G25 TOURISM NEW ZEALAND ANNUAL REPORT 2007–2008 ‘Youngest Country’ New Zealand is ‘The Youngest Country on Earth’, the last habitable land mass to be settled by human kind. This is the basis of Tourism New Zealand’s refreshed international marketing campaign which launched in August 2007. www.tourismnewzealand.com G25 CONTENTS 2007–2008 Chairman’s Report 02 Statement of Service Performance 12 Overview 12 Chief Executive’s Marketing of New Zealand as a Visitor Destination: 13 Report 04 Campaign 14 Channel 23 About Tourism Capability 26 New Zealand 07 Management Management Statements 28 at Tourism Financials 31 New Zealand 08 Statement of Responsibility 31 Statement of Financial Performance 32 Governance Statement of Financial Position 33 at Tourism Statement of Changes in Equity 33 New Zealand 09 Statement of Cash Flows 34 Board Members 11 Notes to the Financial Statements 35 Note 1 Statement of accounting policies 35 Note 2 Crown Revenue 38 Note 3 Other Revenue 38 Note 4 Foreign Exchange Gains 38 Note 5 Other Expenses 38 Note 6 Foreign exchange losses 40 Note 7 Total Expenditure of Parent 40 Note 8 Subsidiary Companies 40 Note 9 Associate Company 42 Note 10 Cash 42 Note 11 Receivables 43 Note 12 Derivative ﬁnancial instruments 44 Note 13 Property plant and equipment 44 Note 14 Accommodation bonds 46 Note 15 Creditors and other payables 46 Note 16 Employee entitlements 46 Note 17 Provisions 46 Note 18 Reconciliation of surplus (deﬁcit) to net cash from operating activities 47 Note 19 Contingent liabilities and contingent assets 47 Note 20 Income tax 48 Note 21 Management of risk 48 Note 22 Signiﬁcant accounting judgements, estimates and assumptions 48 Note 23 Capital management 48 Note 24 Categories of ﬁnancial assets and liabilities 49 Note 25 Capital commitments 49 Note 26 Operating commitments 49 Note 27 Related party transactions 50 Note 28 Financial instrument risks 52 Note 29 Remuneration of employees 52 Note 30 Remuneration of directors of parent 53 Note 31 Explanation of transition to NZ IFRS 54 Five-Year Financial Summary of Parent 57 Audit Report 58 Presented to the House of Representatives pursuant to Section 150 of the Crown of Entities Act 2004. CHAIRMAN’S REPORT GREG MUIR 2 TOURISM NEW ZEALAND ANNUAL REPORT 2007–2008 Japan. Better air links between Canada city billboards. This is alongside more and New Zealand helped promote traditional screens like cinema and growth in visitor numbers. television advertising. GREG MUIR CHAIRMAN TOURISM NEW ZEALAND New Zealand’s biggest market for arrivals, However, Tourism New Zealand’s work Australia, continued to grow and will be extends beyond its campaign work. There the backbone of the industry for the is a continued focus on taking consumer coming year. awareness of New Zealand as a holiday destination and turning that interest into India remains a relatively small market holidays booked, tickets bought and for New Zealand, providing only 23,328 activities and accommodation paid for. visitors in the year to June 2008. However, they are visitors who tend to visit during Overseas, that work starts when Tourism the quieter months of April, May and June, New Zealand works with key trade making them valuable to the tourism partners to develop and improve the industry here. holiday and travel itineraries on offer. By training product development managers Tourism New Zealand and front line staff, Tourism New Zealand This is my ﬁrst annual report since taking Tourism New Zealand’s response to these can inﬂuence those in the driving seat over as Chairman of Tourism New Zealand changing market dynamics has been to selling New Zealand offshore. and I am looking forward to playing a review spending in all its major markets part in the development of one of By working with subsidiary partners, and to refocus its efforts and budgets on New Zealand’s biggest industries. Qualmark and i-SITE New Zealand, those regions where it feels it is likely to Tourism New Zealand also strives to stimulate growth. The past year has provided another set improve the quality of visitors’ time here. of milestones for Tourism New Zealand. Despite more difﬁcult conditions, During the year, the number of Qualmark However, tough global economic New Zealand international visitor arrivals licence-holders increased to over 2,100. In conditions and factors like increased from our key markets increased slightly May, the Qualmark environmental competition from other destinations in the 2007/2008 ﬁnancial year and accreditation programme was launched to mean that Tourism New Zealand and overall visitor expenditure was up 4.7% the industry and media at the TRENZ the tourism industry were faced with compared to the previous year. conference in Rotorua. a far more challenging environment. Tourism New Zealand also continued Thank You Global Factors to innovate to ﬁnd new ways to boost visitor numbers. I would like to thank the Tourism Minister Since the last annual report the world’s Damien O’Connor, Tourism New Zealand’s economic situation has changed In August 2007, Tourism New Zealand Chief Executive George Hickton and the fundamentally, something which will unveiled a refreshed 100% Pure dedicated team at Tourism New Zealand undoubtedly affect the tourism industry. As New Zealand campaign to the for the work and energy they put into easy access to cheap credit is reduced and industry and to the public