for an offer of secured bonds issued by auckland council · pdf filefor an offer of secured...

Investment StatementFor an offer of secured bonds issued by Auckland Council5 March 2014

Investment Statement 2014 | 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? p18

Who is involved in providing it for me? p19

How much do I pay? p20

What are the charges? p21

What returns will I get? p21

What are my risks? p23

Can the investment be altered? p27

How do I cash in my investment? p28

Who do I contact with enquiries about my investment? p30

Is there anyone to whom I can complain if I have problems with the investment? p30

What other information can I obtain about this investment? 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 http://www.fma.govt.nz

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: www.business.govt.nz/fsp

You can also complain to the Financial Markets Authority if you have concerns about the behaviour of a financial adviser.

This is an important document

This Investment Statement is an important document and should be read in its entirety.

If you have any questions about any part of this document, please contact Auckland Council or your financial or legal adviser.

This Investment Statement is prepared for the purposes of the Securities Act 1978 as at 5 March 2014. 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.

Contents

Important notice p5

Offer highlights p6

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

Section Page


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 32-34. 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.

Important noticeThe 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.

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Issuer: Auckland Council.

Description: The Bonds will be our direct, secured and unsubordinated debt obligations.

Types of Bonds: 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.

Security: 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 25-27 of this Investment Statement.

None of our other assets are charged under the Debenture, or are able to be resorted to under the Debenture.

Credit rating: 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: www.standardandpoors.com and Moody’s credit ratings is available at: www.moodys.com

Issue Amount: 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.

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.

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.

Offer highlights

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Interest Payment Dates:

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.

Minimum subscription:

$5,000 is the minimum Principal Amount of Bonds that may be subscribed for and thereafter in multiples of $1,000.

Interest on Subscriptions:

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.

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 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 1988.

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 refinancing and capital expenditure.

Further Indebtedness: 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.

How to apply: Instructions on how to apply for the Bonds are contained on page 20 under the heading “How much do I pay?”

Offer highlights


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 2009. 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 2022.

Our LTP 2012-2022 can be found at: www.aucklandcouncil.govt.nz/Longtermplan

Auckland Council’s profile

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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 2014. The Annual Plan 2013/2014 can be found at: www.aucklandcouncil.govt.nz/annualplan 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.




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.

Built and natural environment

We aim to protect and enhance Auckland’s natural

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 2012.

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.

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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 2010. 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).




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 25-27.

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 non-residential, 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 non-residential 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 2013. 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.

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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 2009. 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 25-27 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


Issue Date


Maturity Date


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.


Credit rating

We, Auckland Council, have a Standard & Poor’s long-term 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: www.standardandpoors.com and Moody’s ratings is available at: www.moodys.com

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, 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 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.


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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 1988.

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?”.



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).

New Zealand taxation

Resident withholding tax (RWT) will be deducted from interest payments to New Zealand residents (or non-residents 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 22-23.

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.


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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 25-27 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: www.business.govt.nz/companies

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.



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 1988.

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 2009. We can be contacted at:

Auckland Council 1 Greys AvenueAuckland

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: www.aucklandcouncil.govt.nz

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 WalkerAlf FilipainaArthur AnaeBill CashmoreCalum PenroseCameron BrewerChris DarbyDenise KrumDick QuaxDr Cathy Casey

George WoodHon Christine FletcherJohn WatsonLinda CooperMike LeePenny WebsterRoss ClowSharon StewartWayne 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: www.aucklandcouncil.govt.nz/EN/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 9-13.

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Trustee and Security Trustee

The Trustee and the Security Trustee in respect of the Bonds is Trustees Executors Limited. Its address for contact is:

Trustees Executors Limited Level 12 45 Queen Street Auckland

The address of the Trustee and the Security Trustee is current as at the date of this Investment Statement, but is subject to change. The current address of the Trustee and the Security Trustee may be obtained from its website at: www.trustees.co.nz

The Trustee is licensed by the Financial Markets Authority. Its current licence includes acting as a trustee in respect of debt securities. This licence was granted on 17 September 2012 and expires on 16 January 2018 and is subject to certain conditions. A full list of the conditions imposed on the Trustee’s licence by the Financial Markets Authority can be viewed at: www.fma.govt.nz/help-me-comply/trustees/licensed-trustees-and-statutory-supervisors/

Registrar

The Registrar in respect of the Bonds is Computershare Investor Services Limited. The Registrar can be contacted at:

Postal address:Computershare Investor Services LimitedPrivate Bag 92119 Auckland 1142

Physical address:Computershare Investor Services LimitedLevel 2 159 Hurstmere Road Takapuna Auckland

The addresses of the Registrar are current as at the date of this Investment Statement, but are subject to change. The current addresses of the Registrar may be obtained from its website at: www.computershare.co.nz

How much do I pay?

The Issue Price for the Bonds will be specified in the Series Notice and applications must be for a minimum Principal Amount of $5,000 and thereafter in multiples of $1,000. No other amounts are payable.

Applications must be made on the application form contained at the back of this Investment Statement in accordance with the instructions on that application form. Applications must be accompanied by payment in full.

Applicants who are members of the NZClear system, or who are able to have payments made on their behalf through the NZClear system, may by prior arrangement settle their application for Bonds on the Issue Date through the NZClear system.

Unless otherwise specified in the Series Notice for the Bonds, applicants who are not members of the NZClear system must pay for the Bonds applied for by a personal cheque (or, if the application is for Bonds of an aggregate Principal Amount of $500,000 or more, by bank cheque), or other method acceptable to us.

All cheques must be in New Zealand dollars drawn on a New Zealand branch of a financial institution and submitted with a correctly completed application form. Cheques should be made payable to “Auckland Council Bond Offer” and crossed “Not Transferable” and must not be post-dated.

Cheques should be delivered or sent, together with the application form, as specified in the Series Notice for the Bonds.

All other applicants should settle in accordance with any other requirements set out in the Series Notice for the Bonds, or the requirements of the NZX Primary Market Participant or financial intermediary from whom an allocation was obtained.

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. Any application money received in respect of such an application, whether because of late receipt or otherwise, will be returned (without interest) to the applicant as soon as reasonably practicable and, in any event, within five Business Days after the Issue Date.

If we accept an application in part only, the balance of the application money will be refunded to the applicant within five Business Days after the Issue Date.

No interest is payable on money refunded.

Where your payment for Bonds is dishonoured, we may cancel any Bonds issued to you, and may pursue you for damages suffered by us.

There is no cooling off period in respect of the Bonds to allow you to cancel your application for Bonds or investment in the Bonds.

What are the charges?

You will pay no fees or charges to us to invest in the Bonds other than the Issue Price. However, a fee or commission may be charged by the financial intermediary through whom you receive an allocation of Bonds. We take no responsibility for the pricing actions of market participants, and any fee or commission is to be directly negotiated between you and the relevant market participant.

All fees and expenses payable to the Trustee, the Security Trustee or the Registrar in connection with the Offer are payable by us.

What returns will I get?

The information set out in this section should be read together with the information set out under the heading “What are my risks?” on page 23 of this Investment Statement. Certain events could reduce or eliminate the returns intended to be derived from the Bonds.

As at the date of this Investment Statement, it is not possible to quantify the exact amount of returns you will receive, and therefore no such amount can be promised

by us. We are legally liable to pay to you the returns on the Bonds.

The principal factors that will determine the returns to you are:

• the interest rate (where applicable) attaching to the Bonds;

• our financial position;

• your individual tax circumstances, as described below under the heading “New Zealand taxation”;

• if you choose to sell your Bonds prior to the Maturity Date, the effect of market interest rates and other factors on the price at which they may be sold; and

• other risk factors described under the heading “What are my risks?” on page 23 of this Investment Statement.

