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E.37

Maori Trustee

Annual Report 2011

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Maori Trustee Purpose This annual report has been prepared pursuant to section 150 of the Crown Entities Act 2004 to report on the operations of Màori Trustee, the statement of service performance and the audited financial statements for the year ended 31 March 2011.

Foreword This is the annual report of Màori Trustee for the year ended 31 March 2011. The Crown Entities Act 2004 sections 151(3) and 155(d) state that the annual report and statement of responsibility must be dated and signed by the sole member in the case of a corporation sole. John Paki was the Màori Trustee for the year ended 31 March 2011 and his term ended 18 August 2011. The 2011 annual report was completed after this date and as the newly appointed Màori Trustee I have signed the Màori Trustee annual report for the year ended 31 March 2011 and the statements of responsibility in accordance with the legislation. The Message from the Màori Trustee has been signed by John Paki, as the incumbent Màori Trustee for the year ended 31 March 2011.

Jamie Tuuta Màori Trustee 20 September 2011

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Message from the MĂ ori Trustee

4

Overview

8

MĂ ori Trustee and Group

Statement of responsibility

14

Audit report

15

Financial statements

Statement of service performance

18

Statement of comprehensive income

25

Statement of changes in equity

26

Statement of financial position

27

Statement of cash flows

28

Notes to the financial statements

29

MĂ ori Trustee Common Fund and Special Investment Accounts

Statement of responsibility

54

Audit report

55

Common Fund financial statements and notes to the financial statements

57

Special Investment Accounts statement of financial position and notes

65

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Introduction The Màori Trustee’s core role as a professional trustee for the beneficial owners, our clients, remains paramount. As an independent organisation, we are primarily accountable to the beneficial owners and the Màori Land Court for operating in a fiduciary capacity and the prudent management of their assets in accordance with trust instruments and trustee principles. However, since the transition of Màori Trustee to a stand-alone organisation in 2009 the strategic focus for the organisation has placed greater emphasis on capitalising Màori assets and economic development. This change is now starting to gain traction and be perceived by other organisations. This has been demonstrated by a number of Màori asset holding entities and iwi organisations seeking to develop shared working relationships with Màori Trustee at a business-to-business level, where Màori Trustee is seen not only to be a key asset holder but also an independent organisation with the capacity to work with others in developing new and collaborative approaches. Underpinning our approach is the strategic focus on: • Improved awareness of land and asset ownership and performance and a greater involvement in decision-making • Effective governance of Màori land and assets • Growth in assets, improved utilisation and increasing benefits to owners. As a key land-holder and developer of assets across the primary sectors, Màori Trustee is beginning to play a pivotal role, and to be seen as a central organisation able to catalyse Màori economic development and collaborative synergies. This aligns with priorities set out by the government in relation to: • • • •

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Lifting the performance of the economy Unlocking our natural resources Better equipping New Zealanders for the economic challenges they face Helping businesses grow by connecting them with science and research.

The need for focused and strategic investment in physical capital, skills and knowledge, that enables and supports productivity growth and long term sustainability, is imperative to lifting the performance of New Zealand’s economy. Drawing on expertise in science and technology and in developing new and innovative products and services that meet the market needs is crucial to achieve advanced addedvalue and a reputation for quality products. Cognisant of these imperatives, in July 2010 Màori Trustee joined the Miraka dairy manufacturing enterprise as an investor with a 16% shareholding alongside supplier shareholders Tuaropaki Trust, Wairarapa Moana Incorporation, Hauhangaroa Partnership, Tauhara Moana Trust and Huiarau Farms, strategic partners Te Awahohonu Forest Limited and the largest Vietnamese dairy company, Vinamilk, and Global Dairy Network. Miraka has started building a high-class powder milk factory at the Tuaropaki site to utilise the geothermal energy and is on track to be ready in the 2011 season. While initially Miraka will produce commodity whole milk powder, the strategic intent underpinning Màori Trustee’s investment is for growth through international export channels and higher valueadded production, such as infant milk formula. In conjunction with the development of export industry, Màori Trustee is acutely aware of the need to build the scale within the Màori asset base, both physical, in terms of the land, and knowledge, in terms of the management systems and expertise, to manage intergenerational assets. As an example of a new venture bringing together a number of trusts to form a dairy operation, last year we reported on Te Rua o Te Moko. I am pleased to report that the venture is progressing well, based on the initial efforts to build a strong structure with expert governance and management. These factors have been integral to raising revenue from increased milk solid production coupled with the strong market prices. Over two years the equity position has grown by almost $300,000. This project, and a number of others based on collaborative approaches to develop scale are underway. Often these projects require time to


bed in, and require support through the facilitation and expert advice that Màori Trustee brings to ensure sound decision-making by all parties. This is particularly important where the decisions require long term commitment and investment strategies. Key sectors Màori Trustee is targeting include horticulture, dairy, and pastoral operations. It is particularly pleasing that Màori Trustee is involved in projects with other Màori land-based organisations and research institutions which at their core are about increasing the innovative and technological development within the primary sector. This is not a short term approach and over time is expected to have wider economic and social benefits from improving productivity, increasing focus on exporting and enhancing the sustainable use of land, now and for future generations. Transformation There has been a significant amount achieved in terms of establishing a new organisation and developing new approaches to providing services to our clients. While much remains to be done, the emphasis for the next year is on building fit for purpose systems and information technology required to improve the services received by clients and to improve the efficiency and operating capability of the organisation.

Màori economic development. The Federation of Màori Authorities and the Màori Tourism Council are currently co-located in the building. The transformation for the organisation was based on the principles of independence, accountability and sustainability and viability. As a trustee corporation, Màori Trustee holds a privileged position as a fiduciary, requiring due care and operating in the best interests of clients. As part of this we have begun a new process for enhancing the transparency and accountability of the organisation through an enhanced framework of legislative compliance, including the development of a legislative compliance policy, training and a web-based compliance survey, tailored to the obligations of the Màori Trustee. Previously Te Puni Kòkiri had been responsible for compliance obligations. However, the new framework and survey system includes legislative requirements for ‘generic’ legislation (eg employment relations, building ownership) as well as ‘organisation specific’ legislation, which for the first year included the Màori Trustee Act 1953, Màori Trustee Amendment Act 2009, Màori Trustee Regulations 2009 and Te Ture Whenua Màori Act 1993. Over time we will build on this to ensure continued assurance and accountability to our clients.

This is a significant programme of work and a key step in the programme of change. As we develop the new technology platform new requirements will continue to evolve based on the changing environment. This will continue to be tested against what our clients are telling us, through our face to face engagement, web developments and client satisfaction feedback.

In developing and enhancing sound ‘best practice’ and in order to keep abreast of the changes to the regulatory environment, Màori Trustee has forged a relationship with the Trustee Corporations Association and has applied for membership alongside the other statutory trustee corporations1. This has been useful in, for example, developing our submission to the Commerce Select Committee on legislation regulating financial service providers and financial advisors.

In September 2010 Màori Trustee purchased a building to be its new Wellington premises. While this was precipitated by the need to relocate to have more effective space and more visibly to be an independent and stand-alone organisation, it has also been inspired by the opportunity to co-locate with other Màori organisations, and to create a synergistic environment to help facilitate and support

Further, we have also been developing relationships with other organisations that have similar interests and face similar issues arising from the nature of trusteeship and Màori land, such as the Public Trust and the Màori Land Court. While the issues are varied, we see a strong benefit in sharing relevant information and knowledge that can assist in policy development and enhancing the service we provide to our clients.

1.

Public Trust, Guardian Trust, Trustee Executors, Perpetual Trust, Covenant Trustee Company.

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Sustainability and viability The Màori Trustee is a financial service provider with trustee responsibilities focusing on the needs of the clients as beneficiaries of trusts. The sustainability and viability of the organisation, and the ability to make commercially-based investment decisions rests strongly on the ability of the Màori Trustee to invest the capital wisely and prudently within a medium to long term timeframe.

provide a solid and secure foundation enhancing the ability to invest in ventures and purchase assets, provide a source of income to undertake development and other activities, and ensure a prudent backstop. Outlook While during the period of transformation there has been significant expenditure on professional services, and personnel costs have increased, looking forward we expect other key operating costs to reduce through greater efficiencies. Moreover, the continued enhancement in service offerings is also providing the impetus for increased revenue generation and greater transparency in fees charged.

Our funds management performance for 2010-11 has continued to produce results above market rates. Indeed, over the last seven years, including through the global financial crisis, Màori Trustee has maintained its focus on the maintenance of capital, income and liquidity requirements within prudent risk and quality parameters.

The use of new technologies to enhance our accountability to clients and to connect more efficiently and effectively with them are key areas we continue to develop. The use of web-based information, and in particular the opportunities for data-matching will assist in the on-going management of the clients’ interests and properties as well as strengthening transparent reporting. This has begun with Births, Deaths and Marriages and is currently being worked through in relation to the Electoral Roll and Inland Revenue.

The chart below shows the cumulative performance for the period September 2003-31 March 2011 against the benchmark NZX Composite A Grade Index and the inflation rate. The overall financial position strengthened over the last year, the total assets having grown 4% for the year to $112.7m. A strong balance sheet is required to generate confidence and capacity to meet legislative and fiduciary obligations in all market conditions. Over time as Màori Trustee continues to build the asset base, it is envisaged that this will

Màori Trustee General Purposes Fund and Common Fund investment portfolio cumulative performance September 2003 – March 2011 60.00% 50.00% 40.00% 30.00% 20.00% 10.00%

MTGP (Gross)

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MTCF (Gross)

NZX Comp A Index

Mar 11

Dec 10

Jun 10

Inflation

Sep 10

Mar 10

Dec 09

Sep 09

Jun 09

Mar 09

Dec 08

Sep 08

Jun 08

Mar 08

Dec 07

Jun 07

Sep 07

Mar 07

Dec 06

Jun 06

Sep 06

Mar 06

Dec 05

Sep 05

Jun 05

Mar 05

Dec 04

Jun 04

Sep 04

Mar 04

Dec 03

Sep 03

0.00%


We recognise that there are increasing regulatory requirements that affect the operations of the organisation, for example through the Financial Service Provider, Financial Advisers legislation or the Emissions Trading Scheme legislation. The Non-bank Deposit Takers and Securities Trustee and Statutory Supervisors legislative proposals are in preparation and the Law Commission’s review of the law of trusts and the proposed review of Te Ture Whenua Màori Act will be key areas to watch and input into over the coming year. In addition, the regulatory changes in relation to freshwater management, including allocation mechanisms and infrastructure investment, and the new indigenous biodiversity policy will require Màori Trustee to have a long term and balanced approach to growth opportunities for the land and other assets Màori Trustee manages. Together with the uncertain and subdued investment markets, these changes will continue to create challenges for the revenue, financial performance and sustainability of Màori Trustee. However, we are confident that the enhanced focus on the best interests of the clients and developing people capability and systems capacity of the organisation, will ensure the continued sustainability and viability of Màori Trustee. The audit report for the 2011 financial statements is a qualified opinion as the audited financial statements from Màori Trustee’s associate Miraka Limited are not available within three months of the Màori Trustee balance date, as required by NZ IAS 28 Investments in Associates. Miraka Limited has a balance date of 31 July, and their financial statements are audited as at this date. It is impractical for Miraka Limited to provide for an audit of their financial statements as at the Màori Trustee’s balance date of 31 March each year.

The Màori Trustee, as a director, along with the Miraka Board of Directors are confident that the Miraka Limited unaudited financial statements at 31 March 2011 accurately reflect the financial position as at 31 March 2011 and the financial performance for the eight months to 31 March 2011. Thanks This is my last annual report as the Màori Trustee, as my tenure under the Màori Trustee Amendment Act 2009 ends on 18 August 2011. I acknowledge the dedication of all the staff, particularly those who operated during the extended period of the review of the Màori Trust Office leading up to the 2009 reforms and maintained the services within resource constraints, helping the Màori Trustee grow to a strong financial position. After 90 years in existence, the change to a standalone, independent trustee corporation fit for the future, was a positive step and a significant opportunity to achieve outcomes for Màori in the 21st century, beyond what was seen as the traditional role of the Màori Trustee. These changing times have brought their challenges, but also bring great opportunities. The Màori Trustee is well placed to seize those opportunities and to continue to grow to secure a better future for the people we serve.

John E Paki Màori Trustee

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MÀORI TRUSTEE OPERATIONAL OVERVIEW The 2010-11 year has shown some encouraging trends in both financial and non-financial performance. Our focus on clients has continued to be at the heart of the operations. Focus on clients Key results for the year: • collected rental income on behalf of clients of $14.4m (2010 $14.0m) and other income of $5.8 ($4.3m in 2010) from activities such as forestry, kiwifruit, dairy and stock sales • 91% of rental income invoiced was received on time (2010 92%) • made payments to 26,194 owners who received $6.3m (2010 23,493 payments, $6.2m) • Common Fund performance was 7.24% for the year (2010 7.91%) • Distributable income was $3.442m, paid to 81,263 accounts (2010 $1.3m, paid to 82,256 accounts for the nine months to 31 March 2010).

Màori Trustee during the year placed greater emphasis on finding ways to connect with clients. The development of the website and improved information has shown positive results, with a significant increase in the web traffic. Another key highlight was the Matatini National Kapahaka Festival in Gisborne for which Maui Tangohau (Deputy Màori Trustee and Gisborne manager) was chair of the organising committee, and staff attended taking the opportunity to have a ‘mobile office’ at the grounds. This not only provided a real opportunity to raise the profile of Màori Trustee, but also had some positive results in terms of locating owners and even making payment arrangements. Our focus on clients has been underpinned by our first client satisfaction survey. The results show in particular: Higher satisfaction among • knowledgeable clients (78%) • those who attended meetings (70%) • those satisfied with meetings (80%) • those satisfied with the information received (80%) Main reasons for dissatisfaction • did not get any reports on their land and assets (62%) • were not included in decision making about their land (29%) • did not agree with the decisions made (21%) The results were generally positive and there is a solid foundation of information from which to enhance the focus for the delivery of services which clearly showed that there remain challenges in order to: • increase the knowledge of Màori land owners on the role of Màori Trustee • focus increased systems capability on the improved provision of information • enhance Màori Trustee’s mechanisms for working in partnership with the owners.

