Consolidated Statement of Financial Performance for the Year Ended 31 March 2004
Notes 2004 2003
$'000 $'000
Total operating revenue 3 26,632 (5,567)
Total operating expenses 4 (1,521) (1,676)
Total operating surplus (deficit) before distributions 25,111 (7,243)
Less distributions:
Donations paid from income (5,495) (5,804)
Sponsorships (156) (132)
Net surplus (deficit) before taxation 19,460 (13,179)
Income tax 7 - -
Net surplus (deficit) retained as trustees income 19,460 (13,179)
The surplus (deficit) has been allocated to:
Capital 5 - -
Investment fluctuation reserve 6 9,432 (4,897)
Donation reserve 6 10,028 (8,282)
19,460 (13,179)
Consolidated Statement of Movements in Trust Funds for the Year Ended 31 March 2004
Notes 2004 2003
$'000 $'000
Trust funds at the start of the year 189,168 203,539
Surplus (deficit) and revaluations-
Net surplus (deficit) for the year:
Capital 5 - -
Investment fluctuation reserve 6 9,432 (4,897)
Donation reserve 6 10,028 (8,282)
Total recognised revenues and expenses for the period 19,460 13,179
Other movements:
Donations paid from capital 6 (554) (1,192)
Trust funds at the end of the year 208,074 189,168
Consolidated Statement of Financial Position as at 31 March 2004
Notes 2004 2003
$'000 $'000
Trust funds:
Capital 5 198,642 198,642
Investment fluctuation reserve 6 9,432 -
Donation reserve 6 - (9,474)
Total trust funds 208,074 189,168
Current liabilities:
Accounts payable 8 234 263
Donations payable 703 1,572
937 1,835
Total trust funds and liabilities 209,011 191,003
Current assets:
Westpac Limited cheque account 773 116
773 116
Non-current assets:
Investments 9 206,062 189,164
Fixed assets 10 2,176 1,723
208,238 190,887
Total assets 209,011 191,003
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 21st day of June 2004.
Consolidated Statement of Cash Flows for the Year Ended 31 March 2004
Notes 2004 2003
$'000 $'000
Cash flow from operating activities-
Cash was provided from:
Investment income received 18,431 7,932
18,431 7,932
Cash was applied to:
Payments to suppliers and employees (1,641) (1,715)
Donations paid from income (6,033) (6,841)
Tax paid - -
(7,674) (8,556)
Net cash flow from operating activities 13 10,757 (624)
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 (8,697) -
Purchase of fixed assets (518) (166)
(9,215) (166)
Net cash flow from investing activities (9,215) 1,591
Cash flow from financing activities-
Cash was applied to:
Donations paid from capital (885) (1,097)
Net cash flow from financing activities (885) (1,097)
Net increase (decrease) in cash held 657 (130)
Cash at beginning of the year 116 246
Ending cash carried forward 773 116
The Waikato Community Trust Incorporated Notes To and Forming Part Of the Consolidated Financial Statements for the Year Ended 31 March 2004
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, 2003 and 2004 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. Transfers have not been made in the 2003 and 2004 years. 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 6.8% (2003 - 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 is transferred to income.
At the trust's current risk profile, the investment fluctuation reserve should have a lower limit of 9% (2003 - 9%) and an upper limit of 25% (2003 - 25%) of the "base capital value". When the reserve falls below the lower limit, the level of expenditure and distributions are reviewed by the trust. If the reserve exceeds the upper limit, any further excess returns are transferred to the donation reserve.
? Donation Reserve
The trust's present donation policy is to distribute annually as donations 3.5% (2003 - 4.5%), 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 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. All hedge instruments are also revalued to market value at year end and unrealised profits and losses are 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.
