Statement of Income and Expenditure for the Year Ended 31 March 1996 Note 1996$000 1995$000 Income Dividends 3,300 2,600 Other investments2 252 58 3,552 2,658 Committed donations5 2,417 1,577 1,135 1,081 Expenditure Audit 7 7 Facilities rental 35 42 Legal 9 12 Occupancy 20 18 Other operating 52 68 Public and statutory reporting 56 52 Staff 187 184 Trustees' fees 48 56 Trustees' expenses 10 13 424 452 711 629 Unrealised investment revaluations3 13,746 10,603 Donation from ASB Charitable Trust6 0 4,075 Surplus before taxation 14,457 15,307 Taxation4 63 14 Net surplus $14,394 $15,293 The Net Surplus has been allocated as follows: Investment revaluation reserve6 12,464 9,796 Charitable purposes reserve fund6 1,606 4,887 Investment fluctuation reserve6 0 (69) Uncommitted surplus 324 679 $14,394 $15,293 The notes to these financial statements form part of and should be read in conjunction with this Statement of Income and Expenditure. Statement of Movement in Trust Funds for the Year Ended 31 March 1996 1996$000 1995$000 Total trust funds at beginning of year94,423 79,130 Net surplus14,394 15,293 Total trust funds at end of year$108,817 $94,423 The notes to these financial statements form part of and should be read in conjunction with this Statement of Movement in Trust Funds. Balance Sheet as at 31 March 1996 Note 1996$000 1995$000 Source of funds Trust funds Capital7 44,320 44,320 Investment revaluation reserve6 52,081 39,617 Charitable purposes reserve fund6 10,244 8,638 General reserve6 1,000 1,000 Uncommitted surplus 1,172 848 108,817 94,423 Liabilities ASB Charitable Trust 14 0 Taxation 41 0 Creditors 40 62 Committed donations5 1,245 687 1,340 749 $110,157 $95,172 Employment of funds Investments Shares3 106,316 92,570 Other investments3 3,457 2,399 109,773 94,969 Current assets Cash 29 27 Cash charitable purposes reserve fund 327 95 Debtors 28 15 Taxation 0 2 ASB Charitable Trust 0 64 384 203 $110,157 $95,172 Approved on behalf of the board: JUDITH BASSETT, Chairperson. WAARI WARD-HOLMES, Deputy Chairman. Dated this 31st day of May 1996. The notes to these financial statements form part of and should be read in conjunction with this Balance Sheet. Statement of Cash Flows for the Year Ended 31 March 1996 1996$000 1995$000 Cash flows from operating activities Cash was provided from: Refund of expenses by ASB Charitable Trust294 556 Dividends received3,300 2,600 Decrease in bonds0 336 Interest received on investments239 133 Donation from ASB Charitable Trust0 4,075 3,833 7,700 Cash was disbursed on: Increase in term deposits(861) (1,307) Payment to suppliers, trustees and staff(655) (974) Charitable purposes reserve fund(232) (90) Donations to voluntary organisations(1,859) (1,309) G.S.T. received/(paid)6 (2) Tax (paid)/received(20) 15 (3,621) (3,667) Net cash inflow from operating activities 212 4,033 Cash flows from investing activities Cash was disbursed on: ASB Bank Limited capital call 0 (4,075) Net cash outflow from investing activities 0 (4,075) Net cash inflow/(outflow) from activities 212 (42) Add opening cash brought forward 227 269 Ending cash carried forward $439 $227 The notes to these financial statements form part of and should be read in conjunction with this Statement of Cash Flows. Reconciliation of Reported Surplus to Net Cash Flow from Operating Activities 1996$000 1995$000 Net surplus 14,394 15,293 Add non-cash items: Unrealised investment revaluations(13,746) (10,603) Unrealised investment fluctuations0 104 Unrealised interest on bonds0 2 Unrealised movement on bonds13 (18) (13,733) (10,515) Movements in working capital items: Decrease in creditors(21) (3) Increase in committed donations558 268 Donations paid through charitable purposes reserve fund bank account87 80 Dividend attributable to charitable purposes reserve fund(324) (170) Decrease in taxation receivable43 28 Increase in debtors(9) (13) Decrease in ASB Charitable Trust78 36 412 226 Movements in investments: Increase in term deposits(861) (1,307) Decrease in bonds0 336 (861) (971) Net cash inflow from operating activities $212 $4,033 Notes to the Financial Statements for the Year Ended 31 March 1996 1. Statement of Accounting Policies The ASB Bank Community Trust (``the trust'') was formed on 30 May 1988 through the creation of a trust deed in compliance with the Trustee Banks Restructuring Act 1988. Under the terms of the trust deed