Notes 2001 2000
$'000 $'000
Total operating revenue 3 4,578 16,924
Total operating expenses 4 (1,874) (2,065)
Total operating surplus before distributions 2,704 14,859
Less: distributions-
Donations paid from income 15 & 16 (12,770) (5,608)
Sponsorships (234) (22)
Net surplus before taxation (10,300) 9,229
Income tax 5 - (39)
Net surplus retained as trustees income (10,300) 9,190
The surplus has been allocated to:
Capital 6 7,251 4,536
Investment fluctuation reserve 7 (10,164) 3,319
Donation reserve 7 (7,387) 1,335
(10,300) 9,190
The Waikato Community Trust Incorporated Consolidated Statement of Movements in Trust Funds for the Year Ended 31 March 2001
Notes 2001 2000
$'000 $'000
Trust funds at the start of the year 225,661 217,971
Surplus and revaluations
Net surplus for the year:
Capital 6 7,251 4,536
Investment fluctuation reserve 7 (10,164) 3,319
Donation reserve 7 (7,387) 1,335
Total recognised revenues and expenses for the year (10,300) 9,190
Other movements
Donations paid from donation reserve 7 (2,168) (1,500)
Trust funds at the end of the year 213,193 225,661
The Waikato Community Trust Incorporated Consolidated Statement of Financial Position as at 31 March 2001
Notes 2001 2000
$'000 $'000
Trust funds-
Capital 6 193,184 185,933
Investment fluctuation reserve 7 19,343 29,507
Donation reserve 7 666 10,221
Total trust funds 213,193 225,661
Current liabilities-
Westpactrust cheque account 53 -
Accounts payable 8 261 323
Donations payable 1,725 1,726
Income tax payable - 39
2,039 2,088
Total trust funds and liabilities 215,232 227,749
Current assets-
Westpactrust cheque account - 99
Short term deposits 1,112 506
1,112 605
Non-current assets-
Investments 9 212,554 225,859
Fixed assets 10 1,566 1,285
214,120 227,144
Total assets 215,232 (227,749)
J. A. GRACE, Trustee
R. A. WIBERG, Trustee.
Dated this 8th day of June 2001.
The Waikato Community Trust Incorporated Consolidated Statement of Cash Flows for the Year Ended
31 March 2001
Notes 2001 2000
$'000 $'000
Cash flow from operating activities-
Cash was provided from:
Investment income received 17,773 13,030

17,773 13,030
Cash was disbursed to:
Payments to suppliers and employees (1,871) (1,907)
Donations paid from income (13,141) (6,192)
Tax paid (39) -
(15,051) (8,099)
Net cash flow from operating activities 13 2,722 4,931
Cash flow from investing activities-
Cash was applied to:
Net increase in investments (497) (2,876)
Purchase of fixed assets (362) (454)
Net cash flow from investing activities (859) (3,330)
Cash flow from financing activities-
Cash was applied to:
Donations paid from donation reserve (2,015) (1,532)
Net cash flow from financing activities (2,015) (1,532)
Net increase (decrease) in cash held (152) 69
Cash at beginning of the year 99 30
Ending cash carried forward (53) 99
The Waikato Community Trust Incorporated Notes to and Forming Part of the Consolidated Financial Statements for the Year Ended 31 March 2001
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, Trust Waikato Amateur Sport Limited and Trust Waikato District Improvements 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, that is reviewed and revised from time to time, with a targeted long term annual rate of return of 8.4% (2000 - 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 is transferred to income. At the trust's current risk profile the investment fluctuation reserve should have a lower limit of 10% (2000 - 8.1%) and an upper limit of 26% (2000 - 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 4.9% (2000 - 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 other than land, art and artefacts, 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 12.0-48.0% Diminishing Value
Motor Vehicles 31.2% Diminishing Value
Buildings 4.0-31.2% Diminishing Value
(d) Donations and Distributions
Donations and distributions made are included in the statement of financial performance or statement of movements in equity 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 G.S.T. 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 crystallise in the foreseeable future.
(h) 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 reflected in the statement of financial performance.
(i) Consolidation Method
The purchase method is used to consolidate the trust and its subsidiaries. All inter-entity transactions, balances and unrealised profits and losses on transactions between group members have been eliminated.