Interest Rate

Fixed Rate Bonds

Fixed Rate Bonds will bear interest on their respective Principal Amounts at the fixed Interest Rate as 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

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.

The Interest Rate on each Floating Rate Bond will be reset on each Interest Payment Date for that Bond.

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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 elapsed in the relevant Interest Period and on the basis of a 365 day year.

Interest Payments

We will pay interest on the Fixed Rate Bonds and Floating Rate Bonds as set out in the Series Notice for the Bonds on each Interest Payment Date for the Bonds specified in the Series Notice for the Bonds until and including the Maturity Date for the Bonds specified in the Series Notice for the Bonds, to the Bondholders as at the relevant Record Date.

The first Interest Payment Date for the Bonds 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. If an Interest Payment Date or the Maturity Date falls on a day that is not a Business Day, the due date for any payment to be made on that date will, subject to the Series Notice for the Bonds, be the next following Business Day (except, in the case of Floating Rate Bonds, if the following Business Day falls in the next calendar month in which case the due date for that payment will be the first preceding day which is a Business Day) without adjustment, interest or additional payment as a result thereof.

Principal Amount

The Principal Amount of the Bonds will be repaid by us on the Maturity Date specified in the Series Notice for the Bonds.

New Zealand taxation

The following commentary does not purport to be, or contain specific professional or legal advice, and does not constitute a full discussion of New Zealand tax issues. It is intended as a general guide only and is based on current legislation and likely New Zealand

Inland Revenue practice. Taxation laws are subject to change, and such changes may materially affect your tax position with respect to an investment in the Bonds. You should seek qualified, independent financial and taxation advice before deciding to invest. You will be personally responsible for all tax return filing obligations in respect of your investment in the Bonds, compliance with the financial arrangements rules (if applicable) and payment of provisional or terminal tax (if required) on interest derived.

We will deduct resident withholding tax (RWT), where appropriate, from all interest payments made or credited to you if you are a New Zealand tax resident or engaged in business in New Zealand through a fixed establishment in New Zealand (Resident Bondholders) at the rate required by law, but will not deduct RWT if you provide the Registrar with a current RWT exemption certificate issued under section 32H of the Tax Administration Act 1994 or any successor or predecessor legislation. You must notify the Registrar if a RWT exemption certificate provided to the Registrar is subsequently withdrawn. As at the date of this Investment Statement, the applicable RWT rates are as follows:

• Non-corporate Resident Bondholders that supply their IRD number to the Registrar may elect for RWT to be deducted at a rate of 17.5%, 30% or 33%.

• Non-corporate Resident Bondholders who have a reasonable expectation that their income for the income year will be $14,000 or less or receive interest as a trustee of certain testamentary trusts and who supply their IRD number to the Registrar, may elect for RWT to be deducted at a rate of 10.5%.

• Non-corporate Resident Bondholders who do not supply their IRD number to the Registrar or who do not make an election will have RWT deducted at a rate of 33%.

• Corporate Resident Bondholders that supply their IRD number to the Registrar may elect for RWT to be deducted at a rate of 28% or 33%.

• Corporate Resident Bondholders that supply their IRD number to the Registrar but who do not make an election will have RWT deducted at a rate of 28%.



• Corporate Resident Bondholders who do not supply their IRD number to the Registrar will have RWT deducted at a rate of 33%.

Inland Revenue may instruct us to apply a different rate than what you have advised. IR283 booklet is available on the Inland Revenue website to assist you if you are unsure of which rate to select.

http://www.ird.govt.nz/forms-guides/title/forms-r/ir283-guide-rwt-interest-payers-guide.html?id=righttabs

Subject to the two bullet points immediately below, interest payments made or credited to you if you are not a Resident Bondholder (Non-Resident Bondholders) (i.e. Bondholders who are not New Zealand tax resident and do not engage in business in New Zealand through a fixed establishment in New Zealand) will be subject to deduction of non-resident withholding tax (NRWT) at the rate required by law. However:

• if we are lawfully able, and elect, to do so, we will not deduct NRWT from interest payments made or credited to Non-Resident Bondholders and will instead deduct the cost of approved issuer levy (AIL) at the rate of 2% from such interest payments (provided that a Non-Resident Bondholder may instruct us in writing to deduct NRWT and not deduct AIL); or

• if we are lawfully able, and elect, to do so, we will not deduct NRWT or AIL from interest payments made or credited to Non-Resident Bondholders.

Neither us, the Trustee, the Registrar or any other person is obliged to gross-up or otherwise pay an additional amount to Bondholders as a consequence of the deduction of any withholding.

If we, the Trustee or the Registrar become liable to make any payment of, or on account of, tax payable by you, then we, the Trustee or the Registrar will be indemnified by you in respect of such liability.

If you are not the beneficial owner of the Bonds (e.g. you hold Bonds as a bare trustee or nominee for another person), you must notify the Registrar, as this may change the New Zealand withholding tax treatment of interest payments made to you.

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.

What are my risks?

The principal risk for you is that you may not be able to recover your original investment and returns on the Bonds described in the section “What returns will I get?” on page 21. The inability to recover your original investment and the returns could arise (among other reasons) because we are insolvent. You could receive none of or less than the returns mentioned above if we become insolvent for any reason. These factors and risks may also affect our ability to pay interest on or redeem the Bonds.

You will not, in any circumstances, be liable to pay any further amounts to us or any other person in respect of the Bonds.

Market risk

If you wish to sell Bonds, rather than hold them to maturity, the price at which you are able to sell may be less than the price you paid for them, because rising interest rates or other factors may make the Bonds less attractive to buyers. The market value of bonds issued at a substantial discount or premium to their principal amount tend to also fluctuate more in relation to general changes in interest rates than do prices for bonds issued at their Principal Amount. Generally, the longer the remaining term of the bonds, the greater the price volatility as compared to bonds issued under the same terms with a shorter remaining term.

The market for the Bonds may become illiquid or cease to exist, meaning you may be forced to hold your Bonds until the Maturity Date.

None of these risks will affect our obligation to repay the full Principal Amount on the Maturity Date.


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Credit risk

We rely on the Auckland economy for revenue and the properties within the Auckland region for our rating revenue. The revenue to be obtained from those sources is dependant upon economic factors affecting general trading circumstances (e.g. local or global recessions), property values within the Auckland region, regulatory risk (e.g. government regulation), changes to taxation regimes and financial markets (e.g. rising interest rates) and specific natural disasters. Our creditworthiness may decline due to circumstances beyond our control and for reasons that are not specific to us such as a recession in Auckland or New Zealand, a regulatory change or a judicial decision.

If our financial position or performance is worse than expected or our credit rating is downgraded, the future market price of a Bond may be less than the Issue Price paid for it. A change in the credit rating for the Bonds, or of the programme or of us, may occur at any time.

Economic factors

Future growth of the Auckland regional economy is subject to many factors beyond its control. A downturn in the general economic and business conditions in Auckland or New Zealand or globally could affect the ability of Auckland ratepayers to pay their rates.

We have granted security over our rates and rates revenue to secure our indebtedness under the Bonds. We have the statutory power to recover any previous year’s rates outstanding from persons with an interest in the property, including any first mortgagee. If necessary, we have the power to sell the land in order to recover the outstanding rates.

