued without interest being paid in respect of them (Zero Coupon Bonds) and any reference in this Investment Statement to Bonds bearing interest excludes any Zero Coupon Bonds. The Bonds (other than any Zero Coupon Bonds) will bear interest at either a fixed rate (Fixed Rate Bonds) or a floating rate (Floating Rate Bonds) as specified in the Series Notice for the Bonds. One or more types of Bonds described in this Investment Statement may, at our discretion, be on offer at any time during the currency of this Investment Statement. We will offer Bonds in separate Series. The Series Notice for each Series will specify: the type of Bonds on offer; the key features of the Series (such as the Opening Date, Closing Date, Issue Date, Maturity Date, Interest Rate, and Interest Payment Date); and whether the Bonds will be Fixed Rate Bonds, Floating Rate Bonds or Zero Coupon Bonds. We may offer one or more different Series of Bonds at any time, and we may also offer a Series of Bonds that has the same terms as a previous Series of Bonds. Each Series Notice for Bonds offered under this Investment Statement will supplement, and form part of, this Investment Statement. Status of Bonds The Bonds are secured by a charge over all of our rates from time to time set or assessed by us and all of our rates revenue and certain proceeds of such assets, being proceeds which constitute accounts receivable, negotiable instruments or cash. A detailed description of the security over rates created by the Debenture and enforcement under the Debenture is set out in pages of this Investment Statement. None of our other assets are charged under the Debenture, or are able to be resorted to under the Debenture. Opening Date As specified in the Series Notice for the Bonds. Closing Date As specified in the Series Notice for the Bonds. Issue Date As specified in the Series Notice for the Bonds. Maturity Date As specified in the Series Notice for the Bonds. 14

15 Summary of main terms of the offer Credit rating We, Auckland Council, have a Standard & Poor s longterm credit rating of AA and a Moody s long-term credit rating of Aa2. Issuers with a credit rating of AA are assessed by Standard & Poor s and Moody s as having a very strong ability to meet their financial commitments. A Standard & Poor s credit rating (including an AA credit rating) may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within this major credit rating category. Standard & Poor s has assigned a rating of AA, and Moody s has assigned a rating of Aa2, to the programme set out in this Investment Statement. Standard & Poor s and/or Moody s will also assign ratings to the Bonds. These ratings will be specified in the Series Notice for the Bonds. A credit rating is not a recommendation to invest in the Bonds and may be subject to revision, suspension or withdrawal at any time. Any downward revision or withdrawal of a rating may have an adverse effect on the market price of the Bonds. Further information about Standard & Poor s credit ratings is available at: and Moody s ratings is available at: No rating agency has been involved in the preparation of this Investment Statement. Currency New Zealand dollars. Aggregate Principal Amount We may from time to time offer for subscription Bonds pursuant to this Investment Statement up to a maximum aggregate outstanding Principal Amount of NZ$4,000,000,000. Interest Rate Fixed Rate Bonds will bear interest on their respective Principal Amounts at the fixed interest rate specified in the Series Notice for the Bonds. Where the Fixed Rate Bonds are subject to a minimum interest rate, this will be specified in the Series Notice for the Bonds. We will pay you interest in arrears in equal quarterly, semiannual, annual or other instalments as specified in the Series Notice for the Bonds on the Interest Payment Dates specified in the Series Notice for the Bonds. Floating Rate Bonds will bear interest on their respective Principal Amounts at a variable interest rate determined as the Base Rate plus or minus the Margin as specified in the Series Notice for the Bonds. Where the Floating Rate Bonds are subject to a minimum interest rate, this will be specified in the Series Notice for the Bonds. We will pay you interest on Floating Rate Bonds by reference to the specified Interest Period, being periods of one, two, three, four, five or six months duration, or such other duration, as specified in the Series Notice for the Bonds, in arrears on the Interest Payment Dates specified in the Series Notice for the Bonds. The interest rate on each Floating Rate Bond will be reset on each Interest Payment Date for that Bond. The Registrar will determine the interest rate for the Floating Rate Bonds and calculate the amount of interest payable on each Floating Rate Bond for the relevant Interest Period. Interest will be calculated on the Principal Amount of each Floating Rate Bond on the basis of the number of days in the relevant Interest Period and on the basis of a 365 day year. Accordingly, the interest rate for the Fixed Rate Bonds and the Floating Rate Bonds is not known at the date of printing this Investment Statement. Investment Statement

