Consolidated Statement of Financial Performance for the Year Ended 31 March 2002
Notes 2002 2001
$'000 $'000
Total operating revenue 3 3,207 4,578
Total operating expenses 4 (1,884) (1,874)
Total operating surplus before distributions 1,323 2,704
Less distributions:
Donations paid from income (8,621) (12,770)
Sponsorships (213) (234)
Net surplus before taxation (7,511) (10,300)
Income tax - -
Net surplus retained as trustees income (7,511) (10,300)
The surplus has been allocated to:
Capital 6 5,458 7,251
Investment fluctuation reserve 7 (14,446) (10,164)
Donation reserve 7 1,477 (7,387)
(7,511) (10,300)
Consolidated Statement of Movements in Trust Funds for the Year Ended 31 March 2002
Notes 2002 2001
$'000 $'000
Trust funds at the start of the year 213,193 225,661
Surplus and revaluations-
Net surplus for the period:
Capital 6 5,458 7,251
Investment fluctuation reserve 7 (14,446) (10,164)
Donation reserve 7 1,477 (7,387)
Total recognised revenues and expenses for the period (7,511) (10,300)
Other movements:
Donations paid from capital 7 (2,143) (2,168)
Trust funds at the end of the year 203,539 213,193
Consolidated Statement of Financial Position as at 31 March 2002
Notes 2002 2001
$'000 $'000
Trust funds:
Capital 6 198,642 193,184
Investment fluctuation reserve 7 4,897 19,343
Donation reserve 7 - 666
Total trust funds 203,539 213,193
Current liabilities:
WestpacTrust cheque account - 53
Accounts payable 8 252 261
Donations payable 2,514 1,725
2,766 2,039
Total trust funds and liabilities 206,305 215,232
Current assets:
WestpacTrust cheque account 246 -
Short term deposits 744 1,112
990 1,112
Non-current assets:
Investments 9 203,676 212,554
Fixed assets 10 1,639 1,566
205,315 214,120
Total assets 206,305 215,232
N. J. CLARKE, Trustee.
R. H. T. AWA, Trustee.
Dated this 17th day of June 2002.
Consolidated Statement of Cash Flows for the Year Ended 31 March 2002
Notes 2002 2001
$'000 $'000
Cash flow from operating activities-
Cash was provided from:
Investment income received 16,616 17,773
16,616 17,773
Cash was disbursed to:
Payments to suppliers and employees (2,049) (1,871)
Donations paid from income (7,985) (13,141)
Tax paid - (39)
(10,034) (15,051)
Net cash flow from operating activities 14 6,582 2,722
Cash flow from investing activities-
Cash was applied to:
Net increase in investments (4,162) (497)
Purchase of fixed assets (131) (362)
Net cash flow from investing activities (4,293) (859)
Cash flow from financing activities-
Cash was applied to:
Donations paid from capital (1,990) (2,015)
Net cash flow from financing activities (1,990) (2,015)
Net increase (decrease) in cash held 299 (152)
Cash at beginning of the year (53) 99
Ending cash carried forward 246 (53)
The Waikato Community Trust Incorporated Notes To and Forming Part Of the Consolidated Financial Statements for the Year Ended 31 March 2002
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) Reserves Policy
The following reserving policies were adopted by the trust in 1998. These policies were reviewed in conjunction with the strategic asset allocation review undertaken in 2000. These policies were further reviewed in November 2001, following
18 months of poor investment performance, and the consequential reduction of the investment fluctuation reserve below
target levels.
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 8.4% (2001 - 8.4%) 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 9% (2001 - 10%) and an upper limit of 25% (2001 - 26%) of the "base capital value". If the reserve falls below the lower limit, then the level of expenditure and distributions will be reviewed by the trust. 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 5.0% (2001 - 4.9%, subject to the investment fluctuation reserve policy) 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 the 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.