the trust was settled with 60 million $1 fully paid ordinary shares in ASB Bank Limited representing 100 percent of the issued capital. As at 31 March 1988 the net tangible asset backing of those 60 million shares was $147,655,000. In 1989 45 million shares were sold to the Commonwealth Bank of Australia for $252,000,000 which was then donated to the ASB Charitable Trust. The measurement basis adopted is that of historical cost adjusted for the revaluation of certain assets. Reliance is placed on the fact that the trust is a going concern. The financial statements have been prepared in accordance with the requirements of the Financial Reporting Act 1993. Bank Bank is stated as the balance in the bank account rather than the balance as per the cash book. Statement of Cash Flows Cash comprises cash at bank and call deposits but excludes charitable purposes reserve fund cash. Dividends Dividends are recognised as income when they are received by the trust. They are recorded net of any imputation tax credits. Donations Donations are accounted for as they are distributed or committed to be distributed to eligible organisations as approved by the trustees. Expenses Some expenses are shared jointly with the ASB Charitable Trust. Whilst each trust bears its own specific costs, the joint expenses are allocated between each trust on the basis of the number of applications processed by each. Joint expense allocations were: 1996 1995 This trust40 percent 40 percent ASB Charitable Trust60 percent 60 percent Investments Investments in shares are valued at the net tangible asset backing as disclosed in the latest published accounts. Any revaluation difference is transferred to an investment revaluation reserve. Other investments are stated at market value. Any gains or losses are recognised in income and expenditure for the period. Financial Instruments All assets and liabilities of the trust are financial instruments and are recognised in the balance sheet. All financial instruments are recorded at market value or fair value. The quantitative disclosures required by FRS 31 disclosure of information about financial instruments, have been included throughout the financial statements where material. Reserves The investment revaluation reserve reflects the increase in the net tangible asset value of the shareholding in ASB Bank Limited less that portion attributable to the charitable purposes reserve fund. The charitable purposes reserve fund represents funds appropriated by ASB Charitable Trust to enable the trust to participate in the issue of new equity by ASB Bank Limited. In order to maintain the non taxable status of this reserve, the trust is required to segregate these funds appropriated from ASB Charitable Trust and the income attributable thereto. There are also certain restrictions on the distribution of income from this fund. Transfers to other reserves from the unallocated surplus are made at the discretion of the trustees. Taxation Taxation includes both current and deferred tax. Deferred tax is calculated using the comprehensive liability method. Comparatives Certain comparatives have been restated for disclosure purposes. Changes in Accounting Policies There have been no material changes in accounting policies during the period. 1996$000 1995$000 2. Income Other Investments Interest received265 167 Investment loss(13) (109) $252 $58 3. Investments Shares in ASB Bank Limited Balance as at 1 April92,570 77,892 Call on capital 4,075 Increase in net tangible assets13,746 10,603 Balance as at 31 March$106,316 $92,570 Total number of shares held in ASB Bank Limited as at 31 March 1996 was 22 825 000 (1995 22 825 000) of which 2 128 608 (1995 2 128 608) are attributable to the charitable purposes reserve fund.[qp] The increase in net tangible assets is based on unaudited accounts as at 31 December 1995.[qp] Other Investments[qp] These consist of securities & deposits managed in-house.[qp] Investments comprise: Call deposits410 200 Term deposits2,168 1,307 Bonds879 892 $3,457 $2,399 Certain of the trust's deposits are subject to a right of set off under the terms of the trust's banking agreement. There has been no set off applied in the presentation of these accounts.