2004 2003
$'000 $'000
3. Revenue
Comprises:
Interest 5,735 5,303
Dividends 6,684 6,271
Sundry income 42 131
Realised gains 3,759 40,903
Realised losses (21,064) (44,660)
Unrealised gains 32,956 982
Unrealised losses (1,480) (14,497)
26,632 (5,567)
2004 2003
$'000 $'000
4. Expenses
Comprises:
Audit fees 12 11
Accountancy/secretarial fees 31 31
Consultants - tax 6 11
Consultants - other - 17
Employee remuneration 236 218
Funds management services 513 648
Investment advisory services 134 134
Statutory reporting 10 10
Trustees fees 194 181
Depreciation - office equipment 26 42
- motor vehicles 12 17
- buildings 27 24
Other expenses 320 332
1,521 1,676
2004 2003
$'000 $'000
5. Capital
Balance at beginning of the year 198,642 198,642
Transfer from income - -
Balance at the end of the year 198,642 198,642
2004 2003
$'000 $'000
6. Reserves
Investment fluctuation reserve:
Balance at beginning of the year - 4,897
Transfer from (to) income 9,432 (4,897)
Balance at the end of the year 9,432 -
Donation reserve:
Balance at beginning of the year (9,474) -
Transfer from (to) income 10,028 (8,282)
554 (8,282)
Less donations paid (554) (1,192)
Balance at the end of the year - (9,474)
2004 2003
$'000 $'000
7. Taxation
Net income (deficit) before taxation as per statement of financial performance 19,460 (13,179)
Less:
Non-assessable income 35,016 (7,047)
(15,556) (20,226)
Add:
Non-deductible expenditure 816 787
Non-deductible losses - 13,071
Imputation tax credits received and withholding tax deducted 232 202
Adjustment for prior year - (1,578)
Donations payable 210 123
1,258 12,605
Assessable income for the year (14,298) (7,621)
Less:
Loss brought forward (8,234) (2)
Assessable income (loss) for tax purposes (22,532) (7,623)
Taxation @ 33% - -
Imputation tax credits received and withholding tax deducted - -
- -
Imputation tax credits transferred to loss carried forward (702) (611)
Assessable loss for tax purposes (22,532) (7,623)
Losses carried forward (23,234) (8,234)
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.
2004 2003
$'000 $'000
8. Payables
Accounts payable 234 263
234 263
2004 2003
$'000 $'000
9. Investments
Passive global equities 55,758 22,960
NZ fixed interest and cash 78,237 82,778
Active global equities - 19,605
NZ equities and cash 16,452 12,343
Global fixed interest 55,615 51,478
206,062 189,164
2004 2003
$'000 $'000
10. Fixed Assets
Office equipment:
At cost 195 184
Accumulated depreciation (131) (104)
Net book value 64 80
Motor vehicles:
At cost 67 67
Accumulated depreciation (42) (31)
Net book value 25 36
Art and artefacts:
At cost 451 391
Accumulated depreciation - -
Net book value 451 391
Buildings:
At cost 960 600
Accumulated depreciation (165) (138)
Net book value 795 462
Land:
At cost 841 754
Accumulated depreciation - -
Net book value 841 754
Total fixed assets 2,176 1,723
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 $1,547,000 (2003 - $2,294,000) 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 2004/2005 $970,000 and 2005/2006 $577,000.
There are no other capital commitments or contingent liabilities at balance date (2003 - Nil).
2004 2003
$'000 $'000
13. Cash Flow Reconciliation
Net surplus (deficit) 19,460 (13,179)
Adjust for non-cash items:
Depreciation and loss on sale 65 83
Investment income (8,201) 13,499
(8,136) 13,582
Impact of changes in working capital items:
Increase (decrease) in accounts payable (29) 10
Increase (decrease) in taxation payable - -
Increase (decrease) in donations payable (538) (1,037)
(567) (1,027)
Net cash inflow from operating activities 10,757 (624)
14. 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 7.50%
New Zealand fixed interest 25.00%
New Zealand cash 12.50%
Global fixed interest (fully hedged) 27.50%
Global equities (50% hedged) 27.50%
100.00%
The following financial assets have been recognised in the financial statements of the trust.
2004 2003
$'000 $'000
Investments 206,062 189,164
206,062 189,164
These are denominated in the following currencies:
2004 2003
$'000 $'000
Australian dollar equivalents 545 2
Austrian schilling eqivalents 63 8,771
Belgian franc equivalents 244 5,371
Canadian dollar equivalents 1,515 1,517
Danish krona equivalents 179 471
Deutschmark equivalents 1,623 1,481
Euro equivalents 27,646 3,225
French franc eqivalents 6,696 2,738
Great Britain pound equivalents 5,728 9,669
Italian lira equivalents 905 350
Japanese yen equivalents 9,276 3,843
Netherlands guilder equivalents 1,955 478
New Zealand dollars 94,739 95,285
Spanish peseta equivalents 865 5,010
Swedish krona equivalents 546 1,218
Swiss franc equivalents 1,755 760
United States dollar equivalents 50,130 47,378
Other equivalents 1,652 1,597
206,062 189,164
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 2004, the trust's investment managers had forward exchange contracts in accordance with this policy.
The market value of the New Zealand cover is $28,225,747 (nominal value - $28,660,401). The market value of the cover at balance date accounts for 51.40% of funds held in global equities. At balance date, global fixed interest investments were held by a New Zealand investment manager. No undisclosed credit risk exists.
