ASB Bank Community Trust Trustee Banks Restructuring Act 1988 Statement of Income and Expenditure for the Year Ended 31 March 1998 Note 1998$000 1997$000 Income Dividends 4,850 3,750 Other investments2 438 396 5,288 4,146 Committed donations5 3,449 3,965 1,839 181 Expenditure Audit 6 6 Facilities rental 34 32 Legal 1 2 Occupancy 38 23 Other operating 71 53 Public and statutory reporting 52 55 Staff 195 189 Trustees' fees 56 51 Trustees' expenses 9 9 462 420 1,377 (239) Investment revaluations3 20,638 15,196 Surplus before tax 22,015 14,957 Taxation4 (93) 93 Net surplus $22,108 $14,864 The net surplus has been allocated as follows: Investment reserve6 18,714 13,778 Charitable purposes reserve fund6 2,432 1,138 Uncommitted surplus/(deficit) 962 (52) $22,108 $14,864 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 1998 1998$000 1997$000 Total trust funds at beginning of year123,681 108,817 Net surplus22,108 14,864 Total trust funds at end of year$145,789 $123,681 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 1998 Note 1998$000 1997$000 Source of funds Trust funds Capital7 44,320 44,320 Investment reserve6 84,573 65,859 Charitable purposes reserve fund6 13,814 11,382 General reserve6 1,000 1,000 Uncommitted surplus 2,082 1,120 145,789 123,681 Liabilities Bank overdraft 9 0 ASB Charitable Trust 52 63 Creditors 11 12 Committed donations5 2,710 3,204 2,782 3,279 $148,571 $126,960 Employment of funds Investments Shares3 142,150 121,512 Other investments3 6,383 5,381 148,533 126,893 Current assets Cash 0 20 Cash charitable purposes reserve fund 0 10 Debtors 38 15 Taxation 0 22 38 67 $148,571 $126,960 Approved on behalf of the board: JUDITH BASSETT, Chairperson. WAARI WARD-HOLMES, Deputy Chairman. Dated this 25th day of May 1998. 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 1998 1998$000 1997$000 Cash flows from operating activities Cash was provided from: Dividends received4,850 3,750 Interest received on investments423 407 Net charitable purposes reserve fund56 0 Taxes received116 0 Net G.S.T.0 4 5,445 4,161 Cash was disbursed on: Payment to suppliers, trustees and staff(32) (32) Refunds to ASB Charitable Trust for the services of suppliers, trustees and staff(440) (371) Net charitable purposes reserve fund0 (372) Donations to community organisations(3,943) (2,005) Taxes paid0 (156) (4,415) (2,936) Net cash inflow from operating activities 1,030 1,225 [pj] Cash flows from investing activities Cash was provided from: Special dividends received 0 57,955 Cash was disbursed on: Increase in term deposits(940) (1,142) Increase in bonds(511) 0 ASB Bank Limited share purchase0 (57,955) (1,451) (59,097) Net cash outflow from investing activities (1,451) (1,142) Net cash (outflow)/inflow from activities (421) 83 Add opening cash brought forward 522 439 Ending cash carried forward $101 $522 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 1998$000 1997$000 Reported surplus 22,108 14,864 Add non-cash items: Unrealised investment revaluations(20,638) (15,196) Unrealised movement on bonds11 0 (20,627) (15,196) Movements in working capital items: Decrease in creditors(1) (28) (Decrease)/increase in committed donations (494) 1,959 Net charitable purposes reserve fund56 (372) Decrease/(increase) in taxation receivable22 (63) (Increase)/decrease in debtors(23) 12 (Decrease)/increase in ASB Charitable Trust(11) 49 (451) 1,557 Net cash inflow from operating activities $1,030 $1,225 Notes to the Financial Statements for the Year Ended 31 March 1998 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: 1998 1997 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 contributed 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 contributed 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. Changes in Accounting Policies There have been no material changes in accounting policies during the period. 