TRUST BANK WELLINGTON COMMUNITY TRUST Trustee Banks Restructuring Act 1988 Annual Report for the Year Ended 31 March 1995 Trust Particulars The Trust Bank Wellington Community Trust was incorporated as a charitable trust in accordance with the provisions of the Trustee Banks Restructuring Act 1988. The purpose of the community trust is to provide charitable, cultural, philanthropic and recreational benefits to the community. Trustees: Mr W. A. Brien, e.d., Chairperson, Mr B. M. Alleway, Ms D. Chin, Mr M. F. Dunphy, Mr D. Gibbons, Dr M. B. Jameson, Mr G. L. Reeves, Mr P. Richardson, Mrs B. S. Stones, J.P., Ms E. Tennet, M.P., Mr P. J. Willis, J.P. Bankers: Trust Bank Wellington. Fund Manager: Tower Corporation Holdings Limited. Solicitors: Morrison Morpeth. Auditors: Deloitte Touche Tohmatsu. Executive: Frances Russell, Administrator. Address: Level 9, BDO House, 99105 Customhouse Quay, P.O. Box 11-679, Wellington. Telephone: (04) 499 7966. Facsimile: (04) 499 5960. Chairperson's Report This is the seventh annual report of the Trust Bank Wellington Community Trust. Objective The trust remains committed to providing support to cultural, charitable, philanthropic and recreational organisations and groups in the area served by Trust Bank Wellington. Trustees Right Hon. F. D. (Frank) O'Flynn retired in May. Being the inaugural chairperson of the trust he had seen the trust grow from a fledgling organisation through to the dynamic trust that it is today. His wisdom and expertise will be missed. Two new trustees were appointed this year Mr Peter Richardson, a solicitor from Upper Hutt; and Mr Peter Willis, an accountant from Eastbourne. Mr G. Littlefair was not reappointed. Administration 1994 saw the trust employ a salaried staff member for the first time. Frances Russell now has the responsibility of administering the trust. Office space is rented in BDO House on Customhouse Quay. This move coincided with the restructuring of Trust Bank New Zealand Limited. Fund Manager The cash asset of the trust increased significantly last year due to the sell down of shares when Trust Bank New Zealand listed on the New Zealand Stock Exchange. This sell down gave an $8 million cash asset to the trust. It was initially invested with Trust Bank Wellington. The Investment Sub Committee consisting of Graeme Reeves, Debbie Chin and Malcolm Dunphy, selected a Fund Manager, Tower Corporation Holdings Limited, to manage both the cash asset, and the total share portfolio. This approach was seen as a prudent move by the trust to protect the investment as well as protect the trustees. Consequently our share portfolio with the bank and our cash asset are continually monitored by professionals who have the responsibility of minimising our risk, and maximising our investment so that the largest possible return is available for distribution. Bank Liaison During the year we have continued to have a professional and working relationship with Trust Bank Wellington. Once again local branch managers organised functions for the trust so that many of the successful groups were able to attend in person to collect their grants. It is my intention to maintain a mutually beneficial relationship between the trust and the bank. To that end I pay tribute to the retiring General Manager, Reece Mead, for his energetic contribution, and also wish both him and Carol all the best for the future. Grants The trust operates under predetermined guidelines for the distribution of grants to community organisations and groups. This year applications were received seeking over $2.5 million. The amount sought by applicants varies considerably from year to year but has always been well beyond the trust's resources on each occasion. The gap between expectation and realisation may be narrowed this coming year because of the successful share float of TBNZ and our decision to sell down some of our holding. The ensuing year could see almost $1 million being available for distribution to groups within the Trust Bank Wellington area. The criteria for grants have basically remained the same over the years, however this year the application form and information brochure have been combined making completion easier for applicants, and at the same time allowing the procedure for a more stringent audit process to be put in place. The Grants Sub Committee, consisting of David Gibbons, Peter Willis, Michael Jameson and myself evaluated the applications and recommended that $627,076 be distributed to 439 applicants. It is my intention to significantly reduce the workload of the sub committee in 1995 as our administrator, who fully participated in all aspects of the grants round last year, will be in a position to classify the applications. For the first time it was agreed to make a substantial donation to one applicant. Wellington Girls College Foundation submitted an excellent application outlining a project to set up a language centre at the college. The trust viewed the application with great interest as the project was seen to be a visionary one, and the foundation had worked very hard to raise a large amount of money from other sources, needing the final donation to get the project started. The $25,000 donation in 1994, with the promise of another $25,000 in 1995, also secured naming rights to