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The overall drivers of client satisfaction were found to be: Overall drivers of client satisfaction keeping you up to date with the management of your land

15% 16%

is accountable to the owners providing a range of choices for developing your land

18%

ensuring information about your land and payments is easy to get

18% 33%

working in partnership with the owners 0%

5%

10%

15%

20%

25%

30%

35%

Funds Management The Màori Trustee has over the last several years had good performance results from the General Purposes Fund and Common Fund in the fixed interest bond and money market sectors. Màori Trustee has performed well even during the recent global financial crisis, outperforming the NZX Composite A Grade Index and market figures across all asset classes suitable as investment grade investments. The chart below, based on the NZX FundSource data, provides a comparison against various asset classes’ performance over the last seven years. Màori Trustee has continuously performed very well over the last ten years, particularly given the mix, size, purpose and requirements of the General Purposes Fund and Common Fund. Màori Trustee has performed better than all investment grade asset classes (other than NZ residential property), and performed well beyond the inflation rate, which is the base for capital protection. Màori Trustee - 7 year comparison to market

en t po Bon C r ds at om M e T p B os C on M om ite T ds G m A en on G er ra Fu al de Pu nd B rp os on ds es N B Z o 18 nd 0 s D ay te N rm Z 90 M de T D po C ay M o si T m B t G m a n en on k er B Fu ill al Pu nd C rp os as es h C as h or

C

er nm

N

G ov

tio rn a te In

ZX

na A ll le qu iti es

rt y

N ZX

op e

pr Z

N

Li

st

ed

pr o

C

pe rt

PI

y

8.00% 7.00% 6.00% 5.00% 4.00% 3.00% 2.00% 1.00% 0.00%

Data: NZX FundSource

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Key results for the year For the year to 31 March 2011, the overall performance of both the General Purposes Fund portfolio and the Common Fund portfolio exceeded the benchmarks used. Money market Sector Performance 31 March 2010 – 31 March 2011

Fixed interest

Benchmarks Màori Trustee

NZX 90 Day bank Bill

MJW1 Avg Cash

Benchmarks Màori Trustee

NZX Composite A Grade2

MJW Avg Fixed interest

Common Fund

4.40%

3.10%

3.90%

8.30%

7.40%

7.70%

General Purposes Fund (fund portfolio only)

3.70%

3.10%

3.90%

8.30%

7.40%

7.70%

There was strong growth in both funds. Moreover, this growth is largely due to the investment performance, rather than net contributions. These positive gross performance returns3 continue the trend from last year.

Growth 31 March 2010 – 31 March 2011

Value as at 31 March 2011

Growth from 1 April 2010 to 31 March 2011

Total % growth

% growth due to contributions and withdrawals

% growth due to performance

Common Fund

$67,001,536

$7,282,761

12.2%

5.1%

7.1%

General Purposes Fund (fund portfolio only)

$73,712,637

$3,680,542

5.3%

-0.7%

6.0%4

$140,714,173

$10,963,303

8.4%

1.9%

6.5%

Total

The composition of the Common Fund remained consistent with 2009-10. However, the composition of the General Purposes Fund was changed during the 2010-11 year, largely as a result of the purchase of assets, including an equity stake in Miraka, and the Wakefield St property. As a result of these changes, the proportion of assets held in fixed interest and short term money market was reduced, with a commensurate rise in equity holdings. Portfolio composition  

Common Fund (%)

General Purposes Fund (%)

2011

2010

2011

2010

Fixed interest

77

76

71

76

Money market

23

24

9

17

Private equity

-

-

20

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1.

Melville Jessup Weaver – consulting actuaries indices provide a survey average. This is used as a way to test that the Màori

Trustee’s benchmark index – the NZX Composite A Grade index – remains a useful comparative measure. 2.

The NZX Composite A Grade index is a combination of all NZ fixed rate corporate bonds rated A or better plus all NZ Government

bonds for the 12 months to 31 March 2011.

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3.

Gross performance is before fees and tax for the 12 months to 31 March 2011.

4.

The total growth was less than the performance growth due to withdrawals from the fund being larger than contributions by $510,987.


Economic environment The economic environment has been challenging over the last several years. While there have been signs of recovery since the global economic downturn, over the last six months, including the changes brought about by the Christchurch earthquake, there are several factors that will impact on Màori Trustee’s situation. In particular interest rates are remaining low and inflation is rising. The Official Cash Rate (OCR) is 2.5%. The CPI inflation rate is now higher than the OCR interest rate, and is rising to over 5%. Together, the capacity for the Màori Trustee to maintain income is going to be significantly more difficult than in the previous years. Interest rates and inflation

official cash rate-OCR (%)

Nov 10

Apr 10

Sep 09

Feb 09

Jul 08

Dec 07

May 07

Oct 06

Mar 06

Aug 05

Jan 05

Jun 04

Nov 03

Apr 03

Sep 02

Feb 02

Jul 01

Dec 00

May 00

Oct 99

Mar 99

9 8 7 6 5 4 3 2 1 0

inflation-CPI (%)

In this context Màori Trustee continues to take significant care to align the investment profile with the requirements of the business for the short term within a long term context. This involves maintaining income and ensuring that money is invested to preserve the real value of the assets. It is important that Màori Trustee continues to have a buffer to manage shocks and financial uncertainty through diversification such as the investment in Miraka Limited, which is expected to have growth over a 5-10 year period, and in the Wakefield St property.

Regulatory environment The regulatory environment Màori Trustee operates in saw a number of significant changes during 2011. Of particular note, in the context of the financial sector changes, the Màori Trustee was registered as a Financial Service Provider under the Financial Service Providers (Registration and Dispute Resolution) Act November 2010. Màori Trustee is also registered as a member of a Dispute Resolution Scheme as required under the Act. During 2010-11 a significant amount of work has been undertaken in preparation for the application of the Emissions Trading Scheme (ETS) to pre-1990 forestry. Over the coming year Màori Trustee will manage the processes for application, and seek ways to balance the long term benefits with the risks and liabilities associated with the scheme. Furthermore, as part of our on-going management of this issue, in April the NZ Emissions Trading Scheme Review Panel (led by David Cargill) called for submissions. Màori Trustee has presented to the panel in relation to Màori land and pre-1990 forestry and unforeseen implications of the scheme relating to Màori land and the Màori Trustee.

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Risk and Assurance We maintained sound risk and assurance governance through the development of our risk management programme. The governance of risk and assurance is provided through a Risk and Assurance committee. The committee comprises external members, Pat Waite (Chair) and Ross Himona, who are suitably qualified for the nature of Màori Trustee roles and responsibilities. Key ways in which the organisation managed its risk and assurance obligations are: • The investment committee, which includes external advice through Taupò Moana Group, meets monthly to provide oversight across Màori Trustee’s funds. • The IT Governance Committee, which includes external expert members, has provided oversight of the information systems and technology programme of change, including the processes of supplier selection. • We managed our ongoing operating risks through our core management systems, audits, regular risk profiling, continuity planning, and quality assurance processes, including a web-based systematic legislative compliance programme rolled out across the organisation.

Financial Summary The overall results for 2011 are not directly comparable to the 2010 results due to the one-off changes resulting from the legislative changes that took effect on 1 July 2009.

Màori Trustee group financial performance Total revenue was $19.301m compared to $90.470m in 2010 including the $70.207m Te Puni Kòkiri creditor write-off and the $1.354m section 460A loan fees recognised as revenue in 2010. The significant areas of revenue were: • $11.434m Crown appropriation, including a capital component (2010 $11.507m) • $3.037m from fees and commission income, including for management of the Common Fund (2010 $2.233m) • income from investments and lending of $4.801m (2010 $5.128m). Total expenditure was $16.308m, compared to $11.378m in 2010. The significant areas of expenditure were: • $5.664m for employees and other personnel costs (2010 $5.325m) • $1.661m for professional services (2010 $2.777m) • $1.111m for building occupancy, telecommunications and IT, and TPK service charges (2010 $1.338m) • $5.089m share of associates’ net deficit (2010 $0.037m net surplus). • $1.568m impairment of investments in associates (2010 nil). Màori Trustee group financial position Màori Trustee’s equity as at 31 March 2011 was $108.059m compared to $103.612m as at 31 March 2010. Total assets as at 31 March 2011 were $112.690m (2010 $108.314m). Held to maturity investments reduced by $1.975m and short term deposits reduced by $3.132m. Investments in associates increased by $4.797m with the purchase of the associate Miraka Limited, offset by the share

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of associates’ net deficit and impairment in investments in associates. Property, plant and equipment increased by $4.720m with the purchase of the Wakefield Street property. The total liabilities fell from $4.702m as at 31 March 2010 to $4.631m as at 31 March 2011.

Common Fund and Special Investment Accounts Client funds held as at 31 March 2011 were: • $64.393m in the Common Fund • $8.002m in Special Investment Accounts. Total management fees for the year charged against the Common Fund were $0.467m. The Common Fund distributable income paid to 81,263 eligible accounts was $3.442m for the year to 31 March 2011. Annual growth in Common Fund and Special Investment Accounts

$ 80,000,000 70,000,000 60,000,000 50,000,000 40,000,000 30,000,000 20,000,000 10,000,000 -

2004

2005

2006

2007

2008

2009

2010

2011

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In terms of the Crown Entities Act 2004, the Màori Trustee is responsible for the preparation of financial statements, the statement of service performance and for the judgements made in them. The Màori Trustee is responsible for the establishment and maintenance of a system of internal controls designed to provide reasonable assurance as to the integrity and reliability of financial reporting. In the Màori Trustee’s opinion these financial statements and the statement of service performance for the year ended 31 March 2011, set out on pages 18 to 53, fairly reflect the financial position and operations of the Màori Trustee.

Jamie Tuuta Màori Trustee 20 September 2011

Matters Relating to the Electronic Presentation of the Audited Financial Statements and Statement of Service Performance This audit report relates to the financial statements and statement of service performance of the Màori Trustee and Group for the year ended 31 March 2011 included on the Màori Trustee’s website. The Màori Trustee is responsible for the maintenance and integrity of the Màori Trustee’s website. We have not been engaged to report on the integrity of the Màori Trustee’s website. We accept no responsibility for any changes that may have occurred to the financial statements and statement of service performance since they were initially presented on the website. The audit report refers only to the financial statements and statement of service performance named above. It does not provide an opinion on any other information which may have been hyperlinked to or from the financial statements and statement of service performance. If readers of this report are concerned with the inherent risks arising from electronic data communication, they should refer to the published hard copy of the audited financial statements, statement of service performance and related audit report dated 20 September 2011to confirm the information included in the audited financial statements and statement of service performance presented on this website. Legislation in New Zealand governing the preparation and dissemination of financial information may differ from legislation in other jurisdictions.

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To the readers of The Màori Trustee and Group’s financial statements and statement of service performance for the year ended 31 March 2011 The Auditor-General is the auditor of the Màori Trustee (the Trustee) and Group. The Auditor-General has appointed me, Phil Kennerley, using the staff and resources of Audit New Zealand, to carry out an audit of the financial statements and statement of service performance of the Trustee and Group on her behalf. We have audited: • the financial statements of the Trustee and Group on pages 25 to 53 that comprise the statement of financial position as at 31 March 2011, the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year ended on that date and the notes to the financial statements that include accounting policies and other explanatory information; and • the statement of service performance of the Trustee and Group on pages 18 to 24.

Qualified opinion – The scope of the audit was limited because the financial information of the associate Miraka Limited is not audited Reason for our qualified opinion The Group has included in the financial statements unaudited financial figures for the year ended 31 March 2011 relating to its associate, Miraka Limited. This includes the Group’s share of Miraka Limited’s deficit for the year of $39,000, other comprehensive income for the year of $175,000, net assets of $8,568,000, and the detailed information disclosed in note 11 to the financial statements. Miraka Limited has a balance date of 31 July and its most recent audited financial statements are for the 14 months ended 31 July 2010. As only unaudited financial statements for Miraka Limited were available for the eight months ended 31 March 2011, there were no satisfactory audit procedures that we could adopt to obtain sufficient evidence to confirm the financial figures relating to Miraka Limited. Any misstatement of these financial figures would affect the Group’s financial position and financial performance for the year ended 31 March 2011. In addition, any misstatement of Miraka Limited’s financial information may affect the carrying value of the Trustee’s investment in Miraka Limited of $10,000,000. As the Trustee acquired its investment in Miraka Limited in July 2010, there is no effect on the 2010 amounts included in these financial statements as comparative information.

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Qualified opinion on statement of financial position and the statement of comprehensive income In our opinion, except for the effects of the matter described in the “Reason for our qualified opinion” paragraph above, the financial statements of the Trustee and Group on pages 25 to 53: • •

comply with generally accepted accounting practice in New Zealand; and fairly reflect the Trustee and Group’s: ° financial position as at 31 March 2011; and ° financial performance for the year ended on that date; and

Opinion on the statement of cash flows In our opinion the financial statements of the Trustee and Group on pages 25 to 53 fairly reflect the Trustee and Group’s cash flows for the year ended 31 March 2011.

Opinion on the statement of service performance In our opinion the statement of service performance of the Trustee and Group on pages 18 to 24: • complies with generally accepted accounting practice in New Zealand; and • fairly reflects for each class of output: ° its standards of delivery performance achieved as compared with the forecast standards outlined in the funding agreement between the Minister of Màori Affairs and the Trustee (the funding agreement); and ° its actual revenue earned and output expenses incurred, as compared with the forecast revenues and output expenses outlined in the funding agreement. Our audit was completed on 20 September 2011. Our qualified opinion is expressed as at that date. The basis of our opinion is explained below. In addition, we outline the responsibilities of the Trustee and our responsibilities, and we explain our independence.

