ASB Bank Community Trust Trustee Banks Restructuring Act 1988 Statement of Income and Expenditure for the Year Ended 31 March 1997 Note 1997$000 1996$000 Income Dividends 3,750 3,300 Other investments2 396 252 4,146 3,552 Committed donations5 3,965 2,417 181 1,135 Expenditure Audit 6 7 Facilities rental 32 35 Legal 2 9 Occupancy 23 20 Other operating 53 52 Public and statutory reporting 55 56 Staff 189 187 Trustees' fees 51 48 Trustees' expenses 9 10 420 424 (239[teh]) 711 Investment revaluations3 15,196 13,746 Surplus before tax 14,957 14,457 Taxation4 93 63 Net surplus $14,864 $14,394 The Net Surplus has been allocated as follows: Investment reserve6 13,778 12,464 Charitable purposes reserve fund6 1,138 1,606 Uncommitted (deficit)/surplus (52[teh]) 324 $14,864 $14,394 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 1997 1997$000 1996$000 Total trust funds at beginning of year108,817 94,423 Net surplus14,864 14,394 Total trust funds at end of year$123,681 $108,817 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 1997 Note 1997$000 1996$000 Source of funds Trust funds Capital7 44,320 44,320 Investment reserve6 65,859 52,081 Charitable purposes reserve fund6 11,382 10,244 General reserve6 1,000 1,000 Uncommitted surplus 1,120 1,172 123,681 108,817 Liabilities ASB Charitable Trust 63 14 Taxation 0 41 Creditors 12 40 Committed donations5 3,204 1,245 3,279 1,340 $126,960 $110,157 Employment of funds Investments Shares3 121,512 106,316 Other investments3 5,381 3,780 126,893 110,096 Current assets Cash 20 29 Cash charitable purposes reserve fund 10 4 Debtors 15 28 Taxation 22 0 67 61 $126,960 $110,157 Approved on behalf of the board: JUDITH BASSETT, Chairperson. WAARI WARD-HOLMES, Deputy Chairman. Dated this 26th day of May 1997. 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 1997 1997$000 1996$000 Cash flows from operating activities Cash was provided from: Refund of expenses by ASB Charitable Trust0 294 Dividends received3,750 3,300 Interest received on investments407 239 Net G.S.T.4 6 4,161 3,839 Cash was disbursed on: Payment to suppliers, trustees and staff(32[teh]) (655[teh]) Refunds to ASB Charitable Trust for the services of suppliers, trustees and staff(371[teh]) 0 Charitable purposes reserve fund(372[teh]) (232[teh]) Donations to voluntary organisations(2,005[teh]) (1,859[teh]) Taxes paid(156[teh]) (20[teh]) (2,936[teh]) (2,766[teh]) Net cash inflow from operating activities 1,225 1,073 Cash flows from investing activities Cash was provided from: Special dividends received 57,955 0 Cash was disbursed on: Increase in term deposits(1,142[teh]) (861[teh]) ASB Bank Limited share purchase(57,955[teh]) 0 (59,097[teh]) (861[teh]) Net cash outflow from investing activities (1,142[teh]) (861[teh]) Net cash inflow from activities 83 212 Add opening cash brought forward 439 227 Ending cash carried forward $522 $439 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 1997$000 1996$000 Reported surplus 14,864 14,394 Add non-cash items: Unrealised investment revaluations(15,196[teh]) (13,746[teh]) Unrealised movement on bonds0 13 (15,196[teh]) (13,733[teh]) Movements in working capital items: Decrease in creditors(28[teh]) (21[teh]) Increase in committed donations1,959 558 Charitable purposes reserve fund(372[teh]) (237[teh]) (Increase)/decrease in taxation receivable(63[teh]) 43 Decrease/(increase) in debtors12 (9[teh]) Increase in ASB Charitable Trust49 78 1,557 412 Net cash inflow from operating activities $1,225 $1,073 Notes to the Financial Statements for the Year Ended 31 March 1997 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 at bank and call deposits. 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: 1997 1996 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 the investment 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 or are not materially different from 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 reserve reflects both the realised and unrealised increase in the net tangible asset value of the shareholding in ASB Bank Limited and the increase in value realised through the receipt of the special dividend. It excludes the portion of the increases 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. 1997$000 1996$000 2. Income Other Investments Interest received396 265 Investment loss0 (13[teh]) $396 $252 3. Investments Shares in ASB Bank Limited Balance as at 1 April106,316 92,570 Special dividend(57,995[teh]) 0 Share purchase57,995 0 Increase in net tangible assets15,196 13,746 Balance as at 31 March$121,512 $106,316 A special dividend of $57,995,325 was received from ASB Bank Limited on 28 June 1996 of which $5,404,783 was attributed to the charitable purposes reserve fund. The special dividend was fully imputed. The proceeds of the special dividend ($57,995,325) were immediately reinvested in the purchase of new shares issued by ASB Bank Limited.