Statement of Financial Performance for the Year Ended 31 March 2007
Notes 2007 2006
$’000 $’000
Total operating revenue 3 21,396 30,529
Total operating expenses 4 (1,858) (1,959)
Total operating surplus before distributions 19,538 28,570
Less distributions:
Donations paid from income (8,540) (6,981)
Sponsorships (181) (144)
Net surplus retained as trustees’ income 10,817 21,445
The surplus has been allocated to:
Capital 5 5,350 15,373
Investment fluctuation reserve 6 5,467 4,923
Donation reserve 6 – 1,149
10,817 21,445
Statement of Changes in Trust Funds for the Year Ended 31 March 2007
Notes 2007 2006
$’000 $’000
Trust funds at the start of the year 237,485 217,189
Surplus and revaluations—
Net surplus for the year:
Capital 5 5,350 15,373
Investment fluctuation reserve 6 5,467 4,923
Donation reserve 6 – 1,149
Total recognised revenues and expenses for the period 10,817 21,445
Other movements:
Donations paid from capital 6 – (1,149)
Trust funds at the end of the year 248,302 237,485
Statement of Financial Position as at 31 March 2007
Notes 2007 2006
$’000 $’000
Trust funds:
Capital 5 219,365 214,015
Investment fluctuation reserve 6 28,937 23,470
Donation reserve 6 – –
Total trust funds 248,302 237,485
Current liabilities:
Accounts payable 8 175 143
Donations payable 1,892 1,474
2,067 1,617
Total trust funds and liabilities 250,369 239,102
Current assets:
Westpac Limited 71 632
Receivables 39 63
110 695
Non-current assets:
Investments 9 247,894 236,108
Property, plant and equipment 10 2,365 2,299
250,259 238,407
Total assets 250,369 239,102
Statement of Cash Flows for the Year Ended 31 March 2007
Notes 2007 2006
$’000 $’000
Cash flow from operating activities—
Cash was provided from:
Investment income received 15,685 16,684
15,685 16,684
Cash was applied to:
Payments to suppliers and employees (1,895) (2,116)
Donations paid from income (7,828) (6,682)
(9,723) (8,798)
Net cash (used in)/provided by operating activities 12 5,962 7,886
Cash flow from investing activities—
Cash was provided from:
Net decrease in investments – –
– –
Cash was applied to:
Net increase in investments (6,075) (6,119)
Purchase of property, plant and equipment (154) (98)
(6,229) (6,217)
Net cash (used in)/provided by investing activities (6,229) (6,217)
Cash flow from financing activities—
Cash was applied to:
Donations paid from capital (294) (1,089)
Net cash used in financing activities (294) (1,089)
Net increase in cash and cash equivalents (561) 580
Cash and cash equivalents at beginning of the financial year 632 52
Cash and cash equivalents at the end of the financial year 71 632
The Waikato Community Trust Incorporated Notes to and Forming Part of the Consolidated Financial Statements for the Year Ended 31 March 2007
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% (2006 – 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% (2006 – 9%) and an upper limit of 25% (2006 – 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 4.25% (2006 – 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 when approved by the trustees.
(e) Goods and Services Tax
Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except for receivables and payables which are recognised inclusive of GST.
(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 and 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.
2007 2006
$’000 $’000
3. Revenue
Comprises:
Interest 10,049 11,325
Dividends 2,348 2,405
Sundry income 29 40
Realised gains/(losses) 3,259 2,914
Unrealised gains/(losses) 5,711 13,845
21,396 30,529
2007 2006
$’000 $’000
4. Expenses
Comprises:
Audit fees 13 13
Accountancy/secretarial fees 35 48
Consultants – other 25 54
Employee remuneration 331 271
Funds management services 603 647
Investment advisory services 159 105
Statutory reporting 5 9
Trustees fees 209 213
Depreciation – office equipment 37 22
– motor vehicles 18 16
– buildings 33 35
Other expenses 390 526
1,858 1,959
2007 2006
$’000 $’000
5. Capital
Balance at beginning of the year 214,015 198,642
Transfer from income 5,350 15,373
Balance at the end of the year 219,365 214,015
2007 2006
$’000 $’000
6. Reserves
Investment fluctuation reserve:
Balance at beginning of the year 23,470 18,547
Transfer from (to) income 5,467 4,923
Balance at the end of the year 28,937 23,470
Donation reserve:
Balance at beginning of the year – –
Transfer from/(to) income – 1,149
– 1,149
Less donations paid – (1,149)
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.