[qp] 4. Taxation Surplus before taxation14,457 15,307 Net dividend(3,300) (2,600) Committed donations2,417 1,577 Unrealised investment fluctuations 104 Unrealised investment revaluations(13,746) (10,603) Donation from ASB Charitable Trust (4,075) Income attributable to charitable purposes reserve fund(16) (5) Non-deductible expenditure378 357 $190 $62 Taxation charge @ 33 percent63 20 Over provision0 (6) $63 $14 5. Donations For this year Committed and disbursed1,274 904 Committed but not yet disbursed1,161 684 Total donations approved2,435 1,588 Donations written back(18) (11) $2,417 $1,577 Committed but not yet disbursed Committed in previous years94 6 Committed this year1,151 681 $1,245 $687 6. Reserves Investment revaluation reserve Balance as at 1 April39,617 29,821 Increase in value of ASB Bank Limited shares13,746 10,603 Increase attributable to the charitable purposes reserve fund(1,282) (807) Balance as at 31 March$52,081 $39,617 Investment fluctuation reserve Balance as at 1 April 69 Transfer to surplus (69) Balance as at 31 March Charitable purposes reserve fund Balance as at 1 April8,638 3,751 Donation from ASB Charitable Trust 4,075 Increase in value of ASB Bank Limited shares1,282 807 Income324 175 Donations to voluntary organisations (170) Balance as at 31 March$10,244 $8,638 General reserve Balance as at 1 April1,000 1,000 Allocation to surplus Balance as at 31 March$1,000 $1,000 7. Trust Capital Balance as at 1 April44,320 44,320 Balance as at 31 March$44,320 $44,320 8. Financial Instruments Currency Risk All financial instruments are held in New Zealand and therefore the trust is not subject to currency risk. Interest Rate Risk The trust invests in securities that are subject to interest rate risk. The trust actively monitors this risk and changes asset allocations and maturity profiles accordingly. Credit Risk The trust owns financial instruments that are subject to credit risk. The maximum credit risk exposure to the trust is the value of investments as disclosed in the financial statements. Fair Values All financial instruments are carried at market value. KPMG Audit Report to the Trustees of ASB Bank Community Trust We have audited the financial statements (comprising the statement of income and expenditure, the balance sheet, the statement of cash flows and the notes to these financial statements). The financial statements provide information about the past financial performance of the trust and its financial position as at 31 March 1996. This information is stated in accordance with the accounting policies included in the notes to these financial statements. Trustees' Responsibilities The trustees are responsible for the preparation of financial statements which give a true and fair view of the financial position of the trust as at 31 March 1996 and of the results of operations and cash flows for the year ended 31 March 1996. Auditors' Responsibilities It is our responsibility to express an independent opinion on the financial statements presented by the trustees and report our opinion. 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 judgments made by the trustees in preparation of the financial statements, 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 statements are 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. Unqualified Opinion We have obtained all the information and explanations we have required. In our opinion the financial statements: comply with generally accepted accounting practice; give a true and fair view of the financial position of the trust as at 31 March 1996 and the results of its operations and cash flows for the year ended on that date. Our audit was completed on 31 May 1996 and our unqualified opinion is expressed as at that date. KPMG, Auckland. ASB Charitable Trust Statement of Income and Expenditure for the Year Ended 31 March 1996 Note 1996$000 1995$000 Income Managed funds 42,467 (6,358) Sale of investment property2 120 0 Other investments 107 59 Rent 74 111 42,768 (6,188) Direct expenditure Fund management, custodian and advisory fees 1,659 1,364 41,109 (7,552) Committed donations4 13,209 8,067 ASB Bank Community Trust Charitable Purposes Reserve Fund 0 4,075 27,900 (19,694) Other expenditure Audit 30 30 Depreciation 52 63 Legal 12 13 Occupancy 29 26 Other operating 66 74 Public and statutory reporting 84 78 Staff 295 287 Trustees' fees 72 85 Trustees' expenses 15 22 655 678 27,245 (20,372) Investment property revaluation2 0 64 Net surplus/(deficit) $27,245 ($20,308) The net surplus/(deficit) has