Government regulation

Our structure and powers are defined by statute and could be impacted by changes in those statutes. The legislation to which we are subject, including the LGA, the Local Government (Auckland Council) Act 2009 and the Local Government (Rating) Act 2002, could be the subject of further amendment. There may also be a number of orders in council, the implementation of which may affect us and our operations.

The Local Government Act 2002 Amendment Act 2012 recently came into force. This legislation allows regulations to be introduced to prescribe parameters or benchmarks for assessing whether a local authority (including its subsidiaries i.e. CCOs) is prudently managing its revenues, expenses, assets, liabilities, investments and general financial dealings. It is likely that a local authority’s debt levels will be prescribed under such regulations, and that a significant failure to comply with those regulations will provide for the Crown to intervene in the local authority’s affairs.

Natural disasters

A major catastrophe or natural disaster of significant magnitude (for example, earthquakes, volcanic activity or floods) could also materially adversely affect us. Such an event may affect our financial position and the ability of Auckland ratepayers to pay their rates.

Consequences of insolvency

You will not be liable to pay any further amounts to us or any other person in respect of the Bonds if we become insolvent.

Enforcement Events under the Trust Documents

The Bonds are constituted by the Trust Documents. The money payable in respect of the Bonds, including interest, is secured by the Debenture.

If an Event of Default occurs and is subsisting, the Trustee may in its discretion declare the Bonds to be immediately due and payable and is required to do so in accordance with an Extraordinary Resolution (Trust Deed). A declaration by the Trustee accelerating the moneys payable under the Bonds held by you means we are required to pay to you the Principal Amount outstanding in respect of those Bonds, together with accrued interest calculated on a daily basis from the last Interest Payment Date on which interest was paid. The Events of Default under the Trust Documents include the following events: • a failure to pay any Principal Amount of any Bond

within 2 business days (as defined in the Master Trust Deed) of its due date;



• a failure to pay any interest on the Bonds within 7 business days (as defined in the Master Trust Deed) of its due date;

• a failure to pay any other material amount due on any Bond within 30 days after demand in writing;

• any material breach by us of any other material covenant or condition contained in the Trust Documents and such breach is not remedied within 30 days of us receiving notice from the Trustee specifying the default and requiring it to be remedied;

• any breach of any representation or warranty in a material respect and, where such misrepresentation is capable of being remedied, such misrepresentation is not remedied within 30 days of us becoming aware of that misrepresentation;

• the security under the Debenture is enforced or becomes enforceable;

• we cease or threaten to cease to carry on all or substantially all of our activities, or an order is made for our dissolution (except where such order is followed by an amalgamation or a solvent reconstruction where all or substantially all of our operations are transferred to or vested in another entity);

• a receiver, or receiver and manager, is appointed of, or an encumbrancer takes possession of or exercises a power of sale in respect of, all or any material part of the Charged Assets, and we are unable to show to the Trustee’s satisfaction that such event will not have a material adverse effect on our ability to meet our payment obligations under the Trust Documents;

• a statutory manager is appointed, or a recommendation is made in that regard, under the Corporations (Investigation and Management) Act 1989;

• any material provision of the Trust Documents or other Transaction Documents (as defined in the Master Trust Deed) ceases to have effect or becomes void, voidable, illegal, invalid or unenforceable;

• the enactment of or any change in law or directive occurs which will have a material adverse effect on our ability to perform our payment obligations when due under the Trust Documents;

• we pass a resolution to repudiate our payment obligations under the Trust Documents and such would result in the occurrence of a payment default; or

• an event of default specified in the terms and conditions of the Bonds occurs.

Acceleration of repayment of the Bonds under the Trust Documents does not necessarily mean the security under the Debenture is enforced. Enforcement under the Debenture is subject to its terms.

Security over rates

The Bonds are secured by the charge created under the Debenture. The Debenture creates a charge over all our rates from time to time set or assessed and all our rates revenue and certain proceeds of such assets, being proceeds which constitute accounts receivable, negotiable instruments or cash (Charged Assets). The charge over the Charged Assets is first ranking except to the extent that other security is preferred by law.

The Debenture allows the Security Trustee to appoint a receiver where an Enforcement Event has occurred. Where a receiver has been appointed, that receiver is able to collect our rates and apply them in repayment of the Secured Money (the definition of which is set out in the glossary on pages 32-34) under the Debenture. You have had the benefit of the Debenture extended to you through the issue of security stock to the Trustee (which is held by the Trustee for the benefit of you and the other Bondholders) and as such, our indebtedness in respect of the Bonds forms part of the Secured Money.

From the date of appointment of a receiver until such time as the appointment terminates, our rates and rates revenue vest in the receiver and all power necessary for the recovery of the rates levied under section 115 of the LGA are conferred on, and may be exercised by, the receiver.

All rates made in respect of any land constitute a charge on the land (section 59 of the Rating Act 2002 (the Rating Act)). Although the owner (as recorded in the rates records) is primarily liable for the rates, we also have the statutory power to recover the rates outstanding from persons with an interest in the property, including any first mortgagee.


26

If necessary, we have the power to sell the land in order to recover the outstanding rates (section 70 of the Rating Act).

Only the Charged Assets are the subject of the charge under the Debenture. None of our other assets are charged under the Debenture and a receiver appointed under the Debenture has no recourse to any of our other assets.

The Debenture is available for inspection at our offices at Auckland Council, 1 Greys Avenue, Auckland and can be viewed on our website at: www.aucklandcouncil.govt.nz/EN/AboutCouncil/businessandeconomy/Pages/investorcentre.aspx

Enforcement under Debenture

The charge under the Debenture is held by the Security Trustee for the benefit of all persons to whom the benefit of the charge under the Debenture has been extended (Stockholders), which include you and the other Bondholders and our other secured creditors. All Stockholders rank equally with each other in respect of the Charged Assets.

Because the Stockholders include our other creditors (not just the Bondholders), in certain circumstances the Security Trustee may act in a way which is not in the best interests of the Bondholders or in accordance with the wishes of the Bondholders. In particular:

• the security is enforceable after grace periods (two business days (as defined in the Debenture) where principal has become due) pursuant to the Debenture;

• if an Enforcement Event occurs under the Debenture and is subsisting, the Security Trustee may in its discretion (among other things) declare all Secured Money to be immediately due and payable. The Security Trustee is required to make such a declaration if it is directed to by an Extraordinary Resolution (Debenture) of all Stockholders (not just the Bondholders). As there are other Stockholders, the Bondholders may not hold the required voting majority and therefore an Extraordinary Resolution (Debenture) might not be able to be passed without the cooperation of other Stockholders. Therefore, the Security Trustee may not have to act in accordance with the Trustee’s directions;

• alternatively, other Stockholders may be able to pass an Extraordinary Resolution (Debenture) against the wishes of the Trustee or Bondholders. If so, the Security Trustee may be directed to act in accordance with the other Stockholders’ instructions, notwithstanding that such instructions may be against the interests of the Bondholders;

• the Bonds do not include a cross-default or cross-acceleration event of default. While it will be an Event of Default if the Debenture becomes enforceable, it is possible that the Security Trustee may take steps to enforce the security under the Debenture even when there is no payment default in respect of the Bonds. Any enforcement action under the Debenture will be subject to the terms of the Debenture. The claims of Bondholders will rank equally with all other Stockholders in the event of enforcement action.

