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1997 Annual Report

STATEMENT OF OBJECTIVES

Funds were appropriated by Parliament in the year ending 30 June 1997 for the purposes of the Securities Commission on the basis that we provide:

Funds are to be appropriated in the year ending 30 June 1998 for the purposes of the Commission on the basis that we perform the following functions:

For management and reporting purposes we have divided our work into the following categories:

Category (2) of 1997 has been sub-divided into categories (2) and (3) for 1998. Otherwise the categories are substantially unchanged.

Projected information for 1998 in this Statement of Objectives does not form part of the Financial Statements of the Securities Commission and has not been audited.

STATEMENT OF SERVICE PERFORMANCE

	1997 Projected	1997 Actual	1998 Projected
1. Exemptions - Aplications considered
General	60	85	100
Life Insurance Companies	35	34	9
The Commission also commenced a review of all exemption notices following the enactment of the Securities Amendment Act 1996. There are at present 333 notices in force.
2. Market Authorisations - Applications considered	30	39	6
3. Market Intervention - Actions completed
General	45	51	30
Banning of Directors	15	29	40
4. Reform
Law Securities Market Regulation - the policy Securities Act and Regulations Substantial Security Holdings Insider Trading Futures Contracts Market Manipulation Equity Warrants Company Law Practices Prospectuses and Advertisements Financial Reporting Due Diligence Corporate Governance Substantial Security Holdings Insider Trading Company Takeovers Life Insurance Unit Trusts Electronic Communication of Offer Documents International Regulatory Policy and Practice

We issued some 21 statements or comments or reports in relation to review and comment on business law and practices during the financial year. We had expected to issue 25 statements or comments or reports in the year. We expect to issue some 25 statements or comments or reports in 1998.

5.Public Understanding of Securities Markets

We have commenced an audit of our communication strategies. We aim to inaugurate a regular Commission bulletin in the new year.

The Chairman, Members and staff of the Commission are committed to speeches, papers, and other forms of comment which assist the public understanding of securities markets. Our statements, comments and reports under work categories 3 and 4 above are material to the Commission's service performance in this work category.

B. COST

Grants totalling $1,866,667 (excluding GST) were received in the 1997 financial year. These funds, after adjustment for the carry forward of funds from the previous year, other income, capital expenditure and taxes, were expended as follows between the respective work categories:

Exemptions	$567,000	(26%)
Market Authorisations)	$626,000	(28%)
Market Intervention     )
Reform	$893,000	(40%)
Public Understanding	$134,000	(6%)

C. QUALITY AND TIMELINESS

In performing our work in accordance with our statement of purpose we aim to maintain standards in relation to quality and timeliness to meet our obligations under the Securities Act 1978 and the Public Finance Act 1989 and our understandings with the Minister of Commerce on performance standards and measures. These aspects of our work are maintained under continuing review by regular monthly reporting to Commission Members, by the frequent meetings

of the Commission, a total of 84 during the 1997 financial year, and by the supervision of staff exercised by the Chief Executive. In addition we shall be reporting quarterly to the Minister of Commerce in the new financial year.

The Commission Members are appointed by the Governor-General having regard to their qualifications, experience and skill in the public market for securities.

D. PROPOSED FINANCIAL PERFORMANCE: 1998 FINANCIAL YEAR

We expect Parliament to appropriate funds totalling $2,111,111 (excluding GST) for our purposes in the 1998 financial year. We also expect to derive estimated income of $100,000 (excluding GST) from fees and charges paid by users of the Commission's services. We propose to expend this money, after adjustment for the carry forward of funds from the previous year, other income, capital expenditure and taxes, as follows:

Exemptions	$619,000	(28%)
Market Authorisations	$44,000	(2%)
Market Intervention	$774,000	(35%)
Reform	$597,000	(27%)
Public Understanding	$177,000	(8%)

We shall be working over the course of the year to reduce our commitment to Reform and Exemptions to less than 25% each of our total expenditure in the 1999 financial year. We will increase our general market activity when we have completed the heavy programme of work related to the coming into force of the Securities Amendment Act 1996, the review of the Securities Regulations and the review of all exemption notices.

Projected information for 1998 in this Statement of Service Performance does not form part of the Financial Statements of the Securities Commission and has not been audited.

Report of the Audit Office

TO THE READERS OF THE FINANCIAL STATEMENTS for THE SECURITIES COMMISSION FOR THE YEAR ENDED 30 JUNE 1997

We have audited the financial statements on pages 31 to 40. The financial statements provide information about the past financial and service performance of the Securities Commission and its financial position as at 30 June 1997. This information is stated in accordance with the accounting policies set out on page 35.

Responsibilities of the Members of the Securities Commission

The Public Finance Act 1989 requires the Members of the Securities Commission to prepare financial statements in accordance with generally accepted accounting practice which fairly reflect the financial position of the Securities Commission as at 30 June 1997, the results of its operations and cash flows and the service performance achievements for the year ended 30 June 1997

Auditor's Responsibilities

Section 43(1) of the Public Finance Act 1989 requires the Audit Office to audit the financial statements presented by the Members. It is the responsibility of the Audit Office to express an independent opinion on the financial statements and report its opinion to you. The Controller and Auditor-General has appointed Rodney Barber, of Audit New Zealand, to undertake the audit.

Basis of Opinion

An audit includes examining, on a test basis, evidence relevant to the amounts and disclosures in the financial statements. It also includes assessing:

• the significant estimates and judgments made by the Members in the preparation of the financial statements; and
• whether the accounting policies are appropriate to the Securities Commission's circumstances, consistently applied and adequately disclosed.

We conducted our audit in accordance with generally accepted auditing standards in New Zealand. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatements, whether caused by fraud or error. In forming our opinion, we also evaluated the overall adequacy of the presentation of information in the financial statements and the Securities Commissions compliance with significant legislative requirements. We have performed certain other assurance based assignments for the Securities Commission. Other than these assignments and in our capacity as auditor acting on behalf of the Controller and Auditor-General, we have no relationship with or interests in the Securities Commission.

Unqualified Opinion

We have obtained all the information and explanations we have required. In our opinion the financial statements of the Securities Commission on pages 31 to 40:

• comply with generally accepted accounting practice; and
• fairly reflect:
  - the financial position as at 30 June 1997;
  - the results of its operations and cash flows for the year ended on that date; and
  - the service performance achievements in relation to the performance targets and other measures adopted for the year ended on that date.

RJ Barber
Audit New Zealand

On behalf of the Controller
and Auditor-General
Wellington, New Zealand

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Securities Commission, New Zealand

12th floor, Reserve Bank Building, 2 The Terrace, PO Box 1179 Wellington, New Zealand

+64 4 472 9830 phone +64 4 472 8076 fax

Inquiries to seccom@seccom.govt.nz