17 JULY

NEW ZEALAND GAZETTE

2165

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 and 2003 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. No transfer has been made in the 2003 year. 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 8.4% (2002 – 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 will be transferred to income. At the trust’s current risk profile, the investment fluctuation reserve should have a lower limit of 9% (2002 – 9%) and an upper limit of 25% (2002 – 25%) of the “base capital value”. If the reserve falls below the lower limit, then the level of expenditure and distributions will be reviewed by the trust. If the reserve exceeds the upper limit, then 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 4.5% (2002 – 5.0%), 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 trust funds.

(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.

(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) 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.

Sixty three such interests were recorded during the course of the year and a register of those conflicts is available for inspection at the trust. Trustees are required to declare any business conflicts they have in relation to the trust’s overall operations. No such conflicts were declared during the 2003 financial year.