Statement of Financial Performance for the Year Ended 31 March 2006
Notes 2006 2005
$’000 $’000
Total operating revenue 3 30,529 18,128
Total operating expenses 4 (1,959) (1,774)
Total operating surplus before distributions 28,570 16,354
Less distributions:
Donations paid from income (6,981) (6,187)
Sponsorships (144) (141)
Net surplus retained as trustees’ income 21,445 10,026
The surplus has been allocated to:
Capital 5 15,373 –
Investment fluctuation reserve 6 4,923 9,115
Donation reserve 6 1,149 911
21,445 10,026
Statement of Movements in Trust Funds for the Year Ended 31 March 2006
Notes 2006 2005
$’000 $’000
Trust funds at the start of the year 217,189 208,074
Surplus and revaluations—
Net surplus for the year:
Capital 5 15,373 –
Investment fluctuation reserve 6 4,923 9,115
Donation reserve 6 1,149 911
Total recognised revenues and expenses for the period 21,445 10,026
Other movements:
Donations paid from capital 6 (1,149) (911)
Trust funds at the end of the year 237,485 217,189
Statement of Financial Position as at 31 March 2006
Notes 2006 2005
$’000 $’000
Trust funds:
Capital 5 214,015 198,642
Investment fluctuation reserve 6 23,470 18,547
Donation reserve 6 – –
Total trust funds 237,485 217,189
Current liabilities:
Accounts payable 8 143 167
Donations payable 1,474 1,115
1,617 1,282
Total trust funds and liabilities 239,102 218,471
Current assets:
Westpac Limited 632 52
Receivables 63 –
695 52
Non-current assets:
Investments 9 236,108 216,144
Property, plant and equipment 10 2,299 2,275
238,407 218,419
Total assets 239,102 218,471
Statement of Cash Flows for the Year Ended 31 March 2006
Notes 2006 2005
$’000 $’000
Cash flow from operating activities—
Cash was provided from:
Investment income received 16,684 17,775
16,684 17,775
Cash was applied to:
Payments to suppliers and employees (2,116) (1,896)
Donations paid from income (6,682) (5,812)
(8,798) (7,708)
Net cash flow from operating activities 13 7,886 10,067
Cash flow from investing activities—
Cash was provided from:
Net decrease in investments – –
– –
Cash was applied to:
Net increase in investments (6,119) (9,729)
Purchase of property, plant and equipment (98) (184)
(6,217) (9,913)
Net cash flow from investing activities (6,217) (9,913)
Cash flow from financing activities—
Cash was applied to:
Donations paid from capital (1,089) (874)
Net cash flow from financing activities (1,089) (874)
Net increase/(decrease) in cash held 580 (721)
Cash at beginning of the year 52 773
Ending cash carried forward 632 52
The Waikato Community Trust Incorporated Notes To and Forming Part Of the Consolidated Financial Statements for the Year Ended 31 March 2006
1. Statement of Accounting Policies
Basis of Reporting
The financial statements presented here are for the reporting entity The Waikato Community Trust Incorporated.
The financial statements have been prepared in accordance with the requirements of the New Zealand Institute of Chartered Accountants for the measurement and reporting of profit on a historical cost basis with the exception of investments which are recorded at market value. The reporting currency is in New zealand dollars.
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, 2004 and 2005 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 were not made in the 2003, 2004 and 2005 years due to insufficient returns on investments. Following a sufficient increase in investment performance, an appropriate amount has been added to base capital in 2006 for the 2003 to 2006 years.
? Investment Fluctuation Reserve
The trustees have adopted an investment strategy with a targeted long term annual rate of return of 6.8% (2005 – 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% (2005 – 9%) and an upper limit of 25% (2005 – 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% (2005 – 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) Property, Plant and Equipment
All property, plant and equipment has been recorded at cost price less accumulated depreciation.
(c) Depreciation
Depreciation of property, plant and equipment, 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 GST 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) 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.
(i) 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.
(j) Investments
Investments are stated at market value. Adjustments to market value of investments are included in the statement of financial performance.
(k) Changes in Accounting Policies
There have been no changes in accounting policies since the previous annual financial statements. All other 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.
