annual report - deloitte

ANNUAL REPORT 2 DECEMBER 2017

D I R E C T O R Y

TRUSTEES Gloria Koia (Chair)

Huimai Makela Airini Hepi

Kyle Amopiu Riria McDonald TRAINEE TRUSTEES Briar Ensor Preston Whare

SECRETARY Murray Patchell

FARM SUPERVISOR Perrin Ag Consultants

ACCOUNTANTS Deloitte, Rotorua

AUDITORS BDO Rotorua

SOLICITORS O’Sullivan Clemens

BANKERS Westpac

REGISTERED OFFICE Deloitte Chartered Accountants

2/1176 Amohau Street ROTORUA

PO Box 12003 ROTORUA

Phone (07) 343 1050 Fax (07) 343 1051 Email [email protected]

WEBSITE www.rotorua.deloitte.co.nz

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C O N T E N T S

PAGE 1. Directory

2. Contents

3. Agenda

4. Minutes of AGM dated 10 December 2016

6. Chairman’s Report

9. Farm Report

16. Audit Report

18. Financial Summary

25. Education Grant Report

27. Education Grants Policy 28. Review of 2016 Grant

29. Owners Grant Analysis

30. Owners Grant Policy

31. Kotahitanga Strategy

37. Maori Land Court Successions

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ANNUAL GENERAL MEETING

The 35th Annual General Meeting

held at Mangakaretu Marae, 283 Arapuni Road,

Waotu (Putaruru)

on

Saturday 2nd December 2017 at 10 am.

AGENDA 1. Apologies. 2. Minutes. 3. Annual Reports. 4. Appointment of Auditor. 5. Distributions. 6. Trust Structure Update.

7. General Business. 8. Lunch.

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KOKAKO TRUST MINUTES OF THE 34TH ANNUAL GENERAL MEETING OF OWNERS

HELD AT WHAKAARATAMAITI MARAE, PUTARURU, ON SATURDAY 10 DECEMBER 2016 AT 10.00AM.

CHAIRMAN: Jackie Aratema. SECRETARY: Murray Patchell. ATTENDANCE: 63. APOLOGIES: 43. (Geoffrey Rice/Emily Rota-Bidois) Carried MIHI AND KARAKIA: Kyle Amopiu. MINUTES: Of the previous AGM held on 28 November 2015 were taken as read and

confirmed. (Geoffrey Rice/Te Miri Te Tomo) Carried CHAIRMAN’S REPORT: Jackie Aratema tabled and read his report. RESOLVED: “That the Chairman’s report be adopted.” (Sonia Cooper/Takarei Te Tamaki) Carried FARM REPORT: Trudy Laan tabled and read her farm report. RESOLVED: “That the farm report be received.” (Andrew Thompson/Joe Edwards) Carried Matters arising: 1. Trudy advised that No. 3 farm manager, Richard Cook, had suffered

a heart attack but was now well on the way to recovery. 2. In view of low payout, cost cutting had been undertaken for repairs

and maintenance but these will need to be addressed in the future. Trudy explained the arrangements with the lower order sharemilker where the Trust owns the stock and the lower order sharemilker employs staff, vehicles and shed expenses, and receives 25% of the income. She added that a full 50/50 arrangement is working better in a low payout year, but goes the other way in a better payout year.

3. Andrew Thompson queried if the Trust had met its long term vision

for Ngatira. Trudy confirmed this was the case. Ngatira had wanted their farm managed properly, and to still be involved and this was happening. She recommended the Trust should continue leasing when the lease expires in 3 years. The Chairman of Ngatira Trust also confirmed they were happy with arrangements.

4. Trudy also drew attention to the Perrin AG scholarship available for

agricultural students, closing 31 March. FINANCIAL REPORT: Murray Patchell tabled and spoke to a summary of the financial results for

the year ended 30 June 2016, and made copies of the audited financial statements available for owners that required them.

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RESOLVED: “That the financial report be received.” (Huimai Makela/Emily Rota-Bidois) Carried AUDITOR: RESOLVED: “That Iles Casey be reappointed auditors for the next year.” (Jackie Aratema/Sonia Cooper) Carried DISTRIBUTION: RESOLVED: 1. “That $70,000 be made available for owners grants as per the policy

tabled.” 2. “That kaumatua grants of $250 each be paid to kaumatua aged 65

years or more as at 31 December 2016.” (Jackie Aratema/Emily Rota-Bidois) Carried EDUCATION GRANTS: Chairman referred to the Education Grant policy and schedule of recipients

contained in the reports. Sonia Cooper thanked the Trust for her granddaughters grant, and Emily Rota-Bidois also thanked the Trust for her education grant.

KOTAHITANGA STRATEGY: Mana Newton presented the proposed strategy for restructure of the Trust,

moving forward with implementation from 1 July 2017. He explained that the strategy had been on hold during the low payout when the Trust adopted defensive financial strategies, but with the improved payout the Trust can now proceed with more aggressive development strategies. Geoff Rice noted that Trust will incur costs with an independent director and he said the directors of the subsidiary company need to be allowed to run the business. Mana emphasised the importance of value being received rather than on costs incurred. The Trust can set high level rules to maintain controls on the subsidiary company.

RESOLVED: “That the Kotahitanga strategy report be received.” (Airini Hepi/Arama Karaka Pirika) Carried TRUSTEE ELECTION: Murray Patchell advised that 7 candidates had been nominated for the 2

positions available. The candidates were then invited to speak to the meeting. Voting papers were then issued and collected for counting at the office. Results to be advertised in the newspaper. Subsequently, Riria McDonald and Kyle Amopiu were the 2 highest poling candidates.