2002 2001
$'000 $'000
3. Revenue
Comprises:
Interest 6,597 12,099
Dividends 3,811 5,268
Donation - 17
Rent 25 25
Realised gains 30,222 34,577
Realised losses (24,040) (34,156)
Unrealised gains 1,823 3,046
Unrealised losses (15,231) (16,298)
3,207 4,578
2002 2001
$'000 $'000
4. Expenses
Comprises:
Audit fees 10 10
Accountancy/secretarial fees 37 42
Consultants - donations - 5
Consultants - tax 22 34
Consultants - other 22 6
Employee remuneration 197 199
Funds management services 680 619
Investment advisory services 137 143
Statutory reporting 153 159
Trustees fees 193 184
Depreciation 58 78
Other expenses 375 395
1,884 1,874
2002 2001
$'000 $'000
5. Taxation
Net surplus before taxation as per statement of financial performance (7,511) (10,300)
Less:
Non-assessable income (7,352) (7,583)
(14,863) (17,883)
Add:
Non-deductible expenditure 1,008 1,020
Non-deductible losses 14,046 16,298
Imputation tax credits received and withholding tax deducted 163 129
Adjustment for prior year (2) -
Donations payable 683 995
15,898 18,442
Assessable income for the year 1,035 559
Less:
Loss brought forward (550) (717)
Assessable income (loss) for tax purposes 485 (158)
Taxation @ 33% 160 -
Imputation tax credits received and withholding tax deducted (160) -
- -
Imputation tax credits transferred to loss carried forward 2 392
Assessable loss for tax purposes - 158
Losses carried forward 2 550
The trust's ability to carry forward tax losses is subject to statutory provisions.
2002 2001
$'000 $'000
6. Capital
Balance at beginning of the year 193,184 185,933
Transfer from income 5,458 7,251
Balance at the end of the year 198,642 193,184
The transfer from income for inflation and regional population growth was calculated at an annual rate of 2.825% on the balance at the beginning of the year (2001 - 3.9%).
2002 2001
$'000 $'000
7. Reserves
Investment fluctuation reserve:
Balance at beginning of the year 19,343 29,507
Transfer from (to) income (14,446) (10,164)
Balance at the end of the year 4,897 19,343
Donation reserve:
Balance at beginning of the year 666 10,221
Transfer from (to) income 1,477 (7,387)
2,143 2,834
Less donations paid (2,143) (2,168)
Balance at the end of the year - 666
2002 2001
$'000 $'000

8. Payables
Accounts payable 252 261
252 261
2002 2001
$'000 $'000
9. Investments
Passive global equities 29,228 26,863
NZ fixed interest and cash 84,312 90,909
Active global equities 25,907 26,338
NZ equities and cash 12,877 11,565
Global fixed interest 51,352 56,879
203,676 212,554
2002 2001
$'000 $'000
10. Fixed Assets
Office equipment:
At cost 168 170
Accumulated depreciation (111) (96)
Net book value 57 74
Motor vehicles:
At cost 67 64
Accumulated depreciation (14) (36)
Net book value 53 28
Art and artefacts:
At cost 291 202
Accumulated depreciation - -
Net book value 291 202
Buildings:
At cost 599 597
Accumulated depreciation (115) (89)
Net book value 484 508
Land:
At cost 754 754
Accumulated depreciation - -
Net book value 754 754
Total fixed assets 1,639 1,566
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.
2002 2001
$'000 $'000
Term deposits 743 1,112
Investments 203,676 212,554
204,419 213,666
These are denominated in the following currencies:
2002 2001
$'000 $'000
Austrian schilling eqivalents 6,794
Australian dollar equivalents 2 611
Canadian dollar equivalents 1,810 2,400
Danish krona equivalents 460 2,484
Deutschmark equivalents 2,554 10,894
Euro equivalents 5,241 6,479
French franc eqivalents 2,408 4,542
Great Britain pound equivalents 9,236 8,737
Italian lira equivalents 517 618
Japanese yen equivalents 4,895 5,278
Netherlands guilder equivalents 2,803 698
New Zealand dollars 97,947 104,068
Spanish peseta equivalents 1,166 1,692
Swedish krona equivalents 1,377 653
Swiss franc equivalents 944 860
United States dollar equivalents 63,891 61,849
Other equivalents 2,374 1,803
204,419 213,666
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 2002, the trust's investment managers had forward exchange contracts in accordance with this policy.
