Consolidated Statement of Financial Performance for the Year Ended 31 March 2003
Notes 2003 2002
$'000 $'000
Total operating revenue 3 (5,567) 3,207
Total operating expenses 4 (1,676) (1,884)
Total operating surplus before distributions (7,243) 1,323
Less distributions:
Donations paid from income (5,804) (8,621)
Sponsorships (132) (213)
Net surplus before taxation (13,179) (7,511)
Income tax - -
Net surplus retained as trustees income (13,179) (7,511)
The surplus has been allocated to:
Capital 5 - 5,458
Investment fluctuation reserve 6 (4,897) (14,446)
Donation reserve 6 (8,282) 1,477
(13,179) (7,511)
Consolidated Statement of Movements in Trust Funds for the Year Ended 31 March 2003
Notes 2003 2002
$'000 $'000
Trust funds at the start of the year 203,539 213,193
Surplus (deficit) and revaluations-
Net surplus (deficit) for the period:
Capital 5 - 5,458
Investment fluctuation reserve 6 (4,897) (14,446)
Donation reserve 6 (8,282) 1,477
Total recognised revenues and expenses for the period 13,179 (7,511)
Other movements:
Donations paid from capital 6 (1,192) (2,143)
Trust funds at the end of the year 189,168 203,539
Consolidated Statement of Financial Position as at 31 March 2003
Notes 2003 2002
$'000 $'000
Trust funds:
Capital 5 198,642 198,642
Investment fluctuation reserve 6 - 4,897
Donation reserve 6 (9,474) -
Total trust funds 189,168 203,539
Current liabilities:
Accounts payable 8 263 252
Donations payable 1,572 2,514
1,835 2,766
Total trust funds and liabilities 191,003 206,305
Current assets:
WestpacTrust cheque account 116 246
Short term deposits - 744
116 990
Non-current assets:
Investments 9 189,164 203,676
Fixed assets 10 1,723 1,639
190,887 205,315
Total assets 191,003 206,305
R. H. T. AWA, J. KILBRIDE, C. M. CAVE, M. G. LAW, N. J. CLARKE, J. T. MAIPI, B. DOUBE, T. H. MOXON,
B. L. HOSKING, J. S. PEMBERTON, L. E. KARALUS, H. A. RAUMATI, H. KATIPA, G. M. SAUNDERS, Trustees.
Dated this 16th day of June 2003.
Consolidated Statement of Cash Flows for the Year Ended 31 March 2003
Notes 2003 2002
$'000 $'000
Cash flow from operating activities-
Cash was provided from:
Investment income received 7,932 16,616
7,932 16,616
Cash was applied to:
Payments to suppliers and employees (1,715) (2,049)
Donations paid from income (6,841) (7,985)
Tax paid - -
(8,556) (10,034)
Net cash flow from operating activities 14 (624) 6,582
Cash flow from investing activities-
Cash was provided from:
Net decrease in investments 1,757 -
1,757 -
Cash was applied to:
Net increase in investments - (4,162)
Purchase of fixed assets (166) (131)
Net cash flow from investing activities 1,591 (4,293)
Cash flow from financing activities-
Cash was applied to:
Donations paid from capital (1,097) (1,990)
Net cash flow from financing activities (1,097) (1,990)
Net increase (decrease) in cash held (130) 299
Cash at beginning of the year 246 (53)
Ending cash carried forward 116 246
The Waikato Community Trust Incorporated Notes To and Forming Part Of the Consolidated Financial Statements for the Year Ended 31 March 2003
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 subsidiaries 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 a 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
Set out below are the reserving policies. They were adopted by the trust in 1998 and have been amended following reviews in 2000, 2001 and 2003 to reflect investment performance.
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. No transfer has been made in the 2003 year. An appropriate amount will be transferred when investment performance improves sufficiently.
? Investment Fluctuation Reserve
The trustees have adopted an investment strategy with a targeted long term annual rate of return of 8.4% (2002 - 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% (2002 - 9%) and an upper limit of 25% (2002 - 25%) 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 4.5% (2002 - 5.0%), 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 or deficit after transfers to the capital and the investment fluctuation reserve is held in the donation reserve and represents the trust's retained earnings or accumulated losses. It is the trust's intention to apply the surplus in this fund to future donations or recover deficits from future income.
(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
Donations made are included in the statement of financial performance or statement of movements in trust funds.