Basis of opinion We carried out our audit in accordance with the Auditor-General’s Auditing Standards and the International Standards on Auditing (New Zealand). Those standards require that we comply with ethical requirements and plan and carry out our audit to obtain reasonable assurance about whether the financial statements and statement of service performance are free from material misstatement. Material misstatements are differences or omissions of amounts and disclosures that would affect a reader’s overall understanding of the financial statements and statement of service performance. We are unable to determine whether there are material misstatements because the scope of our work was limited, as we referred to in our opinion. An audit involves carrying out procedures to obtain audit evidence about the amounts and disclosures in the financial statements and statement of service performance. The procedures selected depend on our judgement, including our assessment of risks of material misstatement of the financial statements and statement of service performance, whether due to fraud or error.

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In making those risk assessments, we consider internal control relevant to the entity’s preparation of the financial statements and statement of service performance that fairly reflect the matters to which they relate in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also involves evaluating: • • • •

the appropriateness of accounting policies used and whether they have been consistently applied; the reasonableness of the significant accounting estimates and judgements made by the Trustee; the adequacy of all disclosures in the financial statements and statement of service performance; and the overall presentation of the financial statements and statement of service performance.

We did not examine every transaction, nor do we guarantee complete accuracy of the financial statements and statement of service performance. We did not receive all the information and explanations we required although believe that we have obtained sufficient and appropriate audit evidence to provide a basis for our qualified opinion.

Responsibilities of the Trustee The Trustee is responsible for preparing the financial statements and the statement of service performance: • in accordance with generally accepted accounting practice in New Zealand; • that fairly reflect the Trustee and Group’s financial position, financial performance and cash flows; and • that fairly reflect it’s service performance that include achievements compared to forecasts. The Trustee’s responsibilities arise from the Public Finance Act 1989 and the Màori Trustee Act 1953. Those responsibilities include the design, implementation, and maintenance of internal control relevant to the preparation of the financial statements and statement of service performance so that those statements are free from material misstatement, whether due to fraud or error.

Responsibilities of the Auditor We are responsible for expressing an independent opinion on the financial statements and statement of service performance and reporting that opinion to you based on the audit. This responsibility arises from section 15 of the Public Audit Act 2001 and the Màori Trustee Act 1953.

Independence When carrying out the audit, we followed the independence requirements of the Auditor-General, which incorporate the independence requirements of the New Zealand Institute of Chartered Accountants. Other than the audit, we have no relationship with, or interests in, the Trustee or its subsidiary.

Phil Kennerley Audit New Zealand On behalf of the Auditor-General Wellington, New Zealand

17


The Màori Trustee Amendment Act 2009 established the Màori Trustee as a standalone entity from 1 July 2009. The Màori Trustee was listed in Schedule 4 of the Public Finance Act 1989, requiring the preparation of the annual report and statement of service performance in compliance with requirements of the Crown Entities Act 2004. In a letter dated 5 August 2009, the Minister of Finance, as empowered by section 45N(2) of the Crown Entities Act, granted the Màori Trustee the following exemptions from the provisions of the Crown Entities Act 2004: • An exemption from providing “an assessment against the intentions, measures and standards set out in a statement of intent prepared at the beginning of the financial year”. This exemption recognises that the Màori Trustee is not required, under Schedule 4 of the Public Finance Act, to prepare a statement of intent. However, the annual report must provide the information that is necessary to enable an informed assessment to be made of the operations and performance for the financial year. • An exemption from preparing a statement of service performance “in respect of any class of outputs that is not funded (in whole or in part) by the Crown”. This exemption addresses outputs not directly funded in whole or part by the Crown. In addition, in his letter the Minister of Finance has “determined” that the definition of “financial year” set out in section 136(1) of the Crown Entities Act 2004 will be 12 months ending 31 March for the Màori Trustee. This statement of service performance reports against the outputs stated in the funding agreement between the Minister of Màori Affairs (on behalf of the Crown) and the Màori Trustee for the 12 months ended 30 June 2011. These performance measures are also relevant for the 12 months ended 31 March 2011. The total cost of outputs for the year ended 31 March 2011 is summarised below. 2011 Actual

Budget

Actual

$000

$000

$000

10,478

10,478

7,987

-

-

3,426

10,478

10,478

11,413

Management of the Common Fund

1,023

1,067

Management of client interests

1,252

1,260

Land management

4,793

5,047

Supporting sustainable development of assets

1,168

1,646

Capability and capacity of the organisation

960

1,712

Statutory and Funding Agreement requirements

468

576

9,664

11,308

Crown appropriation Màori Trustee funding ex TPK creditor Total output funding

Total output expenditure 1

18

2010

As 2010 was a transition year, output costings were not available for individual outputs.

10,5831


Management of the Common Fund The Common Fund represents monies received by the Màori Trustee under sections 23 and 25 of the Act, and held in trust for the persons entitled to receive the monies. Management of the Common Fund includes the following functions: • Investing and managing the monies held in trust. All Common Fund investment income remains in the

Common Fund.

• Administering Common Fund transactions and records. • Distributing income from the administration of land to the beneficial owners of the land. The total client funds under management in the Common Fund at 31 March 2011 was $65.0 million (2010 $58.1 million). Measures

Results

1. Management of Common Fund

Achieved

Comment

Monitor investment strategy in accordance with statutory and

The investment strategy was monitored through the eleven monthly meetings of the Investment

regulatory requirements, and in accordance with investment strategy and parameters

Committee. The investment strategy was updated in September 2010.

Administration and management of Common Fund transactions and records, in accordance with the Màori Trustee Act and the Trustee Act

Administration of Common Fund transactions and records continues, including calculation and distribution of monies to client accounts. System changes were implemented to ensure compliance with changes to GST and income tax rates effective from 1 October 2010.

2. Undertake quarterly reviews of the Common Fund in accordance with section 26(4) of the Màori Trustee Act

Achieved

Quarterly reviews of performance undertaken and reported quarterly. The Common Fund achieved 8.3% (compared to the NZX composite A Grade index of 7.4%).

Management of Client Interests The management of client interests includes: • Managing ownership interests in land administered by the Maori Trustee. At 31 March 2011 there were

198,179 ownership interests (2010 194,086).

• Managing client records for accounts held by clients. At 31 March 2011 there were 130,048 client

accounts (2010 129,115).

• Calculating and paying distributable income which is paid to account holders on a pro-rata basis.

Distributable income of $3.4 million was paid to 81,263 client accounts for the year ended 31 March 2011

(nine months to 31 March 2010 $1.3m paid to 82,256 accounts).

• Making payments to clients. • Locating beneficial owners.

19


Measures 3. Manage ownership interests in land administered by the Màori Trustee, by adding new ownership records

Results

Actual 2011

Target 2011

Actual 2010

Partially achieved1

3,248

4,000

4,020

4. Manage client records for accounts held by clients with respect to one or more properties or funds

• Update client account records

Achieved

12,961

12,000

12,443

• Provide information as requested by the Màori Land Court

Achieved

1,388

1,200

1,350

• Complete information requests for the Màori Land Court by due date

Achieved

100%

95%

100%

• Make payments to clients (number of payments)

Achieved

26,194

20,000

23,493

Pay distributable income to client accounts by 31 March in accordance with section 26 of the Màori Trustee Act and Regulation 10 of the Màori Trustee regulations

• Pay distributable income on time

Achieved

100%

95%

100%

• Provide distributable income reports to clients which are on time and accurate

Achieved

100%

95%

n/a

1

The estimated number of new ownership records was not attained because the estimated number is largely dependent on factors beyond Màori Trustee control, such as the number of Màori Land Court orders and the number of successors. Measures 5. Implement, monitor, evaluate and refine the strategy to identify, locate and obtain information from beneficial owners to enable the payment of unclaimed monies

20

Results Achieved

Comment Of the 130,048 client accounts, only 95,322 have land interests for which the Màori Trustee is the trustee or agent. Of this number 81,714 are living and the Màori Trustee has valid contact details for 62% of these living clients. The following strategies were undertaken: • On-line marketing trial in October and November. • Data matching with Births, Deaths and Marriages data. • A trial web portal developed for one land block. • Web site enhancements went live in September, including an “unclaimed money” search component. • Màori Trustee established a “mobile office” at the Matatini event in January 2011. All initiatives are being monitored and the outcomes assessed.


Land Management As a function of Crown funding, the Màori Trustee provides: • On-going administration of land for which there are insufficient located owners to make decisions with respect to the management and ownership of the land • Administration of land for which the owners are located, but which is uneconomic to those owners and the owners have nominated the Màori Trustee as the preferred administrator. The Maori Trustee provides governance and management of properties to protect the beneficial owners’ interests, by: • Managing the land, seeking utilisation of the land and payment of rates • Maintaining the accounts • Record management • Collection and payment of monies, including taxes • Meeting legal and compliance requirements • Providing reports for inspection The total income collected on behalf of clients was $14.4 million rental income and other income of $5.8 million from activities such as forestry, kiwifruit, dairy and stock sales (2010 $14.0 million and $4.3 million respectively). Measures

Results

Actual 2011

Target 2011

Actual 2010

6. Provide governance and management to protect the beneficial owners’ interests

• Number of properties managed

Partially achieved

2,023

2,060

2,046

• Number of rent reviews

Achieved

207

-

169

• Number of lease renewals

Achieved

80

-

89

• Number of lease inspections

Achieved

683

666

619

• % of income collected on time

Achieved

91%

90%

92%

• % of tax returns filed accurately and on time

Achieved

100%

95%

99%

7. Manage the Màori Trustee’s accountability in accordance with trust orders and fiduciary requirements through:

1

• Number of meetings with owners and representatives

Achieved

671

500

568

• Number of appearances before the Màori Land Court on applications relating to the Màori Trustee

Achieved

268

200

215

• Number of special purpose update reports to owners or representatives on arrangements for their properties

Achieved

249

200

164

• Seek client feedback to measure perceptions and satisfaction by 30 June

Achieved1

The client satisfaction survey was completed in November 2010. 21


The overall KPI for Màori Trustee is 44%. This figure is calculated from an average of performance ratings (Total Good + Excellence) across twenty specific service areas. This somewhat low rating for the overall KPI reflects the lack of sufficiently detailed knowledge about different service areas of Màori Trustee. Looking at those clients who were knowledgeable (said they know a lot or a fair amount about Màori Trustee) the KPI improves to 57%. The overall KPI rating is significantly lower than the summary indicator rating for “Satisfaction with the overall management and administration of your land and assets” (60%). The results were generally positive and provided information to enhance the focus for service delivery. Supporting Sustainable Development of Assets Where the Màori Trustee administers land, the Màori Trustee aims to support the sustainable development of assets by planning and increasing the productivity of land. Where the owners agree, Màori Trustee facilitates the incorporation of Màori land into collective ownership structures. Measures

Results

Comments

8. Review land utilisation strategy

22

• Develop and maintain 200 block plans

Not achieved

Màori Trustee has developed a template for block profiles. The production of the block profiles is technology dependent and therefore this measure will not be achieved until the new systems are implemented. Block profiles have been manually produced for a small number of blocks that have been identified as having potential for collectivisation or development.

• Bring 600ha into higher productive use

Partially achieved

364 hectares were brought into higher productive use during the 12 months to 31 March 2011. Over the 21 months from 1 July 2009 to 31 March 2011 over 914 hectares were brought into higher productive use. The process involves working with owners and lessees, and this work is not evenly paced and not easy to forecast.

Achieved

In November Màori Trustee implemented a strategic planning service for Màori land blocks.

Support and encourage active owner participation through the provision of information and facilitating opportunities for development

In November Màori Trustee finalised the matching of block data with LINZ records. This information is required to have a Geographic Information System (GIS) and will enable analysis tools to assist with the management and development of land.


Measures

Results

Comments

Plans include sustainability factors

Achieved

Màori Trustee’s strategy is to support and encourage owner participation in developments. Strategic planning processes have been initiated for a number of properties in 2010-11. These have included, where appropriate, sustainability factors across whenua, whànau and financial issues. Màori Trustee has completed a significant amount of work in preparation for the application of the Emissions Trading Scheme (ETS) to pre-1990 forestry.

Capability and Capacity of the Organisation This output relates to any other areas that the Crown considers that it is a matter of good governance to continue to provide funding to enable and enhance the Màori Trustee to meet his statutory and common law obligations to beneficiaries. Measures

Results

9. Develop and enhance systems and processes, including reporting requirements, to provide effective and efficient core services to clients.

Achieved

Achieved

A quantitative client satisfaction survey was completed by an external research company.

10. Build the capacity and capability of the organisation • review training strategy • monitor organisational performance framework • organisational performance framework reviewed and refined by 30 June 2011

Achieved

The training strategy has been reviewed and training has been delivered for key stakeholder engagement, sales, project management, as well as specialist areas such as the Emissions Trading Scheme.

11. Review fees and commissions charging framework by 31

Achieved

Seek client feedback to measure perceptions and satisfaction by 30 June 2011

The systems development was progressed during 2010-11 with the RFI stage completed in December and responses from the RFP received in April 2011. An IT governance committee was established during the year to provide oversight for projects and for ensuring a strategic and co-ordinated approach for information technology.

A revised performance management template has been developed for implementation in 2011-12.

March 2011 12. Develop and implement an outcomes framework for accountability and reporting purposes by 30 June 2011

Comments

The fees charging framework was reviewed and from 1 November 2010 Màori Trustee charged fees at a fixed rate per hour for the services provided to clients.

In progress

Màori Trustee has developed an outcomes framework for discussion with Te Puni Kòkiri as part of the process for completing the new funding agreement from 1 July 2011.

23


Statutory and Funding Agreement Requirements This output relates to any other areas that the Crown considers that it is a matter of good governance to continue to provide funding to enable and enhance the Màori Trustee to meet his statutory and common law obligations to beneficiaries. Statutory requirements include requirements under the Public Finance Act, Crown Entities Act, Public Audit Act, Trustee Act, Màori Trustee Act, Official Information Act and others as required. Measures 13. Meet statutory requirements and timeframes, including for the annual report.