GENERAL BUSINESS: 1. Gloria Koia provided historical background to Whakaaratamaiti

Marae. Meeting closed at 12.55pm with karakia from Arama Karaka Pirika. Signed as a correct record CHAIRMAN

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Chair Report

Ngaa mih i o ngaa Tupuna O’ Kokako ki a koutou katoa

Ngaa mihi ki nga whanau katoa o te whenua o Kokako ,nga mihi ,koutou katoa.

2016-2017 has proven challenging with many changes. As the new Chair after Jackie Aratema resigned I acknowledge both Jackie and Te Wano Walters for the sharing, guidance and learning received from their huge expertise and wisdom over the many years they served Kokako.

There are many new challenges emerging in farming, not least of which will be the increasing environmental demands and need to meet a rapidly changing market.

To meet these challenges it has been necessary to first change the structure of Kokako Trust to enable planning for our future direction. We can no longer keep all our “eggs in one basket” so to speak, but need to step out of the square and seek out carefully analysed options that will supplement and enable our Dairy Farming operations to diversify while also improving the health and well-being of Kokako whenua. With Tikanga instilled to remind us of our beginnings and nga manaakitanga o-nga rangatahi ki nga pakeke-Kaumatua. The purpose being to make the waka o’Kokako resilient, make it even stronger & drive it further towards meeting our objectives.

The new operating structure, which will be explained in more detail by Mana Newton, has been created to differentiate our different operating functions and enable more Trustee responsibility for specific areas. Through this structure we intend to have greater connection with rangatahi being bought on board the development projects for education and training to gain higher achievements towards successful employment.

As a true Kaitiaki of the whenua I see my role as being to help steer that vision of continuous growth for Kokako which will best be met through feeding the next generation with nga korero ana kia haere ki-te rapu i nga Matauranga Maori i-nga Whare waananga,, a ka hoki mai ki te mahi i nga mahi .

By building our rangatahi we build Kokako. We can offer that if everyone does see and understand the Vision. Presentations by our robust Team of Expertise have guided the Trustees through this pathway and with such focus we can achieve not only securing benefits for our Shareholders but also developing an ongoing future resource, our Rangatahi.

The Team again through Mana Newton and Corey Wilson guided always with Murray Patchell, have once again steered the Waka , strengthening the Trust and overall operations, some highlights of which i am pleased to report.

Kokako has been successful in gaining putea from the MPI Maori Initiative Fund for our re-structure and we also have an application in with the Sustainable Farming Fund, yet to be confirmed early next year but having reached the final panel.

Kokako Trust is obligated and legally required to meet higher standards in Nitrate, Phosphate and Methane reduction impacting on nga whenua and waterways that meet our awa

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surrounding us. The Sustainable Farming Fund application, if successful will fund us to explore a system to create a healthier outcome for treating the effluent and providing a higher quality fertiliser and possibly electricity to the farms. Neighbouring Farms are supportive and have joined Kokako collectively in the application. Provided the study proves that it is a viable proposition they wish to enter a formal Partnership with Kokako. Fonterra as well as the Waikato Regional Council Sustainability Management also support the initiative in the pathway to finding better and alternative solutions.

The lease of land from Ngatira has once again provided supplemental feed and Kokako has both maintained and developed the land towards reaching higher outcomes... Through PerrinAg management, Kokako has been able to help Ngatira’s asset growth by maintaining top level care for the whenua. The uniqueness of both Trusts is that we share common links. Kokako thanks Ngatira for their ongoing support.

As with the invitation given by Te Wano Walters past Chair, Kokako will continue to extend the hand to create Partnerships that share Resources & Expertise and are of benefit to both parties. The message is for Maori to empower each other and grow in strength. The true doing of Te Kotahitanga.

With that in thought Research on the History and Whakapapa of Kokako is now at a point where we can form a Team, the goal being to next year unveil a Memorial for the urupa on Kokako whenua. Mangakaretu, Ngatira and Whakaaratamaiti whanau have gathered alongside mokopuna who whakapapa to tupuna buried there. Everyone will be notified as planning continues. Research has shown korero’ on several significant sites and naming of the streams to Tupuna ingoa involved.

Which now brings us to our Taratahi Farm Training programme - another partnership, alongside which also will include kura within Te kaokaoroa whom whakapapa te Kokako,- rangatahi learning skills of Business Management. Hopefully this will be established next Year and be included in their curriculum. Taratahi wishes to develop this programme on a National level in Partnership with Kokako and the nurturing of Kokako mokopuna. Presently young Ricky Thompson is completing his Pi Culture training through Taratahi, another direction Kokako is taking in exploring Manuka Honey production. Our trees have survived any contact with Myrtle Rust and are healthy & growing. More will be added.

Lastly, South Waikato Council Environment has come on board to support the Clean-up waterways as Kokako is gifted in owning an artesian spring which is in need of clearing and replanting, All Kokako stream-ways will eventually be cleaned & replanted an objective being to re-generate to their original use of Tuna Nurseries.

So next Year will provide plenty of opportunity to bring whanau, mokopuna together in our future planning events in meeting our challenge for everyone to learn more about how our whanau lived upon the lands.

Our Forestry Report identifies that harvesting is due for one block .Planning is essential before harvest as trees will be re-planted to ensure we keep within our Carbon Credit allocations. Other options are also being looked at to increase our tree plantation whether it be by Radiata Pine or Native.

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Finally I wish to acknowledge our Trainee Trustees whom have made themselves available and involved in the Trusts planning, sadly Briar will be leaving us next year and the door opens for another to join our Team. I thank her for her invaluable expertise. He tino ataahua hoki te wahine mo tou awhi me nga whakaaro pai. Preston joined us this year and brings his skills to the mixture.

Happy to say, Kokako have successfully come through another careful year of meeting market changes and that Fonterra’s latest pay dividend has enabled us to keep reducing the loan and help us toward the next ventures ahead.

This has been a Team effort due to an overall input from Governance and Management planning the drive towards a sustainable future. I thank our advisors, my Fellow Trustees, farm Managers and especially our Kai-mahi on our farms.

