The Community Trust of Wellington Trustee Banks Restructuring Act 1988 Trust Bank Wellington Community Trust and its Subsidiary Companies (trading as The Community Trust of Wellington) Audit Report To the readers of the financial report of Trust Bank Wellington Community Trust and its subsidiary company (trading as The Community Trust of Wellington (``the group'')). We have audited the financial report. The financial report provides information about the past financial performance and its financial position of the group as at 31 March 1999. This information is stated in accordance with the accounting policies set out in the notes to the financial statements. Board of Trustees' Responsibilities The board of trustees is responsible for the preparation of a financial report which gives a true and fair view of the financial position of the group as at 31 March 1999 and of the results of operations and cash flows for the year ended 31 March 1999. Auditor's Responsibilities It is our responsibility to express an independent opinion on the financial report presented by the board of 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 financial report. It also includes assessing: the significant estimates and judgments made by the board of trustees in the preparation of the financial report, and whether the accounting policies are appropriate to the group's circumstances, consistently applied and adequately 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 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 financial report. Other than in our capacity as auditors we have no relationship with or interests in the group. Unqualified Opinion We have obtained all the information and explanations we have required. In our opinion: Proper records have been kept by the group as far as appears from our examination of those records; and the financial report: complies with generally accepted accounting practice; gives a true and fair view of the financial position of the trust and subsidiary as at 31 March 1999 and the results of its operations and cash flows for the year ended on 31 March 1999. Our audit was completed on 14 June 1999 and our unqualified opinion is expressed as at that date. SPICER & OPPENHEIM, Chartered Accountants. Wellington. Consolidated Statement of Financial Performance for the Year Ended 31 March 1999 Notes 1999$ 1998$ Income Investment income (net)11 4,501,782 8,025,585 Interest received 10,984 15,551 Donations returned 1,500 10,000 Rental income 76,620 Total income 4,590,886 8,051,136 Less expenses Auditors' fees 7,438 5,237 Depreciation 1,793 2,079 Donations expenses 21,477 27,279 Interest 30,122 Operating costs 199,855 168,202 Trustee expenses 11,923 9,298 Trustee fees 54,630 39,980 Total expenses 327,238 252,075 Net surplus before donations 4,263,648 7,799,061 Less donations 5,105,114 3,602,166 Net surplus (deficit) after donations ($841,466) $4,196,895 Consolidated Statement of Movements in Trust Funds for the Year Ended 31 March 1999 1999$ 1998$ Trust funds at 1 April 199848,765,750 44,568,855 Plus Net surplus 4,196,895 Movements in revaluation reserve1,250 48,767,000 48,765,750 Less Net deficit841,466 Total trust funds at 31 March 1999$47,925,534 $48,765,750 Consolidated Statement of Financial Position as at 31 March 1999 Notes 1999$ 1998$ Current assets Bank accounts 63,720 10,503 Investment accounts receivable 151,139 182,065 Prepayments 2,861 1,519 Taxation refund 2,417 110 Total current assets 220,137 194,197 Less current liabilities Trading accounts payable 99,226 87,702 Investment accounts payable 132,224 386,837 Bank of New Zealand loan current portion9 97,915 Goods and services tax 4,201 Total current liabilities 333,566 474,539 Net current liabilities 113,429 280,342 Non current assets Fixed assets3 4,211 5,332 Investments4 48,683,684 49,040,760 Total non current assets 48,687,895 49,046,092 Non current liabilities Bank of New Zealand loan term portion9 648,932 Total non current liabilities 648,932 Net assets $47,925,534 $48,765,750 Represented by: Trust funds Accumulated funds 47,924,284 48,765,750 Revaluation reserve 1,250 Total trust funds $47,925,534 $48,765,750 For and on behalf of the board of trustees: W. A. BRIEN, Chairperson. P. J. WILLIS, Trustee. Dated this 14th day of June 1999. Consolidated Statement of Cash Flows for the Year Ended 31 March 1999 1999$ 1998$ Cash