NOTES TO THE FINANCIAL STATEMENTS

NOTE 1   STATEMENT OF ACCOUNTING POLICIES

1. Reporting Entity
   The Takeovers Panel is a body corporate established by the Takeovers Act 1993. The financial statements presented here are prepared pursuant to section 16 of the Takeovers Act 1993 and section 41 of the Public Finance Act 1989.

2. 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.

3. Specific Accounting Policies
   1. Budget Figures
      The budget figures are those approved by Panel members on 6 June 2001.
      The budget figures are prepared in accordance with generally accepted accounting practice.

   2. Short Term Deposits
      Short term deposits are shown at cost.

   3. GST
      The Panel is registered for GST and GST is accounted for by the net method.

   4. Financial Instruments
      Financial instruments recognised in the statement of financial position include cash balances, receivables, payables, and investments.

   5. Income Tax
      The Panel is exempt from income tax under the Income Tax Act 1994.

   6. Sundry Debtors
      Sundry debtors are stated at their expected realisable value after providing for doubtful and uncollectable debts.

   7. Revenue Recognition
      The Government grant is recognised as revenue when it becomes due. Revenue from application fees and costs recoverable is recognised when the relevant services are provided or when the Panel has made the relevant determination under section 32 of the Takeovers Act 1993.

   8. Litigation Fund
      Interest income and expenditure on approved litigation fund matters are reported as income and expenditure of the Panel in the financial period in which they were derived or incurred. Reimbursements from the Crown to top up the fund are reported as income in the period in which the Panel’s claim for reimbursement is accepted by the Crown.
      The balance of the fund is disclosed as a component of equity in the statement of financial position.

   9. Prepayment for Use of Assets
      This represents amounts paid to the Securities Commission to finance the purchase of assets required by the Commission to service the requirements of the Panel. The amounts are being written off, having regard to the expected life of the assets and the estimated period of the arrangements with the Commission, over the following periods:

      Furniture, fittings and library	5 years
      Office equipment	3 years

NOTE 2   CHANGES IN ACCOUNTING POLICIES

There have been no changes in the Panel’s accounting policies. All of the policies have been applied on bases consistent with those used last year.

NOTE 3   LITIGATION FUND

The Panel has established a litigation fund from an appropriation of $675,000 made by Parliament. The fund is to be used solely for litigation costs that are incurred by the Panel as it enforces compliance with the Takeovers Code or responds to litigation brought against it. It is being held on short term deposit. Parliament has made a further appropriation of $675,000 for the year ending 30 June 2003 to top up the fund to the set level of $675,000, should this be required during the year.
There have been no calls on the resources of the litigation fund to date.
The fund was originally appropriated as GST inclusive, but subsequently changed to a status of GST not applicable. As a result the Panel is due a refund of GST and use of money interest from Inland Revenue.

	2002 $		2001 $
Opening balance 1 July 2001	-		-
Government grant received	600,000		-
GST refund due from Inland Revenue	75,000		-
Interest received	17,906		-
Interest accrued	6,302
Expenditure on approved litigation	-		-
Balance at 30 June 2002	$699,208		-

NOTE 4   REMUNERATION OF MEMBERS OF THE PANEL

Members are remunerated on the basis of time spent on the work of the Panel. Members’ fees for the year ended 30 June 2002 were:

	2002 $		2001 $
J.C. King (Chairman)	61,267		31,057
D.O. Jones (Deputy Chairman)	76,550		5,950
D.M. Byrne	6,195		-
C.G. Giffney	25,788		-
G.G.H. Gilmour	-		5,300
A. Lawrence	26,297		4,000
K.J. O'Connor	23,118		4,700
J.M. Ott	-		3,800
D.J. Quigg	17,357		-
P.A. Randall	566		5,550
D.M.D. Rawstorne	20,200		5,300
	$257,338		$65,657

