Trustee Banks Restructuring Act 1988 Consolidated Statement of Financial Performance for the Year Ended 31 March 1997 Note 1997$ 1996$ Income Income from investments2 9,641,256 3,950,324 Less expenditure Advertising and promotion 118,276 33,379 Audit fees Trust auditors 6,556 2,875 Other auditors 2,571 Depreciation 16,247 8,743 Professional fees 68,122 25,683 Rent 11,180 11,059 Trustees' expenses 31,073 16,456 Trustees' fees 52,057 44,201 Wages and salaries 73,812 39,957 Other expenses 61,626 20,317 Total expenditure 441,520 202,670 Profit on sale of investment in Trust Bank New Zealand Limited11 26,065,537 Net income before community payments 35,265,273 3,747,654 Less community payments General donations 1,901,590 854,500 Special donations 1,817,196 745,496 Bursaries 264,000 112,000 Total community payments 3,982,786 1,711,996 Surplus transferred to equity $31,282,487 $2,035,658 (The notes to the financial statements form part of and are to be read in conjunction with the above accounts.) Consolidated Statement of Movements in Equity for the Year Ended 31 March 1997 1997$ 1996$ Equity at start of period77,965,715 75,930,057 Net surplus for the period31,282,487 2,035,658 Total recognised revenues and expenses31,282,487 2,035,658 Equity at the end of period$109,248,202 $77,965,715 (The notes to the financial statements form part of and are to be read in conjunction with the above accounts.) Consolidated Statement of Financial Position as at 31 March 1997 Note 1997$ 1996$ Equity Accumulated funds 109,248,202 16,695,715 Revaluation reserve3 61,270,000 Total trust funds 109,248,202 77,965,715 Represented by: Current assets Cash and bank deposits4 11,173,757 1,833,350 Accruals and sundry debtors 96,323 5,179 Total current assets 11,270,080 1,838,529 Less current liabilities Sundry creditors 65,366 24,115 Employee entitlements 3,595 Donations payable5 287,221 Total current liabilities 356,182 24,115 Net current assets 10,913,898 1,814,414 Non current assets Fixed assets At cost 70,642 42,858 Less accumulated depreciation 24,917 12,827 45,725 30,031 Investments6 98,288,579 76,121,270 Total non current assets 98,334,304 76,151,301 Net assets $109,248,202 $77,965,715 (The notes to the financial statements form part of and are to be read in conjunction with the above accounts.) Signed on behalf of the board of trustees: G. GLASS, Chairperson. B. MARTIN, Trustee. Dated this 13th day of June 1997. Consolidated Statement of Cash Flows for the Year Ended 31 March 1997 Note 1997$ 1996$ Cash flows from operating activities Cash was provided from: Dividends 2,557,514 3,654,000 Interest on investments 7,350,993 317,621 9,908,507 3,971,621 Cash was applied to: Community payments (3,694,637[teh]) (1,709,966[teh]) Trustees and employees (155,804[teh]) (100,974[teh]) Suppliers of other goods and services (240,369[teh]) (81,655[teh]) Net operating cash flows8 5,817,697 2,079,026 Cash flows from investing activities Cash was provided from: Sale of Government securities 92,419,979 231,638 Sale of Trust Bank New Zealand Limited shares 99,218,581 Cash was applied to: Investments in Government securities (93,083,925[teh]) (1,025,747[teh]) Investments in managed funds (80,000,000[teh]) Investments in shares (14,999,984[teh]) Purchase of fixed assets (31,941[teh]) (38,144[teh]) Net investing cash flows 3,522,710 (832,253[teh]) Net increase (decrease) in cash held 9,340,407 1,246,773 Add cash at 1 April 1,833,350 586,577 Cash at 31 March4 $11,173,757 $1,833,350 (The notes to the financial statements form part of and are to be read in conjunction with the above accounts.) Notes to the Consolidated Financial Statements for the Year Ended 31 March 1997 1. Statement of Accounting Policies Reporting Entity Trust Bank Eastern and Central Community Trust Incorporated is a charitable trust incorporated in accordance with the provisions of the Trustee Banks Restructuring Act 1988. The financial statements have been prepared in accordance with applicable financial reporting standards and other generally accepted accounting practices in New Zealand. Measurement Base Unless otherwise stated the measurement base applied is that of historical cost. Specific Accounting Policies The following are the particular accounting policies which have a material effect on the measurement of results and financial position: Investment income is accounted for on an accruals basis recognising both realised and unrealised gains or losses in value. Income from managed funds are recorded net of fund manager's expenses. Donations made are included in the statement of financial performance when approved by the trustees. Depreciation is charged to write off the cost of fixed assets over their expected economic lives using the straight line method: Computer equipment 3 years Fixtures and fittings 9 years Furniture 10 years Office equipment 5 years Investments are valued at market value. Foreign currency balances are converted to NZD at the year end rate of exchange. Transactions completed during the year are converted at the rate applying at the date of the transaction. Foreign exchange gains and losses are included within the statement of financial performance. Income tax is not provided as the trust has charitable status for tax purposes therefore its income is not subject to taxation. G.S.T. inclusive accounting has been adopted as the trust is not registered for G.S.T. purposes. Consolidation of Eastern and Central Community Trust Charities Limited, a wholly owned subsidiary, has been achieved using the purchase method of consolidation. Cash comprises cash at bank, call deposits and short term deposits but does not include cash held by fund managers. Changes in Accounting Policies Following the sale of the trust's investment in Trust Bank New Zealand Limited, the trustees have developed an investment policy to meet the