We may from time to time, without the consent of the Security Trustee, the Bondholders or the Trustee, incur further secured indebtedness that ranks equally with our obligations to the Bondholders. There is no restriction in the Debenture on the amount of debt for which we may provide security. Each NZ$1 of secured debt under the Debenture is entitled to one vote at a meeting of Stockholders, with the number of votes with respect to a debt issuance programme generally being equivalent to the New Zealand dollar equivalent of the programme limit. As at 31 January 2014, the aggregate nominal amount of Stock which has been issued and not cancelled by us under the Debenture is NZ$11,154,292,001, US$2,500,000,000 and AUD$1,000,000,000 (including in respect of debt issuance programmes, so all such debt has not been issued). If we incur further secured indebtedness in the future, the Trustee may find it more difficult to meet the Extraordinary Resolution (Debenture) requirements needed to instruct the Security Trustee.

The Security Trustee’s ability to take enforcement action under the Debenture is subject to the limitations, obligations and restrictions contained in the Debenture, including that an Enforcement Event (as summarised below) has occurred.




In summary, the Enforcement Events under the Debenture are:

• a failure to pay any principal amount in respect of any Stock (which includes security stock) issued under the Debenture within two business days (as defined in the Debenture) of its due date (or expiration of any applicable grace period);

• a failure to pay any interest on or secured by any Stock (which includes security stock) issued under the Debenture within seven business days (as defined in the Debenture) of its due date;

• a failure to pay any other material amount due and payable pursuant to the Debenture within 30 days after a final demand in writing has been made for that amount;

• a receiver, or receiver and manager, is appointed (or we request any such appointment), or an encumbrancer takes possession of or exercises a power of sale in respect of all or a material part of the Charged Assets unless we satisfy the Security Trustee that such event will not have a material adverse effect on our ability to repay the Secured Money when it is due and payable; or

• any material default (not otherwise referred to above) of any material covenant, condition or other provision contained in the Debenture is made by us and such default continues for more than 30 days after we receive written notice from the Security Trustee specifying the default and requiring it to be remedied.

If an Enforcement Event occurs under the Debenture and is subsisting, the Security Trustee may and shall, if directed by an Extraordinary Resolution (Debenture), take one or more of the following steps:

• subject to the conditions of any particular Stock, declare that the whole or any affected part of the Stock and Secured Money becomes immediately due and payable;

• enter into possession or take possession of all or any part of the Charged Assets;

• either with or without taking possession sell, call in, collect and convert into money all or any part of the Charged Assets in the manner and for the consideration the Security Trustee thinks fit;

• apply any of the Charged Assets that are accounts receivable, money or negotiable instruments (as those terms are defined in the Personal Property Securities Act 1999) in or towards the satisfaction of the Secured Money; or

• call a meeting of Stockholders to determine what action (if any) the Security Trustee should take.

Can the investment be altered?

The investment can only be altered by an amendment to the terms of the Bonds.

Terms of the Bonds which are contained in the Trust Documents may be amended:

• by agreement between the Trustee and us without the consent of the Bondholders if, in the opinion of the Trustee, the amendment is necessary or desirable:

o to correct a manifest error or omission, or it is of a minor, formal or technical nature;

o to facilitate the expedient issue of Bonds by Council;

o to facilitate the expedient issue of types of Bonds not specifically provided for in the Master Trust Deed;

o to comply with the Securities Act 1978 in relation to the issue of Bonds to which that Act may apply;

o to facilitate the listing or maintenance of listing of any Bond on any stock exchange;

o to facilitate the establishment and maintenance of more than one Register (as defined in the Master Trust Deed), and the appointment of more than one Registrar, in respect of the issuing of different types of Bonds;

o to facilitate the transfer of Bonds under a system authorised or approved under the Securities Transfer Act 1991 or a ‘designated settlement system’ (as defined in Part 5C of the Reserve Bank of New Zealand Act 1989); or

o to comply with, or as a result of the coming into effect of, any legislation, and where the amendment does not, nor is it likely to, in the reasonable opinion of the Trustee, adversely affect the interests of the Bondholders; and

28


• in all other cases, either by agreement between the Trustee and us without the consent of the Bondholders where the Trustee is of the opinion that the amendment does not, nor is it likely to, adversely affect the interests of the Bondholders, or with the consent of the Bondholders given by an Extraordinary Resolution (Trust Deed).

Amendments may only be made to the terms and conditions of issue of any Bonds (as distinct from the provisions of the Trust Documents) with the consent of all of the relevant Bondholders.

How do I cash in my investment?

Maturity Date

The Principal Amount of the Bonds will be repaid on the Maturity Date specified in the Series Notice for the Bonds. We do not have any right to repay the Bonds prior to the Maturity Date for the Bonds.

Selling or transferring Bonds

You are entitled to sell or transfer your Bonds at any time, subject to the terms of the Trust Documents and applicable securities laws and regulations. The price may differ from the price paid for the Bonds, and we do not guarantee that you will be able to find a buyer.

You should not attempt to sell or transfer any Bonds until you know whether, and how many, Bonds have been issued to you. Neither we or the Trustee, the Security Trustee, the Lead Manager, the Co-Manager, the Manager, the Registrar nor any of our or their respective officers or employees, nor any other person, accepts any liability or responsibility should any applicant for Bonds attempt to sell or transfer any Bonds before receiving a statement recording the number of Bonds (if any) allotted to them.

Bonds may be transferred by means of any commonly used transfer form, or in the case of any quoted Bonds, by means of the NZCDC Settlement System operated by New Zealand Clearing and Depository Corporation Limited. In the case of a sale or transfer of any quoted Bonds, the appropriate FIN (Authorisation Code) will

need to be supplied to the Primary Market Participant, along with the Common Shareholder Number (CSN) for the Bonds.

To be eligible to trade your Bonds you must have an account with a Primary Market Participant, a CSN and an Authorisation Code. If you do not have an account with a broker you should be aware that opening an account can take a number of days depending on the Primary Market Participant’s new client procedures. If you do not have a CSN you will be automatically assigned one. If you do not have an Authorisation Code, it is expected that you will be sent one as a separate communication by the Registrar. If you have a broker and have not received an Authorisation Code by the date you want to trade your Bonds, your broker can arrange to obtain your Authorisation Code from the Registrar. Your broker will be charged $20 for requesting your Authorisation Code from the Registrar and may pass this cost on to you.

Sales or transfers of Bonds must be conducted in multiples of $1,000, provided that the transferor is not left holding Bonds of the same Maturity Date with an aggregate Principal Amount of less than $5,000. In respect of quoted Bonds, we have a waiver from NZDX Listing Rule 11.1.1, to enable us to decline to accept or register a transfer of Bonds if such transfer would result in the transferor holding or continuing to hold Bonds of the same Maturity Date with a Principal Amount of less than $5,000 (or a multiple of $1,000 thereafter).

The effect of such a waiver from NZDX Listing Rule 11.1.1 is that the minimum holding amount in respect of Bonds of the same Maturity Date, after the initial subscription, will be Bonds with an aggregate principal amount of not less than $5,000 (or a multiple of $1,000 thereafter) and we may decline to accept or register a transfer that is not a multiple of $1,000.

You should direct any enquiries about buying or selling Bonds to a Primary Market Participant or your usual investment adviser. Brokerage at applicable rates is likely to be payable by a Bondholder on any transfer of the Bonds effected through such a person.



There is not currently an established market for the Bonds, although it is expected that there will be a secondary market for the Bonds. However, we give no assurances as to the existence or characteristics of such a secondary market.

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 1988.

We are not prohibited from purchasing Bonds, but this is not currently intended.

If you sell or transfer your Bonds, the purchaser will be legally liable to pay the purchase price of the Bonds to you. We are legally liable for payment of all other returns on the Bonds. The interest payable on and the Principal Amount payable in respect of the Bonds are promised to, and are enforceable by, the Bondholders. No other person promises or guarantees the return of the Principal Amount or interest or any other returns in respect of the Bonds.

