Notes 2000 1999
$'000 $'000
Revenue 3 16,924 21,380
Expenses 4 (2,065) (1,635)
SURPLUS BEFORE DISTRIBUTIONS 14,859 19,745
Less: Distributions
Donations Paid from Income 15 & 16 (5,608) (5,322)
Sponsorships (22) -
9,229 14,423
NET SURPLUS BEFORE TAXATION
Income Tax 5 (39) -
NET SURPLUS RETAINED AS TRUSTEES INCOME 9,190 14,423
The surplus has been allocated to:
Capital 4,536 1,256
Investment Fluctuation Reserve 3,319 7,870
Donation Reserve 1,335 5,297
9,190 14,423
The Waikato Community Trust Incorporated Consolidated Statement of Movements in Trust Funds for the Year Ended 31 March 2000
Notes 2000 1999
$'000 $'000
TRUST FUNDS AT THE START OF THE YEAR 217,971 204,782
SURPLUS AND REVALUATIONS
Net Surplus for the year:
Capital 4,536 1,256
Investment Fluctuation Reserve 3,319 7,870
Donation Reserve 1,335 5,297
Total Recognised Revenues and Expenses for the year 9,190 14,423
OTHER MOVEMENTS
Donations Paid from Donation Reserve 7 (1,500) (1,234)
TRUST FUNDS AT THE END OF THE YEAR 225,661 217,971
The Waikato Community Trust Incorporated Consolidated Statement of Financial Position as at 31 March 2000
Notes 2000 1999
$'000 $'000
TRUST FUNDS
Capital 6 185,933 181,397
Investment Fluctuation Reserve 7 29,507 26,188
Donation Reserve 7 10,221 10,386
TOTAL TRUST FUNDS 225,661 217,971
CURRENT LIABILITIES 8 323 278
Accounts Payable 1,726 2,319
Donations Payable 39 -
Income Tax Payable 2,088 2,597
TOTAL TRUST FUNDS AND LIABILITIES 227,749 220,568
CURRENT ASSETS
WestpacTrust Cheque Account 99 30
Short Term Deposits 506 819
605 849
NON-CURRENT ASSETS
Investments 9 225,859 218,774
Fixed Assets 10 1,285 945
227,144 219,719
TOTAL ASSETS 227,749 220,568

J. A. Grace, Chairman.
R. A. Wiberg, Trustee.
Date 6 June 2000.
The Waikato Community Trust Incorporated Consolidated Statement of Cash Flows for the Year Ended
31 March 2000
Notes 2000 1999
$'000 $'000
CASH FLOW FROM OPERATING ACTIVITIES
Cash was provided from:
Investment income received 13,030 7,407

13,030 7,407
Cash was disbursed to:
Payments to suppliers and employees (1,907) (1,534)
Donations paid from Income (6,192) (3,478)
(8,099) (5,012)
Net Cash Flow from Operating Activities 13 4,931 2,395
CASH FLOW FROM INVESTING ACTIVITIES
Cash was applied to:
Net Increase in Investments (2,876) (172)
Purchase of Fixed Assets (454) (945)
Net Cash Flow from Investing Activities (3,330) (1,117)
CASH FLOW FROM FINANCING ACTIVITIES
Cash was applied to:
Donations paid from Donation Reserve (1,532) (1,264)
Net Cash Flow from Financing Activities (1,532) (1,264)
NET INCREASE (DECREASE) IN CASH HELD 69 14
Cash at beginning of the year 30 16
ENDING CASH CARRIED FORWARD 99 30
The Waikato Community Trust Incorporated Notes to and Forming Part of the Consolidated Financial Statements for the Year Ended 31 March 2000
1. STATEMENT OF ACCOUNTING POLICIES
Basis of Reporting
The financial statements presented here are for the reporting entity The Waikato Community Trust Incorporated and its wholly-owned subsidiary Trust Waikato Charities Limited (formerly Waikato Community Trust Charities Limited).
The financial statements have been prepared in accordance with the requirements of the Institute of Chartered Accountants of New Zealand for the measurement and reporting of profit on an historical cost basis with the exception of investments which are recorded at market value.
Specific Accounting Policies
The following specific accounting policies which materially affect the measurement of financial performance and the financial position have been applied:
(a) Trust Funds
In order to prudently manage the financial affairs of the Trust the Trustees have adopted the following policies for accounting for the Trust's Capital and Retained Earnings.