Results Achieved

Comments A legislative compliance policy was completed and compliance monitoring system was introduced. The Màori Trustee was registered as a Financial Service Provider and also registered as a member of a Dispute Resolution Scheme as required under the Financial Service Providers (Registration and Dispute Resolution) Act 2010. The annual report was received by the Minister on 20 August 2010 and tabled in Parliament on 27 August in compliance with section 150 of the Crown Entities Act.

14. Meet quarterly reporting requirements under the funding agreement

24

Achieved

Quarterly reports on the funding agreement were completed for the July, September, December and March quarters.


Group

Parent

2011

2011

2010

2011

2010

Actual

Budget

Actual

Actual

Actual

$000

$000

$000

$000

$000

4,801

4,313

5,128

4,798

5,124

Commission

1,102

1,180

1,049

1,102

1,049

Fees

1,935

1,491

1,184

1,953

1,202

Notes

Revenue Investment income

1

Crown appropriation

2

10,478

10,478

7,987

10,478

7,987

Crown capital funding

2

956

956

3,520

956

3,520

Share of associate’s net surplus

11

-

-

37

-

-

Te Puni Kòkiri creditor written off

3

-

-

70,207

-

70,207

Section 460A loan fees

4

-

-

1,354

-

1,354

Rental

10

-

-

10

-

Other income

19

-

4

19

4

19,301

18,418

90,470

19,316

90,447

5,664

6,029

5,325

5,664

5,325

Total revenue Expenditure Employee benefits Depreciation

12

210

146

139

210

139

Amortisation

13

56

195

89

56

89

1

-

-

399

-

399

Impairment losses/(gains)

10

(27)

-

254

2,838

254

Impairment of investments in associates

11

1,568

-

-

669

-

Share of associates’ net deficit

11

5,089

-

-

-

-

Grants paid

5

3

3

3

3

3

Other expenditure

6

3,745

4,938

5,169

3,724

5,146

16,308

11,311

11,378

13,164

11,355

2,993

7,107

79,092

6,152

79,092

-

-

-

-

-

1,454

-

-

-

-

4,447

7,107

79,092

6,152

79,092

Finance costs

Total expenditure Net surplus Other comprehensive income Share of associates’ other comprehensive income Total comprehensive income

11

The accompanying notes form part of these financial statements. 25


Group

Parent

2011

2011

2010

2011

2010

Actual

Budget

Actual

Actual

Actual

$000

$000

$000

$000

$000

99,176

79,420

153

98,857

(166)

4,436

831

-

4,436

-

103,612

80,251

153

103,293

(166)

Effect of impairment in investment in associate company written back relating to periods prior to 1 April 2009, taken directly to equity

-

-

12,680

-

-

Recognition of earnings in investment in associate company relating to periods prior to 1 April 2009, taken directly to equity

-

-

10,930

-

-

Effect of impairment of loan to subsidiary company written back relating to periods prior to 1 April 2009, taken directly to equity

-

-

-

-

23,610

103,612

80,251

23,763

103,293

23,444

General Purposes Fund

2,283

6,981

74,656

3,988

74,656

Appropriation Account

2,164

126

4,436

2,164

4,436

Total comprehensive income

4,447

7,107

79,092

6,152

79,092

Effect of impairment in earnings in associate company written back

-

-

757

-

-

Effect of impairment of loan to subsidiary company written back

-

-

-

-

757

Restated total comprehensive income

4,447

7,107

79,849

6,152

79,849

101,459

86,401

99,176

102,845

98,857

Appropriation Account

6,600

957

4,436

6,600

4,436

Equity at end of year

108,059

87,358

103,612

109,445

103,293

Equity at beginning of year General Purposes Fund Appropriation Account Equity at beginning of year

Restated equity at beginning of year Transfers from statement of comprehensive income

Equity at end of year General Purposes Fund

The accompanying notes form part of these financial statements. 26


Group Notes

Parent

2011

2011

2010

2011

2010

Actual

Budget

Actual

Actual

Actual

$000

$000

$000

$000

$000

Current assets Cash and cash equivalents

7

10,485

9,691

10,176

10,427

10,081

Debtors and other receivables

8

630

1,670

715

630

714

6,956

7,000

10,088

6,956

10,088

10,470

12,801

2,556

10,470

2,556

28,541

31,162

23,535

28,483

23,439

9

39,671

44,942

49,560

39,671

49,560

10

4,940

6,002

5,146

26,442

29,513

-

-

-

-

-

Term deposits Held to maturity investments

9

Total current assets Non-current assets Held to maturity investments Loans and receivables Investment in subsidiaries Investment in associates

11

34,401

5,200

29,604

14,331

5,000

Property, plant and equipment

12

5,110

442

390

5,110

390

Intangible assets

13

27

694

79

27

79

84,149

57,280

84,779

85,581

84,542

112,690

88,442

108,314

114,064

107,981

4,631

1,084

4,702

4,619

4,688

4,631

1,084

4,702

4,619

4,688

Equity

108,059

87,358

103,612

109,445

103,293

Total liabilities and equity

112,690

88,442

108,314

114,064

107,981

Total non-current assets Total assets Current liabilities Creditors and other payables Total liabilities

14

The accompanying notes form part of these financial statements. 27


Group

Parent

2011

2011

2010

2011

2010

Actual

Budget

Actual

Actual

Actual

$000

$000

$000

$000

$000

Interest income

4,740

4,313

5,691

4,736

5,682

Fees and commissions

3,165

2,671

1,887

3,183

1,905

11,377

8,439

14,135

11,377

14,135

(442)

-

800

(442)

800

29

-

4

29

4

Employee benefits

(5,715)

(6,029)

(3,599)

(5,715)

(3,599)

Suppliers

(3,675)

(5,628)

(2,749)

(3,652)

(2,731)

-

-

(399)

-

(399)

358

(100)

139

358

139

(3)

(3)

(3)

(3)

(3)

9,834

3,663

15,906

9,871

15,933

536

-

757

536

757

Investment maturities and sales

5,047

2,501

4,235

5,047

4,235

Net maturities/(investment) of short term deposits

3,132

3,000

(5,229)

3,132

(5,229)

(4,932)

(204)

(439)

(4,932)

(439)

(4)

(810)

(82)

(4)

(82)

(304)

(583)

(1,794)

(304)

(1,794)

(10,000)

-

-

(10,000)

-

Investment purchases

(3,000)

(8,144)

(8,618)

(3,000)

(8,618)

Net cash flows from investing activities

(9,525)

(4,240) (11,170)

(9,525)

(11,170)

Notes

Cash flows from operating activities

Crown appropriation and capital funding Net receipts from Agribusiness and Ahuwhenua

14

Other income

Interest payments to clients Goods and services tax (net) Grants Net cash flows from operating activities

15

Cash flows from investing activities Loans and receivables repayments

Purchase of property, plant and equipment Purchase of intangible assets Loan advances Investment in associates

Net increase/(decrease) in cash Cash at beginning of year Cash at end of year

7

309

(577)

4,736

346

4,763

10,176

10,268

5,440

10,081

5,318

10,485

9,691

10,176

10,427

10,081

The GST (net) component of cash flows from operating activities reflects the net GST paid to and received from the Inland Revenue Department. The GST (net) component has been presented on a net basis, as the gross amounts do not provide meaningful information for financial statement purposes and to be consistent with the presentation basis for the other primary financial statements.

The accompanying notes form part of these financial statements. 28


Statement of accounting policies Reporting entity The Màori Trustee is a corporation sole defined under the Màori Trustee Act 1953 (the Act) and is domiciled in New Zealand. The Màori Trustee is responsible for monitoring the affairs of a selection of Màori land blocks and trusts to maintain, develop and enhance Màori assets. These financial statements have been prepared in terms of Section 23 of the Act for the General Purposes Fund and the Appropriation Account. The General Purposes Fund represents funds held by the Màori Trustee in his own right. The Appropriation Account was established on 1 July 2009 under the Màori Trustee Amendment Act 2009 to account for revenue received from the Crown as defined by the Funding Agreement between the Minister of Màori Affairs and the Màori Trustee for the period 1 July 2009 to 30 June 2011 (Funding Agreement). The Màori Trust Office was dissolved upon commencement of the Màori Trustee Amendment Act 2009 on 1 July 2009, and the Màori Trustee’s role extended to cover the responsibilities of the former Màori Trust Office as from that date. Whereas the costs of the Màori Trust Office were previously charged to the Màori Trustee by Te Puni Kòkiri and accounted through the General Purposes Fund, as from 1 July 2009 such costs are now met by the Màori Trustee from appropriations received from the Crown. Although the Màori Trustee was established as a stand-alone entity, listed on Schedule 4 of the Public Finance Act 1989 as from 1 July 2009, the roles and responsibilities of the Màori Trustee have remained substantially the same. Therefore, the comparative figures are for the full year ended 31 March 2010. The financial statements for Màori Trustee and Group are for the year ended 31 March 2011, and were approved by the Màori Trustee on 20 September 2011.

Basis of preparation Statement of compliance The financial statements have been prepared in accordance with New Zealand Generally Accepted Accounting Practice (NZ GAAP). They comply with New Zealand equivalents to International Financial Reporting Standards (NZ IFRS), and other applicable Financial Reporting Standards, as appropriate for public benefit entities.

Budget figures The budget figures were approved by the Màori Trustee. The budget figures were prepared in accordance with NZ IFRS and are consistent with the accounting policies adopted by the Màori Trustee for the preparation of the financial statements.

Measurement base The financial statements have been prepared on a historical cost basis modified by the revaluation of held to maturity investments. The methods used to measure fair value are detailed in the specific accounting policies.

Functional and presentation currency The financial statements are presented in New Zealand dollars, which is the Màori Trustee’s functional currency. All values are rounded to the nearest thousand dollars ($000).

29


Standards, amendments and interpretations Standards, amendments and interpretations issued but not yet effective that have not been early adopted, and which are relevant to the Màori Trustee, are: • NZ IFRS 9 Financial Instruments will eventually replace NZ IAS 39 Financial Instruments: Recognition and Measurement. NZ IAS 39 is being replaced through the following three main phases: Phase 1 Classification and Measurement, Phase 2 Impairment Methodology, and Phase 3 Hedge Accounting.

Phase 1 has been completed and has been published in the new financial instrument standard NZ IFRS 9. NZ IFRS 9 uses a single approach to determine whether a financial instrument is measured at amortised cost or fair value, replacing the many different rules in NZ IAS 39. The approach in NZ IFRS 9 is based on how an entity manages its financial assets (its business model) and the contractual cash flow characteristics of the financial assets. The financial liability requirements are the same as those of NZ IAS 39, except for when an entity elects to designate a financial liability at fair value through the surplus/ deficit.

The new standard is required to be adopted for the year ended 30 June 2014. The Màori Trustee has not yet assessed the effect of the new standard and expects it will not be early adopted.

• NZ IAS 24 Related Party Disclosures (Revised 2009) has not been early adopted.

Basis of consolidation Investments in subsidiaries The consolidated financial statements comprise the financial statements of the Màori Trustee and its wholly owned subsidiary, Te Màori Lodges Limited (TML). Subsidiaries are those entities over which the Màori Trustee has the power to govern the financial and operating policies as to obtain benefits from their activities. The principal activity of TML is that of a holding company which holds shares in Quantum Limited. The financial statements of the subsidiary are prepared for the same reporting period and using consistent accounting policies as the Màori Trustee. In preparing the consolidated financial statements, all inter entity balances and transactions resulting from inter-group transactions have been eliminated. The acquisition of subsidiaries is accounted for using the purchase method of accounting. The purchase method involves allocating the cost of the business combination to the fair value of the assets acquired and the liabilities and contingent liabilities assumed at the date of the acquisition. Investments in subsidiaries are subject to annual review for impairment. Investments in associates Associates are entities over which the Màori Trustee has significant influence that are neither subsidiaries nor joint ventures. Significant influence is where the Màori Trustee has over twenty percent of the voting rights. The Màori Trustee treats the investments in Putake Limited, Putake Investments Limited Partnership, Miraka Limited and Quantum Limited as investments in associates. Investments in associates are accounted for using the equity method of accounting in the consolidated financial statements. Under the equity method, investments in associates are carried at cost plus post acquisition changes in the Màori Trustee’s share of the net assets in the associate, less provision for impairment.

30


The financial statements of associates are prepared for the same reporting period as the Màori Trustee, with the exception of Miraka Limited which has a 31 July balance date and Quantum Limited which has a 31 December balance date. The financial statements of associates are prepared using consistent accounting policies. The Màori Trustee is required, as an entity listed in Schedule 4 of the Public Finance Act 1989, to have audited financial statements available within four months of the 31 March 2011 balance date in terms of the Crown Entities Act 2004 section 156(2). The audit was delayed due to confirming the accounting treatment for the associate companies.

Significant accounting policies Revenue Revenue is recognised and measured at the fair value of the consideration received or receivable to the extent that it is probable that economic benefits will flow to the Màori Trustee and that the revenue can be reliably measured. Fees and commissions The Màori Trustee can only deduct fees and/or commissions upon actual receipt of trust monies from fees and commissions owing to the General Purposes Fund from the Common Fund. As such fees and commissions are recognised on a cash basis. Interest Interest revenue is recognised using the effective interest method. The effective interest rate is the rate that exactly discounts the estimated cash flows associated with the financial instrument over the expected life of the instrument. Revenue from the Crown The Màori Trustee receives funding from the Crown, which is restricted in its use for the purpose of the Màori Trustee achieving the outputs specified in the Funding Agreement. Revenue from the Crown is recognised as revenue when earned and is reported in the financial period to which it relates. Dividends Dividends are recognised when the Màori Trustee’s right to receive payment is established. Leases Leases that do not transfer substantially all the risks and rewards incidental to ownership of an asset to the Màori Trustee are classified as operating leases. Operating lease payments are recognised as an expense on a straight-line basis over the term of the lease in the statement of comprehensive income. Financial instruments The Màori Trustee is party to financial instruments as part of its normal operations. Financial instruments include: • financial assets – cash and cash equivalents, debtors and other receivables, held to maturity investments and loans and receivables • financial liabilities – creditors and other payables. Purchases and sales of financial assets are recognised on the date when the Màori Trustee becomes party to a financial contract. Financial assets are derecognised when the right to receive cash flows from the financial assets have expired or been transferred.