Early repayment of Bonds

Unless the Bonds are declared due and payable by the Trustee after an Event of Default occurs, the Principal Amount of the Bonds will be repaid on the Maturity Date specified in the Series Notice for the Bonds. You have no right to require redemption of the Bonds prior to the Maturity Date, except in the case of an Event of Default and then this is only through the Trustee acting on the instructions of Bondholders under an Extraordinary Resolution (Trust Deed). Consequently, you have no right to cash in your investment in the Bonds, other than following an Event of Default or by selling your Bonds (should a market exist for those Bonds).

If an Event of Default occurs under the Trust Documents, the Trustee may (among other things) declare the Bonds immediately due and payable, and is required to do so if so directed by an Extraordinary Resolution (Trust Deed). (Such Events of Default are described under the section “What are my risks?” on page 23 of this Investment Statement).

The occurrence of an Event of Default will not necessarily mean the Debenture becomes enforceable. Enforcement of the Debenture is subject to its terms. If an Event of Default also constitutes an Enforcement Event under the Debenture, then the Security Trustee can be requested to take enforcement action under the Debenture. However, the Stock held for the Bondholders is not the only Stock issued under the Debenture, and this position is not likely to change.

The Security Trustee is only required to enforce the Debenture if directed to do so by an Extraordinary Resolution (Debenture). As there are other Stockholders under the Debenture, there is a risk that the Trustee’s vote (on behalf of the Bondholders) would not be required for an Extraordinary Resolution (Debenture) to be passed and, therefore, the Security Trustee under the Debenture would not have to act in accordance with the directions of the Trustee acting on behalf of the Bondholders. To the extent that the votes of other Stockholders constitute an Extraordinary Resolution (Debenture), the Security Trustee may be directed to act in accordance with their instructions, notwithstanding that acting in accordance with their instructions may be acting against the interests of the Bondholders.

Should the Security Trustee appoint under the Debenture a receiver under section 40A or section 40B of the Receiverships Act 1993, that receiver is only able to raise a special rate sufficient to meet our obligations to Bondholders (and in respect of other Stockholders) as if the Bonds (and such other secured indebtedness) had not been accelerated. That special rate is not able to be shared by our other creditors who do not have the benefit of the Debenture.

The Security Trustee’s ability to take enforcement action under the Debenture is subject to the limitations, obligations and restrictions contained in the Debenture.

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Who do I contact with enquiries about my investment? Enquiries about the Bonds can be made to:

The Registrar Computershare Investor Services Limited Level 2, 159 Hurstmere Road Takapuna AucklandPrivate Bag 92119 Auckland 1142

Email: [email protected] Telephone: 09 488 8777

or

The Issuer Auckland Council 1 Greys Avenue Auckland Attention: Funding Manager

Telephone: 09 357 1734

Is there anyone to whom I can complain if I have problems with the investment?

Any complaints about the Bonds can be made to:

The Issuer Auckland Council 1 Greys Avenue AucklandAttention: Funding ManagerTelephone: 09 357 1734

or

The Trustee Trustees Executors Limited Level 12, 45 Queen Street PO Box 4197, Shortland Street Auckland 1140 Attention: Business Manager, Corporate Trust Telephone: 09 308 7100

or

The Registrar Computershare Investor Services Limited Level 2, 159 Hurstmere Road Takapuna AucklandPrivate Bag 92119 Auckland 1142


There is no ombudsman to whom complaints can be made about the Bonds.

We are a member of the Financial Disputes Resolution Scheme (FDR Scheme). The FDR Scheme is operated by FairWay Resolution. If you cannot agree with us on how to resolve your issue, you can refer the matter to FairWay Resolution by directing the complaint to FairWay Resolution:

Level 9109 Featherston Street Wellington 6011

Telephone: 04 918 4900Fax: 04 918 4901

What other information can I obtain about this investment?

General Issuer documents

There are a number of documents that provide further information about our activities and finances. Included in these are our Most Recent Financial Statements (see glossary on pages 32-34). Our Most Recent Financial Statements are deemed to be incorporated by reference in this Investment Statement.

Our Most Recent Financial Statements can be downloaded free of charge from our website, which is: www.aucklandcouncil.govt.nz, or are available from us free of charge upon request.

Our latest credit rating report, the credit rating report for the programme and any credit rating report obtained for the Bonds is available from us free of charge upon request.



These documents are also available for inspection free of charge at our offices at 1 Greys Avenue, Auckland.

Bondholders can also obtain further information about us from our website, which is: www.aucklandcouncil.govt.nz

Annual report

Our most recent annual report (which includes our most recent annual audited consolidated financial statements) and most recent half yearly report (which will include our most recent half yearly unaudited consolidated financial statements) can be downloaded free of charge from our website, which is: www.aucklandcouncil.govt.nz or are available from us free of charge upon request.

Trust Documents

The Trust Documents contain information about the rights of Bondholders. They are available for inspection at our offices at 1 Greys Avenue, Auckland. Copies of the Trust Documents are also filed with the Registrar of Companies and can be viewed on the Companies Office website: www.business.govt.nz/companies

Debenture

The Debenture contains information about the security created over the Charged Assets and the manner in which that security becomes enforceable. It is available for inspection at our offices at 1 Greys Avenue, Auckland. A copy is also filed with the Registrar of Companies and can be viewed on the Companies Office website: www.business.govt.nz/companies

NZX waivers applicable to us

We have other bonds currently quoted with NZX on the NZDX and we are a party to a listing agreement with NZX.

We have the benefit of certain waivers granted from the NZDX Listing Rules relating to us generally. Waivers which relate to us generally and have on-going relevance have been obtained from Listing Rules 5.1.2(j), 2.2.2, 6.3.2 and 11.1.1.

Listing Rules 5.1.2(j) and 2.2.2 require the directors of an issuer to provide NZX with an acknowledgement that they will use their best endeavours to ensure compliance by us with the Listing Rules. NZX has granted us a waiver from Listing Rules 5.1.2(j) and 2.2.2 to allow two of our councillors, who have been approved by NZX, to provide the required acknowledgement rather than all of our councillors. NZX considered the waiver appropriate given the difference in the governance framework and application of the principle of collective responsibility applying to us.

We have also been granted waivers from NZDX Listing Rules 6.3.2 and 11.1.1. The waiver of Listing Rule 6.3.2 allows the substitution of the period for receipt of notice by Bondholders from ‘one business day’ in lieu of ‘24 hours’. Whereas, Listing Rule 11.1.1 enables us to decline to accept or register a transfer of Bonds if such transfer would result in the transferor holding or continuing to hold Bonds of the same Maturity Date with a Principal Amount of less than NZ$5,000 (or a multiple of NZ$1,000 thereafter). The effect of the waiver from Listing Rule 11.1.1 is that the minimum holding amount for Bonds will at all times be NZ$5,000 and that the Bonds can only be transferred in multiples of NZ$1,000.

NZX waivers applicable to an Offer of Bonds

Where an Offer of Bonds is quoted, we may, depending on the terms of the Bonds, need to obtain waivers from NZX from time to time. Where this is the case, details of the relevant waivers will be specified in the Series Notice for the Offer.


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Glossary

Term Definition

Auckland Council/Issuer/Us/We

Auckland Council, a territorial authority constituted under the Local Government (Auckland Council) Act 2009.

Base Rate As specified in the Series Notice for the Bonds.

Bonds The bonds to be issued by us pursuant to this Investment Statement and, where the context requires, means the Bonds of a Series under the relevant Trust Documents.