focusing promoting New Zealand. I would also like concern over ﬁnancial security increases, on New Zealand as the ‘Youngest to thank our partners in Government, at spending on discretionary activities, such Country on Earth’. both national and local levels, and as travel, will inevitably be impacted. The campaign was launched after a the tourism industry for the support they The recent economic upheaval came thorough review of the 100% Pure provide in ongoing funding, project on top of a year of fuel price rises, which New Zealand campaign. support, media hosting and with the many had forced up the cost of airline tickets other events that arise during the year. The decision was made that the 100% and added, or increased, surcharges on Pure New Zealand brand continued to I would particularly like to thank many ﬂights. prove its worth in international markets and outgoing director Kathy Guy and Chairman Airlines are also looking more closely at the remains a single, strong international brand Wally Stone and acknowledge their viability of routes, with a number of that positions New Zealand well overseas. contributions to the Tourism New Zealand longhaul airlines reducing their ﬂight However, behind the campaign a great deal board. Wally has been Chairman since schedules to New Zealand. more work was done to change the 1999 and his efforts mean I am inheriting Seat and route cut backs inevitably reduce strategic direction of how Tourism a vibrant, world-class tourism organisation. the options for potential visitors to get to New Zealand reaches potential visitors. On that note, I am pleased to be able to New Zealand and force airline ticket prices Tourism New Zealand has shifted its focus present Tourism New Zealand’s annual up; both factors make New Zealand a less report for 2007/08. to reaching people through the screens competitive destination in many markets. they use in everyday life. This means more While visitor numbers from the UK, USA, work developing Tourism New Zealand’s Japan and Korea had started to show the trade and consumer websites. impact of the above factors, others Campaign and promotion work takes in markets had been holding up well. the internet, blog sites, social networking During 2008, China became sites. Advertisements have shown on New Zealand’s fourth-largest market screens in tube stations, railway stations, Greg Muir for international visitors, overtaking ofﬁce entryways, shopping centres and Chairman, Tourism New Zealand TOURISM NEW ZEALAND ANNUAL REPORT 2007–2008 3 CHIEF EXECUTIVE’S REPORT GEORGE HICKTON New Zealand’s Giant Rugby Ball venue is officially opened in the heart of Paris. Highlights 2007/2008 This work is all underpinned by Tourism New Zealand’s strategy to ﬁnd more There is no doubt that last year was a channels and more ways to tell potential GEORGE HICKTON year of change, achievements and visitors about the experience they can CHIEF EXECUTIVE challenges for Tourism New Zealand. have when they get here. TOURISM NEW ZEALAND In one year, we launched the refreshed We continue to look for innovative ways global campaign, led a project to install a to promote our fantastic scenery and our giant inﬂatable rugby ball under the Eiffel people, but also to tell the stories that Tower in Paris, took a slice of link the two. New Zealand life to Japan and helped the As part of that strategy, Tourism world ﬁnd out more about our culture and New Zealand has moved to become country by hosting and promoting events a producer of content, rather than just in New Zealand like Matariki and World a buyer of advertising space. Environment Day. Being a producer allows us to tailor All that was aside from the work the content to the screens people are using organisation does every day promoting all the time to gather and share New Zealand as a holiday destination. information – whether it be the internet, That work resulted in hosting hundreds of television or cinema screens, electronic international media, thousands of training billboards, i-Pods, large outdoor screens or the inside of a giant rugby ball. sessions given to overseas travel sellers and product managers and millions of However, recent events have also served visits to our websites. as reminder that the New Zealand’s 4 TOURISM NEW ZEALAND ANNUAL REPORT 2007–2008 multi-billion dollar tourism industry The campaign captures the youth of the Throughout both of these major offshore cannot be taken for granted. country, the vibrancy of our people and events, Tourism New Zealand received allows us to promote New Zealand as a support and input from a number of Overall, tourist arrivals and spending place to experience life as it should be. Government agencies including the increased in the last ﬁnancial year, Department of Labour, Ministry for though deteriorating international After being unveiled to the industry and Culture and Heritage, Ministry for Foreign economic conditions in many of our media in New Zealand in August, the Affairs and Trade and New Zealand Trade source markets combined to hold growth Youngest Country campaign was rolled and Enterprise. at below Tourism New Zealand’s target out around the world, showing for the ﬁrst levels in some areas. time in the growing Chinese market, as Online well as in the UK, USA, Australia, Japan, As with all businesses experiencing Our online team had another busy Germany and Canada. change, Tourism