Consolidated Statement of Financial Performance for the Year Ended 31 March 2005
Notes 2005 2004
$’000 $’000
Total operating revenue 3 18,128 26,632
Total operating expenses 4 (1,774) (1,521)
Total operating surplus before distributions 16,354 25,111
Less distributions:
Donations paid from income (6,187) (5,495)
Sponsorships (141) (156)
Net surplus retained as trustees income 10,026 19,460
The surplus has been allocated to:
Capital 5 – –
Investment fluctuation reserve 6 9,115 9,432
Donation reserve 6 911 10,028
10,026 19,460
Consolidated Statement of Movements in Trust Funds for the Year Ended 31 March 2005
Notes 2005 2004
$’000 $’000
Trust funds at the start of the year 208,074 189,168
Surplus and revaluations—
Net surplus for the year:
Capital 5 – –
Investment fluctuation reserve 6 9,115 9,432
Donation reserve 6 911 10,028
Total recognised revenues and expenses for the period 10,026 19,460
Other movements:
Donations paid from capital 6 (911) (554)
Trust funds at the end of the year 217,189 208,074
Consolidated Statement of Financial Position as at 31 March 2005
Notes 2005 2004
$’000 $’000
Trust funds:
Capital 5 198,642 198,642
Investment fluctuation reserve 6 18,547 9,432
Donation reserve 6 – –
Total trust funds 217,189 208,074
Current liabilities:
Accounts payable 8 167 234
Donations payable 1,115 703
1,282 937
Total trust funds and liabilities 218,471 209,011
Current assets:
Westpac Limited cheque account 52 773
52 773
Non-current assets:
Investments 9 216,144 206,062
Property, plant and equipment 10 2,275 2,176
218,419 208,238
Total assets 218,471 209,011
Consolidated Statement of Cash Flows for the Year Ended 31 March 2005
Notes 2005 2004
$’000 $’000
Cash flow from operating activities—
Cash was provided from:
Investment income received 17,775 18,431
17,775 18,431
Cash was applied to:
Payments to suppliers and employees (1,896) (1,641)
Donations paid from income (5,812) (6,033)
(7,708) (7,674)
Net cash flow from operating activities 13 10,067 10,757
Cash flow from investing activities—
Cash was provided from:
Net decrease in investments – –
– –
Cash was applied to:
Net increase in investments (9,729) (8,697)
Purchase of fixed assets (184) (518)
(9,913) (9,215)
Net cash flow from investing activities (9,913) (9,215)
Cash flow from financing activities—
Cash was applied to:
Donations paid from capital (874) (885)
Net cash flow from financing activities (874) (885)
Net increase (decrease) in cash held (721) 657
Cash at beginning of the year 773 116
Ending cash carried forward 52 773
The Waikato Community Trust Incorporated Notes To and Forming Part Of the Consolidated Financial Statements for the Year Ended 31 March 2005
1. Statement of Accounting Policies
Basis of Reporting
The financial statements presented here are for the reporting entity The Waikato Community Trust Incorporated and for 2004 its wholly-owned subsidiary Trust Waikato 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 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, 2004 and 2005 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% (2004 – 6.8%) 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% (2004 – 9%) and an upper limit of 25% (2004 – 25%) of the “base capital value”. When the reserve falls below the lower limit, the levels 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% (2004 – 3.5%), 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) Taxation
From 1 April 2004 section CB 4 (1) (m) of the Income Tax Act (1994) exempts the trust from income tax.
(g) 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.
(h) Consolidation Method for Comparatives
The purchase method was used to consolidate the trust and its subsidiaries for 2004. All inter-entity transactions, balances and unrealised profits and losses on transactions between group members were eliminated.
(i) Cash Flows
For the purpose of the statement of cash flows, cash includes cash on hand, deposits held at call with banks, net of bank overdrafts, which are used as part of day-to-day cash management.
(j) Financial Instruments
Financial instruments recognised in the statement of financial position include cash balances, receivables, payables, and investments. Revenues and expenses relating to all financial instruments are recognised in the statement of financial performance. Except for items accounted for by a separate accounting policy, all financial instruments are shown at their fair value.
(k) Investments
Investments are stated at market value. Adjustments to market value of investments are included in the statement of financial performance.
(l) Changes in Accounting Policies
The Inland Revenue Department redefined the tax definition of a “community trust”, which meant the trust is tax exempt from 1 April 2004.
There have been no other changes in accounting policies since the previous annual financial statements. All other policies have been applied on basis 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.
