15 JULY 2004 NEW ZEALAND GAZETTE, No. 87 2193

● Investment Fluctuation Reserve

The trustees have adopted an investment strategy with a targeted long term annual rate of return of 6.8% (2003 – 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 is transferred to income.
At the trust’s current risk profile, the investment fluctuation reserve should have a lower limit of 9% (2003 – 9%) and an upper
limit of 25% (2003 – 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 3.5% (2003 – 4.5%), 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) 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. 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.

(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) Changes in Accounting Policies

There have been no changes in accounting policies since the previous annual financial statements. All 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

Comprises:

Interest 5,735 5,303
Dividends 6,684 6,271
Sundry income 42 131
Realised gains 3,759 40,903
Realised losses (21,064) (44,660)
Unrealised gains 32,956 982
Unrealised losses (1,480) (14,497)
26,632 (5,567)