With everyone understanding and supporting the Vision ahead it can only make our Kokako Waka sail stronger.

Quoted from Minutes recorded in Native Land Court by tupuna korero

“Kokako whenua the Food Basket of the People”.

Paimarire. Gloria Koia. Chairperson.

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` Kokako Annual Report 2016/17

KOKAKO TRUST ANNUAL FARMING REPORT 2016/17 SEASON

INTRODUCTION

The outlook for the 2016/17 year steadily improved with the milk price which was originally forecast at

$4.25/kgMS finishing at $6.12/kgMS. A wetter than expected autumn also allowed the dairy units to

regain some production shortfall from the very wet spring. Milk solids production totalled 499,147kg.

Additional deferred maintenance was caught up on after two years of low milk price. On the Drystock

unit good lamb prices and a high lambing % of 130% saw sheep sales back up to levels last seen in

2011/12. The low level of indebtedness also put Kokako in a strong position.

DAIRY PRODUCTION

Total production from the dairy farms for the 2016/17 season reached 499,147kg milk solids from a

total of 1,172 cows. Actual figures for production achieved over the last few years are given in Table 1

along with district average.

Table 1 Milk Production for all 3 Dairy Units

kgMS Production for

2016/17Final 2017

YTDtotal YTD last year

Total budget

2016/17 Variance to

budgetVariance to

last yr

2016/17 YTD

kgMS/ha

2016/17 YTD

kgMS/cowKokako Dairy 1 169,867 164,991 166,000 3,867 4,876 1132 428Kokako Dairy 2 235,719 230,791 225,000 10,719 4,928 1355 437Kokako Dairy 3 93,562 96,630 91,000 2,562 -3,068 1088 398

Total 499,148 492,412 482,000 17,148 6,736 1217 424

The District average by comparison for the 2016/17 year was 1,239kgMS/ha up 2.1% on the previous

year. Average production over the last 6 years including 2016/17 is 492,102kg MS with the period

including three top years of over 500,000kg and one drought affected year in 2012/13 when

production dropped to 422,306kg. The milk solids price for the last 6 years has averaged $5.78/kg MS

with a range from $3.90/kg to $8.40/kg MS.

Fonterra paid a dividend on shares of 30c/share during the 2016/17 season with an additional 10c

paid already paid early in June of the previous year to assist with cashflow. Kokako Trust has

520,245 Fonterra shares which at the 13th of November 2017 were valued at $6.29/share. The full

dividend received therefore represents a return of 6.4%.

DRYSTOCK UNIT PRODUCTION

Lamb weights averaged 17.75kg carcass weight for the 497 lambs sold with average price at

$94.40/lamb or $5.32/kg carcass weight.

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Image 1: Kokako

lambs at the

Drystock block.

FINANCIAL-OVERALL

The Gross Farm Surplus for taxation purposes after allowing for change in stock value and

depreciation is a surplus of $955,325 compared to $317,680 in the 2015/16 year and a deficit of

$5,284 for 2014/15.

The surplus reduced to a Net Profit of $595,435 for the year after taxation. This compares to an after

tax deficit of $23,044 in 2016, and a deficit of $331,454 in 2015.

The benefit of having paid significant sums of principal off in the past was again felt this year with

Kokako only having $42,226 of interest to pay. A total of $403,625 of principal was repaid in the

2016/17 year. This included $250,000 of principal off the Westpac loans leaving a total term liability at

the end of June 2017 of $818,006. In addition, the $153,625 on loan from Fonterra was repaid in May

2016 prior to the interest charge period. Kokako had these funds earning interest over the previous

18months. A further $150,000 has been repaid off the term loans in the first five months of the

2017/18 year so that at 14 November 2017 the term loan now stands at $668,005 owing.

In the 2016/17 year $139,300 was paid out in the various distributions to owners as shareholder,

kaumatua, marae and education grants.

Table 2 outlines the contribution each farm makes to the overall Farm Surplus including an allowance

for depreciation.

Total Net Surplus

Effective ha

Profit/ha

Dairy Unit 1 $322,930 150 $2,152

Dairy Unit 2 $410,128 174 $2,357

Dairy Unit 3 $216,460 86 $2,516

Drystock Unit ($2,726) 193 ($14.12)

Forestry ($19,869) 60.2 ($331)

Ngatira Lease ($14,185) 113 ($125)

Total $912,738 776

DAIRY ONE

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Jason and Shelley Sabin from Dairy 2 completed their second year as lower order sharemilkers at

Kokako 1 with their team of Ben Glass and Luke Ross. During the season they were paid at the

breakeven level of $1.12/kg MS but once the milk price returned to more profitable levels and Fonterra

paid this out to suppliers they were paid out the remainder to make up to their contract level of 25%.

The 25% payment is to cover all staff, electricity and shed expenses as well as the provision of

motorbikes and their operation.

As the expected milk price for the season started at the low of $4.25/kg the farm plan continued from

the previous season operating at lower cow numbers to reduce costs. The lower numbers were a

blessing as the challenging spring of 2016 meant more feed was required just to feed these cows.

Production reached 169,867kgMS against a revised budget of 166,000kgMS from 397 cows at peak,

428kg MS/cow and 1,132kgMS/ha. Cull cow prices were again high with Kokako 1 averaging

$808/head for the 59 cows sold. Total taxable income amounts to $1,146,268 and for Kokako after

taking out the sharemilker’s portion amounted to $884,763 which compared with an original amount of

$596,875 based on a $4.25/kg milk price. Total expenses excluding the contract milker’s share and

before depreciation at $550,858 $3.16/kg MS which is higher than the previous year’s $512,878 due

to more feed expenses. The original budget was $495,414. On a cash basis the surplus was $334,105

compared to a budget of $108,461.

The Net Operating Surplus after depreciation and including change in livestock value was $322,930.

