State of Hawai i General Obligation Bonds of 2016 $525,000,000 - PowerPoint PPT Presentation

State of Hawai ‘ i General Obligation Bonds of 2016 $525,000,000 Competitive Sale ‐ New Money $325,550,000 Negotiated Sale ‐ Refunding Investor Presentation March 2016

Disclaimer This electronic Investor Presentation you are about to view is provided as of March 3, 2016 for two proposed offerings by the State of Hawai’i (the “State”) of its General Obligation Bonds of 2016 (“the 2016 Bonds”). If you are viewing this presentation after March 3, 2016, there may have been events that occurred subsequent to such date that would have a material adverse effect on the financial information that is presented herein, and neither the State nor Bank of America Merrill Lynch as Representative of the Underwriters on Series 2016 FD, FE & FF Bonds, has undertaken any obligation to update this electronic presentation. All market prices, financial presentation prices, data and other information provided herein are not warranted as to completeness or accuracy and are subject to change without notice. This Investor Presentation is provided for your information and convenience only. Any investment decisions regarding the Bonds should only be made after a careful review of the complete Preliminary Official Statement. By accessing this presentation, you agree not to duplicate, copy, download, screen capture, electronically store or record this Investor Presentation, nor to produce, publish or distribute this Investor Presentation in any form whatsoever. This Investor Presentation does not constitute a recommendation or an offer or solicitation for the purchase or sale of any security or other financial instrument, including the Bonds, or to adopt any investment strategy. Any offer or solicitation with respect to the Bonds will be made solely by means of the Preliminary Official Statements and Official Statements, which describe the actual terms of such Bonds. In no event shall the Underwriters or the Issuer be liable for any use by any party of, for any decision made or action taken by any party in reliance upon, or for any inaccuracies or errors in, or omissions from, the information contained herein and such information may not be relied upon by you in evaluating the merits of participating in any transaction mentioned herein. Neither the Issuer nor the Underwriters make any representations as to the legal, tax, credit or accounting treatment of any transactions mentioned herein, or any other effects such transactions may have on you and your affiliates or any other parties to such transactions and their respective affiliates. You should consult with your own advisors as to such matters and the consequences of the purchase and ownership of the Bonds. Nothing in these materials constitutes a commitment by the Issuer, Underwriters or any of their affiliates to enter into any transaction. No assurance can be given that any transaction mentioned herein could in fact be executed. Past performance is not indicative of future returns, which will vary. Transactions involving the Bonds may not be suitable for all investors. You should consult with your own advisors as to the suitability of the Bonds for your particular circumstances. Clients should contact their salesperson at, and execute transactions through, an entity of the Underwriters or other syndicate member entity qualified in their home jurisdiction unless governing law permits otherwise.

Presentation Participants David Ige Governor State of Hawai ʻ i Wesley Machida Director Hawai ʻ i Department of Budget and Finance Dr. Eugene Tian State Economist Hawai ʻ i Department of Business, Economic Development, and Tourism Randy Finken Managing Director FirstSouthwest, a Division of Hilltop Securities Inc., Financial Advisor (Competitive Sale) Frank Lauterbur Managing Director Bank of America Merrill Lynch, Lead Underwriter (Negotiated Sale) 1

Transaction Part 1: $525 million Competitive New Money on or about 3/15/2016* Issuer: State of Hawai ʻ i Offering: General Obligation Bonds of 2016 Estimated Par Amount: $525.000 million, consisting of the Series FB and FC Bonds* Financing Structure: All Fixed Rate Serial Bonds $500,000,000 Series FB: April 1, 2019 – 2036 $25,000,000 Series FC: April 1, 2017 – 2021 Tax Status: Series FB: Federal and State Tax ‐ Exempt Series FC: Federally Taxable and State Tax ‐ Exempt Security: Full Faith and Credit of the State of Hawai ʻ i Call Provisions: TBD Ratings (M/S/F): Moody’s: Aa2, Positive S&P: AA, Positive Fitch: AA, Stable Use of Proceeds: Series FB: New money bonds for general governmental use Series FC: New money bonds for private activity purposes Pricing: Series FB Competitive Sale: March 15, 2016 at 12:00 pm EDT/ 9:00 am PDT/ 6:00 am HST* Series FC Competitive Sale: March 15, 2016 at 1:00 pm EDT/ 10:00 am PDT/ 7:00 am HST* Closing: April 14, 2016* 2 * Preliminary, Subject to Change.