[qp] Total number of shares held in ASB Bank Limited as at 31 March 1997 was 80 780 325 (1996: 22 825 000) of which 7 533 391 (1996: 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 1996.[qp] Other Investments[qp] These consist of securities and deposits managed in-house.[qp] Investments comprise: Call deposits502 410 Call deposits charitable purposes reserve fund690 0 Term deposits3,310 2,168 Term deposits charitable purposes reserve fund0 323 Bonds879 879 $5,381 $3,780 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. 4. Taxation Surplus before taxation14,957 14,457 Net dividend(3,750[teh]) (3,300[teh]) Committed donations3,965 2,417 Unrealised investment revaluations(15,196[teh]) (13,746[teh]) Income attributable to charitable purposes reserve fund(44[teh]) (16[teh]) Non-deductible expenditure350 378 $282 $190 Taxation charge @ 33 percent$93 $63 5. Donations For this year Committed and disbursed999 1,274 Committed but not yet disbursed2,981 1,161 Total donations approved3,980 2,435 Donations written back(15[teh]) (18[teh]) $3,965 $2,417 Committed but not yet disbursed Committed in previous years223 94 Committed this year2,981 1,151 $3,204 $1,245 6. Reserves Investment reserve Balance as at 1 April52,081 39,617 Increase in value of ASB Bank Limited shares15,196 13,746 Increase attributable to the charitable purposes reserve fund (1,418[teh]) (1,282[teh]) Balance as at 31 March$65,859 $52,081 Charitable purposes reserve fund Balance as at 1 April10,244 8,638 Increase in value of ASB Bank Limited shares1,418 1,282 Income393 324 Donations to voluntary organisations(673[teh]) 0 Balance as at 31 March$11,382 $10,244 General reserve Balance as at 1 April1,000 1,000 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, statement of movement in trust funds, 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 1997. 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 1997 and of the results of its operations and cash flows for the year ended on that date. 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 1997 and the results of its operations and cash flows for the year ended on that date. Our audit was completed on 26 May 1997 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 1997 Note 1997$000 1996$000 Income Managed funds 42,111 42,467 Sale of investment property2 0 120 Other investments 132 107 Rent 7 74 42,250 42,768 Direct expenditure Fund management, custodian and advisory fees 1,683 1,659 40,567 41,109 Committed donations4 12,029 13,209 28,538 27,900 Other expenditure Audit 25 30 Depreciation 47 52 Loss on disposal of fixed assets 7 0 Legal 3 12 Occupancy 34 29 Other operating 63 66 Public and statutory reporting 82 84 Staff 295 295 Trustees' fees 77 72 Trustees' expenses 21 15 654 655 Net surplus $27,884 $27,245 The net surplus has been allocated as follows: Capital maintenance reserve3 5,548 6,951 General reserve3 20,000 20,000 Uncommitted surplus 2,336 294 $27,884 $27,245 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 1997 1997$000 1996$000 Total trust funds at beginning of year345,544 318,299 Net surplus27,884 27,245 Total trust funds at end of year$373,428 $345,544 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 1997 Note 1997$000 1996$000 Source of funds Trust funds Capital5 251,786 251,786 Capital maintenance reserve3 60,565 55,017 General reserve3 58,000 38,000 Retained surplus 3,077 741 373,428 345,544 Liabilities Bank overdraft 2 0 Creditors 495 405 Committed donations4 12,892 16,790 13,389 17,195 $386,817 $362,739 Employment of funds Investments Managed funds2 383,304 358,693 Other investments2 1,158 1,697 384,462 360,390 Current assets ASB Bank Community Trust 63 14 Cash 0 3 Debtors 18 24 Other assets 23 24 104 65 Fixed assets6 2,251 2,284 $386,817 $362,739 Approved on behalf of the board: JUDITH BASSETT, Chairperson. WAARI WARD-HOLMES, Deputy Chairman. Dated this 26th day of May 1997. 