Image 2: Dairy 1 herd

DAIRY TWO

On Dairy Unit 2, with Jason and Shelley Sabin in their eighth year as 50/50 sharemilkers, the

production reached 235,719kg MS,437kgMS/cow and 1,355kgMS/ha from 540 cows milked at peak,

compared to a budget of 225,000kg MS. Total income amounts to $1,435,430 and excluding the

sharemilker’s portion the Kokako Trust income was $759,578 against a budgeted income of $497,002.

Expenses, excluding depreciation, at $320,457, $1.36/kg MS compare with $340,344 the previous

year and a budget of $345,177. Repairs were higher this year as work put off when the milk price was

low was now undertaken. The high level of production on a per ha basis and the well set up nature of

the farm continue to allow this unit to operate at very low level of expenses at around $1.40/kg MS.

The cash surplus for Kokako 2 was $439,122 compared to an original budget of $151,825. The Net

Operating Surplus once allowance has been made for depreciation amounted to $410,128 compared

to a budget of $168,153.

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Image 3: Dairy 2

cows

DAIRY THREE

On Dairy Unit 3, the

farm was managed

for the tenth year by

Richard and Sue

Cook who started in 2007. This season they operated as Contract Milkers receiving $1.50/kg

milksolids and paying for all staffing, electricity, shed expenses and vehicle/motorbike excluding

tractor expenses. Production reached 93,562kg MS, from 240 cows milked,390kgMS/cow and

1,088kgMS/ha compared to a budget of 91,000kg MS.

Total income received was $619,167 with $478,823 for Kokako after the contract milker share is

deducted as against a budget of $297,721. This included 41 cull cows sold for an average of

$645/head. Expenses excluding depreciation at $241,969, $2.71/kg MS, compare to $271,080 last

year and a budget of $270,966. Savings included $2,500 less on feed and nitrogen, $7,500 less on

repairs and maintenance, $3,500 less on vehicle expenses and $1,500 less on weeds. The cash

surplus for the year was $236,854 compared to $13,756 budgeted. Once adjustments for change in

livestock value and depreciation were taken into account, the Net Operating Surplus was $216,460.

Dairy Base reports for the three Dairy units for the 2015/16 year are included in the appendices which

benchmark the farms against others in the District.

DRYSTOCK UNIT

Jim Clarke continued the management of the drystock unit which he has done for the past 14 years

since March 2003. He has continued to make improvements as possible within the budget.

Total ewe numbers at the start of the year were at 519 including ewes and 2-tooths. Lambing % lifted

this year to 130%. A total of 497 lambs were sold for an average of $94/lamb with weights at an

average of 17.8kgccwt. Total lamb sales at $46,918 was the highest level for the past 6 years as

outlined in Table 3 and Figure 1. Plantain has again been used to provide high quality feed over the

summer period to allow for all lambs to be finished.

Table X: Lamb sales data for the last 6 years

Year no of salesave kg

ccwt/lamb kg ccwt/ha ave $/lambtotal $ lamb

sales2016/17 497 17.75 46 $94.40 $46,9182015/16 501 17.86 46 $88.37 $44,2742014/15 356 18.53 34 $95.57 $34,0122013/14 305 15.88 25 $86.74 $26,4562012/13 261 15.74 21 $69.72 $18,1452011/12 367 17.25 32 $109.27 $40,103

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Figure 1: Lamb sales data

from 2011/12 to 2016/17

In total 199 rising 2year

heifers were grazed on the

Drystock unit plus 190

rising 1year heifers plus

300 cows grazing for 8

weeks over the winter

period. These include stock from Dairy 1 and 3 as well as replacements grazed for Milsom. An

additional 42 yearlings from Benner Bros arrived in June which will be grazed over the 2017/18 year.

The rising 2-year heifers returned to the dairy units at the end of April improved weights of 394 to

402kg live weight. The winter cows have been grazed very well and returned home in excellent

condition.

Cash income on the Drystock unit at $248,365 includes $176,857 of grazing income and $51,814 of

stock trading and $9,212 of wool sales. While stock trading was in line with last year the grazing

income was lower due to reduced numbers. Budgeted income was $259,196. Sheep stock values

increased by $11,745 between opening and closing due to a lift in ewe value. Total expenses for the

Drystock unit were $240,615 excluding depreciation and forestry compared to a budget of $247,999

and expenses the previous year of $213,822. The main difference between the last two years is the

catch up on deferred maintenance. The cash surplus at the Drystock unit was $7,750 while the net

surplus after adjustments for livestock value change and depreciation was -$2,726 excluding the

forestry.

Image 4: Kokako

yearling heifers at

the Drystock

FORESTRY

Forestry expenses amounted to $19,869 for ongoing work on maintaining the Kokako forests. The

total Kokako forested area now amounts to 60.2ha.

The first 10ha of trees is now 25 years old and an estimate of value if harvested has been obtained.

The figure in the vicinity of $400,000 net of harvest costs was estimated. At this point the decision was

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made to allow the trees to continue to grow. If log prices continue to be strong the value will increase

over the next few years as total tonnage increases.

We continue to access further areas on the Kokako Trust land that would suit planting in forestry. It is

planned to increase the area of forest as part of a strategy to reduce nutrient loss from the Kokako

land in the future.

NGATIRA

The Ngatira lease land again provided supplement in the form of oat and barley silage, grass silage

and maize silage. In total 207t of silage including oats and grass silage was harvested and transferred

to the dairy units. A further 53t was harvested for use by the 237 cows from Dairy 2 wintered on grass,

oats and silage for 6 weeks.

Only 12.6 of maize was grown in the 2016/17 season. Two paddocks were severely damaged by pigs

eating seedlings along the rows soon after germination and had to be resown. The yield was down to

10t/ha on average as a result. In addition to this $164,308 of maize silage was purchased and on sold

to the dairy units.