flows from operating activities Cash was provided from: Interest on investments10,984 15,551 Rental income76,620 G.S.T. received4,052 Donations returned1,500 10,000 93,156 25,551 Cash was applied to: Payments to suppliers(248,297) (191,520) Payments to fund managers(260,679) (269,763) Payments to trustees(70,135) (50,046) Donations to community(5,105,114) (3,602,166) Tax paid(1,928) (110) (5,686,153) (4,113,605) Net inflow (outflow) from operating activities(5,592,997) (4,088,054) Cash flows from investing activities Cash was applied from: BNZ loan746,847 Net realisation of investments8,125,789 3,733,691 8,872,636 3,733,691 Cash was applied to: Purchase of investment properties(1,383,750) Purchase of fixed assets(672) (4,801) The Embassy Theatre Trust loan(530,000) Karori Sanctuary Wildlife Trust loan(1,312,000) (3,226,422) (4,801) Net inflow (outflow) from investing activities5,646,214 3,728,890 Net increase (decrease) in cash held53,217 (359,164) Opening cash brought forward10,503 369,667 Closing cash carried forward$63,720 $10,503 Shown in statement of financial position as: Cash at bank63,720 10,503 Closing cash carried forward$63,720 $10,503 Consolidated Notes to the Financial Statements for the Year Ended 31 March 1999 1. Statement of Accounting Policies Reporting Entity The financial statements presented here are for the reporting entity Trust Bank Wellington Community Trust and its wholly owned companies Wellington Community Trust Charities Limited and Jarden Mile Investments Limited. The Trust Bank Wellington Community Trust is an incorporated charitable trust under the Charitable Trusts Act 1957. Reporting Basis The trustees have chosen to prepare general purpose financial reports which comply with generally accepted accounting practice. Measurement Base The measurement base adopted is historical cost with the exception of certain items for which specified accounting policies are identified. Investment Income (Net) Investment income (net) includes gross investment income less management fees payable to the fund managers. Investment Properties The investment property held is valued at net current value. Depreciation is not charged on the investment property. The net change in the value of the investment property is transferred directly to the property revaluation reserve. Basis of Consolidation The consolidated financial statements have been prepared using the purchase method of consolidation and include the financial statements of the parent and subsidiary companies. All significant inter-entity profits and transactions have been eliminated in preparing the consolidated financial statements. Accounts Receivable Accounts receivable are stated at expected realised value. Donations Donations made are included in the statement of financial performance when paid. Fixed Assets Fixed assets are stated at cost less accumulated depreciation. Depreciation Depreciation is charged at the maximum rates allowable by the Inland Revenue Department. The tax rates are as follows: Computer equipment 24.048.0 percent CP Office furniture 13.214.4 percent DV Goods and Services Tax The Community Trust of Wellington financial statements are stated on a G.S.T. inclusive basis, with the exception to transactions that went through Jarden Mile Investments Limited whose financial statements are prepared on a G.S.T. exclusive basis, as it is registered for goods and services tax. Shares and Investments Shares and other investments are stated at the market value. Changes in the market value of investments are taken to the statement of financial performance. Financial Instruments All financial instruments held by the trust are recorded in the statement of financial position. The financial instruments comprise equity securities, discounted securities, secured investments, borrowings, deposits and cash. Concentrations of credit risk arise as a result of holding equity securities as investments. These are subject to the normal market risk associated with investments of this nature. There are no significant differences between the fair value and book value of financial instruments. Where possible, financial assets and liabilities are supported by collateral or other security. These arrangements are described in the individual policy statements associated with each item. Changes in Accounting Policies There have been no changes in accounting policies. All policies have been applied on bases consistent with those used in previous years. 