* Capital
Following the sale of the Trust's shares in Trust Bank New Zealand Limited in April 1996 the Trustees agreed that the value of the Trust at that time should be maintained for the benefit of current and future generations living in the Waikato region. For this purpose the Trustees agreed that $169,800,000 would be considered as the 'initial capital' of the Trust. The 'initial capital value' is increased each year to show the 'base capital value' which reflects growth due to inflation and regional growth. An amount was transferred from retained earnings in 1997 to increase the capital of the Trust from its original amount of $21,316,622 to the 'initial capital value' and to provide for growth during the 1997 year. Each year an appropriate amount is transferred from income to allow for growth due to inflation and regional population growth.
* Investment Fluctuation Reserve
The Trustees have adopted an investment strategy with a targeted long term annual rate of return of 7.5% of the Trust's 'base capital value'. Recognising that actual returns are likely to fluctuate from year to year, the Trust holds the variation from the target in an Investment Fluctuation Reserve. In years when investment returns are less than the target an appropriate amount will be transferred to income. At the Trust's current risk profile the Investment Fluctuation Reserve should have a lower limit of 8.1% and an upper limit of 20.3% of the 'base capital value'. If the reserve falls below the lower limit then the level of annual donations will be reduced. If the reserve exceeds the upper limit then any further excess returns will be transferred to the Donation Reserve.
* Donation Reserve
The Trust's present donation policy is to distribute annually as donations 3.5% of the 'base capital value'. The Trustees recognise that for a number of reasons this might not always be achievable and that there will inevitably be fluctuations between the donations distributed and the actual target. The surplus after transfers to capital and the Investment Fluctuation Reserve is held in the Donation Reserve and represents the Trust's retained earnings. It is the Trust's intention to apply this fund to future donations.
(b) Fixed Assets
All fixed assets have been recorded at cost price less accumulated depreciation.
(c) Depreciation
Depreciation of fixed assets is calculated using taxation rates so as to allocate the cost of the assets over their useful lives. The following rates are used:
Office Equipment and Furniture 12-48%
Motor Vehicles 31.2%
Buildings 4-31.2%
(d) Donations and Distributions
Donations and distributions made are included in the Statement of Financial Performance when approved by the Trustees.
(e) Goods and Services Tax
The Trust is not registered for goods and services tax purposes. Accordingly, these financial statements are stated on a GST inclusive basis.
(f) Investments
Investments are stated at market value. Adjustments to market value of investments are included in the Statement of Financial Performance.
(g) Taxation
Income tax expense recognises the current obligations payable to the Inland Revenue Department. The partial method of recognising deferred tax is employed. No deferred tax liability is expected to crystalise in the foreseeable future.
(h) Changes in Accounting Policies
There have been no changes in accounting policies since the previous annual financial statements. All policies have been applied on bases consistent with those used in the prior year.
2. INCORPORATION
The Trust Bank Waikato Community Trust was incorporated on 5 August 1988 with trust capital of $21,316,622. The name of the Trust was changed to The Waikato Community Trust Incorporated in December 1997.
2000 1999
$'000 $'000
3. REVENUE
Comprises:
Managed Funds 16,843 21,362
Other Investments 81 18
16,924 21,380
2000 1999
$'000 $'000
4. EXPENSES
Comprises:
Audit Fees 14 10
Accountancy/Secretarial Fees 38 36
Consultants - Donations 34 34
Consultants - Tax 50 29
Consultants - Other 6 23
Employee Remuneration 189 121
Funds Management Services 763 812
Investment Advisory Services 132 131
Recruitment 8 7
Rental Costs - 9
Statutory Reporting 158 136
Trustees Fees 174 135
Depreciation 112 22
Other expenses 387 130
2,065 1,635
2000 1999
$'000 $'000
5. TAXATION
Net Surplus before taxation as per Statement of Financial Performance 9,229 14,423
Less:
Non-assessable income (13,675) (33,464)
(4,446) (19,041)
Add:
Non-deductible Expenditure 882 569
Non-deductible Losses 2,125 12,370
FIF Income - 5,442
Imputation Tax Credits received and Withholding Tax deducted 354 271
Adjustment for prior year 415 (2,241)
Donations payable 1,608 2,309
5,384 18,720
Assessable Income for the year 938 (321)
Less:
Loss brought forward (812) -
Assessable Income (Loss) for tax purposes 126 (321)
Taxation @ 33% 42 -
Imputation Tax Credits received and Withholding Tax Deducted (42) -
- -
Imputation Tax Credits transferred to Loss Carried Forward 717 491
Assessable Loss for tax purposes - 321
Losses carried forward 717 812
The Inland Revenue Department has recently completed an assessment of the Trust's tax position from 1989 to 1998. As a consequence of this, the Trust is required to pay $38,975 in respect of the 1995 year.