A contractor was employed to do weeds here. A thorough job of both the ragwort, thistles and gorse

has been undertaken on both the flats and the main hill areas.

Income from feed grown and grazing of stock totalled $160,306 excluding the $164,308 for maize

purchased and then on-sold. Budgeted income was $192,830. Grazing income was up but silage

income was slightly less than budgeted. Expenses excluding depreciation and maize bought to on-sell

were $173,160 compared with $175,369 budgeted. The Ngatira unit finished with a cash deficit of

$14,185 after depreciation compared to a budgeted surplus of $17,461.

The term of the Ngatira lease comes to an end on the 31st August 2018. Kokako and Ngatira are

currently having discussions in regard to the renewal of the lease.

Image 5: Ngatira maize germinating.

OUTLOOK FOR 2017/18

The spring has again been extremely wet. This year the continual rain started earlier and impacted

ground conditions and races etc more so than last spring. Pasture growth has been slow and milk

production in total is still slightly behind last year with the shortfall from August through to October.

Over November Dairy 1 and 2 have been on a par with last year and Dairy 3 still behind.

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By the 27th of November production totalled 226,647kgMS down 4.5% on the 237,512kg MS of last

year. At Kokako 1 production was down 5% on last season with Kokako 2 down 2% and Kokako 3

down by 11%.

The Fonterra forecast milk price which had lifted in late July from an initial $6.50/kg to $6.75/kg MS is

likely to be reduced again following the continual falls in the Global Dairy Trade prices.

Areas have again been planted in chicory and turnips to help offset the dry period expected this

summer. The first trial of fodder beet is also being trialled at Kokako 2 for late autumn winter feed.

This seasons lambing % has been very good at 125% for the ewes and feed quality on the drystock is

currently excellent.

As at the end of November Kokako had a bank position of around $454,000 in credit including two

term investments of over $100,000 each.

The allowance for grant and dividends has been held at the same rate as last year.

Our thanks to Murray Patchell and his team and the Kokako Trustees and Gloria Koia the new

chairperson for their continued support. Our thanks also go to the tremendous staff on all the units. It

has been our pleasure to assist the Trust to continue to operate the Kokako whenua and to continue

to strengthen the Kokako financial position.

FARM REPORT PREPARED BY

REGISTERED FARM MANAGEMENT CONSULTANTS

Report Dated: 29th November 2017

DISCLAIMER

The information presented in this report is based on conservative current prices and returns to the best of

the author’s knowledge. No guarantees are given for the final result, which may be affected by factors

outside the author’s control.

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KOKAKO TRUST

SUMMARY OF FINANCIAL RESULTS

The Trust financial statements are prepared by Deloitte and audited by BDO Rotorua. Copies of the full audited financial statements are available upon request. The following summary is not intended to replace those statements but gives a more simplified overview of the Trust’s financial results. The Trust is an Ahu Whenua Trust in terms of section 215 of Te Ture Whenua Act 1993 and accounts are filed with the Maori Land Court.

Net Surplus:

2017 2016

INCOME

Farm Surpluses(Deficits):

Drystock (22,595) 30,081

Dairy 1 322,930 15,666

Dairy 2 410,128 130,369

Dairy 3 216,460 4,025

Ngatira (14,185) (2,221)

Other Income 19,267 37,794

TOTAL INCOME $932,005 $215,714

LESS EXPENDITURE

Administration Costs 210,766 183,676

Interest 42,226 55,158

NZU Revaluation (76)

Taxation 83,577

TOTAL EXPENDITURE 336,569 238,758

SURPLUS AFTER TAX $595,436 ($23,044)

-500,000

0

500,000

1,000,000

1,500,000

$

SURPLUS AFTER TAX

Net Operating Surplus $386,563 $1,372,953 -$331,454 -$23,044 $595,436

2013 2014 2015 2016 2017

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Administration Costs:

2017 2016

ACC 1,056 306

AGM Expenses 9,628 2,500

Audit Fees 6,250 5,750

Bank Charges 433 452

Consultancy 1,100

Environmental Monitoring 168

General Expenses 263 163

Printing Stationery & Advertising 5,062 10,326

Secretarial/Accountancy/ costs 63,398 65,163

Share Register 17,092 15,034

Subscriptions 1,853 1,222

Supervision 43,232 47,798

Trustee Fees & Expenses 49,128 28,746

Trustees Insurance 4,635 5,415

Valuation Fees 7,469 799

TOTAL $210,766 $183,674

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Cashflow: A simplified cashflow overview for the financial year to 30 June is:

2017 2016

CASH ON HAND 1 JULY 403,309 468,062

Add

Cash from Operating activities (after tax) 677,633 (35,866)

Fonterra loan 153,625

Total Cash Available 1,080,942 585,821

Less

Equipment purchases/building additions 110,563 47,211

Bank loan repayments 250,000

Fonterra Loan repayment 153,625

Owners Distributions 139,697 135,301

Total Payments 653,885 182,512

CASH ON HAND 30 JUNE $427,054 $403,309

and as a chart:

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DISTRIBUTIONS

2017 2016

Education Grants 11,400 12,782

Kaumatua Grants 69,750 64,750

Owners Grants 57,150 54,932

Marae Grants 1,000 1,200

TOTAL $139,300 $133,664

CAPITAL EXPENDITURE 2017

Bobby Calf Shelter 6,253

Feed pad extension 33,447

Feed bin troughs 11,460

Tractor (Case I H Farmall) 59,900

TOTAL $111,060

Assets:

2017 2016

Bank deposits 427,054 403,309

Current Assets (Receivables) 523,537 232,847

Tax Refunds 6,417 93,639

Livestock 1,158,585 1,148,715

Shares 3,262,319 2,984,411

Land & Buildings 20,905,669 15,320,892

Vehicles & Equipment 259,888 222,178

Trees 652,784 652,784

NZU’s (carbon credits) 140,128 145,587

TOTAL ASSETS $27,336,381 $21,204,362

Land is recorded at the market valuation as assessed every 5 years by an independent registered valuer. The latest valuation was done as at 30 June 2017. Livestock and shares are at market value. Buildings vehicles and equipment at cost less depreciation. The Tree valuation will be updated in 2019. There are 60 hectares of trees in 17 lots planted between 1987 and 2013.