2007 2006
$’000 $’000
8. Payables
Accounts payable 163 130
Employee entitlements 12 13
175 143
2007 2006
$’000 $’000
9. Investments
Enhanced passive global equities 71,791 71,051
NZ fixed interest and cash 90,186 85,552
NZ equities and cash 20,820 18,575
Global fixed interest 65,097 60,930
247,894 236,108
2007 2006
$’000 $’000
10. Property, Plant and Equipment
Office equipment:
Opening cost 198 209
Add additions 49 7
Less disposals (12) (18)
Closing cost 235 198
Opening depreciation 138 117
Less disposals (11) –
Depreciation expense 38 21
Closing depreciation 165 138
Net book value 70 60
Motor vehicles:
Opening cost 74 74
Add additions/(disposals) 22 –
Closing cost 96 74
Opening depreciation 39 23
Depreciation expense 18 16
Closing depreciation 57 39
Net book value 39 35
Art and artefacts:
Opening cost 629 543
Add additions/(disposals) 85 86
Closing cost 714 629
Opening depreciation – –
Depreciation expense – –
Closing depreciation – –
Net book value 714 629
Buildings:
Opening cost 973 969
Add additions/(disposals) – 4
Closing cost 973 973
Opening depreciation 239 204
Depreciation expense 33 35
Closing depreciation 272 239
Net book value 701 734
Land:
Opening cost 841 841
Add additions/(disposals) – –
Net book value 841 841
Total property, plant and equipment 2,365 2,299
11. Capital Commitments and Contingent Liabilities
Commitments of $3,874,250 (2006 – $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 payable in 2007/2008 are $1,309,250, 2008/2009 are $1,305,000 and 2009/2010 are $1,260,000.
There are no other capital commitments or contingent liabilities at balance date (2006 – Nil).
2007 2006
$’000 $’000
12. Cash Flow Reconciliation
Net surplus/(deficit) 10,817 21,445
Adjust for non-cash items:
Depreciation and loss on sale 88 74
Unrealised gain (5,711) (13,845)
(5,623) (13,771)
Impact of changes in working capital items:
(Increase)/decrease in accounts receivable 24 (63)
Increase/(decrease) in accounts payable 32 (24)
Increase/(decrease) in donations payable 712 299
768 212
Net cash inflow from operating activities 5,962 7,886
13. Financial Instruments
The trust uses the services of an investment adviser 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.
2007 2005
$’000 $’000
Investments 247,894 236,108
247,894 236,108
These are denominated in the following currencies:
2007 2006
$’000 $’000
Australian dollar equivalents 1,881 1,091
Canadian dollar equivalents 4,256 2,806
Danish krona equivalents 602 192
Euro equivalents 31,406 23,705
Great Britain pound equivalents 12,501 22,231
Hong Kong dollar equivalents 582 512
Japanese yen equivalents 20,317 6,921
New Zealand dollars 111,135 104,248
Norwegian kroner equivalents 380 327
Poland zloty equivalents 111 469
Singapore dollar equivalents 438 362
South Korea dollar equivalents 553 1,395
Swedish krona equivalents 869 789
Swiss franc equivalents 2,362 2,217
United States dollar equivalents 60,501 68,864
Other equivalents – (21)
247,894 236,108
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 2007, the trust’s investment managers had forward exchange contracts in accordance with this policy.
The market value of the New Zealand cover is $74,747,741 (nominal value – $72,678,466). This cover is only for global equity investments. The market value of the cover at balance date accounts for 101% 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 30 September 2006, the Waikato Times published a list totalling $8,592,010, which showed all of the donations approved by the trust from the period 1 April 2006 to 30 September 2006.