New Zealand reviewed year keeping up with the demands of our major markets and budget as a result Alongside that, the successful ‘What’s On’ potential visitors seeking high-quality, of these global changes. campaign, which supports the 100% well-presented and easy-to-access Pure New Zealand campaign in Australia, information about New Zealand. Japan continues to be extremely completed its second year in the market. As a result of behind the scenes work, important to New Zealand, but further investment in campaign work was felt The campaign has been successful in the travel trade can now load travel deals unlikely to yield much improvement in improving seasonal performance out of and special offers directly to newzealand. arrival ﬁgures. Accordingly, our focus Australia in the traditionally slower holiday com. Tourism New Zealand also began there is now on working with the months of spring, winter and autumn. syndicating content to other sites, for Japanese travel trade on product example Tourism Auckland. development focusing on the quality of The campaign’s ﬂexibility was demonstrated in the fast turn-around of a The entry pages for the Chinese, Korean yield. Korea is in a similar position. one-off television advertisement that went and German sites were revamped and the The UK and USA markets remain very to air in Sydney during APEC. Australian page was constantly refreshed important for New Zealand. Because to reﬂect the ‘What’s On’ campaign as it of concerns about softening arrival Events rolled out in spring, autumn and winter. numbers, we felt it was timely to Tourism New Zealand has a long history On top of that, the team managed to conduct new research in those of using events as a platform to promote squeeze in the launch of the Front markets to better understand current New Zealand. Row Rugby Club, which aims to build consumer perceptions of New Zealand an online community in the run up to as a destination. Sometimes the events are onshore, like New Zealand hosting the Rugby World the Michael Hill New Zealand Golf Open, That work has resulted in a new Cup 2011, and to create a new ‘Great Matariki and the Montana World of campaign for the UK, which was Walks’ subsection in English, German WearableArt Awards. launched in September 2008. It is hoped and Korean, promoting the nine great that the campaign will slow what will Offshore events during the year included walks of New Zealand. inevitably be a declining market given the the installation of a giant inﬂatable rugby current conditions. Research was also ball under the Eiffel Tower in France International Media concluded and evaluated in the US. during the last stages of the Rugby World Programme Cup and the New Zealand Paradise The International Media programme China, Australia and Canada have shown continues to be a highly effective way of Week, which promoted New Zealand’s good capacity for growth and we believe using international media to reach visitors food and wine, music, fashion, culture this may continue given the right level of in our target markets. and the latest tourism activities to investment in campaign work. In the case Japanese visitors. During the year the team, together with of China, investment continues to improve the quality of holidays for The beneﬁt of using events with high local Regional Tourism Organisations Chinese group tour visitors. public and media awareness are clear and operators, hosted 524 media when you look at the results. from 15 countries. The resulting Overall, last year was one of the most media coverage reached almost a exciting years for Tourism New Zealand During the two weeks the Rugby Ball billion people in our target markets. and one of its busiest. Venue was in place in Paris, over 24,000 people queued to enter the ball and As well as traditional media visits, the Sadly, the economic turmoil overseas international media team has developed experience a stunning audio-visual will inevitably make the coming year a an opinion leaders’ programme. display. However, almost 138 million far more challenging one for Tourism people were exposed to the ball and In keeping with the organisation’s strategy New Zealand and the New Zealand New Zealand messages through media to use screens, the programme targets tourism industry. coverage online, in newspapers and on high-proﬁle, inﬂuential people who can Advertising television and radio. promote the New Zealand experience through a variety of media outlets, and One of the biggest events in Tourism In Japan, over 17,000 visitors attended can talk with our target audiences either New Zealand’s calendar for the year was The New Zealand Paradise Week and online or in person. the launch of a new global campaign with internet trafﬁc to Tourism New Zealand’s a focus on New Zealand as ‘The Youngest consumer website hit a record two-year The international media team hosted six Country on Earth’. high during the festival period. opinion leaders during the year from the TOURISM NEW ZEALAND ANNUAL REPORT 2007–2008 5 visitor satisfaction and the quality of visits to New Zealand. Tourism New Zealand New Zealand’s culture does that through our majority-owned and people draw visitors subsidiary Qualmark, which now boasts to our country over 2,000 registered operators. The scheme took a major step forward this year when the accreditation process expanded to cover environmental sustainability. Qualmark-accredited operators now have to reach minimum environmental standards as part of their Qualmark accreditation, but those with more developed environmental systems can aim for higher gold, silver and UK, USA, Japan, and China. Highlights out to around 1,500 people, and the from the programme include: bi-monthly Tourism News which reaches bronze rankings. 