16 Summary of main terms of the offer Interest Payment Dates Interest on the Fixed Rate Bonds and Floating Rate Bonds will be payable as specified, and on the dates specified, in the Series Notice for the Bonds. The first Interest Payment Date will be specified in the Series Notice for the Bonds. We will pay interest on each Interest Payment Date to the Bondholders as at the Record Date immediately preceding the relevant Interest Payment Date. If the Interest Period ending on that first Interest Payment Date is not a full Interest Period, the interest payable on that first Interest Payment Date will be adjusted accordingly. A more detailed description of how the interest rate for the Fixed Rate Bonds and the Floating Rate Bonds is determined is set out under the heading What returns will I get? on page 21. Issue Price The issue price of each Bond will be specified in the Series Notice for the Bonds. Principal Amount The principal amount of each Bond is $1.00. In the case of an index-linked Bond, the principal amount may be calculated by reference to any index, as specified in the Series Notice for those Bonds. As a result, the principal amount of such Bonds may increase or decrease. Minimum subscription A Principal Amount of $5,000 and in multiples of $1,000 thereafter. Form of Bonds The Bonds will be entered onto the register maintained by the Registrar. No certificate of title for the Bonds will be issued to you, however, the Registrar may issue a certificate or notice of registration (which does not constitute a certificate of title). Title to the Bonds passes by transfer and registration. Both we and the Registrar will rely on the register for the purpose of determining entitlements to interest payments and for the repayment of the Principal Amount of the Bonds on maturity. Quotation Application may be made to NZX in the future to quote Bonds offered pursuant to this Investment Statement and each Series Notice. The Series Notice for the Bonds will confirm whether any such application has been made in respect of the Bonds for that Series. We make no representation that any Bonds offered pursuant to this Investment Statement and the relevant Series Notice have been approved for trading, or are, or will be, tradable on any securities market. NZX accepts no responsibility for any statement in this Investment Statement. NZX is a registered exchange, and NZDX is a registered market, under the Securities Markets Act Use of proceeds The net proceeds from the issue of Bonds will be used for our general purposes which may include application towards our, and any council controlled organisation s, debt retirement and capital expenditure. Who may apply for Bonds Bonds are offered to New Zealand resident investors and investors in other jurisdictions where the Bonds may be lawfully offered. Where Bonds are reserved for particular investors, or subject to specific pools for investors, this will be stated in the Series Notice for the Bonds. Instructions on how to apply for the Bonds are contained on page 20 of this Investment Statement under the heading How much do I pay?. 16

17 Summary of main terms of the offer Allocation policy If the value of applications received is greater than the value of Bonds available, Bonds will be allotted to applicants as determined by us, and where specified in the Series Notice, in consultation with the managers specified in the Series Notice. We reserve the right to refuse all or any part of an application without giving any reason. Refunds If we accept an application in part only, the balance of the application money will be refunded within five Business Days after the Issue Date. If we decline to accept an application, the application money will be refunded in full within five Business Days after the Issue Date. No interest will be paid on refunds (whether in whole or in part). Governing law New Zealand. No underwriting The Offer is not underwritten. No guarantee by the New Zealand Government The New Zealand Government does not guarantee any of our liabilities and so is not a guarantor of, or otherwise an obligor under, the Bonds. Payments by us of principal and interest with respect to our outstanding indebtedness, including the Bonds, are not supported by any guarantee by the New Zealand Government. The New Zealand Government is not obliged or legally required to provide any support in respect of the Bonds. New Zealand taxation Resident withholding tax (RWT) will be deducted from interest payments to New Zealand residents (or nonresidents carrying on business in New Zealand through a fixed establishment in New Zealand) who have not provided the Registrar with a valid RWT exemption certificate. We intend that the cost of the approved issuer levy (AIL) will be deducted from interest paid to Bondholders who are not resident in New Zealand for tax purposes (and do not carry on business in New Zealand through a fixed establishment in New Zealand), unless the Bondholder requests that non-resident withholding tax be deducted at the applicable rate instead. Further, if lawfully able, we may make the filings necessary for interest to be paid to such non-resident Bondholders without deduction of either non-resident withholding tax or approved issuer levy. A more detailed description of the applicable New Zealand taxes is set out under New Zealand taxation on pages Investment Statement