1998$000 1997$000 2. Income Other Investments Interest received444 396 Investment loss(6) 0 $438 $396 3. Investments Shares in ASB Bank Limited Balance as at 1 April121,512 106,316 Special dividend0 (57,995) Share purchase0 57,995 Increase in net tangible assets20,638 15,196 Balance as at 31 March$142,150 $121,512 Total number of shares held in ASB Bank Limited as at 31 March 1998 was 80,780,325 (1997 80,780,325) of which 7,533,391 (1997 7,533,391) are attributable to the charitable purposes reserve fund.[qp] The increase in net tangible assets is based on unaudited accounts of ASB Bank Limited as at 31 December 1997.[qp] Other Investments These consist of securities and deposits managed in-house. Investments comprise: Call deposits110 502 Call deposits charitable purposes reserve fund0 690 Term deposits4,250 3,310 Term deposits charitable purposes reserve fund643 0 Bonds1,380 879 $6,383 $5,381 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 taxation22,015 14,957 Net dividend(4,850) (3,750) Committed donations3,449 3,965 Unrealised investment revaluations(20,638) (15,196) Income attributable to charitable purposes reserve fund(56) (44) Non-deductible expenditure384 350 Distribution to tax approved beneficiaries(225) 0 Taxable loss brought forward(79) 0 $0 $282 Taxation charge @ 33 percent$0 $93 Over provision of prior years$(93) $0 5. Donations For this year Committed and disbursed1,366 999 Committed but not yet disbursed2,101 2,981 Total donations approved3,467 3,980 Donations written back(18) (15) $3,449 $3,965 Committed but not yet disbursed Committed in previous years613 223 Committed this year2,097 2,981 $2,710 $3,204 6. Reserves Investment reserve Balance as at 1 April65,859 52,081 Increase in value of ASB Bank Limited shares20,638 15,196 Increase attributable to the charitable purposes reserve fund(1,924) (1,418) Balance as at 31 March$84,573 $65,859 Charitable purposes reserve fund Balance as at 1 April11,382 10,244 Increase in value of ASB Bank Limited shares1,924 1,418 Income508 393 Donations to voluntary organisations0 (673) Balance as at 31 March$13,814 $11,382 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 1998. 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 1998 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 1998 and the results of its operations and cash flows for the year ended on that date. Our audit was completed on 25 May 1998 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 1998 Note 1998$000 1997$000 Income Managed funds 77,598 42,111 Other investments 78 132 Rent 8 7 77,684 42,250 Direct expenditure Fund management, custodian and advisory fees 1,913 1,683 75,771 40,567 Committed donations4 19,876 12,029 55,895 28,538 Other expenditure Audit 27 25 Depreciation 51 47 Loss on disposal of fixed assets 1 7 Legal 4 3 Occupancy 57 34 Other operating 67 63 Public and statutory reporting 78 82 Staff 300 295 Trustees' fees 84 77 Trustees' expenses 17 21 686 654 Net surplus $55,209 $27,884 The net surplus has been allocated as follows: Capital maintenance reserve3 4,393 5,548 General reserve3 42,000 20,000 Uncommitted surplus 8,816 2,336 $55,209 $27,884 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 1998 1998$000 1997$000 Total trust funds at beginning of year373,428 345,544 Net surplus55,209 27,884 Total trust funds at end of year$428,637 $373,428 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 1998 Note 1998$000 1997$000 Source of funds Trust funds Capital5 251,786 251,786 Capital maintenance reserve3 64,958 60,565 General reserve3 100,000 58,000 Retained surplus 11,893 3,077 428,637 373,428 Liabilities Bank overdraft 0 2 Creditors 497 495 Committed donations4 12,516 12,892 13,013 13,389 $441,650 $386,817 Employment of funds Investments Managed funds2 438,652 383,304 Other investments2 661 1,158 439,313 384,462 Current assets ASB Bank Community Trust 52 63 Cash 40 0 Debtors 3 18 Other assets 21 23 116 104 Fixed assets6 2,221 2,251 $441,650 $386,817 Approved on behalf of the board: JUDITH BASSETT, Chairperson. WAARI WARD-HOLMES, Deputy Chairman. Dated this 25th day of May 1998. 