6,300 people. The system was introduced as a result British TV presenter and adventurer Ben Fogle, who visited in February of the industry’s commitment to Travel Trade sustainability through the New Zealand 2008, did a range of outdoor adventure Some of the most valuable work done to Tourism Strategy. and cultural experiences. The promote New Zealand is done when our video diaries of his trip were broadcast Tourism New Zealand continued to staff work directly with overseas travel on Tourism New Zealand’s channel on work with the i-SITE visitor network, companies developing and selling YouTube, as well as on newzealand.com holidays to New Zealand. which delivered information and advice and the Daily Telegraph website. to over 930,000 international visitors During the year, Tourism New Zealand ran Popular Japanese stage and screen during the year. an International Marketing Alliance (IMA) actress Beverley Maeda visited roadshow in the USA. The trip involved A nationwide booking system, introduced New Zealand to promote walking taking local representatives to meet key last year, has bedded down and is helping tours accompanied by a media contingent US travel sellers, airlines and advertising to improve the speed and quality of from a documentary crew, a magazine and public relations specialists to gain a information given by front-line i-SITE staff. and two websites. better understanding of the opportunities and challenges in that market. In November 2007, Tourism New Zealand In May, Chinese media mogul Wang took over the management of Zhongjun and leading actor Deng Product workshops focused on itinerary New Zealand’s Approved Destination Chau visited New Zealand to learn about development and new product Status (ADS) agreement with the Chinese New Zealand’s ﬁlm industry and luxury opportunities to help sell New Zealand. Government. experiences. A series of articles was These workshops were held in Singapore, posted on leading Chinese internet site Malaysia, Thailand, Taiwan, Hong Kong, Problems had been experienced with sina.com, which has 100 million users. Korea, mainland China and the UK. low-quality tours and, as China is now one One article alone about Mr Wang’s bungy Trade training continued with over of New Zealand’s fastest-growing markets, jump was viewed by 24 million unique 21,000 international travel sellers and we feel it is important to improve the users in the ﬁrst 12 hours. product planners trained throughout quality of ADS group tours. the year. Training took place via Finally, I would like to thank Tourism Corporate Communications seminars, conferences, roadshows and New Zealand’s staff and our trade Tourism New Zealand continues to invest familiarisation trips. Live online training partners, both here and abroad, for the heavily in talking to the tourism industry via the internet has also been trialled in effort they put in to promoting and other stakeholders; they are our Canada this year with great success. New Zealand as a visitor destination for partners in developing a world-class During the year a major review and the beneﬁt of all New Zealanders. tourism industry and improving visitor overhaul of Tourism New Zealand’s trade satisfaction. website was undertaken. The improved Tourism New Zealand’s staff regularly site will be easier to use, has improved functionality and provides more targeted present at conferences and seminars information for travel sellers. around the country providing an international perspective on the Delivering Quality tourism industry. Tourism New Zealand continues to be We also continued to produce a quarterly involved in efforts to monitor and improve George Hickton newsletter, Regional Rap, which is sent Chief Executive, Tourism New Zealand 6 TOURISM NEW ZEALAND ANNUAL REPORT 2007–2008 ABOUT TOURISM NEW ZEALAND Tourism New Zealand was created with The campaign area is probably the most that forms the basis of Tourism the role of marketing New Zealand as recognisable aspect of Tourism New New Zealand’s Capability work. a visitor destination overseas for the Zealand’s work because the results of To ﬁnd out what visitors think about their long-term beneﬁt of New Zealand. that work often carries the 100% Pure time here and their satisfaction levels, New Zealand brand through television It is an exciting and challenging job Tourism New Zealand has an ongoing commercials or other promotional in a fast-moving industry both in research programme. activities. Less obvious, but highly New Zealand and overseas. successful, is Tourism New Zealand’s The organisation also works with In 2007, 903 million tourists travelled International Media Programme, which subsidiary organisations Qualmark and worldwide and spent US$856 promotes New Zealand through hosting i-SITE New Zealand to ensure people are (NZ$1,309) billion. international media. getting good information and access to good quality accommodation, activities New Zealand sees just a tiny proportion The organisation’s Channel work is and transport. of