Trust Bank Eastern and Central Community Trust Inc. Trustee Banks Restructuring Act 1988 Consolidated Statement of Financial Performance for the Year Ended 31 March 1998 Note 1998$ 1997$ Income Income from investments2 27,091,478 9,641,256 Less expenditure Advertising and promotion 192,340 118,276 Audit fees Trust auditors 7,983 9,127 Other auditors 2,262 Depreciation 17,408 16,247 Rent and occupancy 43,026 11,180 Professional fees 67,231 68,122 Trustee expenses 35,396 31,073 Trustee fees 92,71752,057 Wages and salaries 108,781 73,812 Other expenses 61,963 61,626 Total expenditure 629,107 441,520 Profit on sale of investment in Trust Bank New Zealand Limited 26,065,537 Net income before community payments 26,462,371 35,265,273 Less community payments Standard donations 1,739,700 1,901,590 Special donations 3,002,079 1,817,196 Bursaries 262,000 264,000 Total community payments 5,003,779 3,982,786 Net surplus for the period $21,458,592 $31,282,487 (The notes to the financial statements form part of and are to be read in conjunction with the above accounts.) Consolidated Statement of Movements in Equity for the Year Ended 31 March 1998 1998$ 1997$ Equity at start of period109,248,202 77,965,715 Net surplus for the period21,458,592 31,282,487 Total recognised revenues and expenses21,458,592 31,282,487 Equity at the end of period$130,706,794 $109,248,202 (The notes to the financial statements form part of and are to be read in conjunction with the above accounts.) Consolidated Statement of Financial Position as at 31 March 1998 Note 1998$ 1997$ Assets Investments3 123,833,394 98,288,579 Fixed assets4 49,429 45,725 Accrued income 29,008 96,323 Cash and bank deposits5 8,549,403 11,173,757 Total assets $132,461,234 $109,604,384 Liabilities Sundry payables 208,201 65,366 Employee entitlements 10,039 3,595 Donations payable6 1,536,200 287,221 Total liabilities 1,754,440 356,182 Net assets 130,706,794 109,248,202 Equity Trustee funds 130,706,794 109,248,202 Total trust funds $130,706,794 $109,248,202 (The notes to the financial statements form part of and are to be read in conjunction with the above accounts.) GRAEME GLASS, Chairperson. BRIAN MARTIN, Trustee. Dated this 22nd day of May 1998. Consolidated Statement of Cash Flows for the Year Ended 31 March 1998 Note 1998$ 1997$ Cash flows from operating activities Cash was provided from: Dividends from Trust Bank New Zealand Limited 2,557,514 Interest and dividends on investments 7,440,607 7,350,993 7,440,607 9,908,507 Cash was applied to: Community payments (3,754,800) (3,694,637) Trustees and employees (230,450) (155,804) Suppliers of other goods and services (328,808) (240,369) Net operating cash flows7 3,126,549 5,817,697 Cash flows from investing activities Cash was provided from: Sale of Government securities 232,000 92,419,979 Sale of Trust Bank New Zealand Limited shares 99,218,581 Withdrawals from managed funds 10,000,000 10,232,000 191,638,560 Cash was applied to: Investment in Government securities (93,083,925) Investment in managed funds (15,961,791) (80,000,000) Investment in shares (14,999,984) Purchase of fixed assets (21,112) (31,941) Net investing cash flows (5,750,903) 3,522,710 Net increase (decrease) in cash held (2,624,354) 9,340,407 Add cash at 1 April 11,173,757 1,833,350 Cash at 31 March3 $8,549,403 $11,173,757 (The notes to the financial statements form part of and are to be read in conjunction with the above accounts.) Notes to the Consolidated Financial Statements for the Year Ended 31 March 1998 1. Statement of Accounting Policies 1.1 Reporting Entity Trust Bank Eastern and Central Community Trust is a charitable trust incorporated in accordance with the provisions of the Trustee Banks Restructuring Act 1988. The trust has a wholly owned company Eastern and Central Community Trust Charities Limited which is registered under the Companies Act 1993. The consolidated financial statements have been prepared in accordance with generally accepted accounting practice. 1.2 Measurement Base The measurement base applied is that of historical cost adjusted for the market valuation of investments. 1.3 Specific Accounting Policies The following are the particular accounting policies which have a material effect on the measurement of results and financial position. 1.3.1 Basis of Consolidation Purchase Method The consolidated financial statements include the trust and its wholly owned company accounted for using the purchase method. All significant inter-entity transactions are eliminated on consolidation. Both entities have a common balance date of 31 March. 1.3.2 Investment Income is accounted for on an accruals basis recognising both realised and unrealised gains or losses in value. 1.3.3 Foreign Currency balances are converted to NZD at the year end rate of exchange. Transactions completed during the year are converted at the rate applying at the date of the transaction. Foreign exchange gains and losses are included within the statement of financial performance. 1.3.4 Investments are recorded at market value at year end. 1.3.5 Cash comprises cash at bank, call deposits and short term deposits but does not include cash held by fund managers. 1.3.6 Donations are included in the statement of financial performance when approved by the trustees. 1.3.7 Fixed Assets are recorded at cost less accumulated depreciation. 1.3.8 Depreciation is provided on a straight line basis on all tangible fixed assets at rates calculated to allocate the assets' cost less estimated residual value, over their estimated useful lives. The depreciation periods are: Computer equipment 3 years Fixtures and fittings 9 years Furniture 10 years Office equipment 5 years 1.3.9 Income Tax is not provided as the trust has charitable status for tax purposes. 1.3.10 G.S.T. inclusive accounting has been adopted as the trust is not registered for G.S.T. 1.4 Changes in Accounting Policies. There have been no changes in accounting policies. All policies have been consistently applied. 