(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) Conflicts of Interest
During the year, trustees and staff were required to declare when they had either a direct or indirect conflict of interest in a matter being considered by the trust.
Sixty three such interests were recorded during the course of the year and a register of those conflicts is available for inspection at the trust. Trustees are required to declare any business conflicts they have in relation to the trust's overall operations. No such conflicts were declared during the 2003 financial year.
(k) 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.
2003 2002
$'000 $'000
3. Revenue
Comprises:
Interest 5,303 6,597
Dividends 6,271 3,811
Sundry income 131 25
Realised gains 40,903 30,222
Realised losses (44,660) (24,040)
Unrealised gains 982 1,823
Unrealised losses (14,497) (15,231)
(5,567) 3,207
2003 2002
$'000 $'000
4. Expenses
Comprises:
Audit fees 11 10
Accountancy/secretarial fees 31 37
Consultants - tax 11 22
Consultants - other 17 22
Employee remuneration 218 197
Funds management services 648 680
Investment advisory services 134 137
Statutory reporting 10 153
Trustees fees 181 193
Depreciation - office equipment 35 26
- motor vehicles 17 14
- buildings 24 25
(Gain) loss on sale 7 (7)
Other expenses 332 375
1,676 1,884
2003 2002
$'000 $'000
5. Capital
Balance at beginning of the year 198,642 193,184
Transfer from income - 5,458
Balance at the end of the year 198,642 198,642
2003 2002
$'000 $'000
6. Reserves
Investment fluctuation reserve:
Balance at beginning of the year 4,897 19,343
Transfer from (to) income (4,897) (14,446)
Balance at the end of the year - 4,897
Donation reserve:
Balance at beginning of the year - 666
Transfer from (to) income (8,282) 1,477
(8,282) 2,143
Less donations paid (1,192) (2,143)
Balance at the end of the year (9,474) -
There has been no transfer to the investment fluctuation reserve and the capital reserve due to the performance of the fund for the year. Transfers to these reserves will commence when investment performance improves sufficiently.
2003 2002
$'000 $'000
7. Taxation
Net deficit before taxation as per statement of financial performance (13,179) (7,511)
Less:
Non-assessable income (7,047) (7,352)
(20,226) (14,863)
Add:
Non-deductible expenditure 787 1,008
Non-deductible losses 13,071 14,046
Imputation tax credits received and withholding tax deducted 202 163
Adjustment for prior year (1,578) (2)
Donations payable 123 683
12,605 15,898
Assessable income for the year (7,621) 1,035
Less:
Loss brought forward (2) (550)
Assessable income (loss) for tax purposes (7,623) 485
Taxation @ 33% - 160
Imputation tax credits received and withholding tax deducted - (160)
- -
Imputation tax credits transferred to loss carried forward (611) (2)
Assessable loss for tax purposes (7,623) -
Losses carried forward (8,234) (2)
The adjustment for prior year in 2003 relates to a change in the treatment of unrealised losses for one of the trust's investment funds. In 2001 and 2002, unrealised losses were treated as non-deductible for tax purposes when, in fact, they could be deducted. The impact of this change is to increase the tax losses that the trust has available to reduce future taxable income.
2003 2002
$'000 $'000
8. Payables
Accounts payable 263 252
263 252
2003 2002
$'000 $'000
9. Investments
Passive global equities 22,960 29,228
NZ fixed interest and cash 82,778 84,312
Active global equities 19,605 25,907
NZ equities and cash 12,343 12,877
Global fixed interest 51,478 51,352
189,164 203,676
2003 2002
$'000 $'000
10. Fixed Assets
Office equipment:
At cost 184 168
Accumulated depreciation (104) (111)
Net book value 80 57
Motor vehicles:
At cost 67 67
Accumulated depreciation (31) (14)
Net book value 36 53
Art and artefacts:
At cost 391 291
Accumulated depreciation - -
Net book value 391 291
Buildings:
At cost 600 599
Accumulated depreciation (138) (115)
Net book value 462 484
Land:
At cost 754 754
Accumulated depreciation - -
Net book value 754 754
Total fixed assets 1,723 1,639
11. 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.
12. Capital Commitments and Contingent Liabilities
Commitments of $2,294,000 (2002 - $1,000,000) 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.
Subject to fulfilment of the conditions, the commitments are payable in 2003/2004 $1,122,000; 2004/2005 $622,000 and 2005/2006 $550,000.