the building. This institution and the subsequent exposure has attracted much favourable comment for the bank and the trust. It is always very difficult to give away money prudently, and this year was no exception. Each application is evaluated individually, some are declined because they fall outside the trust's criteria, or because of commercial content, and others because of insufficient information. However, at the end of the process the trustees believe that all possible steps have been taken to be fair and equitable to all applicants. Appreciation The trustees of Trust Bank Wellington Community Trust have continued to act in a diligent and prudent manner. With the restructuring of Trust Bank New Zealand and the proposed amendments to the trust deed the trustees are moving the trust into a challenging and exciting phase. I offer my sincere thanks to all the trustees, and especially those who have carried out activities over and above the call of duty. Also to the executive, Frances Russell, and Brian McLaughlin (part time accountant), for their excellent day to day running of the trust. The trust continues to play an important role in the philanthropic, cultural and recreational development of our region and now, with the increased income, a greater number of worth-while charitable organisations will benefit. W. A. (Bill) BRIEN, Chairperson. Income and Expenditure Account for the Year Ended 31 March 1995 1994$ 1995$ Income 540,638 Dividends, Trust Bank New Zealand Limited787,500 26,926 Interest506,666 Interest Tower Corporation Holdings Limited157,471 567,564 Total income1,451,637 Expenditure 117 Accident compensation141 Accounting fee4,140 4,824 Advertising6,859 759 Auditors' fee1,783 96,142 Brokerage Computer expenses720 Depreciation387 1,489 Functions4,972 98 General expenses454 Grants related expenses1,213 Insurance721 Photocopying/faxing373 546 Printing and stationery894 323 Postage455 5,628 Professional fees29,023 Rent5,462 Salaries10,000 7,139 Secretarial services11,217 Telephone and tolls487 33 Travelling expenses 12,390 Trustees' fees12,910 129,488 Total expenditure92,211 438,076 Net income before grants1,359,426 6,637,500 Profit on sale of shares 7,075,576 459,338 Less grants627,076 $6,616,238 Net Profit transferred to trust fund$732,350 Balance Sheet as at 31 March 1995 1994$ 1995$ Trust funds 5,185,399 Balance 1 April 199411,801,637 6,616,238 Net income for year732,350 19,894,342 Revaluation reserve (Note 2)17,531,842 $31,695,979 Balance 31 March 1995$30,065,829 Represented by: Current assets Debtors and prepayments3,012 8,048,858 Deposits Trust Bank Wellington Limited622,283 4,240 Deposits National Disaster Relief Fund 14,431 Interest receivable5,896 13,681 Cash at bank Trust Bank Wellington Limited28,996 8,081,210 Total current assets660,187 Less current liabilities 10,231 Sundry creditors20,386 8,070,979 Working capital639,801 23,625,000 Investments (Note 3)29,422,248 Fixed assets (Note 1)3,780 $31,695,979 Net assets$30,065,829 Signed on behalf of the board of trustees: W. A. BRIEN, Chairperson. P. J. WILLIS, Trustee. Dated this 19th day of June 1995. (The notes to the financial statement form part of and are to be read in conjunction with the above accounts.) Statement of Cash Flows for the Year Ended 31 March 1995 1994$ 1995$ Cash flows from operating activities Cash was provided from: 540,638 Dividends from Trust Bank New Zealand Limited787,500 22,118 Interest on investments515,202 Cash was disbursed to: (112,662) Suppliers of goods and services(70,335) (12,430) Trustees(12,700) (459,338) Grants to community(627,076) (21,674) Net cash flows from operating activities (Note 6)592,591 Cash Flows from Investing Activities Cash was provided from: 7,875,000 Sale of investments Cash was distributed to Purchase of fixed assets(4,167) Purchase of investments(8,003,924) Net Cash flow from investing activities(8,008,091) Net movement in cash over the year(7,415,500) 213,453 Add opening cash balance as at 1 April8,066,779 $8,066,779 Cash at 31 March 1995$651,279 Shown in balance sheet as: 8,048,858 Deposits Trust Bank Wellington Limited622,283 4,240 Deposits National Disaster Relief Fund 13,681 Cash at bank Trust Bank Wellington Limited28,996 $8,066,779 $651,279 Notes to the Financial Statements for the Year Ended 31 March 1995 1. Statement of Accounting Policies General Accounting Policies The general accounting policies adopted in the preparation of these financial statements are: * The measurement base adopted is the historical cost basis, with the exception of investments, which are recorded at their market value. * Reliance has been placed on the fact that the entity is a going concern. * The matching of revenue earned and expenses incurred using accrual accounting except that dividend income and grants are accounted for on a cash basis. Particular Accounting Policies The following are the particular accounting policies which have a material effect on the measurement of results and financial position: (a) Dividend Income: Dividend income from Trust Bank New Zealand Limited is included in the income and expenditure account when it is received. (b) Grants: Grants made are included in the income and expenditure account when paid. (c) Shares and Investments: Shares held in Trust Bank New Zealand Limited and