(j) 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.
2001 2000
$'000 $'000
3. Revenue
Comprises:
Managed funds 4,461 16,843
Other investments 117 81
4,578 16,924
2001 2000
$'000 $'000
4. Expenses
Comprises:
Audit fees 10 14
Accountancy/secretarial fees 42 38
Consultants - donations 5 34
Consultants - tax 34 50
Consultants - other 6 6
Employee remuneration 199 189
Funds management services 619 763
Investment advisory services 143 132
Recruitment - 8
Statutory reporting 159 158
Trustees fees 184 174
Depreciation 78 112
Other expenses 395 387
1,874 2,065
2001 2000
$'000 $'000
5. Taxation
Net surplus before taxation as per statement of financial performance (10,300) 9,229
Less:
Non-assessable income (7,583) (13,675)
(17,883) (4,446)
Add:
Non-deductible expenditure 1,020 882
Non-deductible losses 16,298 2,125
Imputation tax credits received and withholding tax deducted 129 354
Adjustment for prior year - 415
Donations payable 995 1,608
18,442 5,384
Assessable income for the year 559 938
Less:
Loss brought forward (717) (812)
Assessable income (loss) for tax purposes (158) 126
Taxation @ 33% - 42
Imputation tax credits received and withholding tax deducted - (42)
- -
Imputation tax credits transferred to loss carried forward 392 717
Assessable loss for tax purposes 158 -
Losses carried forward 550 717
Following an Inland Revenue assessment, the trust was 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.
2001 2000
$'000 $'000
6. Capital
Balance at beginning of the year 185,933 181,397
Transfer from income 7,251 4,536
Balance at the end of the year 193,184 185,933
The transfer from income for inflation and regional population growth was calculated at an annual rate of 3.9% on the balance at the beginning of the year (2000 - 2.5%).
2001 2000
$'000 $'000
7. Reserves
Investment fluctuation reserve
Balance at beginning of the year 29,507 26,188
Transfer from (to) income (10,164) 3,319
Balance at the end of the year 19,343 29,507
Donation reserve
Balance at beginning of the year 10,221 10,386
Transfer from (to) income (7,387) 1,335
2,834 11,721
Less donations paid (2,168) (1,500)
Balance at the end of the year 666 10,221
2001 2000
$'000 $'000
8. Payables
Accounts payable 261 323
261 323
2001 2000
$'000 $'000
9. Investments
Passive global equities 26,863 30,741
NZ fixed interest and cash 90,909 84,100
Active global equities 26,338 30,433
NZ equities and cash 11,565 37,517
Global fixed interest 56,879 43,068
212,554 225,859
2001 2000
$'000 $'000
10. Fixed Assets
Office equipment:
At cost 170 173
Accumulated depreciation (96) (62)
Net book value 74 111
Motor vehicles:
At cost 64 64
Accumulated depreciation (36) (24)
Net book value 28 40
Art and artefacts:
At cost 202 52
Accumulated depreciation - -
Net book value 202 52
Buildings:
At cost 597 586
Accumulated depreciation (89) (58)
Net book value 508 528
Land:
At cost 754 554
Accumulated depreciation - -
Net book value 754 554
Total fixed assets 1,566 1,285
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 25.0%
New Zealand cash 15.0%
Global fixed interest (fully hedged) 25.0%
Passive global equities (fully hedged) 15.0%
Active global equities 15.0%
100.0%
The following financial assets have been recognised in the financial statements of the trust.
2001 2000
$'000 $'000
Term deposits 1,112 506
Investments 212,554 225,859
213,666 226,365
These are denominated in the following currencies:
2001 2000
$'000 $'000
Australian dollar equivalents 611 426
Canadian dollar equivalents 2,400 1,625
Danish krona equivalents 2,484 912
Deutsch mark equivalents 10,894 2,936
Euro equivalents 6,479 18,726
French franc eqivalents 4,542 4,399
Great Britain pound equivalents 8,737 7,217
Italian lira equivalents 618 1,041
Japanese yen equivalents 5,278 12,700
Netherlands guilder equivalents 698 2,381
New Zealand dollars 104,068 122,154
Spanish peseta equivalents 1,692 1,373
Swedish krona equivalents 653 801
Swiss franc equivalents 860 1,743
United States dollar equivalents 61,849 45,544
Other equivalents 1,803 2,387
213,666 226,365
12. Currency Translation
Trust policy is to hedge exposure on fluctuations in foreign exchange on 100% of global fixed interest investments and 50% of global equity investments. At 31 March 2001, the Trust's investment managers had forward exchange contracts in accordance with this policy.