that huge international tourism designed to convert a potential visitor’s market. In the year to June 2008, desire to travel to New Zealand into Tourism New Zealand also takes a almost 2.5 million international visitors actually making the trip. Much of this work leadership stance in areas like arrived in New Zealand and spent is done through Tourism New Zealand’s 11 environmental best practice. During the almost $6.2 billion dollars (excluding offshore ofﬁces, where staff work with the year, the organisation contributed to the airfare receipts). travel trade developing new ideas for development of the New Zealand Tourism itineraries, promote new products and Strategy to 2015 which cited To keep New Zealand in the spotlight train front-line sales staff so they know environmental enhancement and among potential visitors, and to send more about New Zealand and can sell it protection as a key goal for the Tourism those who come here home happy, more effectively. Industry. Tourism New Zealand works in three main areas – Campaign, Channel Ensuring visitors go home happy and tell Tourism New Zealand has also joined the and Capability. others to visit is one of the most important Govt3 programme to monitor and improve marketing tools New Zealand has and its own environmental performance. former all black tana umaga captains the front row rugby , club an online community of fans being welcomed to new zealand for the rugby world cup in oii. TOURISM NEW ZEALAND ANNUAL REPORT 2007–2008 7 MANAGEMENT AT TOURISM NEW ZEALAND Tourism New Zealand continually THE TOURISM NEW ZEALAND EXECUTIVE TEAM reviews the markets in which it operates and the extent to which it is involved in those markets. Keith Thomas, General Manager Corporate Services Tourism New Zealand currently Keith is responsible for information technology, ﬁnance and the human has 11 offshore ofﬁces. resources aspects of the organisation. Management of offshore activity is achieved through a regional Catherine Bates, General Manager Consumer Marketing structure whereby six regional Catherine is responsible for managing, leading and contributing to the managers report directly to the attainment of Tourism New Zealand’s marketing vision. She works with her General Manager Operations, Tim team to develop and implement integrated creative and marketing Hunter. Currently regional communications plans to deliver Tourism New Zealand’s marketing activities. managers are located in London, Los Angeles, Shanghai, Tokyo, Jane Dent, General Manager International Public Relations Jane’s role is to guide the organisation’s overall public relations efforts to Sydney and Mumbai. reﬂect the message of the global brand campaign. Tourism New Zealand Exposure to ﬂuctuations in foreign achieves PR in its key markets through events, both offshore and onshore, currency exchange rates on normal public relations activity and the International Media Programme (IMP). operating activities in these countries is achieved through the Cas Carter, General Manager Communications use of foreign exchange Cas is responsible for Tourism New Zealand’s internal and external instruments. Tourism New Zealand communication. Responsibilities include liaising with stakeholders such as does not use ﬁnancial instruments the tourism industry, government, media and other stakeholders on tourism for speculative purposes. industry activities and issues. The board is kept appraised of Tim Hunter, General Manager Operations offshore activity at each board Tim manages Tourism New Zealand’s international operations. This involves meeting through a report by the coordinating project planning for international markets, supporting General Manager Operations international trade development work, managing the overseas travel industry detailing activity by market. and online training programmes and coordinating trade networking events and consumer shows. David Wilks, General Manger Tourism Development David is responsible for supporting the promise of New Zealand as a high-quality destination. This is achieved through Tourism New Zealand’s subsidiary commitments, the i-SITE Visitor Information Network and Qualmark, and broader destination management initiatives. David is also executive manager of i-SITE New Zealand and chair of Qualmark. He is also responsible for ensuring that Tourism New Zealand naturally expresses the values of our unique cultural identity. Simon Douglas, Manager Corporate Strategy and Planning Simon is responsible for government liaison and the preparation of strategic documents, including Tourism New Zealand’s Statement of Intent and annual Output Agreement with the Minister of Tourism. He also manages Tourism New Zealand’s funding relationships with government. As a sponsor of the montana world of wearablearttm awards since ooi, Tourism New Zealand has helped build the profile of this premiere art event internationally 8 TOURISM NEW ZEALAND ANNUAL REPORT 2007–2008 GOVERNANCE AT TOURISM NEW ZEALAND The New Zealand Tourism Board (trading industry and the wider commercial goals are set and the formal business as Tourism New Zealand) was established environment. This provides for a planning process commenced. Additional on 1 November 1991, as a Crown Entity well-balanced board which enables it to board meetings are scheduled as required. under the provisions of the New Zealand deal with the issues arising