other investments are stated at the market value. The investment in Trust Bank New Zealand Limited is currently held as a core holding. Changes in this investment's market value are taken to the revaluation reserve. Changes in the market value of other investments are taken to the income and expenditure account. (d) Depreciation of Fixed Assets: Depreciation is provided on a straight line basis at rates that will write off the cost of assets over their estimated lives. Cost Depreciation Book Price to Date Value % $ $ $ Computer equipment30 2,671 267 2,404 Printer24 1,496 120 1,376 $4,167 $387 $3,780 Changes in Accounting Policies There have been no material changes in accounting policies since the previous annual financial statements. All policies have been applied on a basis consistent with those used in the previous years annual financial statements. 2. Revaluation Reserve 1994$ 1995$ Opening balance19,894,342 19,894,342 Movements in the year(2,362,500) $19,894,342 Closing balance$17,531,042 3. Investments 1994$ 1995$ 3.1 The trust's investment in Trust Bank New Zealand is valued at $1.89 per share as at 31 March 1995, this being the market price of the shares. The shares now held in Trust Bank New Zealand Limited comprise 11 250 000 ordinary shares of 50 cents each fully paid. Shares at market value as at 31 March 1994 $23,625,000 Revaluation reserve ($2,362,500) $21,262,500 3.2 Other investments held by Tower Corporation Holdings Limited comprise Money market deposits3,702,554 Discounted securities4,457,194 $8,159,748 $29,422,248 4. Taxation For taxation purposes the trust is deemed to be a charitable organisation and on this basis its income is not subject to taxation. The charitable status is under review which may affect the future tax status of the trust. 5. Goods and Services Tax The trust is not registered for goods and services tax purposes. Accordingly these financial statements are stated on a G.S.T. inclusive basis. 6. Reconciliation of Net Profit with Cash Inflow from Operating Activities 1994$ 1995$ 6,616,238 Net profit732,350 Add (deduct) non cash items Deduction387 Revaluation discounted securities(14,823) Add (less) movement in current assets/liabilities 4,396 Increase/decrease in creditors10,155 (4,808) Increase/decrease interest receivable8,535 Increase/decrease in debtors(2,278) 734,326 Less items classified as investing activities (6,6327,500) Sale of shares Income Tower(142,648) Tower accrued interest913 (21,674) Net cash flows from operating activities$592,591 7. Off Balance Sheet Item An additional grant of $25,000 to the Wellington Girls College Foundation has been approved but not uplifted as at 31 March 1995. 8. Financial Instruments All financial instruments held by the trust are recorded in the balance sheet. The financial instruments comprise equity securities, discounted securities, deposits and cash. Concentrations of credit risk arise as a result of the equity securities being investments in Trust Bank New Zealand Limited. These are subject to the normal market risk associated with investments of this nature. There are no significant differences between the fair value and book value of financial instruments. Audit Report To the readers of the financial report of Trust Bank Wellington Community Trust. We have audited the financial report. The financial report provides information about the past financial performance of Trust Bank Wellington Community Trust and its financial position as at 31 March 1995. This information is stated in accordance with the accounting policies set out. Trustees' Responsibilities The trustees are responsible for the preparation of a financial report which fairly reflects the financial position of the Trust Bank Wellington Community Trust as at 31 March 1995 and of the results of operations for the year ended 31 March 1995. Auditor's Responsibilities It is our responsibility to express an independent opinion on the financial report presented by the trustees and report our opinion to you. Basis of Opinion An audit includes examining, on a test basis, evidence relevant to the amounts and disclosures in the financial statements. It also includes assessing: the significant estimates and judgements made by the trustees in the preparation of the financial report, and whether the accounting policies are appropriate to the trust's circumstances, consistently applied and adequately disclosed. We conducted our audit in accordance with generally accepted auditing standards in New Zealand. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial report is free from material misstatements, whether caused by fraud or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements. Other than in our capacity as auditors we have no relationship with or interest in the Trust Bank Wellington Community Trust. Unqualified Opinion We have obtained all the information and explanations we have required. In our opinion the financial statements fairly reflects the financial position of the Trust Bank Wellington Community Trust as at 31 March 1995 and the results of its operations and cash flows for the year ended on that date. Our audit was completed on 19 June 1995 and our unqualified opinion is expressed as at that date. DELOITTE TOUCHE TOHMATSU, Chartered Accountants. Wellington, New Zealand.