NOTE 5   PREPAYMENT FOR USE OF ASSETS

	2002 $		2001 $
Opening balance	30,308		-
Amount paid to finance the purchase of additional assets	6,170		33,309
Amount amortised for use of assets	(9,849)		(3,001)
Balance at 30 June 2002	$26,629		$30,308
Current portion	10,407		8,349
Non-current portion	16,222		21,959
Balance at 30 June 2002	$26,629		$30,308

NOTE 6   APPLICATION FEES AND COSTS RECOVERABLE

The Takeovers (Fees) Regulations 2001 came into force on 1 July 2001 and enable the Panel to recover costs with respect to applications received for various approvals, for exemptions, and for certain enforcement actions pursuant to the Takeovers Act. An analysis of the amounts earned for the year ending 30 June 2002 is as follows:

	2002 $
Exemptions	213,294
Approvals	86,782
Enforcement - section 32	250,676
Miscellaneous	638
Total	$551,390

NOTE 7   RECONCILIATION OF STATEMENT OF FINANCIAL PERFORMANCE WITH STATEMENT OF CASH FLOWS

	2002 $		2001 $
Reported surplus (deficit)	965,837		113,463
Add prepayment for use of assets	6,170		-
Movement in working capital:
- Increase (decrease) in creditors	4,673		121,589
- (Increase) decrease in receivables	(263,641)		(64,883)
	(258,968)		56,706
Net cash flows from operating activities	$713,039		$170,169

NOTE 8   CASH FLOWS

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

NOTE 9   FINANCIAL INSTRUMENTS

1. Credit Risk
   Financial instruments which potentially subject the Panel to credit risk consist of bank balances, bank short term deposits, sundry debtors, and accrued interest receivable.
   The Panel’s investments are deposited with a registered bank in New Zealand.
   The Panel does not require collateral or security to support financial instruments.
   There are no concentrations of credit risk.

2. Fair Values
   All financial instruments are recognised in the statement of financial position and are stated at fair values.

3. Currency Risk
   The Panel does not hold any overseas securities or deposits and is therefore not exposed to any currency risk.

4. Interest Rate Risk
   The Panel has not purchased any financial instruments that may be subject to interest rate risk.

NOTE 10   COMMITMENTS

There were no lease commitments at balance date. (2001 - no commitments)
The Panel has capital commitments of $34,000 at balance date. (2001 - no material commitments)

NOTE 11   CONTINGENT LIABILITIES

There were no contingent liabilities at balance date. (2001 - no contingent liabilities)

NOTE 12   TRANSACTIONS WITH RELATED PARTIES

There were no transactions with related parties during the year. (2001 - no related party transactions)

NOTE 13   SUBSEQUENT EVENTS

There were no material events subsequent to balance date that would affect the interpretation of the financial statements or the performance of the Panel. (2001 – no subsequent events)

NOTE 14   SEGMENTAL INFORMATION

The Takeovers Panel operates in one industry segment administering the Takeovers Act and Code and is based in one geographical segment, which is New Zealand.

NOTE 15   BUDGET VARIANCES

Significant variances from budget were:

Income
Recoveries under the Takeovers (Fees) Regulations 2001 were higher than budgeted due to a greater number of hours being required for applications for exemptions and approvals than had been estimated. In addition the Panel had not budgeted for recoveries for section 32 matters but was able to make significant recoveries in relation to the Montana Group Limited, Otago Power Limited, and Seafresh New Zealand Limited matters.

Expenditure
The higher than expected workload of the Panel throughout the year resulted in higher expenditure on Securities Commission services to the Panel and on members’ fees. Much of this additional expenditure was able to be recovered under the Takeovers (Fees) Regulations 2001.

Net Surplus
The Panel achieved a reasonable surplus where a modest deficit had been expected. The activities of the Panel are influenced significantly by the level of takeover activity and the needs of the market for exemptions and approvals. The Panel also has obligations to keep the Code under review and to review market practices. When resources came under pressure, as they did throughout the year, it was inevitable that the Panel’s efforts would be concentrated on enforcement matters and applications for exemptions and approvals. As a result the Panel members and executive spent a far higher proportion of time than expected on fee-producing activities.