Bondholder/You A person for the time being who is a holder of Bonds and whose name is entered in the Register as the holder of Bonds, and includes their personal representatives and, in relation to a Bond lodged in NZClear, the person whose name is recorded in the records of NZClear as the person holding the beneficial interest of that Bond at that time.

Business Day A day upon which registered banks are open for general banking business in Auckland and Wellington, New Zealand and, in respect of a Bond quoted on the NZDX, a day which is also a ‘Business Day’ within the meaning of that term in the NZDX Listing Rules.

Charged Assets All rates from time to time set or assessed by us, all our rates revenue and certain proceeds of such assets, being proceeds which constitute accounts receivable, negotiable instruments or cash. (No other assets form part of the Charged Assets under the Debenture, or are able to be resorted to under the Debenture.)

Closing Date As specified in the Series Notice for the Bonds.

Co-Manager Where applicable, means the Co-Managers or Co-Manager named in the Series Notice for the Bonds.

Cross Currency Interest Rate Swap

Means an agreement between two counterparties to physically exchange currencies on a value date (the date a transaction takes effect from as opposed to the date the deal is agreed) and re-exchange the currencies (using an appropriate forward foreign exchange rate determined on the transaction date) on maturity. At pre-agreed times between the value date and maturity date respective currency interest rate payments are made and received between the parties.

Debenture Means the debenture trust deed dated 2 December 2010 between Auckland Council and the Security Trustee, as amended from time to time.

Enforcement Event Has the meaning given to that term in the Debenture, as summarised on page 27.

Event of Default Has the meaning given to that term in the Trust Documents, as summarised on pages 24-25.

Extraordinary Resolution (Debenture)

Means a resolution:

(a) passed at a duly convened meeting (including an adjourned meeting) of Stockholders by a majority consisting of not less than three-fourths of the persons voting thereat upon a show of hands or, if a poll is duly demanded, by a majority consisting of not less than three-fourths of the votes given on such poll; or

(b) in writing signed by at least three-fourths in number of the persons having the right to vote on that resolution, having in aggregate at least three-fourths in nominal amount of the Stock giving the right to vote at a meeting of Stockholders, provided that the person or persons promoting that resolution have given the Security Trustee, us and the Stockholders at least three business days’ (as defined in the Debenture) prior notice of the proposed resolution.


Glossary

Term Definition

Extraordinary Resolution (Trust Deed)

Means a resolution:

(a) passed at a meeting of Holders, properly convened, at which not less than three-fourths of the persons voting upon a show of hands or, if a poll is properly demanded, not less than three-fourths of the votes given on such a poll voted in favour of the resolution; or

(b) in writing signed by at least 75% of Holders having the right to vote on that resolution, having in aggregate at least 75% in Principal Amount of the Bonds giving the right to vote at a meeting of Holders, provided that the person or persons promoting that resolution have given the Security Trustee, us and all other Holders at least three business days’ (as defined in the Trust Documents) prior notice of the proposed resolution.

For the purposes of this definition, the following terms have the following meanings:

Bonds has the meaning given to it in the Master Trust Deed and includes the Bonds (as defined above) issued pursuant to this Investment Statement.

Holders has the meaning given to it in the Master Trust Deed and includes the Bondholders (as defined above).

Interest Payment Date As specified in the Series Notice for the Bonds.

Interest Period In relation to Bonds which are interest bearing, as specified in the Series Notice for the Bonds.

Interest Rate As specified in the Series Notice for the Bonds.

Issue Date As specified in the Series Notice for the Bonds.

Issue Price As specified in the Series Notice for the Bonds.

Lead Manager Where applicable, means the Lead Managers or Lead Manager named in the Series Notice for the Bonds.

Manager Where applicable, means the Managers or Manager named in the Series Notice for the Bonds.

Margin As specified in the Series Notice for the Bonds.

Master Trust Deed Means the master trust deed between Auckland Council and the Trustee dated 27 September 2012, as amended from time to time.

Maturity Date As specified in the Series Notice for the Bonds.

Moody’s Moody’s Investors Services Pty Limited.

Most Recent Financial Statements

Means the financial statements for Auckland Council referred to in the Series Notice for the Bonds, which:

(a) in the case of Bonds with an Issue Date no later than 9 months after the balance date (being 30 June of each year), will be its most recent audited financial statements, and audited consolidated financial statements (together, the Audited Accounts); and

(b) in the case of Bonds with an Issue Date which is more than 9 months after the balance date of the most recent Audited Accounts, will be its most recent interim unaudited financial statements (typically these would be half-yearly unaudited financial statements), and interim consolidated financial statements, that have been prepared in accordance with generally accepted accounting practice (within the meaning of section 5(1) of the Local Government Act 2002).

34

Glossary

Term Definition

NZClear The securities clearing and settlement facility maintained and operated by the Reserve Bank of New Zealand and known as the NZClear System.

NZDX The New Zealand debt market operated by NZX.

NZX NZX Limited.

Offer The offer of Bonds made in this Investment Statement.

Opening Date As specified in the Series Notice for the Bonds.

Organising Participant Where applicable, as specified in the Series Notice for the Bonds.

Primary Market Participant

Has the meaning given to it in the NZX Listing Rules.

Principal Amount Means $1.00 per Bond.

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.

Record Date Means, in relation to any applicable payment date, 6.00pm on the day which is 10 days prior to the relevant payment date or, if that day is not a Business Day, the preceding Business Day.

Registrar Computershare Investor Services Limited.

Secured Money Means the principal and interest payable on, or in respect of, the Stock and, to the extent that such is lawfully entered into by us, all other money owing or payable to or at the direction of the Security Trustee or any receiver or any Stockholder under the Debenture or the terms of issue of any Stock.

Security Stock Certificate Has the meaning given to it in the Debenture and in summary is a certificate issued under the Debenture evidencing the agreement of Auckland Council to extend the benefit of the Debenture to the Stockholder(s) in respect of the indebtedness described in that certificate and where such a certificate has not been issued includes a reference to a certificate that would otherwise have been issued.

Security Trustee Trustees Executors Limited.

Series Means a separate series of Bonds.

Series Notice Means, in respect of a Series of Bonds, the series notice for the Bonds forming part of this Investment Statement which specifies, amongst other things, the important dates, Interest Rate (where applicable) and ratings in respect of the Bonds.

Standard & Poor’s Standard & Poor’s (Australia) Pty Limited.

Stock Has the meaning given to it in the Debenture and includes Security Stock.

Stockholder A person to whom the benefit of the charge under the Debenture has been extended by virtue of a Security Stock Certificate or other Stock Certificate (as defined in the Debenture).

Supplemental Trust Deed Means the supplemental trust deed dated 27 September 2012 between Auckland Council and the Trustee relating to the Series of Bonds offered under this Investment Statement.

Trust Documents The Master Trust Deed and, in respect of a Series of Bonds, the relevant Supplemental Trust Deed relating to that Series of Bonds.

Trustee Trustees Executors Limited.


Auckland Council Secured Bonds Issue

Application Intructions

You should read this Investment Statement carefully before completing the application form. An application will constitute an irrevocable offer by you to subscribe for and acquire the Principal Amount of Bonds specified on the application form (or such lesser amount which Auckland Council may determine) on the terms and conditions set out in this Investment Statement, the relevant Series Notice, the Trust Documents and on the application form.

An application cannot be withdrawn or revoked once it has been submitted. 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.

Our decision on the aggregate Principal Amount of Bonds to be allotted to you and as to whether to accept or reject an application form, or to treat it as valid, will be final.