In the period from 30 September 2006 to 31 March 2007, the trust has also paid, committed or withdrawn the following donations:
$
Total donations published in the Waikato Times on 30 September 2006 8,592,010
Diocese of Waikato – Te Rau Aroha Camp 10,000
Eastern Waikato Netball 6,000
Forest Lake Playcentre (20,000)
Hamilton Chinese Learning Centre Charitable Trust 5,000
Hamilton Combined Christian Foodbank Trust 14,050
Hamilton Multicultural Centre 3,500
Hauraki Maori Trust Board 3,500
Indigo Trust 7,000
K’Aute Pasifika 3,500
Kirikiriroa Maori Wardens Association 4,000
Lochiel/Narrows Golf Club (10,000)
Maniapoto Marae Pact Trust 3,500
Mighty River Harmony 1,000
Ministry of Social Development 4,250
Moana Rahui o Aotea Society Inc (15,000)
Muscular Dystrophy Association of New Zealand Inc (50,000)
Parenting with Confidence (896)
Raglan Community Radio (250)
Raukawa Trust Board 3,500
South Waikato District Council 25,000
Te Awamutu Intermediate PTA 3,500
Te Awamutu YMI and Youth Centre 5,000
Te Kuiti Youth Centre 6,000
Te Reo Irirangi o Tainui Trust (10,000)
Te Runanga o Kirikiriroa 3,500
Te Wananga o Aotearoa (23,000)
The Hub Youth Charitable Trust 2,500
Timberlands Pony Club (1,500)
Tokoroa Council of Social Services 3,500
Waikato Interfaith Council Inc 750
Waikato Raupatu Lands Trust 3,500
Waikato Smallbore Rifle Association 1,000
Waka Tangata Trust (45,000)
Total donations for the year 8,539,414
Of this amount, $7,483,414 has actually been paid to community groups during the year. The remaining $1,056,000 represents donations which will be paid when it is clear to the trust that the project in question will proceed and/or any other conditions have been met.
Donations payable at balance date are:
For the 2006/2007 year 1,056,000
For previous years 836,500
1,892,500
A full list of donations is available on request.
Donation amounts appearing in brackets are donations that were approved prior to 30 September 2006 and have subsequently been withdrawn.
15. Conflicts of Interest
During the year, trustees and staff were required to declare when they had either a direct or indirect conflict of interest in a matter being considered by the trust. 115 such interests were recorded during the course of the year (2006 – 102) and a register of those conflicts is available for inspection at the trust.
16. Subsequent Events
There are no matters or events that have arisen, or been discovered, subsequent to balance date that would require adjustment to, or disclosure in, these financial statements.
17. Segmental Information
The Waikato Community Trust is a charitable trust which operates in the Waikato region.
18. Meeting Attendance
The trust held 19 formal meetings during the year. The following table records each trustee’s attendances at these formal meetings and the total remuneration paid to each trustee, including honoraria and fees for formal meetings, subcommittee meetings, training and development forums, community forums and functions:
Trustee MeetingAttendance Remuneration$
Dennis Astle (from 1 June 2006) 12 12,218
Josie Anderson (from 1 June 2006) 7 7,353
Hori Awa (chair) 16 41,045
Clint Baddeley 16 11,155
Christine Cave 12 10,700
Bernadette Doube 9 9,335
Bruce Hosking (investment committee chair/deputy chair) 15 19,134
Peta Karalus 13 9,650
Heeni Katipa (to 31 May 2006) 0 511
John Kilbride 15 16,090
Michael Law 14 17,350
Joyce Maipi (to 31 May 2006) 1 1,807
Tureiti Moxon 8 9,125
Max Purnell (from 25 November 2006) 4 4,161
Hinerangi Raumati (deputy chair) (to 24 November 2006) 9 8,865
Glenda Saunders (investment committee chair) 13 13,120
Fee-Ching Tan 16 17,770
Total Remuneration 209,389
Trustees and trust staff were invited to 208 separate formal and informal meetings and functions. The trust was able to achieve representation at approximately 124 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 assessment of the impacts of changes in the trust’s accounting policies, has commenced and will be completed early in the 2007/2008 financial year.
The key differences in accounting policies that are expected to arise from adopting NZ IFRS were not known at 31 March 2007.
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 2007. 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 2007 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 statements 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 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 2007 and the results of its operations and cash flows for the year ended on that date.
Our audit was completed on 26 June 2007 and our unqualified opinion is expressed as at that date.
DELOITTE, Chartered Accountants, Hamilton, New Zealand.
This audit report relates to the financial statements of The Waikato Community Trust Incorporated for the year ended 31 March 2007 included on The Waikato Community Trust Incorporated’s website. The Waikato Community Trust Incorporated’s trustees are responsible for the maintenance and integrity of The Waikato Community Trust Incorporated’s website. We have not been engaged to report on the integrity of The Waikato Community Trust Incorporated’s website. We accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website. The audit report refers only to the financial statements named above. It does not provide an opinion on any other information which may have been hyperlinked to/from these financial statements. If readers of this report are concerned with the inherent risks arising from electronic data communication, they should refer to the published hard copy of the audited financial statements and related audit report dated 26 June 2007 to confirm the information included in the audited financial statements presented on this website. Legislation in New Zealand governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
–––––––––––––––
A copy of these financial statements and a full list of 2006-2007 donations is available on request.