Transaction Part 2: $325 million Negotiated Refunding on or about 3/31/2016* Issuer: State of Hawai ʻ i Offering: General Obligation Refunding Bonds of 2016 Estimated Par Amount: $325.550 million, consisting of the Series FD, FE, and FF Bonds* Financing Structure: All Fixed Rate Serial Bonds $6,000,000 Series FD: June 1, 2016 $182,385,000 Series FE: October 1, 2019 – 2028 $137,165,000 Series FF: October 1, 2019 – 2028 Tax Status: Series FD & FE: Federal and State Tax ‐ Exempt Series FF: Federally Taxable and State Tax ‐ Exempt Security: Full Faith and Credit of the State of Hawai’i Call Provisions: 10 ‐ year Par Call* Ratings (M/S/F): Moody’s: Aa2, Positive S&P: AA, Positive Fitch: AA, Stable Use of Proceeds: Series FD, FE & FF: Refund outstanding G.O. bonds for savings Lead Co ‐ Senior Underwriter: Bank of America Merrill Lynch Co ‐ Senior Underwriter: Goldman Sachs Pricing: Retail Order Period: March 30, 2016* Institutional Order Period: March 31, 2016* Closing: April 14, 2016* 3 * Preliminary, Subject to Change.

Presentation Themes Proven Performance Economy Has Delivered Steady Performance for the Past 30 Years  Defense, tourism, and professional services provide an economic foundation whose strength is shown in Vibrant, Multi ‐ high wealth levels and unemployment rates that are consistently among the lowest in the U.S. for the past Faceted ten years Economy  Growth sectors are professional and business services, private health care and real estate  Tourism, while growing, now accounts for only 17% of total economic activity, as compared to 33% in 1988 Significant Reforms to Pension System  Measures enacted will significantly improve funding over time and strengthen and sustain the System Demonstrated  Reforms have and will result in reduced pension liabilities Commitment Commitment to Accelerated OPEB Funding to Managing and Funding  Act 268 establishes an OPEB funding requirement to pay 100% of the ARC by FY 2019, exceeding that of most other States Liabilities  General Fund Financial Plan incorporates accelerated payment of statutorily ‐ required contributions for OPEB to fund 100% of ARC by FY 2017 Replenishment of Reserves Allows for More Budget Stability Proactive  Hawai‘i Hurricane Relief Fund (HHRF) is recapitalized to $182.4 million as of FY 2016 and the Emergency Fiscal and Budget Reserve Fund (EBRF) will be increased to $108 million as of FY 2016 Management  General Fund Financial Plan includes additional deposits totaling $110 million to the EBRF through FY 2017 Supports  General fund balance plus reserve funds is equal to 16.7% of General Fund Revenues for FY 2015 Strong  5% of the State General Fund balance is required to be deposited into the EBRF if certain revenue and fund Performance balance thresholds are met 4

Introduction Updated Credit Metrics Since October 2015 GO Sale  Fell from 3.3% in August 2015 to 2.9% in December 2015 – the 6 th lowest in the U.S. Unemployment Rate  Hit record levels in 2015, with a 4.1% increase over 2014 Visitor Arrivals  Visitor arrivals are expected to increase by an additional 1.9% in 2016  Sector remains strong with home prices and building permits increasing Real Estate  Raised its growth rate for fiscal year 2016 from 6.0% to 6.7% in January and maintained its September 2015 Council on Revenues forecasts for fiscal years 2017 through 2021  Revised projections partly because payment (of about $29 million) for the online travel companies had been received with the remaining $10 million expected sometime later this fiscal year  As of January 2016, year ‐ to ‐ date collections are up 7.3% for FY 2016 (currently forecasted by COR at 6.7%)  Issued on December 31, 2015 with GASB 68 requirements and with no material change to results projected FY 2015 CAFR in October  Actuarial Funded Ratio increased from 61.4% in FY 2014 to 62.2% in FY 2015 FY 2015 ERS Actuarial Valuation Report  GASB 68 allocations for FY 2015 also are included in the report  Report reflects most recent contribution of $117.4 million made by the State in FY 2015, which includes an FY 2015 EUTF Actuarial Valuation Report additional $34.4 million above the required contribution under ACT 268  Per the updated 2015 Valuation Report, the State’s required contributions for FY 2017 and beyond will be reduced as a result of the pre ‐ funding that has already occurred  Submitted to the State Legislature in December 2015 – includes accelerated OPEB funding and additions to Governor’s Supplemental Budget State reserves 5