31


Financial instruments are initially recognised at fair value plus transaction costs. Subsequent measurement of financial instruments depends on the classification of the financial instrument. Cash and cash equivalents Cash and cash equivalents comprise cash on hand, cash at bank and short term deposits with an original maturity of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Debtors and other receivables Debtors are initially recognised at fair value and subsequently measured at amortised cost using the effective interest rate method, less provision for impairment. A provision for impairment of debtors is established when there is objective evidence that the Màori Trustee will not be able to collect all amounts due according to the original terms of the receivable. Financial difficulties of the debtor, default payments or debts more than 60 days overdue are considered objective evidence of impairment. The amount of the provision for impairment is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The carrying amount of the asset is reduced through the use of a provision account, and the amount of the loss is recognised in the statement of comprehensive income. When the debtor is uncollectible, it is written off against the provision account. Held to maturity investments Non-derivative financial assets with fixed or determinable payments are classified as held to maturity investments when the Màori Trustee has the positive intention and ability to hold these investments to maturity. Held to maturity investments include Government stock and commercial bonds. Investments intended to be held for an undefined period are not included in this classification. Held to maturity investments are initially recorded at fair value plus transaction costs and are subsequently measured at amortised cost using the effective interest method less any impairment losses. The amortisation is recorded in the statement of comprehensive income as interest income. Gains and losses are recognised in the statement of comprehensive income when the investments are derecognised or impaired. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted on an active market. Loans and receivables include advances to stations, properties and clients, loans and mortgages, advances to Te Màori Lodges and Conversion Fund loans. These assets are initially recorded at fair value plus transaction costs and are subsequently measured at amortised cost using the effective interest method less provision for impairment. A provision for impairment of loans and receivables is established when there is objective evidence that the Màori Trustee will not be able to collect all amounts due according to the original terms of the receivable. Financial difficulties of the debtor, default payments or debts more than 60 days overdue are considered objective evidence of impairment. The amount of the provision for impairment is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The carrying amount of the asset is reduced through the use of a provision account, and the amount of the loss is recognised in the statement of comprehensive income. When the asset is uncollectible, it is written off against the provision account.

32


Investments in associates The Màori Trustee’s share of post acquisition surplus or deficits are recognised in the statement of comprehensive income, and the share of post acquisition movements in reserves are recognised in reserves. The cumulative post acquisition movements are adjusted against the carrying amount of the investment. Property, plant and equipment Property, plant and equipment consists of EDP equipment, office equipment, furniture and fittings, motor vehicles, land and building. Property, plant and equipment are measured at historic cost, less accumulated depreciation and impairments. Depreciation is charged to the statement of comprehensive income on all property, plant and equipment, other than work in progress and land. Depreciation is calculated on a straight line basis at rates estimated to allocate the cost of an asset over the estimated useful life. The estimated useful lives and associated depreciation rates of the asset classes are as follows: EDP equipment

3 years

33%

Office equipment

5 years

20%

Furniture and fittings

5 years

20%

Motor vehicles

5 years

20%

Building`

50 years

2%

Property, plant and equipment assets are derecognised when disposed or when no further future economic benefits are expected from use of the assets. Gains and losses on disposal are determined by comparing the proceeds with the carrying amount of the asset. Gains and losses on disposal are included in the statement of comprehensive income. Intangible assets Intangible assets consist of acquired software and software modified for use by the Màori Trustee. Intangible assets are measured at historic cost less accumulated amortisation and impairments. Costs that are directly associated with the development of software for internal use are included in intangible assets. Direct costs include software development and employee costs. Amortisation is charged to the statement of comprehensive income on all intangible assets, other than work in progress. Amortisation is calculated on a straight line basis at rates estimated to allocate the cost of an asset over the estimated useful life. The useful lives of the intangible assets have been assessed to be finite. The estimated useful lives and associated amortisation rates of the asset classes are as follows: Acquired software

3 years

33%

Developed software

3 years

33%

Impairment of non financial assets Property, plant and equipment and intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment is recognised in the statement of comprehensive income for the amount by which the carrying amount exceeds the recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use.

33


Creditors and other payables Creditors and other payables represent liabilities for goods and services provided to the Màori Trustee prior to the end of the financial year. Creditors and other payables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method. Employee entitlements Employee entitlements include accrued salaries and wages, annual leave earned and retiring and long service leave entitlements. Employee entitlements expected to be settled within 12 months of balance date are measured at the undiscounted current rates of pay and the accrued entitlements. Employee entitlements that are payable beyond 12 months of balance date such as long service leave are calculated on an actuarial basis, which takes into account years of service, years until entitlement, the likelihood that staff will reach the point of entitlement and the net present value of the estimated cash flows. Superannuation schemes Obligations for contributions to Kiwisaver and the State Sector Retirement Savings Scheme are accounted for as defined contribution superannuation schemes and are expensed in the statement of comprehensive income as incurred. Provisions The Màori Trustee recognises a provision for future expenditure of uncertain amount or timing when there is a present obligation as a result of a past event, it is probable the expenditure will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Goods and Services Tax (GST) All items in the financial statements are exclusive of GST, except for receivables and payables which are presented on a GST inclusive basis. Where GST is not recoverable as input tax, then it is recognised as part of the related asset or expense. The net amount of GST receivable or payable to the Inland Revenue Department is included as part of receivables or payables in the statement of financial position. Income taxation The Màori Trustee is defined as a public authority under the Income Tax Act 2004 and therefore is exempt from income taxation. Statement of cash flows The makeup of cash and cash equivalents in the statement of cash flows is the same as cash and cash equivalents in the statement of financial position. Operating activities include cash received from all income sources by the Màori Trustee and cash payments made for the supply of goods and services. Investing activities include the acquisition and disposal of non-current assets and other investments not included in cash equivalents. Financing activities include activities that result in changes to the size and composition of equity.

34


Contingent assets and contingent liabilities Contingent assets and contingent liabilities are disclosed in the notes to the financial statements at the point at which the contingency is evident. Contingent assets are disclosed if it is probable that the benefits will be realised. Contingent liabilities are disclosed if the possibility that they will crystallise is not remote. Commitments Commitments are future expenses and liabilities to be incurred on contracts that had been entered into before balance date. Cancellable commitments that have penalty or exit costs explicit in the agreement are reported at the minimum future payments including the value of the penalty or exit cost. Commitments include: • non-cancellable operating leases for property, which are measured as the future payments due under the lease contract. • other non-cancellable commitments for consulting contracts, which are measured as the future payments due under the contract.

Significant judgements, accounting estimates and assumptions The preparation of financial statements in conformity with NZ IFRS requires the Màori Trustee to make judgements, estimates and assumptions concerning the future. The estimates and associated assumptions are continually reviewed and are based on historical experience and other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates. Estimation of asset useful lives The useful lives of assets have been based on historical experience. In addition, the condition of the assets are assessed annually and considered against the remaining useful lives. Adjustments to useful lives are made when considered necessary. Significant judgements The Màori Trustee has exercised the following critical judgements in applying the accounting policies. Impairment of financial and non financial assets The Màori Trustee assesses the impairment of assets at each reporting date by evaluating conditions specific to the Màori Trustee and to the particular asset that may lead to impairment. If an impairment trigger exists the recoverable amount of the asset is determined. The Màori Trustee does not consider that the triggers for impairment testing have been significant.

Changes in accounting policies There have been no changes in accounting policies. All policies have been applied on a basis consistent with other years.

35


1. Investment income Group

Interest income from investments Interest income from other sources

Finance costs

Parent

2011

2010

2011

2010

Actual

Actual

Actual

Actual

$000

$000

$000

$000

4,437

4,778

4,434

4,778

364

350

364

346

4,801

5,128

4,798

5,124

-

399

-

399

The Màori Trustee Amendment Act 2009 requires all income received from the investment of money in the Common Fund to be paid into the Common Fund from 1 July 2009. Therefore, the 2010 comparatives includes three months of interest income from the Common Fund and interest expense paid to the Common Fund. 2. Crown appropriation and capital funding Group

Crown appropriation Crown capital funding

Parent

2011

2010

2011

2010

Actual

Actual

Actual

Actual

$000

$000

$000

$000

10,478

7,987

10,478

7,987

956

3,520

956

3,520

The Crown appropriation and Crown capital funding is paid to the Màori Trustee in accordance with the funding agreement between the Minister of Màori Affairs and the Màori Trustee. The 2010 Crown capital funding also includes $1,525,000 for property, plant and equipment, intangibles and cash as part of the transition of the Màori Trust Office, as part of Te Puni Kòkiri, to a standalone entity established on 1 July 2009. 3. Te Puni Kòkiri creditor written off Group

Te Puni Kòkiri creditor written off

Parent

2011

2010

2011

2010

Actual

Actual

Actual

Actual

$000

$000

$000

$000

-

70,207

-

70,207

Section 41 of the Màori Trustee Act 1953 enabled the Crown to recoup the Màori Trust Office expenses from the Màori Trustee General Purposes Fund. By Cabinet approval dated 14 April 2008, the Minister of Finance and the Minister of Màori Affairs were jointly authorised to write off the Màori Trustee liability to the Crown upon enactment of the Màori Trustee Amendment Act 2009, which repealed section 41. As at 1 July 2009, the liability to the Crown was $70,207,000 and this amount was approved for write-off by the Minister of Finance upon recommendation of the Minister of Màori Affairs on 17 November 2009.

36


4. Section 460A loan fees During its administration of loans and advances made under section 460A of the Màori Affairs Act 1953, the Màori Trustee deducted commission from proceeds paid to the Crown. Due to uncertainty regarding the authority to make these deductions, a liability to the Crown was recognised. As at 1 July 2009, upon commencement of Màori Trustee Amendment Act 2009, confirmation was received from Te Puni Kòkiri that the balance owing from the Màori Trustee in respect of section 460A loans was nil. The accumulated balance of $1,354,000 was accordingly recognised as revenue as at that date. 5. Grants Group

Màori Education Trust

Parent

2011

2010

2011

2010

Actual

Actual

Actual

Actual

$000

$000

$000

$000

3

3

3

3

The Màori Trustee is required by Section 3 of the Queen Elizabeth II Postgraduate Fellowship of New Zealand Act 1963 to make an annual payment of $3,000 to the Màori Education Trust. The payment is used for the purposes of maintaining the Fellowship. 6. Other expenditure Group

Parent

2011

2010

2011

2010

Actual

Actual

Actual

Actual

$000

$000

$000

$000

132

127

132

127

8

8

-

-

1

1

-

-

511

538

511

538

Consultants and legal fees

1,661

2,777

1,649

2,766

Other operating costs

1,432

1,718

1,432

1,715

3,745

5,169

3,724

5,146

Fees paid to auditors

Audit fees for parent

Audit fees for subsidiary

Directors’ fees Occupancy

7. Cash and cash equivalents Group

Parent

2011

2010

2011

2010

Actual

Actual

Actual

Actual

$000

$000

$000

$000

Cash at bank and on hand

3,115

3,237

3,115

3,236

Deposits at call

5,370

6,404

5,312

6,340

Short-term deposits

2,000

535

2,000

505

10,485

10,176

10,427

10,081

37


8. Debtors and other receivables Group

Parent

2011

2010

2011

2010

Actual

Actual

Actual

Actual

$000

$000

$000

$000

417

262

417

262

Interest receivable

91

102

91

101

Sundry receivables

122

351

122

351

630

715

630

714

Trade debtors

The carrying value of debtors and other receivables approximates the fair value. Trade debtors are non interest bearing and are generally on 30 - 60 day terms. All trade debtors are not past due. An impairment loss is recognised when there is objective evidence that an individual trade debtor is impaired. All overdue debtors have been assessed for impairment and no provision has been deemed necessary. 9. Held to maturity investments Group

Parent

2011

2010

2011

2010

Actual

Actual

Actual

Actual

$000

$000

$000

$000

Government stock

1,017

-

1,017

-

Commercial bonds

9,453

2,556

9,453

2,556

10,470

2,556

10,470

2,556

Government stock

1,551

2,565

1,551

2,565

Commercial bonds

38,120

46,995

38,120

46,995

39,671

49,560

39,671

49,560

Current portion

Non-current portion

10. Loans and receivables Group

Advances to stations, properties and clients Loans and mortgages Conversion Fund loans Advances to Te MĂ ori Lodges Limited

38

Parent

2011

2010

2011

2010

Actual

Actual

Actual

Actual

$000

$000

$000

$000

33

-

33

-

4,882

5,144

4,882

5,144

25

2

25

2

-

-

21,502

24,367

4,940

5,146

26,442

29,513


Advances to stations, properties and clients Group

Parent

2011

2010

2011

2010

Actual

Actual

Actual

Actual

$000

$000

$000

$000

33

6

33

6

-

(6)

-

(6)

33

-

33

-

(6)

(104)

(6)

(104)

(Increase)/decrease in provision

6

98

6

98

Impairment provision at end of year

-

(6)

-

(6)

Advances to stations, properties and clients Provision for impairment Provision for impairment Impairment provision at beginning of year

Loans and mortgages Group

Parent

2011

2010

2011

2010

Actual

Actual

Actual

Actual

$000

$000

$000

$000

Loans and mortgages

5,346

5,586

5,346

5,586

Provision for impairment

(464)

(442)

(464)

(442)

4,882

5,144

4,882

5,144

(442)

(71)

(442)

(71)

(22)

(371)

(22)

(371)

(464)

(442)

(464)

(442)

Provision for impairment Impairment provision at beginning of year (Increase)/decrease in provision Impairment provision at end of year

Conversion Fund Loans Group

Conversion Fund loans Provision for impairment

Parent

2011

2010

2011

2010

Actual

Actual

Actual

Actual

$000

$000

$000

$000

3,300

3,320

3,300

3,320

(3,275)

(3,318)

(3,275)

(3,318)