Applications to subscribe for Bonds must be made on the application form contained in this Investment Statement. Please complete all relevant sections of the application form using CAPITAL BLOCK LETTERS. We may accept any application form not correctly completed as being valid, and may correct errors and omissions, in our sole discretion.

A. Investor details

Insert your full name(s). Applications must be in the name(s) of natural persons, companies or other legal entities, up to a maximum of three names per application. See table below for joint applicants, only one address is to be entered.

Insert your postal address – all correspondence relating to your holding in the Bonds will be sent to you at this address. For joint applicants, only one address is to be entered.

Provide your telephone number so that Computershare Investor Services Limited or we can contact you in relation to your application should they need to.

Use the table below to see how to write your name correctly.

Type of investor Correct way Incorrect way

Individual person JOHN OLIVER SMITH J SMITH

More than one person JOHN OLIVER SMITHMICHELLE JANE SMITH

J & M SMITH

Company ABC LIMITED ABC

Trusts JOHN OLIVER SMITH(JOHN SMITH FAMILY TRUST A/C)

SMITH FAMILY TRUST

Partnerships JOHN OLIVER SMITHMICHAEL JOHN SMITH(JOHN SMITH AND SONS A/C)

JOHN SMITH & SONS

Clubs and unincorporated associations

JANE MICHELLE SMITH (SMITH INVESTMENT CLUB A/C)

SMITH INVESTMENT CLUB

Superannuation funds JOHN OLIVER SMITH(SUPERANNUATION FUND A/C)

JOHN SMITH SUPERANNUATION FUND

36

B. Application payment details and payment of future interest

Unless otherwise specified in the Series Notice for the Bonds, payment must be made in New Zealand dollars for immediate value by a personal cheque drawn on a New Zealand bank account (or, if the application is for Bonds of an aggregate subscription amount of $500,000 or more, by bank cheque), through the NZClear system (institutional investors only) or by prior arrangement.

Complete the amount of Bonds applied for. Each Bond has a Principal Amount of $1.00. Note the minimum Principal Amount of Bonds that you can apply for is $5,000 and minimum integral multiples are $1,000 as stated in the application form.

Option 1:

Personal cheques must be drawn on a New Zealand registered bank and must be made in New Zealand dollars. Cheques must be made payable to ‘Auckland Council Bond Offer’, crossed ‘Not Transferable’ and must not be post-dated as cheques will be banked on the day of receipt. If an applicant’s cheque is dishonoured, we may cancel your allotment of Bonds and pursue any other remedies available to us at law.

Option 2:

Applicants who are members of NZClear may, by prior arrangement, settle their applications for the Bonds on the Issue Date through the NZClear system, with the Lead Manager on the allotment date.

Future interest payments

All future interest payments will be made to the account specified on the application form. You must provide your bank account details so that we can direct credit your interest payments into your bank account.

C. Common shareholder number details

If you have other investments registered under a Common Shareholder Number (CSN) you must supply your CSN in the space provided. The name and address details on your application form must correspond with the registration details under that CSN. If you do not provide a CSN it will be deemed that you do not have a current CSN and a base registry number and FIN will be allocated to you at allotment of the Bonds.

D. Provide your IRD number and tick the relevant RWT box

Please supply your IRD number. Resident Withholding Tax (RWT) will be deducted from any interest paid to you (unless you provide a valid RWT exemption certificate). Tick the RWT box that applies to you. If you are exempt from RWT, please tick the exempt box and attach a copy of your RWT exemption certificate.

E. Electronic investor correspondence

By supplying your email address, we will be able to deliver your investor correspondence, including your transaction statements, to you electronically where possible. This is a much more environmentally friendly, cost effective and timely option than paper-based investor mail outs.

F. Signing and dating

Read this Investment Statement, the relevant Series Notice and the application form carefully and sign and date the application form.

The application form must be signed by you and each other applicant personally, or by two directors of a company (or one director if there is only one director, whose signature must be witnessed), or in either case by a duly authorised attorney or agent.

If the application form is signed by an attorney, a copy of the power of attorney document is required to be lodged with the Registrar and the attorney must complete the certificate of non-revocation of power of attorney on the reverse of the application form.

If the application form is signed by an agent, the agent must complete the certificate of agent on the reverse of the application form.

Joint applicants must each sign the application form.


G. Closing date and delivery

Application forms, together with cheques, must be mailed or delivered as specified in the Series Notice for the Bonds.

We may accept or reject any application without giving any reason. We will refuse to accept applications which are for less than the minimum amount.

Indemnity

The Investment Statement only constitutes an offer of Bonds to the public in New Zealand 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 to the public, 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 or sold in conformity with all applicable laws and regulations in any jurisdiction in which they are offered, sold or delivered.

You, or any other person, may not purchase, 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 applying for Bonds, you and each applicant indemnify us, each Lead Manager, each Co-Manager, each 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 as a result of the breach of the above selling restrictions.

Personal information rights

Personal information provided by you will be held by us and the Registrar at our respective addresses shown in the Directory or at such other place as is notified upon request. This information will be used for the purpose of managing your investment. You have a right to access and correct any personal information about you under the Privacy Act 1993.


Application formAuckland Council

This application form is issued with the Investment Statement prepared as at 5 March 2014, issued by Auckland Council. Before completing this application form, please carefully read the above Investment Statement and the Series Notice referred to below.

Please complete this application form and return it together with your cheque as specified in the Series Notice for the Bonds.

Series Notice no.: 0002 (Relevant Series Notice)

For instructions on how to complete and deliver this form see the accompanying application instructions.

A. Investor details – please print in block letters

First Name (s): Family Name:



Corporate Name or <<On Account>>:

Postal Address:

Telephone Mobile Telephone daytime

B. Application payment

Applications must be accompanied by payment in full and must be either by cheque or bank draft payable to ‘Auckland Council Bond Offer’ and crossed ‘Not Transferable’. Applications must be for a minimum Principal Amount of NZ$5,000 and, thereafter, in multiples of NZ$1,000. Auckland Council may accept or reject all or part of this application without giving any reason. The Principal Amount of Bonds applied for: NZ$

You may choose only ONE of the PAYMENT options below. Please tick the box next to your selected option ().

Option 1

Please find attached my payment by cheque or bank draft. I have supplied my bank account details below for the purpose of direct crediting of any future interest (if applicable) paid by Auckland Council.

Option 2

Payment will be made through NZClear as arranged with a Lead Manager (authorised institutional investors only).

NZClear Mnemonic:

Broker’s Stamp

Advisor Code

NEW ZEALAND DOLLAR BANK ACCOUNT DETAILS FOR DIRECT CREDIT OF FUTURE PAYMENTS:

Name of Bank:

Name of Account:

OR for the purpose of payments only: Direct credit to my Cash Management Account:

Name of NZX Member from where Cash Management Account is held:

Cash Management Client Account number:

C. Common Shareholder Number

If you currently have a Common Shareholder Number (CSN) or Computershare Holder Number, please enter it here:

Bank Branch Account No. Suffix

40

D. IRD number and Tax rate

IRD number (Only one IRD number is required in respect of joint applications):

Elected Resident Withholding Tax rate (select only one by ticking the appropriate box). Refer to the tax guidance notes on pages 22-23 of the Investment Statement.

10.5% 17.5% 28% (Corporate rate)

30% 33% Exempt*

*If you hold a RWT exemption certificate from IRD, please tick the box “exempt” and attach a copy of your exemption certificate for noting.

Country of tax residence:

Although not New Zealand tax resident, I am engaged in business in New Zealand through a fixed establishment (branch) in New Zealand.

