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Annual Report 30 June 2000

IN THIS SECTION: NOTES TO THE FINANCIAL STATEMENTS

CONTENTS: Statement of Purpose Notable Events Members Chairman's Review Chief Executive's Report New Zealand Securities Markets Enforcement Authorisations Exemptions Reform Internationl Liaison Public Understanding Administration and Staffing ----------------------------- Role, Functions and Powers Financial Statements Statement of Responsibility Statement of Objectives Statement of Service Performance Report of the Audit Office ----------------------------- Staff How to Contact Us

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 30 June 2000

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 an historical 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 15 July 1999. 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 historical 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 nine years.
(iii)		Library: All library acquisitions are recorded at cost. The library is depreciated on a straight line basis over 10 years. The library is revalued to current market value every three years by an 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 current market 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.
(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 entitlement, which has been calculated on an actual entitlement basis at current remuneration rates.
(vi)		GST: GST is accounted for by the net method.
(vii)		Financial Instruments: All financial instruments are recognised in the Statement of Financial Position.
(viii)		Income Tax: The Commission is exempt from income tax under the Income Tax Act 1994.

(D)   CHANGES IN ACCOUNTING POLICIES

There have been no changes in accounting policies. All policies have been applied on bases consistent with those used last year.

NOTE 2    REMUNERATION OF MEMBERS OF THE COMMISSION

	2000 $	1999 $
Members' Fees	139,058	114,737
Chairman's Remuneration	230,050	220,850
(salary, superannuation and allowance)
Total Remuneration paid to Members of the Commission	$369,108	$335,587

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

Members' fees for the Year ended 30 June 2000 were:
F.R.S. Clouston	33,432
I.F. Farrant	15,131
A.N. Frankham	17,101
S.L. Franks	3,011
E.M. Hickey	14,592
L.A.J. Kavanagh	13,620
J.M.G. Perry	13,662
M.R.H. Webb	28,509
	$139,058

NOTE 3    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 $	Number of Employees
200,000 to 210,000	1 (Chief Executive)
120,000 to 130,000	2

NOTE 4    RECONCILIATION OF STATEMENT OF FINANCIAL PERFORMANCE WITH STATEMENT OF CASH FLOWS

	2000 $	1999 $
Reported Surplus (Deficit)	285,293	(79,938)
Add non-cash item:
- Depreciation	101,236	108,551
Add item classified as investing activity:
- Loss on Asset Disposals	1,753	-
Movement in working capital:
- Increase (Decrease) in Creditors	20,205	(15,638)
- Increase in Receivables	(21,697)	(23,767)
	(1,492)	(39,405)
Net Cash Flows from Operating Activities	$386,790	$(10,792)

NOTE 5    FIXED ASSETS

	2000 Cost/Valuation $	Depreciation $	Net Book Value $
ASSETS AT COST
Office Equipment	400,588	243,387	157,201
Office Furniture	76,103	57,120	18,983
Leasehold Improvements	173,318	106,137	67,181
ASSETS AT VALUATION PLUS ADDITIONS AT COST
Library	220,794	41,345	179,449
	$870,803	$447,989	$422,814

	1999 Cost/Valuation $	Depreciation $	Net Book Value $
ASSETS AT COST
Office Equipment	372,054	201,250	170,804
Office Furniture	73,707	52,876	20,831
Leasehold Improvements	173,319	86,880	86,439
ASSETS AT VALUATION PLUS ADDITIONS AT COST
Library	192,660	19,266	173,394
	$811,740	$360,272	$451,468

NOTE 6    EMPLOYEE ENTITLEMENTS

Creditors and accruals include employee annual leave entitlements amounting to $28,232.

NOTE 7    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 8    FINANCIAL INSTRUMENTS

(I)   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.

(II)   FAIR VALUES

All financial instruments are recognised in the Statement of Financial Position and are stated at fair values.

NOTE 9    LEASE COMMITMENTS

	2000 $	1999 $
- Not later than one year	205,000	205,000
- Later than one year and not later than two years	205,000	205,000
- Later than two years and not later than five years	239,000	444,000

NOTE 10    CAPITAL COMMITMENTS

Estimated capital expenditure contracted for at balance date but not provided for: $18,500 (1999 nil).

NOTE 11    CONTINGENT LIABILITIES

There are no contingent liabilities at balance date (1999 nil).

NOTE 12    TRANSACTIONS WITH RELATED PARTIES

During the year the Securities Commission paid fees of $5,880 to F.R.S. Clouston, a Member of the Commission, for specialist services relating to a review of procedures observed by funds managers (1999 nil).

There was no amount outstanding at year end relating to this project.

No related party debts have been written off or forgiven during the year.

NOTE 13    BUDGET VARIANCES

(I)   INCOME

Income for the year was $118,000 above budget. The fee income arising under the Securities (Fees) Regulations 1998, which came into effect on 19 January 1999, was higher than budgeted.

(II)   EXPENDITURE

Expenditure for the year was $168,000 below budget. In particular, the level of professional services and, for part of the year, professional staff was lower than budgeted.