✨ Financial Statements Notes
THE WAIKATO COMMUNITY TRUST INCORPORATED
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
For the year ended 31 March 2010
Fair Value of Financial Instruments
The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis. The quoted market price used for financial assets held by the Trust is the current bid price. These instruments are included in level 1.
The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined by using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.
If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.
There were no transfers between level 1 and 2 in the period.
| Assets | Level 1 | Level 2 | Level 3 | Total |
|---|---|---|---|---|
| NZ$'000 | NZ$'000 | NZ$'000 | NZ$'000 | |
| Financial assets at fair value | ||||
| through profit and loss | 240,795 | - | - | 240,795 |
| Derivatives | - | 590 | - | 590 |
Capital Risk Management
The Trust’s objectives when managing Trust capital is to safeguard its ability to continue as a going concern so that it can continue to provide returns for the community. The capital structure of the Trust consists of cash and cash equivalents and Trust funds. The Trust’s Investment Committee reviews the Trust funds and the risks associated with the trust funds.
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 and increased each year to reflect growth due to inflation and regional growth.
The Trustees have adopted an investment strategy with a targeted long term annual rate of return of 6.8% (2009 - 6.8%) of the Trust’s capital value. Recognising that actual returns are likely to fluctuate from year to year, the Trust retains the variation from the target in Trust funds so that in years when investment returns are less than the target sufficient funds are available to meet expenditure and make distributions. If the Trust fund falls below the value that needs to be maintained for the benefit of current and future generations the level of expenditure and distributions are reviewed by the Trust.
The Trust’s present donation policy is to distribute annually as donations between 3% and 4% (2009 - 3% and 4%) of the Trust fund value that should be maintained for the benefit of current and future generations. 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.
Next Page →
NZ Gazette 2010, No 101
✨ LLM interpretation of page content
🏢
Financial Statements of the Waikato Community Trust
(continued from previous page)
🏢 State Enterprises & InsuranceFinancial Statements, Fair Value, Financial Instruments, Capital Risk Management, Investment Strategy