Page 21

Carbon credits are at market value of $17.20 per unit (8147 units = $140,129). The current price is $19.70 per unit ($160,495). Fonterra share value increased by $312,147 (11%). Market price of $6.06 at 30th June since increased to around $6.36 per share. (520,245 shares at $6.36 = $3,308,758 a 4.95% increase).

Liabilities:

2017 2016

Current Liabilities (Accounts payable) 326,536 102,872

Westpac Bank Mortgage 868,006 1,068,006

Fonterra Co-op loan 153,625

Unclaimed Dividends 154,439 154,837

TOTAL LIABILITIES $1,298,981 $1,479,340

The Westpac Bank fixed loan interest rates are between 3.90% and 4.10%. Bank Overdraft rate is 7.30% with a limit of $300,000.

Net Equity:

2017 2016

Total Assets 27,336,382 21,202,362

Total Liabilities 1,298,981 1,479,340

Net Equity $26,037,401 $19,725,022

Net Equity per share $18,598 $14,089

Page 22

Net Equity/Mortgage

02,000,0004,000,0006,000,0008,000,000

10,000,00012,000,00014,000,00016,000,00018,000,00020,000,00022,000,00024,000,00026,000,00028,000,00030,000,000

$

Net Equity 19,945,961 20,403,974 19,460,054 19,725,022 26,037,401

Stock and shares 5,415,778 4,727,869 3,926,641 4,133,126 4,420,904

Mortgage 1,848,043 1,118,006 1,068,006 1,068,006 818,006

2013 2014 2015 2016 2017

Since Balance date the mortgage has reduced by a further $150,000 to $668,006. Owners: The Trust comprises 1400 shares held by 1692 owners. We hold addresses for 587 owners (34.7%) and 428 of those have provided their bank accounts.

64%

9%

26%

With address/no

bank account

With address and

bank account

No details

Page 23

The distribution of owner’s ages where birthdates and addresses are held (excludes whanau trusts):

0

20

40

60

80

100

120

140

Number

Age group

Age distribution 5 28 51 112 125 88 20 2

<34 35-44 45-54 55-64 65-74 75-84 85-94 >95

Murray Patchell Secretary

Page 24

First Name Last Name Institution: Course

Indya Acraman Massey University Bachelor of Arts

Jamie Allan Auckland University of

Technology

Master of Analytics

Isreal Bennett University of Waikato Bachelor of Accounting

Thomas Bennett Wintec Hamilton Plumbing and Gas Fitting

Emily Bidois Toi Ohomai Institute of

Technology

Diploma in Business

Kuratea Broughton University of Auckland Bachelor of Science

Tyrone Dakin BCITO Certificate in Carpentry

Rhyane Te Rangi Fisher Marama Auckland University of

Technology

Bachelor of Health Science

Tanira Fisher Marama University of Auckland Bachelor of Commerce & Law

Aroha Gillibrand Waikato Institute of

Technology

Bachelor of Nursing

Lee Hingston Toi Ohomai Institute of

Technology

Diploma in Software Development

Sara Hona wintec Hairdressing Course

Chase Kennedy University of Waikato Bachelor of Sport & Leisure

Lani Kereopa Te Wananga O Raukawa Pouturarongo Whakaakoranga

Manurere Kiriona Devonshire Otago Polytechnic Bachelor of Nursing

Kiyana Mackie Bay of Plenty Polytechnic Certificate in Advanced Airline,Travel

Wharehuia Manley Te Wananga O Aotearoa Bachelor of Maori Art

Danielle Marks University of Waikato Bachelor of Law

Cori Marsters Te Wananga O Aotearoa Bachelor of Maori Art

Tomairangi McRae University of Waikato Bachelor of Management Studies

Stanley Herora Morehu Ames Training & Resource Centre Limited

Diploma in 3D Animation

Karen Neate Charles Sturt University Bachelor of Business

Leilani Ngawhika Te Wananga O Aotearoa Bachelor of Education

Eriora Park Te Wananga O Raukawa heke reo

Maranga Peita University of Waikato Bachelor in Maori & Pacific

Development

Joseph Polamalu Victoria University of

Wellington

Bachelor of Arts

Kayla Polamalu Victoria University of Wellington

Bachelor of Arts & Law

Cynthia Pryor Te Whare Wananga O

Awanuiarangi

Doctor of Philosophy

KOKAKO TRUST

2017 Education Grants

57 grants of $200 each were awarded to the following recipients to assist with tertiary education. 83

applications were submitted, with 26 of those being declined due to being incomplete, or the applicant was unable to confirm their whakapapa to a shareholder in the Trust.

Please ensure you provide all information requested when applying for a grant.

The online form for 2018 will be available from the end of January at www.rotorua.deloitte.co.nz (Grants & Scholarships). Applications will close on Monday 30th April 2018.