The Trust's ability to carry forward tax losses is subject to statutory provisions.
2000 1999
$'000 $'000
6. CAPITAL
Balance at beginning of the year 181,397 180,141
Transfer from Income 4,536 1,256
Balance at the end of the year 185,933 181,397
The transfer from income for inflation and regional population growth was calculated at an annual rate of 2.5% on the balance at the beginning of the year (1999 - 0.697%).
2000 1999
$'000 $'000
7. RESERVES
Investment Fluctuation Reserve
Balance at beginning of the year 26,188 18,318
Transfer from Income 3,319 7,870
Balance at the end of the year 29,507 26,188
Donation Reserve
Balance at beginning of the year 10,386 6,323
Transfer from Income 1,335 5,297
11,721 11,620
Less Donations Paid (1,500) (1,234)
Balance at the end of the year 10,221 10,386
2000 1999
$'000 $'000
8. PAYABLES
Accounts Payable 323 278
323 278
2000 1999
$'000 $'000
9. INVESTMENTS
Passive Global Equities 30,741 28,066
NZ Fixed Interest and Cash 84,100 83,733
Active Global Equities 30,433 28,057
NZ Equities and Cash 37,517 37,774
Global Fixed Interest 43,068 41,144
225,859 218,774
2000 1999
$'000 $'000
10. FIXED ASSETS
Office Equipment
At Cost 173 55
Accumulated depreciation (62) (17)
Net Book Value 111 38
Motor Vehicles
At Cost 64 37
Accumulated depreciation (24) (6)
Net Book Value 40 31
Art and Artefacts
At Cost 52 -
Accumulated depreciation - -
Net Book Value 52 -
Buildings
At Cost 586 346
Accumulated depreciation (58) (10)
Net Book Value 528 336
Land
At Cost 554 540
Accumulated depreciation - -
Net Book Value 554 540
Total Fixed Assets 1,285 945
11. FINANCIAL INSTRUMENTS
The Trust uses the services of an investment advisor to pursue an investment policy considered appropriate for the Trust. The current policy is to achieve a long term asset allocation of:
New Zealand Equities 5.0%
New Zealand Fixed Interest 20.0%
New Zealand Cash 30.0%
Global Fixed Interest (Fully Hedged) 20.0%
Passive Global Equities (Fully Hedged) 12.5%
Active Global Equities 12.5%
100.0%
The following financial assets have been recognised in the financial statements of the parent and group.
2000 1999
$'000 $'000
Term Deposits 506 819
Investments 225,859 218,774
226,365 219,593
These are denominated in the following currencies:
2000 1999
$'000 $'000
Australian dollar equivalents 426 787
Austrian schilling equivalents 31 56
Belgium franc equivalents 92 196
Canadian dollar equivalents 1,625 589
Danish krona equivalents 912 416
Deutsch mark equivalents 2,936 2,868
Euro 18,726 10,700
Finland markka equivalents 796 224
French franc eqivalents 4,399 3,297
Great Britain pound equivalents 7,217 10,359
Hong Kong dollar eqivalents 764 611
Irish pound equivalents 62 56
Italian lira equivalents 1,041 1,413
Japanese yen equivalents 12,700 7,550
Malaysia ringgit equivalents - 59
Netherlands guilder equivalents 2,381 1,668
New Zealand dollars 122,154 122,919
Norway krone equivalents 62 56
Portugal escudo equivalents 244 84
Singapore dollar equivalents 336 174
Spanish peseta equivalents 1,373 1,383
Swedish krona equivalents 801 1,533
Swiss franc equivalents 1,743 1,777
United States dollar equivalents 45,544 50,818
226,365 219,593
All financial instruments are disclosed at fair value. No undisclosed credit risk exists.
At 31 March 2000 the Trust's investment managers had forward exchange contracts to cover the global fixed interest and passive global equities position. The value of the New Zealand cover is $73,808,285.
