AN UPDATE May 2017 Important Information Developments : October - PowerPoint PPT Presentation

AN UPDATE May 2017

 Important Information  Developments : October 2015 to April 2017  LGFA Debt Market Activity update  LGFA Membership, Lending and Sector Update  Appendix and Contacts 2

IMPORTANT NOTICE • This presentation has been prepared by New Zealand Local Government Funding Agency Limited (“LGFA”) for general information p urposes only. By listening to the presentation, or reading the presentation materials, you acknowledge and agree to the contents of this disclaimer. • To the maximum extent permitted by law, neither LGFA nor any of its affiliates, directors, officers, partners, employees or agents make any representation, recommendation or warranty, express or implied as to the accuracy, completeness or currency of any of the information in this presentation and accept no responsibility or liability therefore. Data are indicative and approximate only, and all information is subject to change. Some information may be taken from publicly available sources and has not been verified by LGFA. This presentation is intended as a snapshot view of LGFA only, and LGFA has no obligation, and does not undertake or accept any responsibility or obligation, to update, expand or correct anything in this presentation or inform you of any matter arising or coming to its notice, after the date of this presentation, which may affect any matter referred to in this presentation. • This presentation contains forward- looking statements including information regarding LGFA’s future bond issuances and forecast financial performance based on current information, estimates and forecasts. Those statements are subject to risks, uncertainties, and assumptions which are hard to predict or anticipate, and therefore actual outcomes and performance may differ materially from the statements. Any opinions expressed in this presentation reflect the judgement of LGFA as the date hereof, and do not bind LGFA. • This presentation is not a product disclosure statement, disclosure document or other offer document under New Zealand law or any other law. This presentation is not, and does not constitute financial advice. All reasonable care has been taken in relation to the preparation and collation of this presentation. Except for statutory liability which may not be excluded, no person, including LGFA or any person mentioned in this presentation accepts responsibility for any loss or damage howsoever occurring resulting from the use or reliance on this presentation by any person. Past performance is not indicative of future performance and no guarantee or future rights are implied or given. • Nothing in this presentation is an offer to sell, or solicitation of an offer to purchase, any securities. This presentation must not be relied upon by any person for making any investment decision and will not form part of any investment contract. The information provided in this presentation is not investment advice and does not take into account the investment objectives, financial situation or particular needs (including financial and taxation issues) of any particular investor. Any person considering in investing in LGFA securities must refer to any relevant offer documents and disclosures provided expressly in connection with those securities and should take their own independent financial and legal advice on their proposed investment. LGFA securities have not been and will not be registered under the United States Securities Act of 1933 ( U.S Securities Act ) or the securities laws of any state or other jurisdiction of the United States. LGFA securities may not be offered or sold, directly or indirectly, in the United States or to, or for the account or benefit of, any person in the United States except in transactions exempt from, or not subject to, the registration requirements of the U.S. Securities Act and any other applicable U.S. state securities laws. • This presentation is proprietary to LGFA and may not be copied, distributed, disclosed or used without LGFA's express written consent. • NZX Limited accepts no responsibility for any statement in this investor presentation. NZX Limited is a licensed market operator and the NZX Debt Market is a licensed market under the Financial Markets Conduct Act 2013. 3

 Important Information  Developments: October 2015 to April 2017  LGFA Debt Market Activity update  LGFA Membership, Lending and Sector Update  Appendix and Contacts 4

DEVELOPMENTS : OCTOBER 2015 to APRIL 2017  Commenced LGFA Bill issuance October 2015  LGFA Bonds listed on NZX Debt Market November 2015  Commenced short term lending to councils November 2015  Governance change – 2 new directors , one retirementNovember 2015  Transitioned to Financial Markets Conduct Act May 2016  Bond lending facility established October 2016  S&P and Fitch affirm LGFA ratings at AA+ November 2016  Private placements of LGFA Bills available January 2017  April 2033 bond issued April 2017  NZ$7.5 billion of loans outstanding to forty-nine councils as at 12 th April 2017  Lending book quality improved – four councils received credit rating or outlook upgrade  Eight new council members join taking total membership to fifty-three councils  South Wairarapa, Kaipara, Gore, Buller, Central Hawkes Bay, Waitomo District Councils and Canterbury, Northland Regional Councils  Bespoke lending increasingly popular – in excess of 32% of new loans  Support of councils boosts LGFA market share to 70% and 75% (excluding Auckland) 5

LGFA SPREADS TO NZGB AND SWAP (bps) Secondary market levels as at end of each month Average of all LGFA Bonds outstanding Source: LGFA 6

