7 JULY 2005 NEW ZEALAND GAZETTE, No. 105 2503

been made in the 2003, 2004 and 2005 years. 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 6.8% (2004 – 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% (2004 – 9%) and an upper limit of 25% (2004 – 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% (2004 – 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) 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) 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) Consolidation Method for Comparatives
The purchase method was used to consolidate the trust and its subsidiaries for 2004. All inter-entity transactions, balances and unrealised profits and losses on transactions between group members were eliminated.

(i) 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.

(j) 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.

(k) Investments
Investments are stated at market value. Adjustments to market value of investments are included in the statement of financial performance.

(l) Changes in Accounting Policies
The Inland Revenue Department redefined the tax definition of a “community trust”, which meant the trust is tax exempt from 1 April 2004.

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