12. CURRENCY TRANSLATION
Monetary assets denominated in foreign currency are converted to New Zealand dollars at the exchange rates reported at balance date and any unrealised profit or loss resulting from the conversion is effected in the Statement of Financial Performance.
Trust policy is to hedge the currency movements on global fixed interest and passive global equity investments to reduce exposure to fluctuation in foreign exchange. Any unrealised losses and gains are recorded at year end through the Statement of Financial Performance.
2000 1999
$'000 $'000
13. CASH FLOW RECONCILIATION
NET SURPLUS 9,190 14,423
Adjust for non-cash items:
Depreciation & Loss on Sale 112 25
Investment Income (3,895) (13,973)
(3,783) (13,948)
Impact of changes in working capital items:
Increase (decrease) in Accounts Payable 46 76
Increase (decrease) in Taxation Payable 39 -
Increase (decrease) in Donations Payable (561) 1,844
(476) 1,920
Net cash inflow from operating activities 4,931 2,395
14. RELATED PARTY INFORMATION
Trust Waikato Charities Limited (formerly Waikato Community Trust Charities Limited) is a wholly-owned charitable company established by the Trust and is used to carry out some of the Trust's activities.
The Trust acts as nominee for investments held by Trust Waikato Charities Limited.
15. DONATIONS
On 29 September 1999 the Waikato Times published a list totalling $8,576,300 which showed all of the donations approved by the Trust from the period 1 April 1999 to 29 September 1999.
In the period from 30 September 1999 to 31 March 2000 the Trust has also paid, committed or withdrawn the following donations:
$
Total donations as published in the Waikato Times on 29 September 1999 8,576,300
Aotearoa Traditional Maori Performing Arts Festival 50,000
Raukawa Development Trust 12,500
Multicultural Centre Trust 31,000
Waikato Museum of Art and History 12,000
Waikato Chamber of Commerce 500
Te Awamutu Events Centre 450,000
The Parents Place Charitable Trust 25,000
Youth Resource Centre Trust 1,000
Life Unlimited (50,000)
Waikato Regional Sports and Events Trust (2,000,000)
Total donations for the year 7,108,300
Represented by:
Donations paid from income 5,608,300
Donations paid from donation reserve 1,500,000
7,108,300
Of this amount $5,975,300 has been actually paid to community groups during the year.
The remainder of $1,133,000 represents donations which will be paid when it is clear to the Trust that the project in question will proceed and any other conditions have been met.
Donations payable at balance date are:
For the 1999/2000 year 1,133,000
For previous years 593,000
1,726,000
16. CAPITAL COMMITMENTS AND CONTINGENT LIABILITIES
Commitments of $550,000 (1999 $6,750,000) exist for donations that have been approved in the current or previous years subject to the fulfilment of certain conditions in future years. These donations which will be distributed from either capital or future income sources have not been recorded in either the Statements of Financial Performance or Financial Position.
There are no other capital commitments or contingent liabilities at balance date (1999 Nil).
Audit Report to the Trustees of The Waikato Community Trust Incorporated
We have audited the financial statements. The financial statements provide information about the past financial performance of the group and its financial position as at 31 March 2000. This information is stated in accordance with the accounting policies set out therein.
Board of Trustees' Responsibilities
The board of trustees are responsible for the preparation of financial statements in accordance with New Zealand law and generally accepted accounting practice, which give a true and fair view of the financial position of the group as at 31 March 2000 and of the results of the operations and cashflows for the year ended 31 March 2000.
Auditors' Responsibilities
It is our responsibility to express an independent opinion on the financial statements 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 statements. It also includes assessing:
(a) the significant estimates and judgements made by the board of trustees in the preparation of the financial statements; and
(b) whether the accounting policies are appropriate to the group circumstances, consistently applied and adequately disclosed.
We conducted our audit in accordance with generally accepted audit standards in New Zealand. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are 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 statements.
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 the financial statements fairly reflect the financial position of the group as at 31 March 2000 and the results of its operations and cashflows for the year ended 31 March 2000.
Our audit was completed on 6 June 2000 and our unqualified opinion is expressed as at that date.
Deloitte Touche Tohmatsu, Chartered Accountants, Hamilton, New Zealand.
Note: A copy of these financial statements and a full list of 1999-2000 donations are available on request.