Page 25

First Name Last Name Institution: Course

Dexter Rapana University of Auckland Bachelor of Arts & Law

John Rapana University of Waikato Bachelor of Science

Little Mizz Maggie Maki

Rapana Excel Ministries Schl of Performing Arts

Certificate in Performing Arts

Rondell Reihana Te Wananga O Aotearoa Bachelor of Maori Art

Christian Rhind University of Melbourne PhD Economics

Maia Rohe Victoria University of

Wellington

Bachelor of Criminology &

Criminal Justice

Tonisha Rohe Auckland University of

Technology

Bachelor of Arts

Phillip Rolleston Ames Training & Resource Centre Limited

Television,Screen & Animation Courses

Ursulla Rongokea Bay of Plenty Polytechnic Certificate in Health Studies

Olena Smyth Toi Ohomai Institute of Technology

New Zealand Certificate in Study and Career Preparation (Level 4)

Nathan Stanley University of Otago Bachelor of Surveying

Anaru Tapsell Victoria University of

Wellington

Bachelor of Law

Ellen Tapsell Victoria University of

Wellington

Bachelor of Arts and Bachelor of

Commerce

Jack Te Pukeroa Tapsell University of Otago Bachelor of Medicine & Surgery

Maia Tapsell University of Otago Bachelor of Dental Surgery

Petera Tapsell University of Otago Bachelor of Surveying

James Tapsell Kururangi Massey University Master of Fine Arts

Kataraina Tims Te Wananga Takiura o Nga Kura Kaupapa Maori o

Aotearoa

Certificate in Maori Immersion

Julie Waaka University of Waikato Bachelor of Law

Te Awanui Waaka University of Otago Bachelor of Science

Jessemae Waititi Wilson Victoria University of

Wellington

Bachelor of Architecture

Kendra Walker Toi Ohomai Institute of Technology

Bachelor of Nursing

Jamie Waterreus Wharepapa University of Waikato Bachelor of Law

Jessica Whare Netcor Campus (NZ Education & Tourism)

Certificate in Mental Health Support Work

Shannel Whare Toi Ohomai Institute of Technology

Bachelor of Social Work

Jessie Wharekura Toi Ohomai Institute of Technology

Diploma in Business

Pani White University of Waikato Matauranga Maori

Matiu Hamuera Williams University of Waikato Post Grad Diploma in Education

Katie Anne Priscilla Paul NZ Institute of Professional Legal Studies

Professional Legal Studies Course [Practice Certificate]

Page 26

EDUCATION GRANTS POLICY 2017

1. Persons who qualify for an education grant: (a) Registered Owners or descendants of Registered Owners.

(b) Beneficiaries and descendants of beneficiaries in a Whanau Trust constituted in terms of Te Ture Whenua Maori Act 1993.

Applicants must supply a clear whakapapa to either (a) endorsed by a recognised Kokako Kaumatua or Kokako Trustee or (b) signed by a Trustee of the Whanau Trust.

2. Students must be currently attending a (NZQA or overseas equivalent) tertiary institution on a fulltime or part-time basis or an institution or training scheme approved by the Trustees.

3. All students who qualify for a grant will receive an amount approved by the Trustees which varies each year depending on total sum available divided by number of approved applicants.

4. Application must be submitted online and supporting papers lodged with the Secretary by the advertised closing date.

5. Applicants must provide a receipt for course fees paid. The Trustees may at their discretion accept a student loan draw down certificate or a letter of acceptance to enrolment at the education institution provided there is clear evidence of fees paid.

6. Students attending free courses or where fees are paid by a third party are not precluded from receiving a grant provided all other criteria are met.

7. Incomplete or late applications may be rejected.

Page 27

RE

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2014Education

2015Education

2016Education

2016Education

2013Owners

2014Owners

2015Owners

2016Owners

2017Owners

2013Kaumatua

2014Kaumatua

2015Kaumatua

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CO

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Page 28

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Page 29

2017 OWNERS GRANT POLICY An Owners grant in lieu of a dividend was approved at the AGM on 2 December 2017. This grant is

payable to the Owners registered at 2 December 2017 who have supplied their bank account

numbers and addresses. The grant is also available to Owners, subject to the terms of the grants

policy, up to the next AGM. The current policy in respect of the 2017 Owners Grant is as follows:-

1. For identification purposes the grant will be called the “2017 Owners Grant”.

2. The sum of $70,000 has been set aside for 2017 Owners Grants.

3. Payments to be made only to bank accounts and Owners addresses must be held.

4. Payments will be calculated according to shareholding bands as per the attached schedule

with a minimum payment of $75.

5. All Owners with addresses are to be advised of the Owners Grant and those who have not

provided bank accounts details will be asked to do so.

6. Sufficient funds will be retained to cover any Owners who are located after the payment

date.

7. The Trustees reserve the right to make only one payment to an Owner whose name may

appear more than once on the share register where it is evident that those multiple names

refer to one person.

8. Any Owners who are located after the payment date will be entitled to the payment they

would have received had their address and bank account details been known at the

distribution date.

9. Any owners who succeed to shares after the payment date will be entitled to payment of

the current Owner’s grant based on their shareholding where it has not been paid to the

deceased Owner.

10. Entitlement to the payment will expire on the date of the next AGM.

11. Payments to overseas Owners will be subject to deduction of bank charges.

12. The Trustees reserve the right to amend this policy or draft new policy to cover any

circumstance not covered or anticipated by this policy, in respect of payments to all

beneficiaries or to any one or more beneficiaries and the Trustees decision in these matters

will be final.

Owner Grant payments will be made from tax-free retained earnings that will be free of tax in the

hands of the Owners.

Approved…………………………..… Chairman……………………………..

DRAFT

Page 30

Kokako T

rust

2©

2017.

For

info

rmation,

conta

ct

Delo

itte

Touche

Tohm

ats

u L

imited.

Str

ate

gy

Sessio

ns

During t

he y

ear

Kokako h

ave b

een w

ork

ing o

n t

heir S

trate

gy a

nd S

tructu

re.

Fro

m t

he s

trate

gy s

essio

n

Kokako H

ave t

he b

elo

w V

ISIO

N

Man

a w

hen

ua,

man

a t

up

un

a,

wh

an

au

ora h

ei

wh

akatu

pu

ran

ga

If

we u

ph

old

th

e m

an

a o

f ou

r lan

d a

nd

ou

r a

ncesto

rs,

ou

r

fam

ily a

nd

fu

ture g

en

erati

on

s w

ill

be h

ealt

hy.