25

2

25

2

(3,318)

(3,336)

(3,318)

(3,336)

43

18

43

18

(3,275)

(3,318)

(3,275)

(3,318)

Provision for impairment Impairment provision at beginning of year (Increase)/decrease in provision Impairment provision at end of year

39


Advances to Te MĂ ori Lodges Limited Group

Parent

2011

2010

2011

2010

Actual

Actual

Actual

Actual

$000

$000

$000

$000

Advances to Te MĂ ori Lodges Limited

-

-

59,571

57,540

Provision for impairment

-

-

(38,069)

(33,173)

-

-

21,502

24,367

Impairment provision at beginning of year

-

-

(33,173)

(32,027)

(Increase)/decrease in provision

-

-

(4,896)

(1,146)

Impairment provision at end of year

-

-

(38,069)

(33,173)

Provision for impairment

The increase in the provision of $2,031,000 (2010 $1,903,000) as a result of the interest capitalised on the loan, has been netted against the parent's investment income in the statement of financial performance. 11. Investment in associates Group

Parent

2011

2010

2011

2010

Actual

Actual

Actual

Actual

$000

$000

$000

$000

Putake Limited

1,248

5,237

1,248

5,000

Putake Investments Limited Partnership

3,083

-

3,083

-

Miraka Limited

8,568

-

10,000

-

21,502

24,367

-

-

34,401

29,604

14,331

5,000

Quantum Limited

Putake Limited Group 2011

2010

2011

2010

Actual

Actual

Actual

Actual

$000

$000

$000

$000

Carrying value at beginning of year

5,237

5,200

5,000

5,000

Prior year adjustment to opening value

(121)

-

-

-

(3,654)

-

(3,654)

-

(214)

37

-

-

-

-

(98)

-

1,248

5,237

1,248

5,000

Shares repurchased Share of net surplus/(deficit) after tax Impairment Carrying value at end of year

40

Parent


Group 2011

2010

Actual

Actual

$000

$000

Extract from associate’s statement of financial performance Revenue Net surplus/(deficit) after tax

100

337

(429)

(193)

Extract from associate’s statement of financial position Current assets

2,533

2,817

-

7,583

2,533

10,400

38

169

Net assets

2,495

10,231

Share of associate’s net assets

1,248

5,116

Non-current assets Current liabilities

The Màori Trustee has a 50% shareholding in Putake Limited and a position on the Board of Directors. Putake Limited is an investment vehicle for investment in Màori business. On 10 December 2010 the shareholders of Putake Limited established a limited liability partnership, Putake Investments Limited Partnership, and the investments were sold to the partnership. The shareholders of Putake Limited are the limited partners with a 50% ownership each and Putake Limited is the general partner. Putake Limited repurchased and cancelled shares totalling $7,307,000 and the shareholders used the cash proceeds as the cash contribution to the partnership. Putake Investments Limited Partnership Group

Parent

2011

2010

2011

2010

Actual

Actual

Actual

Actual

$000

$000

$000

$000

-

-

-

-

Cash contributions

3,654

-

3,654

-

Share of net deficit after tax

(571)

-

-

-

-

-

(571)

-

3,083

-

3,083

-

Carrying value at beginning of year

Impairment Carrying value at end of year

Extract from associate’s statement of financial performance for the four months ended 31 March 2011 Revenue Net deficit after tax

-

-

(1,142)

-

Extract from associate’s statement of financial position Non-current assets

7,107

-

942

-

Net assets

6,165

-

Share of associate’s net assets

3,083

-

Current liabilities

The Màori Trustee is a 50% owner of Putake Investments Limited Partnership. The partnership was established on 10 December 2010 and purchased the investment from Putake Limited. An impairment of $1,142,000 was subsequently recognised on one of the investments. 41


Miraka Limited Group

Parent

2011

2010

2011

2010

Actual

Actual

Actual

Actual

$000

$000

$000

$000

-

-

-

-

Share purchase

10,000

-

10,000

-

Adjustment to the carrying amount to reflect the share of the net assets on acquisition

(1,568)

-

-

-

Share of net deficit after tax

(39)

-

-

-

Share of other comprehensive income

175

-

-

-

8,568

-

10,000

-

Carrying value at beginning of year

Carrying value at end of year

Extract from associate’s statement of financial performance for the eight months to 31 March 2011 Revenue

1,059

-

Net deficit

(254)

-

Extract from associate’s statement of financial position Current assets

32,008

-

Non-current assets

29,861

-

61,869

-

6,345

-

55,524

-

8,568

-

Current liabilities Net assets Share of associate’s net assets Miraka Limited is a whole milk powder production entity.

The Màori Trustee has a 15.43% shareholding in Miraka Limited. The investment is an associate because the Màori Trustee has one of the five seats on the Board and is therefore deemed to have significant influence. The seat on the Board, and therefore the recognition of the associate commenced from September 2010. The equity accounted results for Miraka Limited for the eight months to 31 March 2011 are unaudited. In the group financial statements, the carrying value of Miraka Limited has been adjusted to reflect the share of associate's net assets in compliance with NZ IAS 28 Investments in Associates. In the parent financial statements Màori Trustee has not impaired the carrying value of the investment because Miraka Limited was still building the plant at 31 March 2011 and it was considered that there was no impairment. Quantum Limited Group 2011

2010

Actual

Actual

$000

$000

Carrying value at beginning of year

24,367

23,610

Share of net surplus/(deficit) after tax

(4,144)

907

1,279

(150)

21,502

24,367

Share of increase/(decrease) in property revaluation reserve Carrying value at end of year

Extract from associate’s statement of financial performance Revenue Net surplus (deficit) after tax 42

48,397

47,537

(13,813)

3,022


Extract from associate’s statement of financial position Current assets

7,605

6,624

145,315

136,675

152,920

143,299

Current liabilities

58,279

7,489

Non-current liabilities

22,967

54,587

Net assets

71,674

81,223

Share of associate’s net assets

21,502

24,367

Non-current assets

The Màori Trustee’s 100% owned subsidiary Te Màori Lodges Limited holds shares representing a 30% ownership interest in Quantum Limited. The investment in the associate Quantum Limited is included in the Group financial statements in compliance with the requirements of NZ IAS 28 Investments in Associates. 12. Property, plant and equipment Group and Parent 2011

Building

EDP Office Land Equipment Equipment

Furniture and fittings

Motor vehicles

Total

$000

$000

$000

$000

$000

$000

$000

-

-

283

169

184

275

911

Additions

2,375

1,925

93

39

525

-

4,957

Disposals

-

-

(33)

(36)

(36)

-

(105)

2,375

1,925

343

172

673

275

5,763

-

-

230

129

109

53

521

24

-

32

16

67

71

210

-

-

(31)

(36)

(11)

-

(78)

24

-

231

109

165

124

653

2,351

1,925

112

63

508

151

5,110

Cost at beginning of year

Cost at end of year Accumulated depreciation at beginning of year Depreciation Depreciation on disposals Accumulated depreciation at end of year Net carrying value at end of year

Group and Parent 2010 EDP Equipment

Office Equipment

Furniture and fittings

Motor vehicles

Total

$000

$000

$000

$000

$000

228

132

112

-

472

55

37

72

275

439

Cost at end of year

283

169

184

275

911

Accumulated depreciation at beginning of year

196

121

91

-

408

34

8

18

53

113

230

129

109

53

521

53

40

75

222

390

Cost at beginning of year Additions

Depreciation Accumulated depreciation at end of year Net carrying value at end of year

43


EDP

Furniture

Motor

Equipment Equipment and Fittings

Vehicle

Total

Depreciation Depreciation charged on assets held by Te Puni Kòkiri Total depreciation expense

Office

$000

$000

$000

$000

$000

34

8

18

53

113

4

2

2

18

26

38

10

20

71

139

There are no restrictions over the title of Màori Trustee’s items of property, plant and equipment, nor are any property, plant and equipment assets pledged as security for liabilities. 13. Intangible assets Group and Parent 2011

2010

$000

$000

1,374

1,292

4

82

Cost at end of year

1,378

1,374

Accumulated amortisation at beginning of year

1,295

1,214

56

81

1,351

1,295

Net carrying value at end of year

27

79

Amortisation

56

81

-

8

56

89

Cost at beginning of year Additions

Amortisation Accumulated amortisation at end of year

Amortisation charged on assets held by Te Puni Kòkiri Total amortisation expense

There are no restrictions over the title of the Màori Trustee’s intangible assets, nor are any intangible assets pledged as security for liabilities. 14. Creditors and other payables Group

Parent

2011

2010

2011

2010

Actual

Actual

Actual

Actual

$000

$000

$000

$000

524

403

512

389

2,605

2,662

2,605

2,662

Sundry creditors

470

912

470

912

Employee benefits

436

487

436

487

GST payable

596

238

596

238

4,631

4,702

4,619

4,688

Creditors and accruals Income in advance

Creditors and other payables are non interest bearing and are normally settled on 30 day terms, therefore the carrying value approximates the fair value. Income in advance is the Crown appropriation for the April to June quarter that was received in March.

44


Sundry creditors represents the liability for funds held on behalf of Agribusiness and Ahuwhenua as at the end of the year. The Màori Trustee administers Agribusiness projects and Ahuwhenua Trophy awards as the umbrella organisation in conjunction with other parties. The contract and sponsorship income received and expenses paid are not treated as Màori Trustee’s income and expenditure in the statement of comprehensive income. In the statement of financial position Agribusiness and Ahuwhenua balances are recognised in cash and cash equivalents and sundry creditors. 15. Reconciliation of net operating surplus with net cash flows from operating activities Group

Parent

2011

2010

2011

2010

Actual

Actual

Actual

Actual

$000

$000

$000

$000

2,993

79,092

6,152

79,092

Amortisation of premiums/discount

(72)

(20)

(72)

(20)

Depreciation

210

113

210

113

56

81

56

81

Impairment losses/(gains)

1,541

254

3,507

254

Share of associates' net deficit/(surplus)

5,089

(37)

-

-

85

629

84

625

(68)

(64,206)

(66)

(64,212)

9,834

15,906

9,871

15,933

Net surplus Add/(deduct) non cash items

Amortisation of intangible assets

Add/(deduct) movements in working capital (Increase)/decrease in debtors and other receivables Increase/(decrease) in creditors and other payables Net cash flows from operating activities 16. Commitments Group

Parent

2011

2010

2011

2010

Actual

Actual

Actual

Actual

$000

$000

$000

$000

Less than 1 year

143

351

143

351

1 year to 2 years

131

326

131

326

2 years to 5 years

265

848

265

848

Greater than 5 years

279

934

279

934

818

2,459

818

2,459

Less than 1 year

60

-

60

-

1 year to 2 years

60

-

60

-

2 years to 5 years

180

-

180

-

50

-

50

-

350

-

350

-

Lease commitments as lessee

Lease commitments as lessor

Greater than 5 years

45


The Màori Trustee leases premises for the regional offices. A significant portion of the non-cancellable operating lease expense relates to the lease of the Rotorua region office. The lease has a right of renewal in December 2015 and a termination date of December 2021. The Màori Trustee has assumed it will not vacate the premises at the lease renewal date. The Màori Trustee does not have the option to purchase the asset at the end of the lease term. There are no restrictions placed on the Màori Trustee by any of its leasing arrangements. 17. Contingent Liabilities Unclaimed Monies (1963 to 1993) A contingent liability of $7,644,000 (2010 $7,644,000) relates to beneficiary monies paid out by the Màori Trustee under statutory direction to the Màori Education Trust, the Màori Purposes Fund Board and the New Zealand Màori Council. The Màori Trustee will be liable to make payment to beneficiaries who establish an entitlement in the future. Compensation Leases The Màori Trustee administers leases where compensation is payable to the lessee on expiry or resumption of a lease. In some of these cases the Màori Trustee is required by the Màori Vested Land Administration Act 1954 to advance to the owners the funds required to meet compensation payments upon resumption, as the level of funds required to be set aside during the course of the lease is insufficient. The value of advances which the Màori Trustee may be required to make upon resumption of a lease is not quantifiable at this time. In other cases where the lease provides for compensation to be paid to the lessee, and there is insufficient funds held on behalf of the owners, the Màori Trustee is not required by statute to provide these funds. However the Màori Trustee is often called upon to provide the finance required. The value of advances is not quantifiable at this time. Other Contingent Liabilities The Màori Trustee has received or is aware of potential claims totalling $229,000 (2010 $200,000). 18. Financial instruments The carrying amounts of each category of financial assets and financial liabilities is as follows: Group

Parent

2011

2010

2011

2010

Actual

Actual

Actual

Actual

Notes

$000

$000

$000

$000

Cash and cash equivalents

7

10,485

10,176

10,427

10,081

Debtors and other receivables

8

630

715

630

714

6,956

10,088

6,956

10,088

4,940

5,146

26,442

29,513

23,011

26,125

44,455

50,396

Loans and receivables

Short term deposits Loans and receivables

46

10

Held to maturity investments

9

50,141

52,116

50,141

52,116

Creditors and other payables

14

4,631

4,702

4,619

4,688


Fair Value The fair values of all loans and receivables is equivalent to the carrying amount disclosed in the Màori Trustee’s statement of financial position. The held to maturity investments had a fair value of $51,939,000 as at 31 March 2011 (2010 $53,464,000). The fair value is determined using quoted market prices. Financial instruments risk Màori Trustee’s activities expose it to a variety of financial instrument risks, including market risk, credit risk and liquidity risk. The Màori Trustee has a series of policies to manage the risks associated with financial instruments and seeks to minimise exposure from financial instruments. These policies do not allow any transactions that are speculative in nature to be entered into. Market Risk Currency risk Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in exchange rates. The Màori Trustee has no foreign denominated financial instruments and, accordingly, has no exposure to currency risk. MIraka Limited purchases goods and services overseas which require it to enter into transactions denominated in foreign currencies. The foreign currency risk is managed by entering into foreign exchange forward contracts. Sensitivity analysis As at 31 March 2011, if the NZ dollar had weakened/strengthened by 5% against the US dollar with all other variables held constant, the surplus for the year would have been: • $258,000 (2010 nil) lower if the NZ dollar had weakened • $258,000 (2010 nil) higher if the NZ dollar had strengthened. Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in interest rates. The Màori Trustee is exposed to interest rate risk on those financial instruments that have a floating interest rate. The investments that have floating or variable interest rates or coupon payments are as follows: Group

Parent

2011

2010

2011

2010

Actual

Actual

Actual

Actual

%

2.89

2.47

2.88

2.47

$000

105

96

104

96

%

3.67

3.32

3.67

3.32

$000

56

70

56

70

Cash and cash equivalents sensitivity analysis Weighted average effective interest rate 1% increase/(decrease) in interest rates would increase/(decrease) interest income and equity Held to maturity investments sensitivity analysis Weighted average effective interest rate 1% increase/(decrease) in interest rates would increase/(decrease) interest income and equity Credit risk Credit risk is the risk that a third party will default on its obligation to the Màori Trustee, causing a loss to be incurred. Credit risk arises from the financial assets of the Màori Trustee which comprise cash and cash equivalents, debtors and other receivables, loans and receivables and held to maturity investments.