long-term objectives of the trust. Due to this change in circumstances the policies for valuation of investments and accrual of donations have been changed. Donations are now accounted for on an accruals basis. All investments are now valued at market value. With the exception of these changes all policies have been consistently applied. The effect of these changes to accounting policies in terms of the financial performance for the year is as follows: Increase/(Decrease)in Surplus for Year Increase in donations accounted for in statement of financial performance$(288,149[teh]) Change in value of investments in statement of financial performance$97,009 2. Income from Investments 1997$ 1996$ Dividends received from Trust Bank New Zealand Limited2,436,000 3,654,000 Realised investment income New Zealand7,000,408 296,324 Overseas474,844 Unrealised investment income New Zealand(847,948[teh]) Overseas23,373 Realised foreign exchange income554,579 $9,641,256 $3,950,324 3. Reserves 1997$ 1996$ Revaluation reserve 61,270,000 $61,270,000 This reserve, created to hold the increment in value of the shareholding in Trust Bank New Zealand Limited, has been realised. 5. Cash and Bank Deposits 1997$ 1996$ Current accounts50,829 5,162 Call accounts5,122,869 446,129 Petty cash59 59 Short-term deposit6,000,000 1,382,000 $11,173,757 $1,833,350 5. Donations Payable Included in donations payable are $95,000 of donations which are subject to the donees fulfilling certain conditions. 6. Investments 1997$ 1996$ New Zealand Government stock$4,076,398 2,809,270 Kiwi bonds242,492 232,000 Managed funds79,938,978 New Zealand shares14,030,711 Shares in Trust Bank New Zealand Limited 73,080,000 $98,288,579 $76,121,270 7. Financial Instruments Financial instruments include New Zealand Govvernment stock, short-term deposits, equities and investments in managed funds both within New Zealand and overseas. Credit Risk The trustees regularly review their investment strategy. The investment strategy ensures an appropriate diversification of investments so that the trust has no significant concentration of counterparty or credit risk. Fair Values The trust has recorded its financial assets and liabilities at current market values which represent estimated fair values and credit risk exposure. Currency Risk Ther trust has exposure to currency risk through its investments in off-shore equities and bonds. Credit Facilities The trust has no credit facilities. Interest Rate Risk The trust investments in fixed rate securities are subject to interest rate risk. 8. Reconciliation of Net Surplus with Operating Cash Flows 1997$ 1996$ Net surplus transferred to trust fund31,282,487 2,035,658 Adjust for non cash items Unrealised and foreign exchange income on investments343,580 15,782 Depreciation16,247 10,215 Movements in net current assets Accruals and sundry debtors(91,147[teh]) 11,261 Sundry creditors332,067 6,110 Profit on sale of investment in Trust Bank New Zealand Limited(26,065,537[teh]) Net operating cash flows$5,817,697 $2,079,026 9. Segmental Reporting The trust operates as a charitable trust distributing funds to the community in the Central North Island region. 10. Contingent Liabilities and Commitments There are no contingent liabilities at 31 March 1997. Lease commitments total $12,111 (1996: $23,291). 11. Shares in Trust Bank New Zealand Limited 1997$ 1996$ Shareholding in Trust Bank New Zealand Limited Recorded at initial public offer value of $2.10 $73,080,000 During the year the shareholding in Trust Bank New Zealand Limited was sold to Westpac Holdings New Zealand Limited. The sale price for the shares was $2.85 cps. The gain on sale represents the surplus over carrying value and is stated after deduction of costs attributable to the sale process. The revaluation reserve (note 3) has been transferred to accumulated funds. Audit Report To the trustees of Trust Bank Eastern and Central Community Trust Inc. We have audited the consolidated financial report. The consolidated financial report provides information about the past financial performance of the Trust Bank Eastern and Central Community Trust Inc. group (the trust) and its financial position as at 31 March 1997. This information is stated in accordance with the accounting policies set out. Trustees Responsibilities The trustees are responsible for the preparation of a consolidated financial report which gives a true and fair view of the financial position of the trust as at 31 March 1997 and of the results of its operations and cash flows for the year ended 31 March 1997. Auditors' Responsibilities It is our responsibility to express an independent opinion on the consolidated 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 consolidated financial report. It also includes assessing: the significant estimates and judgments made by the trustees in the preparation of the consolidated financial report, and whether the accounting policies are appropriate to the trust 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 consider 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 consolidated financial report. Other than in our capacity as auditors we have no relationship with or interests in the trust. Unqualified Opinion We have obtained all the information and explanations we have required. In our opinion the consolidated financial report: complies with generally accepted accounting practice; gives a true and fair view of the financial position of the trust as at 31 March 1997 and the results of its operations and cash flows for the year ended on that date. Our audit was completed on 12 June 1997 and our unqualified opinion is expressed as at that date. DENT ROBERTSON & PARTNERS, Chartered Accountants. Hastings, New Zealand. A full list of donations for this period is available from the Trust Office, P.O. Box 1058, Hastings.