✨ Financial Statements Notes
THE WAIKATO COMMUNITY TRUST INCORPORATED
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2012
16. FINANCIAL INSTRUMENTS
16.1 Capital Risk Management
The Trust Bank Waikato Community Trust was incorporated on 5 August 1988 with Trust capital of $21,316,622. 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 Trust's objective 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 Trust Board reviews the Trust funds and the risks associated with the Trust funds.
The Trustees have adopted an investment strategy with a targeted long term annual rate of return of 7.5% (2011: 7.6%) 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 donations. If the Trust fund falls below the value that needs to be maintained for the benefit of current and future generations the levels of expenditure and donations are reviewed by the Trust.
The Trust's present donation policy is to distribute annually as donations, 4% (2011: 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 be inevitable fluctuations between the donations distributed and the actual target.
The Trust uses the services of an investment advisor to pursue an investment policy considered appropriate for the Trust. The Trust selects fund managers according to their style and specialist skills.
16.2 Financial Risk Management
The Trust's activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and equity price risk), credit risk and liquidity risk.
The Trust has policies to manage the risks associated with financial instruments. The Trust is risk averse and seeks to minimise exposure from its treasury activities. The Trust has established investment policies. These policies do not allow the Trust to enter into any transactions that are speculative in nature.
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument, are disclosed in note 1 to the financial statements.
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NZ Gazette 2012, No 97
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Notes to Financial Statements for The Waikato Community Trust Incorporated
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💰 Finance & RevenueFinancial Statements, Capital Risk Management, Investment Strategy, Financial Risk Management, Waikato Community Trust