14 AUGUST 2008 NEW ZEALAND GAZETTE, No. 127 3359

Department (IRD) is included as part of receivables or payables. The GST component of cash flows arising from investing and financing activities which is recoverable from or payable to the IRD is classified as operating cash flows.

(k) Taxation
The trust is exempt from income tax under section CB4(1)(m) of the Income Tax Act 2004.

(l) Currency Translation
Functional and presentation currency
Items included in the financial statements are measured using the currency of the primary economic environment in which the entity operates ("the functional currency"). The financial statements are presented in New Zealand dollars, which is the trust’s functional and presentation currency, rounded to the nearest dollar.

Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.

Non-monetary assets and liabilities carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Translation differences on non-monetary financial assets and liabilities carried at fair value are included in the income statement for the period. For such non-monetary items, any exchange component of that gain or loss is also recognised directly in equity.

(m) Derivative Financial Instruments
The trust has a 100% passive currency hedging program over units invested in the State Street Global Index Plus Trust. The base currency of the international equity portfolio is New Zealand dollars and all currency exposures are 100% hedged back to the New Zealand dollar.

The trust via fund managers enters into foreign currency forward exchange contracts to manage its exposure to foreign exchange rate risk. Further details of derivative financial instruments are disclosed in note 15 to the financial statements.

Derivatives are initially recognised at fair value on the date a derivative contract is entered in to and are subsequently remeasured to their fair value at each reporting date. The resulting gain or loss is recognised in profit or loss immediately. Derivatives are classified as a current asset or a current liability.

Embedded derivatives
Derivatives embedded in other financial instruments or other host contracts are treated as separate derivatives when their risks and characteristics are not closely related to those of host contracts and the host contracts are not measured at fair value with changes in fair value recognised in profit or loss.

Trust Waikato does not apply hedge accounting.

(n) Leased Assets
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. Payments under operating leases are recognised in the income statement on a straight line basis over the term of the lease.

Entity as lessor
Amounts due from lessees under finance leases are recorded as receivables. Finance lease receivables are initially recognised at amounts equal to the present value of the minimum lease payments receivable plus the present value of any unguaranteed residual value expected to accrue at the end of the lease term. Finance lease payments are allocated between interest revenue and reduction of the lease receivable over the term of the lease in order to reflect a constant periodic rate of return on the net investment outstanding in respect of the lease.

When assets are leased out under an operating lease, the asset is included in property, plant and equipment in the balance sheet based on the nature of the asset. They are depreciated over their expected useful lives on a basis consistent with similar owned property, plant and equipment.

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:

Dividends | 6,628 | 2,348 |
Interest | 10,496 | 10,049 |
Rent | 35 | 29 |
Total revenue| 17,159 | 12,426 |