been allocated as follows: Capital maintenance reserve3 6,951 11,694 General reserve3 20,000 (22,000) Social emergencies reserve3 0 (3,500) Investment fluctuation reserve3 0 (6,887) Uncommitted surplus 294 385 $27,245 ($20,308) The notes to these financial statements form part of and should be read in conjunction with this Statement of Income and Expenditure. Statement of Movement in Trust Funds for the Year Ended 31 March 1996 1996$000 1995$000 Total trust funds at beginning of year318,299 338,607 Net surplus/(deficit)27,245 (20,308) Total trust funds at end of year$345,544 $318,299 The notes to these financial statements form part of and should be read in conjunction with this Statement of Movement in Trust Funds. Balance Sheet as at 31 March 1996 Note 1996$000 1995$000 Source of funds Trust funds Capital5 251,786 251,786 Capital maintenance reserve3 55,017 48,066 General reserve3 38,000 18,000 Retained surplus 741 447 345,544 318,299 Liabilities Bank overdraft 0 1 Creditors 405 316 Committed donations4 16,790 16,843 ASB Bank Community Trust 0 64 17,195 17,224 $362,739 $335,523 Employment of funds Investments Managed funds2 358,693 331,226 Other investments2 1,697 931 Investment properties2 0 960 360,390 333,117 Current assets ASB Bank Community Trust 14 0 Cash 3 0 Debtors 24 13 Other assets 24 25 65 38 Fixed assets6 2,284 2,368 $362,739 $335,523 Approved on behalf of the board: JUDITH BASSETT, Chairperson. WAARI WARD-HOLMES, Deputy Chairman. Dated this 31st day of May 1996. The notes to these financial statements form part of and should be read in conjunction with this Balance Sheet. Statement of Cash Flows for the Year Ended 31 March 1996 1996$000 1995$000 Cash flows from operating activities Cash was provided from: Receipts from fund managers15,000 15,000 Decrease in bonds0 2,764 Interest received on investments122 227 Receipts from rentals74 116 15,196 18,107 Cash was disbursed on: Payment to suppliers, trustees and staff(333) (23) Refunds to ASB Bank Community Trust for the services of suppliers, trustees and staff(294) (556) Fund management and advisory fees(1,609) (1,360) Donations to voluntary organisations(13,262) (12,198) Donation to ASB Bank Community Trust Charitable Purposes Reserve Fund0 (4,075) (15,498) (18,212) Net cash outflow from operating activities (302) (105) Cash flows from investing activities Cash was provided from: Sale of investment property1,200 0 Sale of fixed assets0 19 Bills receivable matured0 145 1,200 164 Cash was disbursed on: Purchase of fixed assets(4) (43) Improvements to land & buildings and investment properties(121) (67) (125) (110) Net cash outflow from investing activities 1,075 54 Net cash inflow/(outflow) from activities 773 (51) Add opening cash brought forward 713 764 Ending cash carried forward $1,486 $713 The notes to these financial statements form part of and should be read in conjunction with this Statement of Cash Flows. Reconciliation of Reported Surplus to Net Cash Flow from Operating Activities 1996$000 1995$000 Net surplus/(deficit) 27,245 (20,308) Add non-cash items: Depreciation87 105 Unrealised movement on bonds3 178 Investment property revaluation0 (64) 90 219 Movements in working capital items: Increase in creditors90 39 Decrease in committed donations(53) (4,130) Decrease in ASB Bank Community Trust(77) (36) Increase in debtors(11) (10) Decrease in other assets1 0 (50) (4,137) Movements in investments: Decrease in bonds0 2,764 Profit on disposal of investment property(120) 0 (120) 2,764 Less fund managers' income reinvested by fund managers (27,467) 21,357 Net cash outflow from operating activities ($302) ($105) Notes to the Financial Statements for the Year Ended 31 March 1996 1. Statement of Accounting Policies The ASB Charitable Trust (``the trust'') was formed on 31 May 1989 through the creation of a trust deed by the ASB Bank Community Trust and a donation of $252,000,000. The measurement basis adopted is that of historical cost adjusted for the revaluation of certain assets. Reliance is placed on the fact that the trust is a going concern. The financial statements have been prepared in accordance with the requirements of the Financial Reporting Act 1993. Bank Bank is stated as the balance in the bank account rather than the balance as per the cash book. Statement of Cash Flows Cash comprises cash at bank and call deposits but does not include cash