1998$ 1997$ 2. Income from Investments Dividends received from Trust Bank New Zealand Limited 2,436,000 Realised investment income7,582,972 7,475,252 Changes in investment values gain (loss)10,116167 (824,575) Foreign exchange movements gain (loss)9,665,295 554,579 27,364,434 9,641,256 Less fund managers expenses272,956 * 27,091,478 9,641,256 [tn,3]* In 1997 income from managed funds were recorded net of fund managers' expenses. 3. Investments Type Manager Appointed 1998 1997 $ $ New Zealand Shares Active Coronet Asset Management Jan 97 10,258,471 9,908,956 Passive TeNZ Dec 9 14,662,725 14,030,711 [tn,2]International Shares Passive State Street Global Advisors May 97 56,646,384 35,023,373 New Zealand Bonds Active Citibank Global Assets Management Mar 97 38,071,633 35,006,648 Passive Self 4,194,181 4,318,891 123,833,394 98,288,579 4. Fixed Assets Fixtures, fittings and equipment at cost91,005 70,642 Less accumulated depreciation41,576 24,917 49,429 45,725 5. Cash and Bank Deposits Current accounts30,460 50,829 Call accounts1,018,743 5,122,869 Petty cash200 59 Short term deposits7,500,000 6,000,000 $8,549,403 $11,173,757 6. Donations Payable Included in donations payable are $823,400 of donations which are subject to the applicants fulfilling certain conditions. 7. Reconciliation of Net Surplus with Operating Cash Flows 1998$ 1997$ Net surplus for the period21,458,592 31,282,487 Adjust for non cash items Unrealised income on investments(19,815,024) 343,580 Depreciation17,408 16,247 Movements in net current assets Accrued income67,315 (91,147) Donations and sundry payables1,398,258 332,067 Item clasified as investing activity Profit on sale of investment in Trust Bank New Zealand Limited (26,065,537) Net operating cash flows$3,126,549 $5,817,697 8. Contingent Liabilities and Commitments There are no contingent liabilities at 31 March 1998. Lease commitments (incl. G.S.T.) 1998$ 1997$ Within 1 year33,750 12,111 12 years33,750 25 years101,250 Beyond 5 years18,280 $187,030 $12,111 A 6-year renewal option exists. 9. Segmental Reporting The trust operates as a charitable trust distributing funds to the community in the Central North Island region. 10. Financial Instruments Financial instruments include short-term deposits, New Zealand Bonds and investments in managed funds both within New Zealand and overseas. 10.1 Credit Risk The trustees regularly review their investment strategy. The investment strategy ensures an appropriate diversification of investments so that the trust has no significant concentration of counterparty or credit risk. 10.2 Fair Values The trust has recorded its financial assets and liabilities at current market values which represent estimated fair values and credit risk exposure. 10.3 Currency Risk The trust has exposure to currency risk through its investments in off- shore equities and bonds. 10.4 Credit Facilities The trust has no credit facilities. 10.5 Interest Rate Risk The trust investments in fixed rate securities are subject to interest rate risk. 11. Net Current Assets Cash, bank deposits and accrued income are expected to be realised within 12 months. All liabilities are due within 12 months. Audit Report To the trustees of Trust Bank Eastern and Central Community Trust Inc. We have audited the consolidated financial report. The consolidated financial report provides information about the past financial performance of Trust Bank Eastern and Central Community Trust Inc. group (the trust) and its financial position as at 31 March 1998. This information is stated in accordance with the accounting policies set out. Trustees' Responsibilities The trustees are responsible for the preparation of a consolidated financial report which fairly reflects the financial position of the trust as at 31 March 1998 and of the results of operations and cash flows for the year ended 31 March 1998. Auditors' Responsibilities It is our responsibility to express an independent opinion on the consolidated financial report presented by the trustees and report our opinion to you. Basis of Opinion An audit includes examining on a test basis, evidence relevant to the amounts and disclosures in the consolidated financial report. It also includes assessing: the significant estimates and judgments made by the trustees in the preparation of the consolidated financial report, and whether the accounting policies are appropriate to the trusts circumstances, consistently applied and a dequately disclosed. We conducted our audit in accordance with generally accepted auditing standards in New Zealand. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary. We obtained sufficient evidence to give reasonable assurance that the consolidated financial report is free from material misstatements, whether caused by fraud or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the consolidated financial report Other than in our capacity as auditors we have no relationship with or interests in the trust. Unqualified Opinion We have obtained all the information and explanations we have required. In our opinion the consolidated financial report: complies with generally accepted accounting practice: gives a true and fair view of the financial position of the trust as at 31 March 1998 and the results of its operations and cash flows for the year ended on that date Our audit was completed on 29 May 1998 and our unqualified opinion is expressed as at that date. DENT ROBERSTON & PARTNERS, Chartered Accountants. Hastings, New Zealand. Schedule of Community Payments for the Year Ended 31 March 1998 Donations by Region $ Poverty Bay589,355 Hawke's Bay1,800,516 Tararua222,514 Wairarapa605,030 Manawatu1,230,617 Horowhenua313,640 Regional242,107 Total donations$5,003,779 An itemised list of all donations is available, free of charge, from the Trust Manager, P.O. Box 1058, Hastings.