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2003 Annual Report

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 30 June 2003

NOTE 1 STATEMENT OF ACCOUNTING POLICIES

(a): Reporting Entity

The financial statements presented here for the reporting entity, the Securities Commission, are prepared pursuant to section 30 of the Securities Act 1978 and section 41 of the Public Finance Act 1989.

(b): Measurement System

The accounting principles recognised as appropriate for the measurement and reporting of results and financial position on a cost basis have been applied with the exception that the library is periodically revalued.

(c)
Accounting Policies

(i): Budget Figures: The budget figures are those approved by Commission Members on 18 July 2002.
The budget figures are prepared in accordance with generally accepted accounting practice and are consistent with the accounting policies adopted by Commission Members for the preparation of the financial statements.
(ii): Depreciation: Fixed assets, other than the library, are shown at cost and have been depreciated on the following bases:
- office furniture - 20 percent of diminishing value,
- office equipment - straight line over five years,
- leasehold improvements - straight line over remaining life of lease,
- motor vehicle - straight line over five years.
(iii): Library: All library acquisitions are recorded at cost. The library is depreciated on a straight line basis over ten years. The library is revalued to fair value every three years by Lambert Library Services (independent valuer). In the year that the periodic revaluation of the library is undertaken any difference between the depreciated value of the library and the fair value is recognised in the asset revaluation reserve. If this results in a debit balance in the asset revaluation reserve, the balance is expensed in the statement of financial performance. The last revaluation was as at 1 July 2001.
(iv): Short Term Deposits: Short term deposits are shown at cost.
(v): Employee Annual Leave: Provision is made in respect of the Commission's liability for employee annual leave entitlements. This has been calculated on an actual entitlement basis at current remuneration rates.
(vi): GST: All items in financial statements are exclusive of GST with the exception of accounts receivable and accounts payable which are stated with GST included.
(vii): Financial Instruments: All financial instruments are recognised in the statement of financial position and all revenues and expenses in relation to financial instruments are recognised in the statement of financial performance.
(viii): Income Tax: The Commission is exempt from income tax under the Income Tax Act 1994.
(ix): Revenue Recognition: Government grant is recognised as revenue when it becomes due. Revenue from application fees and costs recoverable and from administrative services to the Takeovers Panel is recognised when the relevant services are provided.
(x): Litigation Fund: Interest income is reported as income of the Securities Commission in the financial period in which it is derived. The balance of the fund is disclosed as a component of equity in the statement of financial position. In the future years, the reimbursement from the Crown to top up the fund will be shown as income in the period in which the Securities Commission's claim for reimbursement is accepted by the Crown.
(xi): Changes in Accounting Policy: There have been no changes in accounting policies since the date of the last audited financial statements. The policies have been applied on a basis consistent with other years.

NOTE 2 ADMINISTRATIVE SERVICES TO THE TAKEOVERS PANEL

The Commission provides administrative services to the Takeovers Panel. For each financial year the Commission and the Panel agree on the level of services required and on the fees to be paid to the Commission for these services. The costs involved in providing these services are part of total expenditure.

NOTE 3 ALLOCATION OF RECEIPT FOR USE OF ASSETS

This represents amounts received from the Takeovers Panel to finance the purchase of assets required by the Commission to service the requirements of the Panel. The prepayment is being amortised, having regard to the expected life of the assets over the following periods:

Furniture, fittings and library	5 years
Office equipment	3 years

NOTE 4 LITIGATION FUND

Represents Government funding to cover the costs and expenses incurred by the Securities Commission in taking or defending eligible cases. It is being held on short term deposit. There have been no calls on the resources of the litigation fund to date.

NOTE 5 REMUNERATION OF MEMBERS OF THE COMMISSION

	2003 $	2002 $

Members' fees	273,866	251,737
Chairman's remuneration (salary and motor vehicle allowance)	300,000	226,074

Total remuneration paid to Members of the Commission	$573,866	$477,811

Members are remunerated on the basis of time spent on the work of the Commission.