2005 2004
$’000 $’000
3. Revenue
Comprises:
Interest 8,502 5,735
Dividends 9,232 6,684
Sundry income 40 42
Realised gains/(losses) 647 (17,305)
Unrealised gains/(losses) (293) 31,476
18,128 26,632
2005 2004
$’000 $’000
4. Expenses
Comprises:
Audit fees 12 12
Accountancy/secretarial fees 50 31
Consultants – tax 4 6
Consultants – other 13 –
Employee remuneration 271 236
Funds management services 616 513
Investment advisory services 137 134
Statutory reporting 10 10
Trustees fees 195 194
Depreciation – office equipment 30 26
– motor vehicles 17 12
– buildings 38 27
Other expenses 381 320
1,774 1,521
2005 2004
$’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
2005 2004
$’000 $’000
6. Reserves
Investment fluctuation reserve:
Balance at beginning of the year 9,432 –
Transfer from (to) income 9,115 9,432
Balance at the end of the year 18,547 9,432
Donation reserve:
Balance at beginning of the year – (9,474)
Transfer from (to) income 911 10,028
911 554
Less donations paid (911) (554)
Balance at the end of the year – –
7. Taxation
The taxation (G.S.T., Trans-Tasman Imputation and Miscellaneous Provisions) Act 2003 amended the Income Tax Act (1994) to exempt the trust from income tax from 1 April 2004. The effect of this is:
– The trust is not required to prepare an income tax return beyond 31 March 2004.
– The trust can continue to make distributions to community organisations without an income tax liability and the significant compliance costs previously required.
– Trust Waikato Charities Limited, a wholly-owned charitable company established by the trust to carry out some of the trust’s activities, could be wound up before 31 March 2006 and distributed to the trust without tax costs.
2005 2004
$’000 $’000
8. Payables
Accounts payable 156 227
Employee entitlements 11 7
167 234
2005 2004
$’000 $’000
9. Investments
Passive global equities 61,598 55,758
NZ fixed interest and cash 79,087 78,237
NZ equities and cash 16,243 16,452
Global fixed interest 59,216 55,615
216,144 206,062
2005 2004
$’000 $’000
10. Fixed Assets
Office equipment:
At cost 210 195
Accumulated depreciation (135) (131)
Net book value 75 64
Motor vehicles:
At cost 74 67
Accumulated depreciation (23) (42)
Net book value 51 25
Art and artefacts:
At cost 543 451
Accumulated depreciation – –
Net book value 543 451
Buildings:
At cost 969 960
Accumulated depreciation (204) (165)
Net book value 765 795
Land:
At cost 841 841
Accumulated depreciation – –
Net book value 841 841
Total property, plant and equipment 2,275 2,176
11. Related Party Information
Trust Waikato Charities Limited, a wholly-owned charitable company established by the trust, was used to carry out charitable and investing activities. The winding up of this company is near completion. As part of the winding up process, the investments held by the company were distributed in specie to the trust on 1 April 2004.
Trust Waikato Amateur Sport Limited and Trust Waikato District Improvements Limited were wound up during the year. Neither company had traded.
12. Capital Commitments and Contingent Liabilities
Commitments of $1,730,000 (2004 – $1,547,000) 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 2005/2006 $1,180,000 and 2006/2007 $550,000.
There are no other capital commitments or contingent liabilities at balance date (2004 – Nil).
2005 2004
$’000 $’000
13. Cash Flow Reconciliation
Net surplus (deficit) 10,027 19,460
Adjust for non-cash items:
Depreciation and loss on sale 85 65
Investment income (353) (8,201)
(268) (8,136)
Impact of changes in working capital items:
Increase (decrease) in accounts payable (67) (29)
Increase (decrease) in donations payable 375 (538)
308 (567)
Net cash inflow from operating activities 10,067 10,757
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 (fully hedged) 27.50%
100.00%
The following financial assets have been recognised in the financial statements of the trust.
2005 2004
$’000 $’000
Investments 216,144 206,062
216,144 206,062
These are denominated in the following currencies:
2005 2004
$’000 $’000
Australian dollar equivalents 426 545
Canadian dollar equivalents 2,742 1,515
Danish krona equivalents 197 179
Euro equivalents 28,665 39,997
Great Britain pound equivalents 13,301 5,728
Japanese yen equivalents 11,568 9,276
New Zealand dollars 95,441 94,739
Swedish krona equivalents 727 546
Swiss franc equivalents 1,860 1,755
United States dollar equivalents 59,430 50,130
Other equivalents 1,787 1,652
216,144 206,062
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 global equity investments. At 31 March 2005, the trust’s investment managers had forward exchange contracts in accordance with this policy.
The market value of the New Zealand cover is $63,214,031 (nominal value – $64,657,017). The market value of the cover at balance date accounts for 104% 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.
Credit Risk
Financial instruments which potentially subject the society to credit risk principally consist of bank balances, accounts receivable, and investments.
15. Donations
On 25 September 2004, the Waikato Times published a list totalling $6,990,485 which showed all of the donations approved by the trust from the period 1 April 2004 to 25 September 2004.