2. Nature of Business The Trust Bank Wellington Community Trust was incorporated as a charitable trust in accordance with the provisions of the Trustee Banks Restructuring Act 1988. The purpose of the community trust is to provide charitable, cultural, philanthropic and recreational benefits to the community, principally in the trust region. The nature of business of the wholly owned companies, Wellington Community Trust Charities Limited and Jarden Mile Investments Limited, is restricted by their constitution to providing charitable benefits to the community, principally in the region of The Community Trust of Wellington. The Trust Bank Wellington Community Trust and its subsidiary companies operate under the trading name of ``The Community Trust of Wellington''. 3. Fixed Assets Cost$ AccumulatedDepreciation$ BookValue$ 1999 Computer equipment6,793 5,713 1,080 Filing cabinets4,013 882 3,131 $10,806 $6,595 $4,211 1998 Computer equipment6,793 4,418 2,375 Office furniture3,340 383 2,957 $10,133 $4,801 $5,332 4. Investments Investments held by Tower Asset Management comprise: 1999$ 1998$ Money market deposits3,190,561 496,092 Fixed interest bonds5,569,335 15,777,682 Equities17,799,454 11,554,154 Other investments2,746 418,549 Total investments at 31 March 1999$26,562,096 $28,246,477 Investments held by BT Funds Management (NZ) Limited comprise: 1999$ 1998$ Currency(102,267) (22,638) Property 1,325,201 Fixed interest bonds3,067,172 7,538,469 Equities14,117,062 8,469,754 Short term investment1,812,621 3,483,497 Total investments at 31 March 1999$18,894,588 $20,794,283 Secured Investments 1999$ 1998$ The Embassy Theatre Trust530,000 Karori Wildlife Sanctuary Trust1,312,000 Total secured investments as 31 March 1999$1,842,000 On the 30th day of June 1998 the Embassy Theatre Trust entered into a mortgage agreement with Wellington Community Trust Charities Limited. The mortgage is repayable over 10 years and secured over the property held by the Embassy Theatre Trust. The first repayment will be on the 1st day of July 2002. On the 19th day of February 1999 the Karori Wildlife Sanctuary Trust entered into a loan agreement with Wellington Community Trust Charities Limited. The agreement provides for a facility of up to $1,500,000 to be drawn. The loan is guaranteed by the Wellington City Council. The loan is to be repaid over 15 years, with repayments commencing from the 1st day of July 2004. Investment Property 1999$ 1998$ At cost1,383,750 Revaluations brought forward Current year revaluation1,250 Total investment property$1,385,000 A valuation of the investment property was carried out on the 17th day of June 1998 by an independant registered valuer, M. J. Bevin, b.pa. anziv, of Darroch Limited. Since the investment property was purchased during the year the trustees considered it unnecessary to revalue the property at balance date, because of the short ownership period. Annual revaluation will be conducted in future years. Total investment property$48,683,684 $49,040,760 It is the intention of the trustees to hold the investments long term and accordingly they have been classified as non current assets. 5. Taxation The charitable status of the Trust Bank Wellington Community Trust is currently being reviewed by the Inland Revenue. The trustees are of the view that no income tax liability will arise. For taxation purposes the Wellington Community Trust Charities Limited is deemed to be a charitable organisation and on this basis the income is not subject to taxation. The company's charitable status was confirmed on the 27th day of August 1997 by the Inland Revenue Department. For taxation purposes Jarden Mile Investments Limited is deemed to be a charitable organisation and on this basis the income is not subject to taxation. The company's charitable status was confirmed on the 29th day of September 1998 by the Inland Revenue Department. 