The market value of the New Zealand cover is $82,846,784 (nominal value - $83,263,123). The market value of the cover at balance date accounts for 99.1% of funds held in global fixed interest and 49.8% of funds held in global equities. No undisclosed credit risk exists.
2001 2000
$'000 $'000
13. Cash Flow Reconciliation
Net surplus (10,300) 9,190
Adjust for non-cash items:
Depreciation & loss on sale 80 112
Investment income 13,195 (3,895)
13,275 (3,783)
Impact of changes in working capital items:
Increase (decrease) in accounts payable (60) 46
Increase (decrease) in taxation payable (39) 39
Increase (decrease) in donations payable (154) (561)
(253) (476)
Net cash inflow from operating activities 2,722 4,931
14. Related Party Information
Trust Waikato Charities Limited, Trust Waikato Amateur Sport Limited and Trust Waikato District Improvements Limited are wholly-owned charitable companies established by the trust and are 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 16 September 2000, The Waikato Times published a list totalling $14,824,050 which showed all of the donations approved by the trust from the period 1 April 2000 to 16 September 2000.
In the period from 17 September 2000 to 31 March 2001, the trust has also paid, committed or withdrawn the following donations:
$
Total donations as published in The Waikato Times on 16 September 2000 14,824,050
Te Pahu Squash Club (7,500)
PND Support Group (500)
Firth Primary School (18,000)
Waikato Badminton Association 25,000
Sunset Beach Surf Lifesaving Club 6,000
Auckland Philharmonia 2,500
Tahuna Tennis Club 2,500
Hinuera Tennis Club 2,500
The Morrinsville Rugby Football Union 2,500
TYC - Te Awamutu Youth Centre (3,500)
Geoff Burridge Alternative Education Trust 10,000
Pirongia Residents and Ratepayers Association 10,000
Te Kuiti High School 15,000
New Zealand Sports Development Trust 7,500
Hamilton Truancy Services 5,000
Waikato Society of Arts (2,500)
Social Service Waikato Trust 15,000
Music and Art Waikato Trust 15,000
Waikato Sports Leaders Group 1,000
Taumarunui Kokiri Trust 1,000
Morrinsville Seniornet 500
Philanthropy New Zealand 15,000
Hot Water Beach Lifeguard Service 7,000
Asia 2000 Foundation 3,000
Total donations for the year 14,937,550
Represented by:
Donations paid from income 12,770,000
Donations paid from donation reserve 2,167,550
14,937,550
Of this amount, $13,954,550 has been actually paid to community groups during the year.
The remainder of $1,343,000 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 2000/2001 year 1,343,000
For previous years 382,000
1,725,000
16. Capital Commitments and Contingent Liabilities
Commitments of $1,500,000 (2000 - $550,000) 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 (2000 - Nil).
Audit Report to the Board of Trustees of 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 2001. This information is stated in accordance with the accounting policies set out therein.
Board of Trustees' Responsibilities
The Trustees are responsible for the preparation of financial statements, in accordance with New Zealand law and generally accepted accounting practice, which fairly reflect the financial position of the group as at 31 March 2001 and of the results of its operations and cashflows for the year ended 31 March 2001.
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:
? the significant estimates and judgements made by the board of trustees in the preparation of the financial statements; and
? whether the accounting policies are appropriate to the group's circumstances, consistently applied and adequately disclosed.
We conducted our audit in accordance with New Zealand Auditing Standards. 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 obtain 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 auditor, we have no relationship with or interests in the group.
Unqualified Opinion
We have obtained all the information and explanations that we have required.
In our opinion, the financial statements fairly reflect the financial position of the group as at 31 March 2001 and the results of its operations and cashflows for the year ended on that date.
Our audit was completed on 8 June 2001 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 2000-2001 donations are available on request.