2096

NEW ZEALAND GAZETTE

No. 91

Notes to and forming part of the Consolidated Financial Statements for the Year Ended 31 March 1998

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 subsidiary Waikato Community Trust 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 an 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) 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 ‘base capital value’ of the trust and that this value would be increased by 3 percent per annum to reflect 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 ‘base capital value’ and to provide for growth during the 1997 year.

• Investment Fluctuation Reserve

The trustees have adopted an investment strategy with a targeted long term annual rate of return of 7 percent. 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. The investment fluctuation reserve will be capped at 10 percent of the capital value of the trust. Once this cap is reached 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 2 percent of its 3 year average 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 after transfers to capital and the investment fluctuation reserve is held in the donation reserve and represents the trust’s retained earnings.

(b) Basis of Consolidation

The purchase method of consolidation has been used in the preparation of the financial statements.

(c) Changes in Accounting Policies

The accounting policies for trust funds is new this year, however as it impacts on the treatment of funds within total trust funds it has no impact on the financial position of the trust. 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.

3. Revenue

Dividends received—TBNZ Limited .................................................... – 3,409
Realised gain on sale of TBNZ Limited shares .................................. – 18,497
Interest income ................................................................... 2,424 –
Investment income ................................................................ 7,891 –
Realised gain on sale of investments ............................................ 2,020 479
Increase in market value of investments ........................................ 14,307 –
Foreign exchange gains .......................................................... 111 41

                                                                $26,753    $35,370

4. Expenses

Audit fees ...................................................................... 10 6
Accountancy/secretarial fees .................................................... 26 16
Community Trusts Investments Limited—share of costs ........................... – 101
Employee remuneration .......................................................... 71 63
Funds management services .................................................... 510 111
Investment advisory services .................................................. 96 76