Members' fees for the year ended 30 June 2003 were:

	2003 $	2002 $

C.A.N. Beyer	35,625	22,908
F.R.S. Clouston	49,647	37,091
A.M. Cotton	48,173	2,000
I.F. Farrant	-	14,429
E.M. Hickey	31,076	35,768
L.A.J. Kavanagh	27,696	22,477
J.M.G. Perry	17,504	25,009
C.A. Quinn	17,090	16,250
R.M. Spiller	22,295	19,000
M.R.H. Webb	24,760	56,805

	$273,866	$251,737

NOTE 6 EMPLOYEE REMUNERATION

During the year, the number of employees of the Commission, not being Members, who received remuneration and other benefits in excess of $100,000 were:

Remuneration $	No. of Employees 2003	No. of Employees 2002
200,001 to 210,000	-	1
130,001 to 140,000	3	2
120,001 to 130,000	1	-

NOTE 7

RECONCILIATION OF THE NET DEFICIT FROM OPERATIONS WITH THE NET CASH FLOWS FROM OPERATING ACTIVITIES

	2003 $	2002 $

Reported surplus (deficit)	876,516	(116,944)

Add/(less) non-cash items:
- Allocation of receipt for use of assets	(35,557)	(9,848)
- Depreciation	326,805	124,100

	291,248	114,252

Add/(less)movement in working capital:
- Increase (decrease) in creditors	172,981	34,107
- Decrease (increase) in receivables	89,268	(68,036)

	262,249	(33,929)

Add/(less) investing activity items
- Gain on sale of assets	(3,897)	-

	(3,897)	-


Net cash flows from operating activities	$1,426,116	($36,621)

NOTE 8 FIXED ASSETS

	2003 Cost/ Valuation $	Accumulated Depreciation $	Net Book Value $

Assets at cost
Office equipment	518,681	319,183	199,498
Office furniture	128,482	110,011	18,471
Leasehold improvements	321,751	313,941	7,810
Motor vehicle	64,000	22,400	41,600

Assets at valuation
Library	240,853	43,013	197,840

	$1,273,767	$808,548	$465,219

	2002 Cost/ Valuation $	Accumulated Depreciation $	Net Book Value $

Assets at cost
Office equipment	430,992	273,774	157,218
Office furniture	100,224	68,551	31,673
Leasehold improvements	189,863	147,538	42,325
Motor vehicle	64,000	9,600	54,400

Assets at valuation
Library	201,330	20,133	181,197

	$986,409	$519,596	$466,813

NOTE 9 CREDITORS AND ACCRUALS

	2003 $	2002 $

Creditors	302,718	170,661
Employee entitlements	76,659	35,735

	$379,377	$206,396

NOTE 10 CASH FLOWS

The cash flows relating to the Commission's investing activities are reported on a net basis in the statement of cash flows. The amounts involved are held in short term deposits which are rolled over frequently through the year.

NOTE 11 FINANCIAL INSTRUMENTS

(a): Credit Risk
Financial instruments which may subject the Commission to credit risk consist of bank balances, bank short term deposits and accounts receivable.
The Commission's investments are deposited with a registered bank in New Zealand.
The Commission does not require collateral or security to support financial instruments.
There is no significant concentration of credit risk pertaining to accounts receivable.
(b): Fair Values
All financial instruments are recognised in the statement of financial position and are stated at fair values.

NOTE 12 LEASE COMMITMENTS

The Commission has the following operating lease commitments, which are subject to review under the terms of the leases, with terms of more than one year:

	2003 $	2002 $

- Not later than 1 year	140,000	210,000
- Later than 1 year and not later than 2 years	-	35,000

NOTE 13 CAPITAL COMMITMENTS

Estimated capital expenditure contracted for at balance date but not provided for:
$33,413 (2002 - $130,695).

NOTE 14 CONTINGENT LIABILITIES

The Commission is engaged in litigation with a third party. On the basis of legal advice received the Commission does not acknowledge any liability. The claim was unquantified at balance date. (2002 - NIL).

NOTE 15 TRANSACTIONS WITH RELATED PARTIES

During the year there were no transactions with related parties.
No related party debts have been written off or forgiven during the year.

NOTE 16 BUDGET VARIANCES

(a)
Income
Income for the year was on budget.

(b)

Expenditure
Significant variances from budget were:

(i): Additional costs from write down of leasehold improvements, office furniture and lease termination charges.
(ii): Reduced salaries and superannuation subsidies costs due to delayed recruitment.
(iii): Reduced travel and accommodation costs due to curtailed overseas travel and generally reduced travel activity.
(iv): Additional services and supplies costs arising from increases in IT service costs.

NOTE 17 COST ALLOCATION POLICY

Direct costs are charged directly to outputs. Indirect costs are allocated on the basis of direct labour hours spent on each output.

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