6. Commitments (a) Donations As at 31 March 1999 Wellington Community Trust Charities Limited has committed funding to: 1999$ 1998$ Wellington Regional Stadium Trust2,000,000 3,000,000 St James Theatre Trust 1,200,000 Sport Wellington Region Trust1,500,000 2,000,000 Museum of Wellington Trust1,800,000 2,400,000 Victoria University Foundation100,000 Surgical Research Trust120,000 Total commitments as at 31 March 1999$5,520,000 $8,600,000 1999$ 1998$ Payable no later than 1 year3,210,000 3,300,000 Payable later than 1, not later than 2 years1,210,000 3,100,000 Payable later than 2 years1,100,000 2,200,000 $5,520,000 $8,600,000 As at 31 March 1999 donations approved by Trust Bank Wellington Community Trust and Wellington Community Trust Charities Limited but not uplifted were: 1999$ 1998$ Junior Cricket Upper Hutt (approved 1997)100,000 100,000 Newtown Union Health Centre (approved 1998)80,000 80,000 Children's Grief Centre Trust (approved 1998) 50,000 House of Hope, Otaki (approved 1998) 10,000 Total not uplifted as at 31 March 1999$180,000 $240,000 (b) Lease Commitments Commitments existed for non-cancellable operating leases as follows: 1999$ 1998$ Not later than 1 year4,641 11,000 Later than 1 year $4,641 $11,00 (c) Capital Commitments The group has no capital commitments as at 31 March 1999 (1998 $nil). 7. Contingent Liabilities The group has no contingent liabilities as at 31 March 1999 (1998 $nil). 8. Financial Instruments Investments are stated at estimated market value at balance date. Accounts payable, secured investments and accounts receivable are stated at the amount expected to be received or paid. Accordingly, the trustees consider that the fair value of each class of financial asset and financial liabilities is the same as the carrying value in the statement of financial position. Concentration of Credit Risk The concentrations of credit risk incurred by the trust are managed by Tower Asset Management and BT Funds Management (NZ) Limited. Credit risk also exists with the loan agreements entered into during the year. Trustees consider the risk of non-recovery of these investments to be within satisfactory guidelines. Maximum exposures to credit risk as at balance date are: 1999$ 1998$ Bank accounts63,720 10,503 Accounts receivable151,139 182,065 Investments48,683,684 49,040,760 Currency Risk The Community Trust of Wellington incurs currency risk as a result of investment transactions managed by Tower Asset Management and BT Funds Management (NZ) Limited. Interest Rate Risk The investments of The Community Trust of Wellington which are sensitive to changes in interest rates are managed by Tower Asset Management and BT Funds Management (NZ) Limited. The Community Trust of Wellington is also exposed to interest rate fluctuation on loans, as the debt is on a floating rate. 9. Term Loan 1999$ 1998$ Bank of New Zealand Current97,915 Non current648,932 Total liability$746,847 Security 19 Jarden Mile, Ngauranga Interest rate 8.01 percent per annum (fixed for 5 years) Repayments For the first 5 years, 60 consecutive monthly payments of $8,159.57. After 5 years the repayments instalments may be varied so the whole of the loan plus interest is repaid over the term of the loan. Final repayment date Repayment based on 12 year term 10. Revaluation Reserve 1999$ 1998$ Opening balance at 1 April 1998 Movements in the year1,250 Closing balance at 31 March 1999$1,250 11. Investment Income (Net) 1999$ 1998$ Portfolio income realised and unrealised revenue4,729,761 8.296,556 Less fund management fees and expenses(227,979) (270,971) Total investment income (net)$4,501,782 $8,025,585 12. Reconciliation of Net Surplus with Net Cash Flow from Operating Activities 1999$ 1998$ Net surplus/(deficit)(841,466) 4,196,895 Add/(deduct) non cash items: Depreciation1,793 2,079 Portfolio investment income reinvested(4,858,175) (8,259,749) (5,697,848) (4,060,775) Add/(deduct) movements in other working capital items: (Increase)/decrease in accounts receivable30,926 (38,129) (Increase)/decrease in prepayments(1,342) (Increase)/decrease in accounts payable(243,090) 406,881 (Increase)/decrease in G.S.T.4,201 (Increase)/decrease in taxation paid(2,307) (110) (211,612) 368,642 Add/(deduct) items classified as an investing activity: Movement Tower Asset management29,484 (22,720) Movement BT Funds management (NZ) Limited286,979 (373,201) 316,463 (395,921) Net cash flow from operating activities($5,592,997) $4,088,054 The complete annual report, which includes a list of the successful recipients for the 199899 year, is available on request at the office of The Community Trust of Wellington, Level Four, Guardian Assurance House, 111115 Customhouse Quay, Wellington, or by Telephone: (04) 499 7966.