15. Donations
On 27 September 2003, The Waikato Times published a list totalling $6,653,150 which showed all of the donations approved by the trust from the period 1 April 2003 to 27 September 2003.
In the period from 28 September 2003 to 31 March 2004, the trust has also paid, committed or withdrawn the following donations:
$
Total donations as published in The Waikato Times on 27 September 2003 6,653,150
Cambridge Golf Club Inc (7,500)
Cambridge Historical Society 2,000
Cambridge Soccer Club (50,000)
Community Sector Task Force - National 15,000
Community Sector Task Force - Regional 1,000
Eastern Waikato Netball Association (5,000)
Finlay Park Adventure Camp 5,000
Frankton Dinsdale Rauawaawa Charitable Trust 350
Freeman Court - Te Awamutu Eventide Home (10,000)
Hamilton Rowing Club 3,500
Hamilton Seventh Day Adventist School (12,500)
Hauraki Bowling Club (12,000)
JR McKenzie Trust 1,700
Kirikiriroa Family Services Trust 18,000
Matamata Child Care Centre 10,000
Matamata Community Resource Centre 6,000
Ministry of Social Development 10,000
Morrinsville Events Centre Charitable Trust (12,500)
Morrinsville Pakeke Lions (2,000)
Ngaruawahia Rugby Sports Club 2,000
Ngaruawahia Womens Bowling Club (7,500)
Opera Waikato (5,000)
Outward Bound (5,000)
Parawera Marae (20,000)
Pukete Neighbourhood House (50,000)
Rangimarie Te Horanganui Marae (28,000)
River Glade Archers (5,000)
Safer Children's Trust (1,500)
Scottwood Trust (250,000)
Stanley Avenue Primary School 1,500
Taupo District Council (80,000)
Te Akau Waingaro Community Complex 10,000
Te Awamutu Croquet Club (12,000)
Te Hapu o Waipapa Marae Trust (50,000)
Te Kuiti Squash Club (2,000)
Te Kura Kaupapa Maori O Bernard Fergusson (30,000)
Te Ohaaki Marae (7,500)
Te Wharekura O Rakaumangamanga (20,000)
Thames Energy Futures Trust (5,000)
Tigers Sports Club (4,000)
Waahi Whaanui Trust 750
Waharoa Primary School (38,000)
Waikato Combined Equestrian Group Inc. (15,000)
Waikato Museum of Art and History 37,500
Waikato Spitfire and Airforce Memorial Trust 8,000
Waingaro Marae 2,500
Waka Tangata Trust 7,000
Whai Marama Youth Connex 1,000
Total donations for the year 6,048,950
Represented by:
Donations paid from income 5,494,950
Donations paid from capital 554,000
6,048,950
Of this amount, $5,758,450 has been actually paid to community groups during the year.
The remainder of $290,500 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 2003/2004 year 290,500
For previous years 412,500
703,000
16. 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. 106 such interests were recorded during the course of the year (2003 - 63) and a register of those conflicts is available for inspection at the trust.
17. Meeting Attendance
The trust held 24 formal meetings during the year. The following table records each trustee's attendances at these formal meetings:
Trustee Full MeetingAttendance Partial MeetingAttendance Apology forNon Attendance
Hori Awa (deputy chairperson) 13 9 2
Christine Cave 11 5 7
Neil Clarke (chairperson) 19 2 3
Bernadette Doube 7 6 10
Bruce Hosking 20 0 2
Peta Karalus 11 4 9
Heeni Katipa 11 5 7
John Kilbride 21 1 1
Michael Law 17 4 2
Joyce Maipi 9 10 5
Tureiti Moxon 12 5 6
John Pemberton 17 6 0
Hinerangi Raumati (investment committee chairperson) 16 3 3
Glenda Saunders 19 3 2
In addition during the year, trustees were required as part of their role to attend a number of both formal and informal meetings to represent the trust. During the year, the trust and trustees were invited to 409 separate formal and informal meetings and functions. The trust was able to achieve representation at approximately 230 of these meetings/functions.
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 Group and its financial position as at 31 March 2004. This information is stated in accordance with the accounting policies.
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 group as at 31 March 2004 and the results of its operations and cash flows for the year ended 31 March 2004.
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 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 Waikato Community Trust Incorporated 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 Waikato Community Trust Incorporated group as at 31 March 2004 and the results of its operations and cash flows for the year ended on that date.
Our audit was completed on 22 June 2004 and our unqualified opinion is expressed as at that date.
DELOITTE, Chartered Accountants, Hamilton, New Zealand.
---------------
A copy of these financial statements and a full list of 2003-2004 donations is available on request.