The market value of the New Zealand cover is $81,680,020 (nominal value - $80,982,751). The market value of the cover at balance date accounts for 100.7% of funds held in global fixed interest and 54.4% of funds held in global equities. No undisclosed credit risk exists.
12. 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.
13. Capital Commitments and Contingent Liabilities
Commitments of $1,000,000 (2001 - $1,500,000) 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 statement of financial performance or statement of financial position.
There are no other capital commitments or contingent liabilities at balance date (2001 - Nil).
2002 2001
$'000 $'000
14. Cash Flow Reconciliation
Net surplus (7,511) (10,300)
Adjust for non-cash items:
Depreciation & loss on sale 58 80
Investment income 13,408 13,195
13,466 13,275
Impact of changes in working capital items:
Increase (decrease) in accounts payable (9) (60)
Increase (decrease) in taxation payable - (39)
Increase (decrease) in donations payable 636 (154)
627 (253)
Net cash inflow from operating activities 6,582 2,722
15. Donations
On 19 September 2001, The Waikato Times published a list totalling $10,418,500 which showed all of the donations approved by the trust from the period 1 April 2001 to 19 September 2001.
In the period from 20 September 2001 to 31 March 2002, the trust has also paid, committed or withdrawn the following donations:
$
Total donations as published in The Waikato Times on 19 September 2001 10,418,500
Cambridge Life Education Trust 350
Fairfield Primary School (6,500)
Kaputuhi Marae (20,000)
Matamata Lions 2,500
Music and Art Waikato 90,000
Otorohanga District Council (11,500)
Social Service Waikato 90,000
Te Awa Trust 10,000
Te Awamutu Events Centre Trust 100,000
Te Awamutu Music Federation 2,500
Te Awamutu Rowing Club 3,000
Te Kuiti Baptist Church (4,000)
Te Runanga O Kirikiriroa 5,000
Tokoroa Golf Club (7,500)
Uni Link 42,000
Waingaro Marae 30,000
Whitianga Community Resource 20,000
Total donations for the year 10,764,350
Represented by:
Donations paid from income 8,621,350
Donations paid from capital 2,143,000
10,764,350
Of this amount, $9,300,350 has been actually paid to community groups during the year.
The remainder of $1,464,000 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 2001/2002 year 1,464,000
For previous years 1,050,000
2,514,000
Audit Report to the Board of Trustees of Waikato Community Trust Incorporated
We have audited the financial report. The financial report provides information about the past financial performance of The Waikato Community Trust Incorporated and its financial position as at 31 March 2002. This information is stated in accordance with the accounting policies.
Board of Trustees' Responsibilities
The board of trustees is responsible for the preparation, in accordance with New Zealand law and generally accepted accounting practice, of a financial report which gives a true and fair view of the financial position of The Waikato Community Trust Incorporated as at 31 March 2002 and of the results of its operations and cash flows for the year ended 31 March 2002.
Auditors' 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 judgements made by the board of trustees in the preparation of the financial report; and
? whether the accounting policies are appropriate to the trust'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 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 auditor, we have no relationship with or interests in The Waikato Community Trust Incorporated.
Unqualified Opinion
We have obtained all the information and explanations we have required.
In our opinion:
? proper accounting records have been kept by The Waikato Community Trust Incorporated as far as appears from our examination of those records; and
? the financial report:
- complies with generally accepted accounting practice in New Zealand;
- gives a true and fair view of the financial position of the trust as at 31 March 2002 and the results of its operations and cash flows for the year ended on that date.
Our audit was completed on 18 June 2002 and our unqualified opinion is expressed as at that date.
DELOITTE TOUCHE TOHMATSU, Chartered Accountants, Hamilton, New Zealand.
---------------
A copy of these financial statements and a full list of 2001-2002 donations is available on request.