Page 31

Kokako T

rust

3©

2017.

For

info

rmation,

conta

ct

Delo

itte

Touche

Tohm

ats

u L

imited.

Ngā p

ou o

te w

hare

PO

UW

HA

T I

T M

EA

NS

TO

KO

KA

KO

TR

US

T

CO

MM

ERCIA

LCre

ate

a c

om

merc

ial re

turn

for

our

people

that

is

susta

inable

SO

CIA

LEnsuring w

e a

re c

onnecte

d a

nd s

upport

ive o

f th

e

develo

pm

ent

and w

ell b

ein

g o

f w

hanau

EN

VIR

ON

MEN

TAL/C

ULTU

RAL

Uphold

the m

ana o

f th

e e

nvironm

ent

and o

ur

Māorita

nga

in a

ll t

hat

we d

o

Page 32

Kokako T

rust

4©

2017.

For

info

rmation,

conta

ct

Delo

itte

Touche

Tohm

ats

u L

imited.

Where

could

we b

e in 2

5 y

ears

-

50

,00

0,0

00

10

0,0

00

,00

0

15

0,0

00

,00

0

20

0,0

00

,00

0

25

0,0

00

,00

0

30

0,0

00

,00

0

20

16

20

18

20

20

20

22

20

24

20

26

20

28

20

30

20

32

20

34

20

36

20

38

20

40

20

42

Lon

g T

erm

Ass

et

Gro

wth

(2

5 Y

ea

rs)

5%

An

nu

al

Gro

wth

8%

An

nu

al

Gro

wth

10

% A

nn

ua

l G

row

th

Page 33

Kokako T

rust

5©

2017.

For

info

rmation,

conta

ct

Delo

itte

Touche

Tohm

ats

u L

imited.

New

str

uctu

re t

o s

upport

our

str

ate

gy

Genera

l part

ner

Kokako T

rust

Land -

$12.1

m

Fore

str

y -

$0.6

5m

Kokako P

i Kare

rePPE -

$3.4

m

Investm

ents

$3.0

m

Work

ing C

apital -

$0.4

7m

Borr

ow

ings -

$800k

Kokako T

e

Manu T

aik

o

Kokako

Manaaki

Charita

ble

Tru

st

-$50k o

f charita

ble

dis

trib

utions

Lim

ited

Part

ner

100%

Kok

ako

Tru

st

(Mao

ri A

utho

rity)

Dai

ry u

nits

/ tr

adin

g ac

coun

ts

(with

in K

okak

o T

rust

)

Cu

rren

t K

oka

ko T

rust

S

tru

ctu

re

Page 34

Kokako T

rust

6©

2017.

For

info

rmation,

conta

ct

Delo

itte

Touche

Tohm

ats

u L

imited.

Kokako T

rust

Ultim

ate

Pare

nt

Gro

up a

dm

inis

trative f

unction

Kokako P

i Kare

reFarm

opera

tions. Rete

ntion /

re

investm

ent of

pro

fit

Kokako T

e M

anu T

aik

oKokako M

anaaki

Charita

ble

Tru

st

Pro

posed S

tructu

re

Opera

tional

Lease land a

t m

ark

et

rate

Gift

money t

o b

e

dis

burs

ed t

o

beneficia

ries

Beneficia

ries

Dis

trib

utions

Min

imum

$50k

Ris

k

Kokako P

i Kare

re w

ill be e

xpecte

d t

o m

eet

Kokako T

rust

adm

inis

trative r

equirem

ents

prior

to r

ete

ntion o

f any p

rofit.

Page 35

Kokako T

rust

7©

2017.

For

info

rmation,

conta

ct

Delo

itte

Touche

Tohm

ats

u L

imited.

Non f

inancia

l consid

era

tions

New

Str

uctu

re

En

tity

Co

nsid

erati

on

Poin

ts

Kokako T

rust

•W

illbe r

esponsib

le f

or

imple

menting t

he a

ppro

priate

expecta

tions a

nd v

alu

es into

th

e e

ntities c

reate

d

•W

ill lo

se s

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axable

Page 36

MAORI LAND COURT SUCCESSIONS

Q. How do I apply for succession?

A. You need to file an application for succession at the Maori Land

Court. You will need to provide the following:

Original death certificate or a certified copy

Original will (or grant of administration) if there is one Fully completed application papers

Application fee of $60.00

Details of the deceased's whanau, that is parents, brothers, sisters and

children.

When obtaining Court land records you must tell them if the deceased person

is in an Incorporation as the Court does not maintain registers for

Incorporations. They will then ask the Incorporation Secretary for details of

that shareholding.

Q. How much does it cost?

A. The application fee is $60.00. That is the only cost payable to the Maori

Land Court. You may incur other costs obtaining copies of death certificates and if you have to consult a lawyer. You should discuss this with Court staff.

Q. What happens when I lodge my application?

A. The application is searched by Maori Land Court staff to obtain full details of the deceased's land interests. You will receive a copy of that search and will

be advised by letter when you have to go to court. A court hearing will be arranged at the court venue closest to where the land is located or, if you

prefer, closest to where you live. When you arrive at court, you will firstly

speak to a Court officer who will confirm the details of your application. The

Judge of the Court will then re-confirm those details in court. Following the court sitting, you will receive a copy of the court minutes, which is a record of

the hearing. This is confirmation of what happened at the hearing.

Q. Do I have to get a lawyer?

A. In most cases, you can complete succession yourself. You should discuss

whether or not you need a lawyer with Court staff.

Q. What is probate?

A. When the High Court confirms the appointment of an executor to look after

the affairs of a deceased person, the court's authority for that person to act is given in a grant of probate.

If you would like assistance with this process you are welcome to contact Mrs Tai Taitoko in the Rotorua Deloitte office for guidance.

(07 343 1050)

Page 37

annual report - deloitte

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