or deposits held by the fund managers. Depreciation Depreciation is provided over the useful life of the assets. Buildings are depreciated on a straight line basis. Vehicle, office equipment and furniture are depreciated on a diminishing value basis. The rates used are those recommended by the Inland Revenue Department. Dividends Dividends are recognised as income when they are received by the trust and exclude imputation tax credits. Donations Donations are accounted for as they are distributed or committed to be distributed to eligible organisations as approved by the trustees. Expenses Some expenses are shared jointly with the ASB Bank Community Trust. Whilst each trust bears its own specific costs, the joint expenses are allocated between the trusts on the basis of the number of applications processed by each. Joint expense allocations were: 1996 1995 This trust60 percent 60 percent ASB Bank Community Trust40 percent 40 percent Fixed Assets Fixed assets are valued at cost less accumulated depreciation. Investment Properties These are valued at market value. Movements in the valuation of investment properties are recorded in the statement of income and expenditure. No provision for depreciation is made on these properties. Foreign Currencies All amounts denominated in foreign currencies are converted to New Zealand dollars at balance date and all realised and unrealised gains and losses are recognised in income and expenditure for the period. Investments Investments are stated at market value. Any gains or losses are recognised in income and expenditure for the period. Investment transactions are recorded by the fund managers on a settlement date basis. Unsettled transactions are disclosed in the notes as commitments. Financial Instruments All assets and liabilities of the trust with the exception of fixed assets are financial instruments and are recognised in the balance sheet. All financial instruments are recorded at market value or fair value. The trust uses financial instruments with off balance sheet risk to reduce exposure to fluctuations in foreign currency exchange rates. Forward exchange contracts are entered into to hedge foreign currency transactions. These are converted to the New Zealand dollar rate at balance date with all realised and unrealised gains and losses being recognised in the income and expenditure statement. The quantitative disclosures required by FRS 31 disclosure of information about financial instruments, have been included throughout the financial statements where material. Reserves Transfers to the capital maintenance reserve are based on the annual movement in the consumer price index. Transfers to all other reserves from the unallocated surplus are made at the discretion of of the trustees. Taxation The trust has been accorded tax exempt status in New Zealand and Australia but is liable to taxation on investment income in some other overseas countries. Tax on overseas income is accounted for as a reduction of that income. Comparatives Certain comparatives have been restated for disclosure purposes. Changes in Accounting Policies There have been no material changes in accounting policies during the period. 1996$000 1995$000 2. Investments Managed by external managers Balance as at 1 April331,226 352,584 Movement in market value42,467 (6,358) Withdrawals(15,000) (15,000) Balance as at 31 March$358,693 $331,226 Investments managed by external managers comprise Cash, deposits and miscellaneous54,732 70,646 Bonds189,669 170,925 Equities114,292 89,655 Portfolio total$358,693 $331,226 Other investments comprise Call deposits1,483 714 Bonds214 217 $1,697 $931 `Other investments' are managed in-house. Included in these are deposits, certain of which are subject to a right of set-off under the terms of the trust's banking agreement. There has been no set-off applied in the presentation of these accounts.