2006 2005
$’000 $’000
3. Revenue
Comprises:
Interest 11,325 8,502
Dividends 2,405 9,232
Sundry income 40 40
Realised gains/(losses) 2,914 647
Unrealised gains/(losses) 13,845 (293)
30,529 18,128
2006 2005
$’000 $’000
4. Expenses
Comprises:
Audit fees 13 12
Accountancy/secretarial fees 48 50
Consultants – tax – 4
Consultants – other 54 13
Employee remuneration 271 271
Funds management services 647 616
Investment advisory services 105 137
Statutory reporting 9 10
Trustees fees 213 195
Depreciation – office equipment 22 30
– motor vehicles 16 17
– buildings 35 38
Other expenses 526 381
1,959 1,774
2006 2005
$’000 $’000
5. Capital
Balance at beginning of the year 198,642 198,642
Transfer from income 15,373 –
Balance at the end of the year 214,015 198,642
2006 2005
$’000 $’000
6. Reserves
Investment fluctuation reserve:
Balance at beginning of the year 18,547 9,432
Transfer from (to) income 4,923 9,115
Balance at the end of the year 23,470 18,547
Donation reserve:
Balance at beginning of the year – –
Transfer from/(to) income 1,149 911
1,149 911
Less donations paid (1,149) (911)
Balance at the end of the year – –
7. Taxation
The taxation (GST, 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 and 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.
2006 2005
$’000 $’000
8. Payables
Accounts payable 130 156
Employee entitlements 13 11
143 167
2006 2005
$’000 $’000
9. Investments
Enhanced passive global equities 71,051 61,598
NZ fixed interest and cash 85,552 79,087
NZ equities and cash 18,575 16,243
Global fixed interest 60,930 59,216
236,108 216,144
2006 2005
$’000 $’000
10. Property, Plant and Equipment
Office equipment:
At cost 199 210
Accumulated depreciation (139) (135)
Net book value 60 75
Motor vehicles:
At cost 74 74
Accumulated depreciation (39) (23)
Net book value 35 51
Art and artefacts:
At cost 629 543
Accumulated depreciation – –
Net book value 629 543
Buildings:
At cost 973 969
Accumulated depreciation (239) (204)
Net book value 734 765
Land:
At cost 841 841
Accumulated depreciation – –
Net book value 841 841
Total property, plant and equipment 2,299 2,275
11. Capital Commitments and Contingent Liabilities
Commitments of $1,000,000 (2005 – $1,730,000) 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 payable in 2006/2007 are $1,000,000.
There are no other capital commitments or contingent liabilities at balance date (2005 – Nil).
2006 2005
$’000 $’000
12. Cash Flow Reconciliation
Net surplus (deficit) 21,445 10,027
Adjust for non-cash items:
Depreciation and loss on sale 74 85
Investment income (13,845) (353)
(13,771) (268)
Impact of changes in working capital items:
(Increase)/decrease in accounts receivable (63) –
Increase/(decrease) in accounts payable (24) (67)
Increase/(decrease) in donations payable 299 375
212 308
Net cash inflow from operating activities 7,886 10,067
13. 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.
2006 2005
$’000 $’000
Investments 236,108 216,144
236,108 216,144
These are denominated in the following currencies:
2006 2005
$’000 $’000
Australian dollar equivalents 1,091 426
Canadian dollar equivalents 2,806 2,742
Danish krona equivalents 192 197
Euro equivalents 23,705 28,665
Great Britain pound equivalents 22,231 13,301
Hong Kong dollar equivalents 512 –
Japanese yen equivalents 6,921 11,568
New Zealand dollars 104,248 95,441
Norwegian kroner equivalents 327 –
Poland zloty equivalents 469 –
Singapore dollar equivalents 362 –
South Korea dollar equivalents 1,395 –
Swedish krona equivalents 789 727
Swiss franc equivalents 2,217 1,860
United States dollar equivalents 68,864 59,430
Other equivalents (21) 1,787
236,108 216,144
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 2006, the trust’s investment managers had forward exchange contracts in accordance with this policy.
The market value of the New Zealand cover is $77,956,416 (nominal value – $82,233,073). This cover is only for global equity investments. The market value of the cover at balance date accounts for 115% 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.
14. Donations
On 24 September 2005, the Waikato Times published a list totalling $8,066,650, which showed all of the donations approved by the trust from the period 1 April 2005 to 24 September 2005.