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 1997 1997$000 1996$000 Cash flows from operating activities Cash was provided from: Receipts from fund managers 17,500 15,000 Interest received on investments 133 122 Refunds of expenses by ASB Bank Community Trust 371 0 Net G.S.T. 1 0 Receipts from rentals 7 74 18,012 15,196 Cash was disbursed on: Payment to suppliers, trustees and staff(950[teh]) (333[teh]) Refunds to ASB Bank Community Trust for the services of suppliers, trustees and staff0 (294[teh]) Fund management and advisory fees(1,620[teh]) (1,609[teh]) Donations to voluntary organisations(15,927[teh]) (13,262[teh]) (18,497[teh]) (15,498[teh]) Net cash outflow from operating activities (485[teh]) (302[teh]) Cash flows from investing activities Cash was provided from: Sale of investment property0 1,200 Sale of fixed assets5 0 5 1,200 Cash was disbursed on: Purchase of fixed assets (63[teh]) (4[teh]) Improvements to land and buildings and investment properties0 (121[teh]) (63[teh]) (125[teh]) Net cash (outflow)/inflow from investing activities (58[teh]) 1,075 Net cash (outflow)/inflow from activities (543[teh]) 773 Add opening cash brought forward 1,486 713 Ending cash carried forward $943 $1,486 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 1997$000 1996$000 Reported surplus 27,884 27,245 Add non-cash items: Depreciation79 87 Unrealised movement on bonds1 3 80 90 Movements in working capital items: Increase in creditors90 90 Decrease in committed donations(3,898[teh]) (53[teh]) Increase in ASB Bank Community Trust(49[teh]) (77[teh]) Decrease/(increase) in debtors6 (11[teh]) Decrease in other assets1 1 (3,850[teh]) (50[teh]) Movements in investments: Loss on disposal of fixed assets12 0 Profit on disposal of investment property0 (120[teh]) 12 (120[teh]) Less fund managers' income reinvested by fund managers (24,611[teh]) (27,467[teh]) Net cash outflow from operating activities $(485[teh]) $(302[teh]) Notes to the Financial Statements for the Year Ended 31 March 1997 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. Therefore the statement of cash flows does not reflect the cash flows within the fund managers' portfolios. 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: 1997 1996 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 or are not materially different from 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 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. 1997$000 1996$000 2. Investments Managed by external managers Balance as at 1 April358,693 331,226 Movement in market value42,111 42,467 Withdrawals(17,500[teh]) (15,000[teh]) Balance as at 31 March$383,304 $358,693 Investments managed by external managers comprise Cash, deposits and miscellaneous69,129 54,732 Bonds185,208 189,669 Equities128,967 114,292 Portfolio total$383,304 $358,693 Other investments comprise Call deposits945 1,483 Bonds213 214 $1,158 $1,697 `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 April0 960 Expenditure capitalised0 120 Realised gain on disposal0 120 Disposal proceeds0 (1,200[teh]) Balance as at 31 March$0 $0 3. Reserves Capital maintenance reserve Balance as at 1 April55,017 48,066 Allocation from surplus5,548 6,951 Balance as at 31 March$60,565 $55,017 General reserve Balance as at 1 April38,000 18,000 Allocation from surplus20,000 20,000 Balance as at 31 March$58,000 $38,000 4. Donations For this year Committed and disbursed3,786 4,487 Committed but not yet disbursed8,358 10,249 Total donations approved12,144 14,736 Donations written back(115[teh]) (1,527[teh]) 12,029 13,209 For future years Committed but not yet disbursed (off balance sheet)0 59 $12,029 $13,268 Committed but not yet disbursed Committed in previous years4,537 6,616 Committed this year8,355 10,174 $12,892 $16,790 5. Trust Capital Balance as at 1 April251,786 251,786 Balance as at 31 March$251,786 $251,786 6. Fixed Assets Cost 1997$000Accumulated Depreciation Book Value Cost 1996$000Accumulated Depreciation Book Value Land and buildings2,079 91 1,988 2,079 70 2,009 Vehicle, office equipment and furniture612 349 263 597 322 275 $2,691 $440 $2,251 $2,676 $392 $2,284 7. Statement of Cash Flows The depreciation charged to the cash flow statement includes a sum of $31,586 (1996: $34,882) on charged to the ASB Bank Community Trust as facilities rental. 8. Commitments Investments Net investment transactions payable by the fund managers but unsettled prior to year end total $513,383 (1996: ($2,616,056)). 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. 1997$000 1996$000 Foreign currency denominated assets175,754 157,758 Less foreign currency contracts117,997 108,308 $57,757 $49,450 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, statement of movement in trust funds, 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 1997. 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 1997 and of the results of its operations and cash flows for the year ended on that date. 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 1997 and the results of its operations and cash flows for the year ended on that date. Our audit was completed on 26 May 1997 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.