[qp] Investment Properties Balance as at 1 April960 850 Expenditure capitalised120 46 Investment property revaluation 64 Realised gain on disposal120 Disposal proceeds(1,200) Balance as at 31 March0 960 3. Reserves Capital maintenance reserve Balance as at 1 April48,066 36,372 Allocation from surplus6,951 11,694 Balance as at 31 March$55,017 $48,066 Investment fluctuation reserve Balance as at 1 April 6,887 Allocation to surplus (6,887) Balance as at 31 March General reserve Balance as at 1 April18,000 40,000 Allocation from/(to) surplus20,000 (22,000) Balance as at 31 March$38,000 $18,000 Social emergencies reserve Balance as at 1 April 3,500 Allocation to surplus (3,500) Balance as at 31 March 4. Donations For this year Committed and disbursed4,487 4,318 Committed but not yet disbursed10,249 4,303 Total donations approved14,736 8,621 Donations written back(1,527) (554) 13,209 8,067 For future years Committed but not yet disbursed (off balance sheet)59 529 $13,268 $8,596 Committed but not yet disbursed Committed in previous years6,616 12,573 Committed this year10,174 4,270 $16,790 $16,843 5. Trust Capital Balance as at 1 April251,786 251,786 Balance as at 31 March$251,786 $251,786 6. Fixed Assets Cost 1996$000Accumulated Depreciation Book Value Cost 1995$000Accumulated Depreciation Book Value Land and buildings2,079 70 2,009 2,079 49 2,030 Vehicle, office equipment and furniture597 322 275 593 255 338 $2,676 $392 $2,284 $2,672 $304 $2,368 7. Statement of Cash Flows The depreciation charged to the cash flow statement includes a sum of $34,882 (1995 $42,098) on charged to the ASB Bank Community Trust as facilities rental. 8. Commitments Investments Net investment transactions receivable by the fund managers but unsettled prior to year end total $2,616,056 (1995 $559,634). 9. Financial Instruments Currency Risk The trust invests in securities that are denominated in foreign currencies and therefore result in a currency risk. In order to minimise the currency risk, foreign currency assets are hedged. 1996$000 1995$000 Foreign currency denominated assets157,758 136,757 Less foreign currency contracts108,308 97,850 $49,450 $38,907 Interest Rate Risk The trust, through its fund managers, invests in securities that are subject to interest rate risk. The trust actively monitors this risk and changes asset allocations and maturity profiles accordingly. Credit Risk The trust in the normal course of business enters into arrangements with other parties. These arrangements give rise to credit risk for the trust and hence policies and procedures are maintained so that this risk is minimised. For all classes of financial assets held by the trust the maximum credit risk exposure to the trust is the carrying value as disclosed in the financial statements at balance date. Due to the diversification of the investment portfolio and the policies and procedures in place, there is no significant concentrations of credit risk. Fair Values All financial instruments are carried at market value. KPMG Audit Report to the Trustees of ASB Charitable Trust We have audited the financial statements (comprising the statement of income and expenditure, the balance sheet, the statement of cash flows and the notes to these financial statements). The financial statements provide information about the past financial performance of the trust and its financial position as at 31 March 1996. This information is stated in accordance with the accounting policies included in the notes to these financial statements. Trustees' Responsibilities The trustees are responsible for the preparation of financial statements which give a true and fair view of the financial position of the trust as at 31 March 1996 and of the results of operations and cash flows for the year ended 31 March 1996. Auditors' Responsibilities It is our responsibility to express an independent opinion on the financial statements presented by the trustees and report our opinion. 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 judgments made by the trustees in preparation of the financial statements, 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 statements are 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. Unqualified opinion We have obtained all the information and explanations we have required. In our opinion the financial statements: comply with generally accepted accounting practice; give a true and fair view of the financial position of the trust as at 31 March 1996 and the results of its operations and cash flows for the year ended on that date. Our audit was completed on 31 May 1996 and our unqualified opinion is expressed as at that date. KPMG, Auckland. A copy of the list of organisations to whom donations have been made by ASB Bank Community Trust and ASB Charitable Trust is available on request from ASB Trusts, P.O. Box 68-048, Newton, Auckland.