There are no other capital commitments or contingent liabilities at balance date (2002 - Nil).
13. Subsequent Events
Donations payable of $226,000 were withdrawn in the May 2003 trustees' meeting.
2003 2002
$'000 $'000
14. Cash Flow Reconciliation
Net deficit (13,179) (7,511)
Adjust for non-cash items:
Depreciation and loss on sale 83 58
Investment income 13,499 13,408
13,582 13,466
Impact of changes in working capital items:
Increase (decrease) in accounts payable 10 (9)
Increase (decrease) in taxation payable - -
Increase (decrease) in donations payable (1,037) 636
(1,027) 627
Net cash inflow from operating activities (624) 6,582
15. 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.
2003 2002
$'000 $'000
Term deposits - 743
Investments 189,164 203,676
189,164 204,419
These are denominated in the following currencies:
2003 2002
$'000 $'000
Australian dollar equivalents 2 2
Austrian schilling eqivalents 8,771 6,794
Belgian franc equivalents 5,371 -
Canadian dollar equivalents 1,517 1,810
Danish krona equivalents 471 460
Deutschmark equivalents 1,481 2,554
Euro equivalents 3,225 5,241
French franc eqivalents 2,738 2,408
Great Britain pound equivalents 9,669 9,236
Italian lira equivalents 350 517
Japanese yen equivalents 3,843 4,895
Netherlands guilder equivalents 478 2,803
New Zealand dollars 95,285 97,947
Spanish peseta equivalents 5,010 1,166
Swedish krona equivalents 1,218 1,377
Swiss franc equivalents 760 944
United States dollar equivalents 47,378 63,891
Other equivalents 1,597 2,374
189,164 204,419
The unrealised gains and losses on forward contracts have been included in other equivalents.
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 2003, the trust's investment managers had forward exchange contracts in accordance with this policy.
The market value of the New Zealand cover is $73,810,744 (nominal value - $74,613,410). The market value of the cover at balance date accounts for 98.90% of funds held in global fixed interest and 53.79% of funds held in global equities. No undisclosed credit risk exists.
16. Donations
On 21 September 2002, The Waikato Times published a list totalling $7,167,850 which showed all of the donations approved by the trust from the period 1 April 2002 to 21 September 2002.
In the period from 22 September 2002 to 31 March 2003, the trust has also paid, committed or withdrawn the following donations:
$
Total donations as published in The Waikato Times on 21 September 2002 7,167,850
Hamilton Roller Skating Club 12,000
Waihi Coastguard 13,500
Kirikiriroa Marae 40,000
Cambridge Childcare Centre 500
Whakaaratamaiti Marae 11,000
Te Kauwhata Lakeside Lions 2,000
Waihou Hall Community Centre 750
Kio Kio School BOT 4,000
St John's College 12,500
Pio Pio Scout Group 15,000
Central North Island Kindergarten Association 20,000
Te Runanga o Kirikiriroa 2,000
Whangamata Business Association 1,500
Te Ahurei a Rangatahi 2,000
Taumarunui Family Support Services (1,488)
Napi Napi Marae Committee (7,000)
Waitomo Safer Community Council (20,000)
North Waikato Aquatic Trust (280,000)
Total donations for the year 6,996,112
Represented by:
Donations paid from income 5,804,262
Donations paid from capital 1,191,850
6,996,112
Of this amount, $5,424,043 has been actually paid to community groups during the year.
The remainder of $1,572,069 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 2002/2003 year 415,500
For previous years 1,156,569
1,572,069
Audit Report to the Trustees of Waikato Community Trust Incorporated
We have audited the financial statements. The financial statements provide information about the past financial performance of The Waikato Community Trust Incorporated and its financial position as at 31 March 2003. This information is stated in accordance with the accounting policies set out in note 1.
Board of Trustees' Responsibilities
The board of trustees is responsible for the preparation of financial statements, in accordance with New Zealand law and generally accepted accounting practice, which fairly reflects the financial position of The Waikato Community Trust Incorporated as at 31 March 2003 and the results of its operations and cash flows for the year ended 31 March 2003.
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 Waikato Community Trust Incorporated'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 Waikato Community Trust Incorporated.
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 Waikato Community Trust Incorporated as at 31 March 2003 and the results of its operations and cash flows for the year ended on that date.
Our audit was completed on 18 June 2003 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 2002-2003 donations is available on request.