18 Answers to important questions What sort of investment is this? The Bonds The Bonds offered under this Investment Statement are debt securities. They constitute our direct, secured and unsubordinated debt obligations, ranking pari passu and without any preference among themselves. We will offer Bonds in separate Series. The Series Notice for each Series will specify: the type of Bonds on offer; the key features of the Series (such as the Opening Date, Closing Date, Issue Date, Maturity Date, Interest Rate, and Interest Payment Date); and whether the Bonds will be Fixed Rate Bonds, Floating Rate Bonds or Zero Coupon Bonds. We may offer one or more different Series of Bonds at any time, and we may also offer a Series of Bonds that has the same terms as a previous Series of Bonds. Each Series Notice for Bonds offered under this Investment Statement will supplement, and form part of, this Investment Statement. Pursuant to the Debenture, the Bonds are secured by a charge over all of our rates and rates revenue, which is covered in more detail on pages of this Investment Statement. None of our other assets are charged under the Debenture, or are able to be resorted to under the Debenture. The Bonds will rank equally with all of our other indebtedness secured under the Debenture. As at 30 June 2013 (the date of Auckland Council s last audited financial statements as at the date of this Investment Statement), the amount of secured debt outstanding under the Debenture was $4,702,469,179. The aggregate face value of secured debt outstanding as at 31 January 2014 was $4,933,581,766. The face value of secured debt outstanding as at 31 January 2014 includes the New Zealand dollar equivalent of our borrowings in foreign currency namely: Australian dollars of $205,000,000, Swiss francs of $200,000,000 and Norwegian Krone of $1.4 billion. These foreign currency borrowings are hedged back into New Zealand dollars under cross currency interest rate swaps. We may from time to time, without the consent of the Trustee, the Security Trustee or Bondholders, incur further secured indebtedness that ranks equally with our obligations to Bondholders. There is no restriction on the amount of debt which we may raise or incur or the currency we raise the debt in. Trust Documents and Debenture The Bonds will be constituted by, and issued under, the Trust Documents. The Bonds have the benefit of, and are subject to, the provisions of the Trust Documents and the Debenture. Copies of the Trust Documents and the Debenture are available for inspection at our offices at 1 Greys Avenue, Auckland. Copies are also filed with the Registrar of Companies and can be viewed on the Companies Office website: Interest The Fixed Rate Bonds and Floating Rate Bonds pay interest at the Interest Rate. We will pay you interest on the Bonds as specified in the Series Notice for the Bonds in arrears on each Interest Payment Date (being those dates specified in the Series Notice for the Bonds) until and including the Maturity Date specified in the Series Notice for the Bonds. The first Interest Payment Date for the Bonds will be set out in the Series Notice for the Bonds. We will not pay interest on Zero Coupon Bonds. A more detailed description of the Interest Rate which applies to the Fixed Rate Bonds and the Floating Rate Bonds is set out under the heading What returns will I get? on page 21 of this Investment Statement. NZDX Quotation Application may be made to NZX in the future to quote Bonds offered pursuant to this Investment Statement and each Series Notice. The Series Notice for the Bonds will confirm whether any such application has been made in respect of the Bonds for that Series. We make no representation that any Bonds offered pursuant to this Investment Statement and the relevant Series Notice have been approved for trading, or are, or will be, tradable on any securities market. 18

19 Answers to important questions NZX accepts no responsibility for any statement in this Investment Statement. NZX is a registered exchange, and the NZDX is a registered market, under the Securities Markets Act Who is involved in providing it for me? Issuer The issuer of the Bonds is Auckland Council. We are duly constituted as a territorial authority under the Local Government (Auckland Council) Act We can be contacted at: Auckland Council 1 Greys Avenue Auckland The address of the Auckland Council is current as at the date of this Investment Statement, but is subject to change. The current address of the Auckland Council may be obtained from its website at: Names of Auckland Council s councillors The names of each of our councillors are set out below: Mayor His Worship the Mayor, Len Brown Deputy Mayor Penny Hulse Councillors Sir John Walker Alf Filipaina Arthur Anae Bill Cashmore Calum Penrose Cameron Brewer Chris Darby Denise Krum Dick Quax Dr Cathy Casey George Wood Hon Christine Fletcher John Watson Linda Cooper Mike Lee Penny Webster Ross Clow Sharon Stewart Wayne Walker The names of our councillors are current as at the date of this Investment Statement, but are subject to change from time to time. A current list of councillors may be accessed at: AboutCouncil/representativesbodies Our activities We are the local government authority for the Auckland region and, as such, are responsible for, and have a range of mandatory and discretionary functions relating to, the regulation, management and direction of the Auckland region. Our principal functions are: promoting and facilitating community well-being and development; ensuring environmental health and safety (including building control, civil defence, and environmental health matters); providing and managing infrastructure (such as roading and transport, and stormwater); promoting and facilitating recreation and culture; and resource management, including land use planning and development control. We were established on 1 November 2010 under the Local Government (Auckland Council) Act 2009 by the amalgamation of a number of smaller councils (Auckland City Council, Auckland Regional Council, Franklin District Council, Manukau City Council, North Shore City Council, Papakura District Council, Rodney District Council and Waitakere City Council). Further detail on the re-organisation can be found under Auckland Council s profile on pages Investment Statement