47


Cash and cash equivalents and term deposits Cash and cash equivalents and term deposits are invested with registered banks. The Màori Trustee’s maximum credit exposure from potential default is the carrying amount of these instruments. Debtors and other receivables There are no significant concentrations of credit risk with respect to debtors. Loans and receivables The Màori Trustee has made advances to stations, properties and clients and issued mortgages under Section 32 of the Màori Trustee Act 1953 and Section 248 of the Màori Affairs Act 1953. Advances under Section 32 of the Màori Trustee Act 1953 may or may not be secured. Where a security is taken, the security may be a first or second mortgage security over a freehold interest in land, a memorial of charge over land or a debenture. Advances under Section 248 of the Màori Affairs Act 1953 may or may not be secured. Where a security is taken, the security is a memorial of charge over land. The Conversion Fund was abolished by the Màori Affairs Amendment Act 1987 which effectively vested the Conversion Fund assets in the Màori Trustee. Conversion Fund loans are “deemed advances” and are not secured, but the Màori Trustee owns shares in the land in which the Conversion Fund loans relate. Security for other financial instruments is either unobtainable due to the nature of the instrument or is not sought due to the instrument being invested in high credit quality organisations. The Màori Trustee has made impairment provisions for advances and Conversion Fund loans. Held to maturity investments The financial instruments are spread amongst a number of financial institutions to minimise the risk of default. The Màori Trustee and the Màori Trustee Investment Committee apply the following parameters when investing money to minimise exposure to credit risk: • 85% of fixed income securities are to have an A grade rating or better • For New Zealand Government stock, State Owned Enterprise and Local Authority stock and bank items, no single security shall exceed 10% of the fixed income portfolio • For corporate and capital notes, no single security shall exceed 5% of the fixed income portfolio. The following table analyses the credit quality of financial assets that are neither past due nor impaired, with reference to Standard and Poor's credit ratings (if available) or to historical information about counterparty default rates. Group

Parent

2011

2010

2011

2010

Actual

Actual

Actual

Actual

$000

$000

$000

$000

16,505

19,354

16,447

19,259

936

910

936

910

17,441

20,264

17,383

20,169

Cash and cash equivalents and term deposits A or better Lower than A

48


Held to maturity investments A or better

41,617

44,299

41,617

44,299

Lower than A

6,518

4,690

6,518

4,690

Unrated councils

2,006

3,127

2,006

3,127

50,141

52,116

50,141

52,116

Liquidity risk Liquidity risk is the risk that the Màori Trustee will not have sufficient funds to meet commitments as they fall due. The Màori Trustee monitors forecast cash requirements daily. Surplus funds are invested for terms appropriate for the expected cash requirements. A minimum buffer is maintained which provides access to funds in excess of the forecast cash requirements. The Màori Trustee applies the following parameters when investing money to minimise exposure to liquidity risk: • A target of 10% of the portfolio is to be invested in money market accounts with a maximum term of 364 days • A target of 75% to be invested in fixed income securities • A target of 15% to be invested in equity securities. The table below analyses the Màori Trustee’s financial liabilities into maturity groupings based on the remaining period from end of year to the contractual maturity date. Creditors and other payables Group

Less than six months

Parent

2011

2010

2011

2010

Actual

Actual

Actual

Actual

$000

$000

$000

$000

4,631

4,702

4,619

4,688

19. Capital management The Màori Trustee’s capital is its equity, which is comprised of accumulated funds. Equity is represented by net assets. The Màori Trustee is subject to the financial management and accountability provisions of the Màori Trustee Act 1953. The Màori Trustee manages its equity as a by-product of prudently managing revenues, expenses, assets and liabilities, investments and general financial dealings to ensure the Màori Trustee effectively achieves its strategies and remains a going concern. 20. Related parties A related party is a person or an entity that is related to the Màori Trustee (the reporting entity). A person or a close member of that person’s family is a related party if that person: • Has control over the reporting entity • Is a member of the key management personnel of the reporting entity.

49


An entity is a related party if any of the following conditions apply: • The entity is in the same group, including subsidiaries • The entity is an associate or joint venture • A person who has control over the reporting entity also has significant influence or is a member of the key management personnel of the entity. Crown The Crown is a major source of revenue for the Màori Trustee. Appropriation revenue from the Crown of $10,478,000 (2010 $7,987,000) and Crown capital funding of $956,000 (2009 $3,520,000) is provided pursuant to a Funding Agreement between the Màori Trustee and the Minister of Màori Affairs. The funding provided by the Crown enables the Màori Trustee to fulfil statutory and other common law obligations. The statement of service performance reports against the outputs detailed in the Funding Agreement. Payment for these services is managed by Te Puni Kòkiri on behalf of the Crown. As at 31 March 2011 Crown appropriation of $2,605,000 had been received in advance for the April to June quarter (2010 $2,662,000). Common Fund The Màori Trustee manages the Common Fund and this management relationship confers significant influence on the funds. The Màori Trustee is entitled to charge the Common Fund a management fee under section 26A of the Màori Trustee Amendment Act 2009. A management fee of $467,000 was charged (nine months to 31 March 2010 $322,000). As at 31 March 2011 $42,000 was included as a receivable from the Common Fund (2010 $322,000). The Màori Trustee earned $799,000 Common Fund investment income for the three months to 30 June 2009 and paid $399,000 interest to Common Fund account holders for the three months to 30 June 2009. This practice stopped with the enactment of the Màori Trustee Amendment Act 2009. Statutory Role The core function of the Màori Trustee under legislation is to hold land as trustee or administer land as agent for Màori land owners. The Màori Trustee has a statutory entitlement under the Màori Trustee Act to charge fees and commissions for managing trusts, agencies and properties, providing accounting and tax services and taking instructions for special investments. For the year ended 31 March 2011, the Màori Trustee earned $2,585,000 fees and commissions (2010 $1,871,000). The Màori Trustee also administers other entities under statute, for example the Màori Soldiers Trust, including Hereheretau station. The Màori Trustee is able to lend monies under the Màori Trustee Act. Loans made to Common Fund trusts, agencies and properties and to staff are at market interest rates, unless the loan is advanced to replace a Conversion Fund loan. Te Màori Lodges Limited (TML) Te Màori Lodges Limited (TML) is a wholly owned subsidiary of the Màori Trustee. TML is a holding company which holds shares in Quantum Limited. During the year the Màori Trustee provided management services to TML for $18,000 (2010 $18,000). The Màori Trustee has an advance to TML at 31 March 2011 of $59,571,000 (2010 $57,540,000). The provision for impairment against the advance at 31 March 2011 was $38,069,000 (2010 $33,173,000). The Màori Trustee charged interest on the TML advance of $2,031,000 (2010 $1,903,000). The interest income was capitalised to the advance. Intercompany transactions and balances have been eliminated in the Group financial statements.

50


Putake Limited Màori Trustee has an investment in the associate Putake Limited. The company invested in enterprises that create greater Màori wealth, commercial understanding, transparency, corporate governance and choice. On 10 December 2010 Putake Limited sold its investments to Putake Investments Limited Partnership. John Paki, Màori Trustee, is a director of Putake Limited. He received no remuneration or other benefits in 2011 (2010 $nil). Putake Investments Limited Partnership Màori Trustee is a 50% owner in the partnership. The partnership was established on 10 December 2010 and purchased the investments from Putake Limited. Miraka Limited Màori Trustee has an investment in the associate Miraka Limited. The company is building a milk powder factory at Tuaropaki and the factory is planned to be ready in August 2011. John Paki, Màori Trustee, is a director of Miraka Limited. The Màori Trustee received $17,000 for directors fees in 2011 (2010 $nil). Ahuwhenua Trophy The Màori Trustee performs an administration role for the Ahuwhenua Trophy BNZ Màori Excellence in Farming Award 2011 Beef and Sheep (2010 Dairy). This role involves invoicing and receiving sponsorship and paying the related expenditure. Maui Tangohau, Deputy Màori Trustee, is the project director of the organising committee. The Màori Trustee received no fees for the services provided (2010 $nil). Tekau Plus Following suspension of the programme last year, Màori Trustee continued to hold money on instruction from Te Puni Kòkiri. The funds were distributed to cluster businesses in May 2011. The Màori Trustee received no management fees or board meeting fees (2010 $32,000). Key Management Personnel The Màori Trustee maintains an interests register. There were no payments made or payments received from entities that key management personnel have control or significant influence over, other than the entities noted above. A family member of one of the key management personnel provided consultancy services to Màori Trustee totalling $79,000 (2010 $nil). Some key management personnel and family members are owners of land managed by the Màori Trustee in the ordinary course of business and have account balances with the Common Fund. Distributable income paid on account balances was calculated in compliance with legislation. Group

Parent

2011

2010

2011

2010

Actual

Actual

Actual

Actual

$000

$000

$000

$000

1,257

958

1,257

958

43

25

43

25

1,300

983

1,300

983

Key management personnel benefits Salaries and other current employee benefits Post employment benefits

51


Key management personnel comprise the Màori Trustee and the seven other members of the Màori Trustee senior management team. 21. Remuneration of employees Parent

Parent

2011

2010

Actual

Actual

$000

$000

$100,000 - $109,999

-

2

$110,000 - $119,999

2

-

$120,000 - $129,999

3

2

$130,000 - $139,999

1

1

$140,000 - $149,999

2

2

$150,000 - $159,999

1

-

$190,000 - $199,999

1

-

$210,000 - $219,999

1

-

$250,000 - $259,999

1

1

12

8

Total remuneration paid or payable

During the year ended 31 March 2011 no employees received compensation in relation to cessation (2010 $nil). 22. Post reporting date events On Wednesday 25 May, the Minister of Màori Affairs announced that Jamie Tuuta had been appointed as Màori Trustee, effective from 19 August 2011. There have been no other significant post reporting date events. 23. Explanation of significant variances against budget Statement of comprehensive income Fees were higher than budget by $444,000. In November 2010 Màori Trustee changed the way fees were charged from a standard fee per activity to time spent on the activity charged at a standard rate, which resulted in an increase in the fee income. Share of associates’ net deficit was higher than budget by $5,089,000, the impairment of investment in associates was higher than budget by $1,568,000 and the share of associates’ other comprehensive income was higher than budget by $1,454,000. The following events occurred during the year and were not known at the time the budgets were prepared:

• The Màori Trustee invested in Miraka Limited

• Putake Limited sold its investments and incurred a loss on disposal

• Putake Investments Limited Partnership incurred an impairment provision on one of its investments

• Quantum Limited tax expense and an increase in the asset revaluation reserve.

Other expenditure was less than budget by $1,193,000 and a large proportion of this relates to expenditure for consultants and legal expenses. At the time the budgets were set there were assumptions made about expenditure for transformation projects for the new standalone entity, for example implementation of the new core systems was budgeted for 2011, but only the procurement phase was completed in 2011. In addition there was budget for professional advice for the Financial Service Providers Act, Emissions Trading Scheme, legislative compliance and legal opinions, and the actual costs were less than budgeted.

52


Statement of changes in equity The transfers from statement of comprehensive income for the Appropriation Fund is $2,038,000 higher than budget. This is a result of the budget variances for other expenditure explained above as well as variances for employee benefits, amortisation and interest earned on the Appropriation Fund cash balances. Statement of financial position The current held to maturity investments are less than budget by $2,331,000 because two bonds with maturities in 2011-12 were sold during the year. The non-currrent held to maturity investments are less than budget because funds were not invested in bonds but used for other investments. Investments in associates are higher than budget by $29,201,000 because the impairment of the investment in Quantum Limited has been reduced and the investment in Miraka Limited of $10,000,000. Property, plant and equipment is higher than budget by $4,668,000 because of the purchase of the Wakefield St property. Creditors and other payables are higher than budget by $3,547,000. This is because the Crown appropriation for the April-June 2011 quarter of $2,996,000 (including GST) was received in advance, and was not included in the budget. Statement of changes in cash flows The cash flows from Crown appropriation and capital funding was $2,938,000 higher than budget because of the April-June 2011 quarter Crown appropriation received in advance. The cash flows to suppliers were less than budget by $1,953,000. This is a result of the budget variances explained for the statement of comprehensive income. Cash flows from investment maturities and sales were higher than budget by $2,546,000 and cash flows for investment purchases were less than budget by $5,144,000. The budget assumptions were that funds surplus to liquidity requirements would be invested in bonds, however funds were used for other investments. Cash flows for the purchase of property, plant and equipment were higher than budget by $4,728,000 because of the purchase of the Wakefield St property. Cash flows for investments in associates was higher than budget by $10,000,000 because of the investment in Miraka Limited. 24. Prior period adjustments The Group's investment in the associate Quantum Limited was measured at nil in previous years' financial statements, but it should have been measured at the carrying value in Te Màori Lodge's financial statements.  Similarly, in the Màori Trustee's parent financial statements the carrying value of advances to Te Màori Lodges should have been measured at the value of that company's asset backing. The financial statements for 2010, which are presented as comparative information in these financial statements, have been restated to correct this matter. The effect of this restatement is as follows.