In the period from 26 September 2004 to 31 March 2005, the trust has also paid, committed or withdrawn the following donations:
$
Total donations published in the Waikato Times on 25 September 2004 6,990,485
Anglican Action 2,500
Capernwray Bible School 10,000
Chartwell Co-operating Parish 7,000
Enderley Park Community Centre Committee 2,500
Fairfield/Chartwell Community Centre 200
Fraser Tech Rugby Football Club 5,000
Hamilton Multicultural Services Trust 3,000
Hamilton Youth Council 1,000
Hauraki Maori Trust Board 3,000
Huntly Boating Club (reduced prior year commitment) (11,000)
IHC Waikato/King Country 2,000
Kaute Pasifika 3,000
Kaute Pasifika Trust 50,000
Kirikiriroa Family Services Trust (withdrawn prior year commitment) (18,000)
Knighton Normal School (reduced prior year commitment) (7,000)
Mangakino Community Agency 31,000
Maniapoto Trust Board 3,000
Ngaruawahia Pony Club 350
NZ Council of Social Services 2,500
Onewhero Early Childhood Education Centre 2,500
Pauanui Play School 500
Raglan Community Radio 500
Rangitoto Tuhua (Te Hape Marae (reduced prior year commitment) (12,500)
Raukawa Trust Board 3,000
Social Services Waikato Trust 18,000
Te Aratahi Business Network 2,500
Te Awamutu Light Operatic Society (reduced prior year commitment) (7,000)
Te Runanga o Kirikiriroa 3,000
Tokoroa Council of Social Services 3,000
Trust Waikato Tairua Surf Lifesaving Club 2,000
Waerenga Hall Society Inc 1,000
Waikato Raupatu Lands Trust 3,000
Whatawhata Rugby Sports Club (reduced prior year commitment) (13,500)
YWCA 11,000
Total donations for the year 7,097,535
Represented by:
Donations paid from income 6,186,800
Donations paid from trust funds that existed at 31 March 2004 910,735
7,097,535
Of this amount, $6,287,535 has actually been paid to community groups during the year. The remainder of $810,000 represents donations which will be paid when it is clear to the trust that the project in question will proceed and/or any other conditions have been met.
Donations payable at balance date are:
For the 2004/2005 year 810,000
For previous years 305,000
1,115,000
16. Conflicts of Interest
During the year, trustees and staff were required to declare when they had either a direct or indirect conflict of interest in a matter being considered by the trust. 111 such interests were recorded during the course of the year (2004 – 106) and a register of those conflicts is available for inspection at the trust.
17. Subsequent Events
There are no matters or events that have arisen, or been discovered, subsequent to balance date that would require adjustment to, or disclosure in, these financial statements.
18. Segmental Information
The Waikato Community Trust is a charitable trust which operates in the Waikato area.
19. Meeting Attendance
The trust held 20 formal meetings during the year. The following table records each trustee’s attendances at these formal meetings:
Trustee MeetingAttendance Remuneration$
Hori Awa (chairperson from June 2004) 17 31,272
Clint Baddeley (trustee from June 2004) 17 12,393
Christine Cave 17 10,665
Neil Clarke (trustee and chairperson to May 2004) 3 4,400
Bernadette Doube 13 11,225
Bruce Hosking (investment committee chairperson from June 2004) 19 16,635
Peta Karalus 19 10,525
Heeni Katipa 13 9,475
John Kilbride 19 13,780
Michael Law 17 11,995
Joyce Maipi 12 10,665
Tureiti Moxon 17 10,420
John Pemberton (trustee to June 2004) 2 1,597
Hinerangi Raumati (deputy chairperson from June 2004) 19 16,427
Glenda Saunders 17 12,520
Fee-Ching Tan (trustee from June 2004) 16 11,133
Total remuneration 195,127
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 trustees and trust staff were invited to 358 separate formal and informal
meetings and functions. The trust was able to achieve representation at approximately 211 of these meetings and functions.
20. Comparatives
The comparatives for 2004 were based on consolidated financial statements showing the financial performance and position
of the trust and its subsidiaries. There are no consolidated financial statements for 2005, as all the assets of the trust’s subsidiary company, Trust Waikato Charities Limited, have been transferred to the trust. No 2005 financial statements are required for the company.
Audit Report to the 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 2005. This information is stated in accordance with the accounting policies.
Board of Trustees’ Responsibilities
The board of trustees are responsible for the preparation of a financial report, 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 2005 and the results of its operations and cash flows for the year ended 31 March 2005.
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 that we have required.
In our opinion, the financial report fairly reflects the financial position of The Waikato Community Trust Incorporated as at
31 March 2005 and the results of its operations and cash flows for the year ended on that date.
Our audit was completed on 20 June 2005 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 2004–2005 donations is available on request.