LGFA SPREADS TO NZGB (bps) Source: LGFA Secondary market levels as at end of each month 7

LGFA SPREADS TO SWAP (bps) Source: LGFA 8 Secondary market levels as at end of each month

FINANCIAL OUTCOMES 2015-16 FULL YEAR (12 months to June 2016) 2016-17 HY (6 months to Dec 2016 unaudited)  Net Interest Revenue $15.53m compared to budget $16.36m  Net Interest Revenue $8.51m compared to budget $8.20m  Expenses $5.98m compared to budget $5.94m  Expenses $3.2m compared to budget $3.1m  Net Operating Profit $9.55m compared to budget $10.42m  Net Operating Profit $5.31m compared to budget $5.07m  Bond Issuance $1.265b compared to budget $1.2b  Bond Issuance $0.595b compared to budget $0.6b  Net Interest Revenue unfavourable difference to budget of  Net Interest Revenue favourable difference to budget of $830k $314k  Lower interest rate impact on investment capital of $430k  Timing benefit from portfolio accruals  Amortisation differences of swaps with TMS transition of  Early repurchase of a December 2017 loan by a council $200k  A council “blend and extend” loan transaction of $200k  Expenses unfavourable difference to budget of $40k  Expenses unfavourable difference to budget of $74k  NZX listing fees  NZX listing fees higher due to listing of Treasury Stock  Legal costs with FMCA transition, NZX listing, 5 new council  AIL impact slightly positive members, LGFA bills and short term lending  AIL impact slightly positive 9

KEY CHANGES : 2016 vs 2015 STATEMENT OF INTENT Bond Issuance ($million)  No significant changes to qualitative 2016-17 2017-18 2018-19 performance targets or objectives 2016 SOI $1,000 $1,400 $1,300  Included short dated lending and LGFA Bills into 2015 SOI $1,270 $1,640 $1,000 forecasts -$270 -$240 $300  Conservative financial forecasts  Reduced Net Interest Income 2016/17 Net Interest Income ($million) and 2017/18 2016-17 2017-18 2018-19  Reduced Bond Issuance volumes 2016/17 2016 SOI $16.6 $17.5 $17.8 and 2017/18 2015 SOI $18.2 $18.9 $18.2  Lower interest rate forecast – impact on -$1.6 -$1.4 -$0.4 Liquid Asset Portfolio and investment of share capital Expenses -Opex + Issuance+ AIL ($million)  Expenses reduced through lower AIL and 2016-17 2017-18 2018-19 prior SOI expense budgets too high 2016 SOI $6.6 $6.6 $6.7 2015 SOI $6.8 $7.4 $8.0 -$0.2 -$0.8 -$1.3 10

 Important Information  Developments : October 2015 to April 2017  LGFA Debt Market Activity Update  LGFA bond programme  LGFA and NZGB curves  LGFA spreads to NZGB and swap  Primary and secondary market  Investor holdings analysis  NZX listing  LGFA bills  LGFA bond lending facility  LGFA Membership, Lending and Sector Update  Appendix and Contacts 11

NEW ZEALAND DOLLAR DOMESTIC BENCHMARK PROGRAMME – BONDS AND BILLS LGFA BONDS OUTSTANDING as at 10 April 2017 Average bond tender sizes – calendar years 2012: NZ$171 million 2013: NZ$189 million Amount on Date of initial 2014: NZ$187 million 2015: NZ$150 million Maturity Coupon Issue Issuance 2016: NZ$128 million 2017 ytd: NZ$168 million (NZ$ million) Average bond tender bid cover ratio : 3.3 times 15-Dec-2017 6.00% 1,015 15/02/2012 15-Mar-2019 5.00% 1,250 6/06/2012 LGFA TENDER BILLS OUTSTANDING as at 10 April 2017 Amount on Issue 15-Apr-2020 3.00% 735 13/08/2014 Maturity (NZ$ million) 12-April-2017 50 15-May-2021 6.00% 1,400 15/05/2013 17-May-2017 50 15-Apr-2023 5.50% 1,400 2/04/2014 14-June-2017 50 15-April-2025 2.75% 625 20/06/2016 12-July-2017 25 16-August-2017 25 15-April-2027 4.50% 950 16/03/2015 13-September-2017 25 14-April-2033 3.50% 125 10/04/2017 Bespoke maturities 125 Total 7,500 Total 350 The LGFA securities constitute unsecured debt obligations of LGFA Source: LGFA 12