In the period from 25 September 2005 to 31 March 2006, the trust has also paid, committed or withdrawn the following donations:
$
Total donations published in the Waikato Times on 24 September 2005 8,066,650
Access to Communication Technology Trust (10,000)
Eastlink – Lugton Park Combined Sports 105,000
Enderley Park Community Centre (61,000)
Epworth Retreat & Recreation Centre (15,000)
Hamilton Multicultural Centre 3,000
Hauraki Maori Trust Board 3,000
K’aute Pasifika 3,000
Maniapoto Trust 3,000
Matamata College Sports Club 11,000
Melville Primary School 1,500
Pirongia Te Aroaro o Kahu Restoration Society Inc. 5,000
Raukawa Trust Board 3,000
Rawhiti Kindergarten (553)
Riding for Disabled Cambridge Group (45,000)
South Waikato Achievement Trust (7,000)
Tainui – Te Ataarangi ki Hauraki – Hui a tau 2005 2,500
Te Kauwhata College Sports Club 2,000
Te Ohaaki Marae (27,000)
Te Runanga o Kirikiriroa 3,000
Thames Valley Waikato Floral Arts Grants Committee (350)
Tokoroa Council of Social Services 3,000
Turangawaewae Marae Committee 80,000
Turangawaewae Rugby League Sports and Cultural Club (10,000)
Waikato Hockey Charitable Trust 45,000
Waikato Raupatu Lands Trust 3,000
Waitomo District Council (37,000)
Total donations for the year 8,129,747
Represented by:
Donations paid from income 6,981,047
Donations paid from trust funds that existed at 31 March 2005 1,148,700
8,129,747
Of this amount, $7,177,747 has actually been paid to community groups during the year. The remainder of $952,000 represents donations which will be paid when it is clear to the trust that the project in question will proceed and/or any other conditions have been met.
Donations payable at balance date are:
For the 2005/2006 year 952,000
For previous years 521,500
1,473,500
Donation amounts appearing in brackets are donations that have been approved prior to 24 September 2005 and have subsequently been withdrawn.
15. Conflicts of Interest
During the year, trustees and staff were required to declare when they had either a direct or indirect conflict of interest in a matter being considered by the trust. 102 such interests were recorded during the course of the year (2005 – 111) and a register of those conflicts is available for inspection at the trust.
16. Subsequent Events
There are no matters or events that have arisen, or been discovered, subsequent to balance date that would require adjustment to, or disclosure in, these financial statements.
17. Segmental Information
The Waikato Community Trust is a charitable trust which operates in the Waikato area.
18. Meeting Attendance
The trust held 19 formal meetings during the year. The following table records each trustee’s attendances at these formal meetings:
Trustee MeetingAttendance Remuneration$
Hori Awa (chairperson) 18 36,945
Clint Baddeley 19 15,180
Christine Cave 15 13,220
Bernadette Doube 13 11,820
Bruce Hosking (investment committee chair) 18 18,655
Peta Karalus 11 12,030
Heeni Katipa 11 7,550
John Kilbride 18 15,635
Michael Law 13 10,630
Joyce Maipi 15 12,905
Tureiti Moxon 14 11,330
Hinerangi Raumati (deputy chair) 15 19,496
Glenda Saunders 11 10,735
Fee-Ching Tan 19 17,245
Total Remuneration 213,376
In addition during the year, trustees took part in three Trust Waikato subcommittees, various training and development forums and community sector forums.
Trustees and trust staff were invited to 251 separate formal and informal meetings and functions. The trust was able to achieve representation at approximately 151 of these meetings and functions.
19. NZ IFRS
The trust is required to adopt the New Zealand equivalents to International Financial Reporting Standards (NZ IFRS) no later than the year ending 31 March 2008.
The process of transition to NZ IFRS, including an independent assesment of the impacts of changes in the trust’s accounting policies was commenced during the year ended 31 March 2006. It is anticipated that this process will be completed early in the 2006/2007 financial year.
The key differences in accounting policies that are expected to arise from adopting NZ IFRS were not known at 31 March 2006.
The impact of adopting NZ IFRS may materially affect the reported financial performance and financial position presented in future financial reports of the trust.
Audit Report to the Trustees of The 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 2006. This information is stated in accordance with the accounting policies.
Trustees’ Responsibilities
The trustees are responsible for the preparation, in accordance with New Zealand law and generally accepted accounting practice, of financial statements which fairly reflect the financial position of The Waikato Community Trust Incorporated as at 31 March 2006 and the results of operations and cash flows for the year ended on that date.
Auditors’ Responsibilities
It is our responsibility to express to you an independent opinion on the financial report presented by the trustees.
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 statements; and
? whether the accounting policies are appropriate to The Waikato Community Trust Incorporated 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 2006 and the results of its operations and cash flows for the year ended on that date.
Our audit was completed on 19 June 2006 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 2005-2006 donations is available on request.