Investment in associates increased by Loans and receivables increased by Equity increased by

Group 2010 $000

Parent 2010 $000

24,367

-

-

24,367

24,367

24,367

53


In terms of the Màori Trustee Act 1953, the Màori Trustee is responsible for the preparation of the Common Fund and Special Investment Accounts financial statements and for the judgements made in them. The Màori Trustee is responsible for the establishment and maintenance of a system of internal controls designed to provide reasonable assurance as to the integrity and reliability of financial reporting. In the Màori Trustee’s opinion the financial statements as at 31 March 2011 set out on pages 57 to 66 fairly reflects the financial position and operations of the Common Fund and Special Investment Accounts.

Jamie Tuuta Màori Trustee 20 September 2011

Matters Relating to the Electronic Presentation of the Audited Financial Statements This audit report relates to the financial statements of the Màori Trustee Common Fund and Special Investment Accounts for the year ended 31 March 2011 included on the Màori Trustee’s website. The Màori Trustee is responsible for the maintenance and integrity of the Màori Trustee’s website. We have not been engaged to report on the integrity of the Màori Trustee’s website. We accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website. The audit report refers only to the financial statements named above. It does not provide an opinion on any other information which may have been hyperlinked to or from the financial statements. If readers of this report are concerned with the inherent risks arising from electronic data communication, they should refer to the published hard copy of the audited financial statements and related audit report dated 20 September 2011to confirm the information included in the audited financial statements presented on this website. Legislation in New Zealand governing the preparation and dissemination of financial information may differ from legislation in other jurisdictions.

54


To the readers of The Màori Trustee’s Common Fund and Special Investment Accounts financial statements for the year ended 31 March 2011 The Auditor-General is the auditor of the Màori Trustee’s (the Trustee) Common Fund and Special Investments Accounts. The Auditor-General has appointed me, Phil Kennerley, using the staff and resources of Audit New Zealand, to carry out an audit of the financial statements of the Common Fund and Special Investment Accounts on her behalf. We have audited: • the financial statements of the Trustee’s Common Fund on pages 57 to 64 that comprise the statement of financial position as at 31 March 2011, the statement of comprehensive income and statement of cash flows for the year ended on that date and a summary of accounting policies and other explanatory information. • the statement of the Trustee’s Special Investment Accounts on page 65 as at 31 March 2011 and the accompanying summary of significant accounting policies and other explanatory information on page 66. In our opinion, the financial statements of the Trustee’s Common Fund on pages 57 to 64: ° comply with generally accepted accounting practice in New Zealand; and ° fairly reflect the Common Fund’s: - financial position as at 31 March 2011; and - financial performance and cash flows for the year ended on that date; and the statements of the Trustee’s Special Investment Accounts on pages 65 to 66: ° comply with generally accepted accounting practice in New Zealand; and ° fairly reflect the financial position of the Special Investment Accounts as at 31 March 2011. Our audit was completed on 20 September 2011. Our opinion is expressed as at that date. The basis of our opinion is explained below. In addition, we outline the responsibilities of the Trustee and our responsibilities, and we explain our independence.

Basis of opinion We carried out our audit in accordance with the Auditor-General’s Auditing Standards and the International Standards on Auditing (New Zealand). Those standards require that we comply with ethical requirements and plan and carry out our audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. Material misstatements are differences or omissions of amounts and disclosures that would affect a reader’s overall understanding of the financial statements. If we had found material misstatements that were not corrected, we would have referred to them in our opinion. An audit involves carrying out procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgement, including our assessment of risks of material misstatement of the financial statements, whether due to fraud or error.

55


In making those risk assessments, we consider internal control relevant to the entity’s preparation of the financial statements that fairly reflect the matters to which they relate in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also involves evaluating: • the appropriateness of accounting policies used and whether they have been consistently applied; • the reasonableness of the significant accounting estimates and judgements made by the Trustee; • the adequacy of all disclosures in the financial statements; and • the overall presentation of the financial statements. We did not examine every transaction, nor do we guarantee complete accuracy of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Responsibilities of the Trustee The Trustee is responsible for preparing the financial statements • in accordance with generally accepted accounting practice in New Zealand; and • that fairly reflect the Common Fund ’s financial position, financial performance and cash flows, and the financial position of the Special Investment Accounts. The Trustee’s responsibilities arise from the Public Finance Act 1989 and the Màori Trustee Act 1953. Those responsibilities include the design, implementation, and maintenance of internal control relevant to the preparation of the financial statements so that those statements are free from material misstatement, whether due to fraud or error.

Responsibilities of the Auditor We are responsible for expressing an independent opinion on the financial statements and reporting that opinion to you based on the audit. This responsibility arises from section 15 of the Public Audit Act 2001 and the Màori Trustee Act 1953.

Independence When carrying out the audit, we followed the independence requirements of the Auditor-General, which incorporate the independence requirements of the New Zealand Institute of Chartered Accountants. Other than the audit, we have no relationship with, or interests in, the Trustee or its subsidiary.

Phil Kennerley Audit New Zealand On behalf of the Auditor-General Wellington, New Zealand

56


Notes

Interest received on Common Fund investments Realised capital gains on disposal of Common Fund investments Less MĂ ori Trustee management fee Distributable income Other non-cash interest income Net surplus/(deficit)

1

2

2011

2010

$000

$000

3,823

1,576

86

-

(467)

(322)

3,442

1,254

(3,442)

(1,254)

-

-

(276)

1,028

(276)

1,028

The accompanying notes form part of these financial statements. 57


2011

2010

$000

$000

Equity at beginning of year

1,028

-

Transfers from statement of comprehensive income

(276)

1,028

752

1,028

Equity at end of year

The accompanying notes form part of these financial statements. 58


Notes

2011

2010

$000

$000

6,248

4,364

832

1,023

11,800

10,217

9,474

1,486

28,354

17,090

37,520

42,010

65,874

59,100

64,393

57,490

729

582

65,122

58,072

752

1,028

65,874

59,100

Current assets Cash and cash equivalents Accrued interest Bank deposits Investments

3

Total current assets Non-current assets Investments

3

Total assets Current liabilities Accounts with the Common Fund Accounts payable Total current liabilities Equity Total liabilities and equity

4

The accompanying notes form part of these financial statements. 59


2011

2010

$000

$000

3,824

1,576

(2,755)

(994)

Management fee

(747)

-

Tax paid to IRD on behalf of account holders

(260)

-

62

582

Increase in accounts with the Common Fund (net)

6,903

6,897

Investment maturities and sales

4,342

3,731

Investment purchases and repayments

(7,840)

(12,616)

(Increase)/decrease in bank deposits

(1,583)

1,869

Net cash flows from investing activities

1,822

(119)

Net increase in cash

1,884

463

Cash at beginning of year

4,364

3,901

Cash at end of year

6,248

4,364

Notes

Cash flows from operating activities Interest income Distributable income net of tax paid to account holders

Net cash flows from operating activities

5

Cash flows from investing activities

The accompanying notes form part of these financial statements. 60


Statement of accounting policies Reporting entity The Màori Trustee is a corporation sole defined under the Màori Trustee Act 1953, and amended by the Màori Trustee Amendment Act 2009, (the Act) and is domiciled in New Zealand. The financial statements are prepared in terms of Section 23 of the Act for the Common Fund. The Common Fund represents monies received by the Màori Trustee under Sections 23 and 25 of the Act, in trust for persons entitled to receive them. All Common Fund monies are guaranteed by the Crown under Section 27 of the Act. Section 26B (2) of the Act requires the Màori Trustee’s annual report to report on the total amount of distributable income, less management fees, paid on money held in trust in the Common Fund. The financial statements for the Common Fund are for the year ended 31 March 2011, and were approved by the Màori Trustee on 20 September 2011.

Basis of preparation Statement of compliance In November 2004 the Accounting Standards Review Board (ASRB) approved the adoption of New Zealand equivalents to International Financial Reporting Standards (NZ IFRS). At that time, the ASRB announced the adoption of NZ IFRS would be mandatory for reporting entities with accounting periods beginning on or after 1 January 2007. In September 2007 the ASRB announced that for certain small to medium size entities the mandatory adoption of NZ IFRS had been delayed. These entities can continue to apply New Zealand Generally Accepted Accounting Principles (NZ GAAP) as prescribed by New Zealand Financial Reporting Standards and Statements of Standard Accounting Practice. The Common Fund meets the criteria for deferral of NZ IFRS due to not being publicly accountable and their size. The financial statements have been prepared in accordance with NZ GAAP, consistent with previous periods.

Measurement base The financial statements have been prepared on a historical cost basis, except for the revaluation of certain items as detailed in the specific accounting policies. Functional and presentation currency The financial statements are presented in New Zealand dollars, which is the Màori Trustee’s functional currency. All values are rounded to the nearest thousand dollars ($000).

Significant accounting policies Revenue Investment income is recognised on an accruals basis. Cash and cash equivalents Cash and cash equivalents comprise cash on hand, cash at bank and short term deposits with an original

61


maturity of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Investments Investments include government stock and commercial bonds. Investments are stated at the lower of cost, adjusted for the amortisation of any premium or discount, or net realisable value. The premium or discount is amortised over the life of the investment on a straight line basis. Financial instruments Financial instruments include cash and cash equivalents, investments, accrued interest and accounts payable. The financial instruments are subject to credit risk, whereby a third party will default on its obligation to the Màori Trustee, causing a loss to be incurred. On initial recognition, financial assets are measured at cost. Financial assets are derecognised when the right to receive cash flows from the financial assets have expired or been transferred. Income tax The Common Fund has been issued a certificate of exemption from the Inland Revenue Department. The Common Fund is a complying trust. Tax is deducted from distributable income and paid to IRD on behalf of the Common Fund account holders. Goods and Services Tax (GST) The Common Fund is not registered for GST. Changes in accounting policies There have been no changes in accounting policies. All accounting policies have been applied on a basis consistent with other years. 1. Distributable income

2011

2010

$000

$000

Interest received on Common Fund investments

3,909

1,576

Màori Trustee management fee

(467)

(322)

Distributable income

3,442

1,254

Less tax withheld on distributable income

(687)

(260)

Net distributable income paid to Common Fund accounts

2,755

994

The Màori Trustee Act 1953, as amended by the Màori Trustee Amendment Act 2009, requires distributable income to be paid to Common Fund account holders.

62


Distributable income commenced from 1 July 2009 and therefore only nine months is included in the 2010 financial year. 2. Other interest income Other interest income comprises accrued interest and the amortisation of any premium or discount on the purchase of investments. Section 26(3)a of the Màori Trustee Amendment Act only includes money received by the Màori Trustee as income for the purposes of calculating distributable income. It therefore does not include accrued interest and the amortisation. The accrued interest at 30 June 2009 was nil. This is because prior to the Màori Trustee Amendment Act the Common Fund investment income (received and accrued) from Common Fund investments was paid to the Màori Trustee General Purposes Fund. 3. Investments 2011

2010

$000

$000

Government stock

2,989

-

Commercial bonds

6,485

1,486

9,474

1,486

Government stock

1,508

4,483

Commercial bonds

36,012

37,527

37,520

42,010

46,994

43,496

2011

2010

$000

$000

42

322

687

260

729

582

Current portion

Term portion

4. Accounts payable

Màori Trustee management fee Tax on distributable income

63


5. Reconciliation of net operating surplus with net cash flows from operating activities 2011

2010

$000

$000

(276)

1,028

-

(5)

(Increase)/decrease in accrued interest

191

(1,023)

Increase/(decrease) in accounts payable

147

582

62

582

Net surplus/(deficit) Add/(deduct) non cash items Amortised premiums/discount Add/(deduct) movements in working capital

Net cash flows from operating activities

64


2011

2010

$000

$000

Cash and cash equivalents

3,033

448

Bank deposits

4,859

7,278

110

181

8,002

7,907

8,002

7,907

Investments under specific direction

Company debentures, stocks and bonds Total investments under specific direction Funded by Specific deposits on behalf of MĂ ori clients

The accompanying notes form part of these financial statements. 65


Statement of accounting policies Reporting entity The Màori Trustee is a corporation sole defined under the Màori Trustee Act 1953, and amended by the Màori Trustee Amendment Act 2009, (the Act) and is domiciled in New Zealand. The financial statements are prepared in terms of Section 23 of the Act for the Special Investment Accounts. Special Investment Accounts are investments made in accordance with Section 24 of the Act. The financial statement for the Special Investment Accounts is for the year ended 31 March 2011, and was approved by the Màori Trustee on 20 September 2011.

Basis of preparation Statement of compliance In November 2004 the Accounting Standards Review Board (ASRB) approved the adoption of New Zealand equivalents to International Financial Reporting Standards (NZ IFRS). At that time, the ASRB announced the adoption of NZ IFRS would be mandatory for reporting entities with accounting periods beginning on or after 1 January 2007. In September 2007 the ASRB announced that for certain small to medium size entities the mandatory adoption of NZ IFRS had been delayed. These entities can continue to apply New Zealand Generally Accepted Accounting Principles (NZ GAAP) as prescribed by New Zealand Financial Reporting Standards and Statements of Standard Accounting Practice. The Special Investment Accounts meet the criteria for deferral of NZ IFRS due to not being publicly accountable and their size. The financial statement has been prepared in accordance with NZ GAAP, consistent with previous periods. Measurement base The financial statements have been prepared on a historical cost basis, except for the revaluation of certain items as detailed in the specific accounting policies.

Functional and presentation currency The financial statements are presented in New Zealand dollars, which is the Màori Trustee’s functional currency. All values are rounded to the nearest thousand dollars ($000).

Significant accounting policies Cash and cash equivalents Cash and cash equivalents comprise cash on hand, cash at bank and short term deposits with an original maturity of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Investments Investments are units purchased in equity funds. Investments are stated at cost. Changes in accounting policies There have been no changes in accounting policies. All accounting policies have been applied on a basis consistent with other years. 66


67


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Maori trustee annual report 2011