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 1998 1998$000 1997$000 Cash flows from operating activities Cash was provided from: Receipts from fund managers 22,250 17,500 Interest received on investments 76 133 Refunds of expenses by ASB Bank Community Trust 440 371 Net G.S.T. 2 1 Receipts from rentals 8 7 22,776 18,012 Cash was disbursed on: Payment to suppliers, trustees and staff(1,068) (950) Fund management and advisory fees(1,849) (1,620) Donations to charitable organisations(20,252) (15,927) (23,169) (18,497) Net cash outflow from operating activities (393) (485) Cash flows from investing activities Cash was provided from: Bond maturity100 0 Sale of fixed assets15 5 115 5 Cash was disbursed on: Purchase of fixed assets(73) (63) (73) (63) Net cash inflow/(outflow) from investing activities 42 (58) Net cash outflow from activities (351) (543) Add opening cash brought forward 943 1,486 Ending cash carried forward $592 $943 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 1998$000 1997$000 Reported surplus 55,209 27,884 Add non-cash items: Depreciation85 79 Unrealised movement on bonds4 1 89 80 Movements in working capital items: Increase in creditors2 90 Decrease in committed donations(376) (3,898) Decrease/(increase) in ASB Bank Community Trust11 (49) Decrease in debtors15 6 Decrease in other assets2 1 (346) (3,850) Movements in investments: Loss on disposal of fixed assets 2 12 Less fund managers' income reinvested by fund managers (55,347) (24,611) Net cash outflow from operating activities $(393) $(485) Notes to the Financial Statements for the Year Ended 31 March 1998 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: 1998 1997 This trust60 percent 60 percent ASB Bank Community Trust40 percent 40 percent Fixed Assets Fixed Assets are valued at cost less accumulated depreciation. 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. Changes in Accounting Policies There have been no material changes in accounting policies during the period. 1998$000 1997$000 2. Investments Managed by external managers Balance as at 1 April383,304 358,693 Movement in market value77,598 42,111 Withdrawals(22,250) (17,500) Balance as at 31 March$438,652 $383,304 Investments managed by external managers comprise Cash, deposits and miscellaneous58,487 69,129 Bonds191,673 185,208 Equities188,492 128,967 Portfolio total$438,652 $383,304 Other investments comprise Call deposits552 945 Bonds109 213 $661 $1,158 `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] 3. Reserves Capital maintenance reserve Balance as at 1 April60,565 55,017 Allocation from surplus4,393 5,548 Balance as at 31 March$64,958 $60,565 General reserve Balance as at 1 April58,000 38,000 Allocation from surplus42,000 20,000 Balance as at 31 March$100,000 $58,000 4. Donations For this year Committed and disbursed9,791 3,786 Committed but not yet disbursed10,388 8,358 Total donations approved20,179 12,144 Donations written back(303) (115) $19,876 $12,029 Committed but not yet disbursed Committed in previous years2,182 4,537 Committed this year10,334 8,355 $12,516 $12,892 5. Trust Capital Balance as at 1 April251,786 251,786 Balance as at 31 March$251,786 $251,786 6. Fixed Assets Cost 1998$000Accumulated Depreciation Book Value Cost 1997$000Accumulated Depreciation Book Value Land and buildings2,079 112 1,967 2,079 91 1,988 Vehicle, office equipment and furniture644 390 254 612 349 263 $2,723 $502 $2,221 $2,691 $440 $2,251 7. Statement of Cash Flows The depreciation charged to the cash flow statement includes a sum of $34,068 (1997 $31,586) 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 $2,535,554 (1997 $513,383). 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. 1998$000 1997$000 Foreign currency denominated assets246,931 175,754 Less foreign currency contracts172,236 117,997 $74,695 $57,757 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 1998. 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 1998 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 1998 and the results of its operations and cash flows for the year ended on that date. Our audit was completed on 25 May 1998 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.