WAV/RULE: NZXR: NZX Market Supervision -ACC -Waiver Rules 10.4.1 and 10.5.1

30 Aug 2010 5:17 pm

NZXR 30/08/2010 WAV/RULE

REL: 1717 HRS NZX Regulation

WAV/RULE: NZXR: NZX Market Supervision -ACC -Waiver Rules 10.4.1 and 10.5.1

27 August 2010 NZX Market Supervision Decision Auckland City Council

Application for Waiver from NZDX Listing Rules 10.4.1(a) and 10.5.1

Background 1. Auckland City Council ("ACC") is a Listed Issuer ("Issuer"), with Bonds quoted on the NZDX Market. 2. From November 1 2010, the various Auckland territorial authorities, including ACC, will be reorganised and succeeded by the Auckland Council ("AC"), pursuant to the Local Government (Tamaki Makaurau Reorganisation) Act 2009 ("Reorganisation Act"), the Local Government (Auckland Council) Act 2009 and the Local Government (Auckland Transitional Provisions) Act 2010. 3. The succession related provisions of the Reorganisation Act will result in AC becoming the Listed entity and the Issuer of the Bonds. 4. The Reorganisation Act prescribes changes to the reporting framework for the various territorial authorities, including ACC, to enable the transition and consolidation of financial information for the existing councils, which will be succeeded by AC. As a result of this, the affected councils, including ACC, are not required to prepare an annual report for the year ended 30 June 2010, and are instead required to prepare a report in respect of the 16-month period ended 31 October 2010, to be adopted by AC. 5. Rule 10.4.1(a) requires an Issuer to make a preliminary announcement, before the release of an annual report, and in any event, within 60 days after the end of its financial year. 6. Rule 10.5.1 requires an Issuer to publish an annual report within three months of the end of each financial year. Application 7. ACC has approached NZX Market Supervision ("NZXMS") seeking a waiver from Rules 10.4.1(a) and 10.5.1, being the requirement to prepare and publish a preliminary announcement and an annual report, in respect of the year ended 30 June 2010, so as to allow it to provide that information for a 16 month period ending 31 October 2010, on or before 31 January 2011. 8. In support of its application ACC submits that: (a) The changes to the reporting timetable of ACC and AC are prescribed by statute; (b) ACC and AC are subject to extensive reporting obligations under the Local Government Act 2002 ("LGA"), which result in ACC and AC disclosing additional financial information to the market, including a Long Term Council Community Plan ("LTCCP") and an Annual Plan. The LTCCP is prepared every three years and contains information relating to the following ten year period and includes an in-depth description of the services and capital works ACC and/or AC proposes to undertake. The LTCCP is audited by the Auditor General. The Annual Plan identifies aspects of the LTCCP that require amendment and includes forecast financial statements and a funding impact statement, including references to the entities liability management policy (including interest rate exposure, liquidity, credit exposure, specific borrowing limits and security). This must be prepared in accordance with the principles and procedures that apply to the preparation of financial statements and funding impact statements in the LTCCP; (c) ACC and AC have low risk profiles compared to other Issuers; (d) ACC and AC will be subject to the continuous disclosure regime in Rule 10.1 and, subject to exceptions from that Rule, must immediately disclose all material information to the market; and (e) Subscribers of ACC's second bond issue ($350m) did so against the financial reporting framework described in this application. 9. For the reasons set out above, ACC considers it appropriate that the waivers be granted on the following conditions: (a) a certificate is provided to the market, not later than 30 September 2010 from ACC, signed by the General Manager of Finance of the City Council, certifying that, in his opinion, and after due enquiry: (i) all material financial information about ACC that is required to be disclosed to the market has been disclosed; and

(ii) ACC remains, and has continued to remain, in compliance with its continuous disclosure obligations under Rule 10.1.1.

(b) AC provides to the market a copy of its Annual Plan on, or before, 31 October 2010.

Rules 10. Rule 10.4.1(a) provides: Each Issuer shall make an announcement pursuant to Rule 10.4.2 through NZX for public release, in the manner prescribed by Rule 10.2 as soon as the Material Information is available, and in any event; (a) before the release of each annual report, and not later than 60 days after the end of the financial year to which that report relates; and 11. Rule 10.5.1 provides: Subject to Rule 10.5.2, each Issuer shall within three months of the end of each of the Issuer's financial years:

(a) Deliver to NZX electronically, in the format specified by NZX from time to time; and (b) Make available to each Quoted Security holder in accordance with Rule 10.5.3,

an annual report. That annual report shall be delivered to NZX before or at the same time as it is made available to Quoted Security holders in accordance with Rule 10.5.3, and shall contain all information:

(c) required by law;

(d) required in a preliminary announcement by Rule 10.4.2; and

(e) required by Rules 10.5.5 and 10.5.6.

The financial statements in that annual report shall be audited and shall be accompanied by an audit report in accordance with the requirements of the Financial Reporting Act 1993.

Decision 12. On the basis that the information provided to NZXMS is full and accurate in all material respects, NZXMS grants ACC the waiver sought from Rules 10.4.1(a) and 10.5.1 for the financial year ending 31 June 2010, subject to the following conditions: (a) AC provides to the market a copy of AC's Annual Plan on, or before, 31 October 2010;

(b) AC provides to the market a copy of AC's LTCCP, as soon as this is available;

(c) ACC provides to the market not later than 30 September 2010, a certificate signed by ACC's General Manager of Finance that, in his opinion, and after due enquiry: (i) all material financial information about ACC that is required to be disclosed to the market has been disclosed; and

(ii) ACC remains, and has continued to remain, in compliance with its continuous disclosure obligations under Rule 10.1.1.

(d) AC provides to the market on, or immediately prior to, 20 December 2010, a certificate signed by AC's General Manager of Finance that, in his opinion, and after due enquiry:

(i) all material financial information about AC that is required to be disclosed to the market has been disclosed; and

(ii) AC remains, and has continued to remain, in compliance with its continuous disclosure obligations under Rule 10.1.1.

(e) AC provides to the market the information required by Rule 10.5.1, in respect of ACC, for the 16 month period ending 31 October 2010, not later than 31 January 2011.

Reasons 13. In coming to this decision, NZXMS has considered the following matters: (a) Given the introduction of the various territorial authorities, and each of their respective business structures, ACC's historical accounts will be of little value to Bondholders following the reorganisation. Accordingly, the provision of historical accounts by ACC provides limited benefit to investors. (b) ACC and AC are subject to extensive reporting obligations under the LGA. Accordingly, there will be a high level of disclosure provided by AC's Annual Plan and LTCCP. As the forecast financial statements contain a description of the sources and means by which expenditure will be funded, they act as a control on AC's expenditure and a measure of the predictability, certainty and security of the Bonds and the ability of AC to make coupon and capital payments. The Auditor General must express an opinion on the quality of the forecasts contained in the LTCCP. (c) ACC, and subsequently AC, have a low risk profile compared to other Issuers, having the ability to leverage rate holders. Accordingly, AC's ability to meet its financial commitments in respect of Debt products is largely constant, and able to be forecast. Investors will have the benefit of the forecast information contained in the Annual Plan and LTCCP. (d) ACC is required by statute to report for a 16-month period ending 31 October 2010. This timeframe has been proposed to facilitate the introduction of AC and the extensive work required to combine the distinct reporting entities. It is appropriate that the reporting requirements of the Rules reflect this reporting structure in this instance.

ENDS. End CA:00199074 For:NZXR Type:WAV/RULE Time:2010-08-30:17:17:54

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