E. Electronic correspondence and reporting

To enable Auckland Council to provide you with your investor correspondence electronically, please complete your email address below. If you do not provide an email address, investor correspondence will be sent to you at the address provided above.

Email:

F. Agreement of conditions

1. I / we have received, read and understood the Investment Statement and the Relevant Series Notice and make this offer to subscribe for Bonds in New Zealand.

2. I / we agree to be bound by the terms and conditions set out in the Trust Documents, the Investment Statement, the Relevant Series Notice and this application form.

3. I / we agree to accept the Bonds applied for or such lesser amount as may be allocated by Auckland Council.

4. I / we agree this application form was distributed with the Investment Statement together with the Relevant Series Notice.

5. I / we acknowledge that I / we am / are not in a jurisdiction which prohibits the making of this offer to subscribe for Bonds and that I / we am / are not acting for a person in such a jurisdiction.

6. All of the information that I / we have given on this form is true and correct.

7. I / we understand that, by completing this application form, I / we will be providing personal information (“this information”) about me / us, which will be held securely by Auckland Council. I / we have the right to access and correct this information subject to the provisions of the Privacy Act 1993.

8. In the case of joint Investors, the joint Investors agree that, only the address of the first named joint Investor will be recorded by the Registrar and all interest payments (where applicable), notices etc will be sent to the address of the first Investor.

G. Signature of Investor(s)

Signature (Investor 1) Authorised signatory signs here



Date Day/Month/Year

H. Certificate of non-revocation of power of attorney/agent

(Complete this section if you are acting on behalf of the applicant for whom you have a Power of Attorney / Agent)

Please select representative: Power of Attorney Agent

I, (Name of Attorney / Agent) of (Address and Occupation of Attorney / Agent) certify:

1. That as attorney / agent of under a deed / agreement dated of

I have been appointed his / her / the Company / Attorney / Agent.

2. That I have executed the application for Bonds on the face hereof as attorney / agent under the said power of attorney / deed / agreement and pursuant to the powers conferred on me.

3. That at the date hereof I have not received notice of revocation of that appointment by death or liquidation of the donor or otherwise.

Signed at this Day of Month and Year

Signature of attorney/agent


Application formAuckland Council

This application form is issued with the Investment Statement prepared as at 5 March 2014, issued by Auckland Council. Before completing this application form, please carefully read the above Investment Statement and the Series Notice referred to below.

Please complete this application form and return it together with your cheque as specified in the Series Notice for the Bonds.

Series Notice no.: 0002 (Relevant Series Notice)

For instructions on how to complete and deliver this form see the accompanying application instructions.

A. Investor details – please print in block letters




Corporate Name or <<On Account>>:

Postal Address:

Telephone Mobile Telephone daytime

B. Application payment

Applications must be accompanied by payment in full and must be either by cheque or bank draft payable to ‘Auckland Council Bond Offer’ and crossed ‘Not Transferable’. Applications must be for a minimum Principal Amount of NZ$5,000 and, thereafter, in multiples of NZ$1,000. Auckland Council may accept or reject all or part of this application without giving any reason. The Principal Amount of Bonds applied for: NZ$

You may choose only ONE of the PAYMENT options below. Please tick the box next to your selected option ().

Option 1

Please find attached my payment by cheque or bank draft. I have supplied my bank account details below for the purpose of direct crediting of any future interest (if applicable) paid by Auckland Council.

Option 2

Payment will be made through NZClear as arranged with a Lead Manager (authorised institutional investors only).

NZClear Mnemonic:

Broker’s Stamp

Advisor Code

NEW ZEALAND DOLLAR BANK ACCOUNT DETAILS FOR DIRECT CREDIT OF FUTURE PAYMENTS:

Name of Bank:

Name of Account:

OR for the purpose of payments only: Direct credit to my Cash Management Account:

Name of NZX Member from where Cash Management Account is held:

Cash Management Client Account number:

C. Common Shareholder Number

If you currently have a Common Shareholder Number (CSN) or Computershare Holder Number, please enter it here:

Bank Branch Account No. Suffix

42

D. IRD number and Tax rate

IRD number (Only one IRD number is required in respect of joint applications):

Elected Resident Withholding Tax rate (select only one by ticking the appropriate box). Refer to the tax guidance notes on pages 22-23 of the Investment Statement.

10.5% 17.5% 28% (Corporate rate)

30% 33% Exempt*

*If you hold a RWT exemption certificate from IRD, please tick the box “exempt” and attach a copy of your exemption certificate for noting.

Country of tax residence:

Although not New Zealand tax resident, I am engaged in business in New Zealand through a fixed establishment (branch) in New Zealand.

E. Electronic correspondence and reporting

To enable Auckland Council to provide you with your investor correspondence electronically, please complete your email address below. If you do not provide an email address, investor correspondence will be sent to you at the address provided above.

Email:

F. Agreement of conditions

1. I / we have received, read and understood the Investment Statement and the Relevant Series Notice and make this offer to subscribe for Bonds in New Zealand.

2. I / we agree to be bound by the terms and conditions set out in the Trust Documents, the Investment Statement, the Relevant Series Notice and this application form.

3. I / we agree to accept the Bonds applied for or such lesser amount as may be allocated by Auckland Council.

4. I / we agree this application form was distributed with the Investment Statement together with the Relevant Series Notice.

5. I / we acknowledge that I / we am / are not in a jurisdiction which prohibits the making of this offer to subscribe for Bonds and that I / we am / are not acting for a person in such a jurisdiction.

6. All of the information that I / we have given on this form is true and correct.

7. I / we understand that, by completing this application form, I / we will be providing personal information (“this information”) about me / us, which will be held securely by Auckland Council. I / we have the right to access and correct this information subject to the provisions of the Privacy Act 1993.

8. In the case of joint Investors, the joint Investors agree that, only the address of the first named joint Investor will be recorded by the Registrar and all interest payments (where applicable), notices etc will be sent to the address of the first Investor.

G. Signature of Investor(s)




Date Day/Month/Year

H. Certificate of non-revocation of power of attorney/agent

(Complete this section if you are acting on behalf of the applicant for whom you have a Power of Attorney / Agent)

Please select representative: Power of Attorney Agent

I, (Name of Attorney / Agent) of (Address and Occupation of Attorney / Agent) certify:

1. That as attorney / agent of under a deed / agreement dated of

I have been appointed his / her / the Company / Attorney / Agent.

2. That I have executed the application for Bonds on the face hereof as attorney / agent under the said power of attorney / deed / agreement and pursuant to the powers conferred on me.

3. That at the date hereof I have not received notice of revocation of that appointment by death or liquidation of the donor or otherwise.

Signed at this Day of Month and Year

Signature of attorney/agent


Directory

Issuer Auckland Council 1 Greys AvenueAuckland

Attention: Funding ManagerTelephone: 09 357 1734

Trustee Trustees Executors Limited Level 12, 45 Queen Street PO Box 4197 Shortland Street Auckland 1140


Registrar Computershare Investor Services Limited Level 2, 159 Hurstmere Road Takapuna Auckland Private Bag 92119 Auckland 1142


Managers of Bond Placements As specified in the Series Notice

Security Trustee Trustees Executors Limited Level 12, 45 Queen Street PO Box 4197 Shortland Street Auckland 1140


Auckland Council’s solicitors Simpson Grierson 88 Shortland Street Private Bag 92518 Auckland


Trustee and Security Trustee’s solicitorsMinter Ellison Rudd Watts 88 Shortland StreetPO Box 3798Auckland 1140


Find out more: visit www.aucklandcouncil.govt.nz