from the role Under Section 92 of the Crown Entities Tourism Board Act 1991. As a Crown it plays in marketing New Zealand as a Act 2004, the board must ensure that Entity, Tourism New Zealand is expected visitor destination. the organisation acts in a manner to comply with the appropriate provisions Tourism New Zealand introduces each consistent with the Statement of Intent of the Crown Entities Act 2004. and Output Agreement it has negotiated new director to the organisation through The board of directors of Tourism an induction process involving time spent with the Crown. New Zealand, including the position of with each member of the Executive and Tourism New Zealand is required to Chairman, is appointed by the Minister of his or her respective team. Directors are report quarterly on its performance Tourism. A proﬁle of the current directors also encouraged, where appropriate, to against these documents. The reports of Tourism New Zealand is shown on attend tourism-related events such as form the basis of discussion and review page 11. All directors receive formal TRENZ, the annual Tourism Conference by the board at regular meetings timed letters of appointment from the Minister and the Inbound Tour Operators Council to coincide with the required reporting of Tourism setting out their duties, terms Conference. deadlines. and conditions of appointment and the The board has six scheduled meetings Unless speciﬁcally directed by the expectations of their role. a year including a two-day meeting in Minister of Tourism, the board is the By virtue of the appointments made by December to review the organisation’s overall and ﬁnal body responsible for the Minister of Tourism, the board has ongoing strategic direction. As a result of all decision-making within Tourism a wide range of skills in the tourism the strategic meeting, the organisation’s New Zealand. abc Outgoing Chairman Wally stone talking to delegates at the PATA ceo challenge on new zealand tourism initiatives on confronting climate change TOURISM NEW ZEALAND ANNUAL REPORT 2007–2008 9 There is a direct relationship between the performance and establish performance Tourism New Zealand conducts its own Minister of Tourism and the Chairman of the targets for the following year. internal audits, often with the involvement board. The Chairman has regular meetings of its external auditors. Sites to be audited Tourism New Zealand has an audit with the Minister to discuss progress and are agreed by the audit committee and committee comprised of four board issues facing the tourism industry. programmes of work are developed with members which is appointed by the As well as this regular communication input by the external auditors. The results board. The Committee is currently and engagement with its shareholding chaired by Susie Johnstone, a chartered are reported back to the audit committee. Minister, Tourism New Zealand is aware accountant; other members being Tourism New Zealand has a controlling of the need to engage with the wider Malcolm Johns and Sean Murray. interest in two subsidiary companies; community to promote an understanding Outgoing director Kathy Guy and a 60 percent shareholding in Qualmark of tourism development and associated Chairman Wally Stone also served as New Zealand Limited; and (through the issues. Tourism New Zealand achieves this members for the ﬁnancial year under terms and conditions of a relationship through regular meetings with various review. In addition, the board has agreement that meets the criteria industry groups, regional seminars run appointed an external member, Gill Cox, a determined in FRS-37 for consolidating throughout the year as well as number chartered accountant and past president investments in subsidiaries) the Visitor of external publications, such as of the New Zealand Institute of Chartered Information Network Incorporated (VIN Tourism News. Accountants. Inc), trading as i-SITE New Zealand. The board is conscious of its obligations The audit committee meets at least to ensure that directors avoid any conﬂicts Three of Tourism New Zealand’s three times a year. It reviews Tourism of interest in their decision-making Executive, including the chief executive, New Zealand’s internal control framework, process. The board ensures that proper are directors of Qualmark and one external audit relationships and process is followed and that directors’ executive member represents Tourism engagements, risk management and interests are formally recorded, with any New Zealand on the i-SITE New Zealand ﬁnancial reporting, including adoption of changes or additions being disclosed board. The board is provided with IFRS reporting standards. Following each at the start of each meeting. Directors ﬁnancial information from each meeting the chair of the audit committee excuse themselves from any discussions in organisation at each board meeting, reports back, either verbally or through which their duty as a director could as well as commentary on performance written papers, to the board together be compromised. and signiﬁcant issues. with appropriate recommendations. Day-to-day management of the Tourism New Zealand expects all its Tourism New Zealand manages its risks organisation has been delegated to employees and directors to maintain through a risk management framework; the chief executive who is directly the highest ethical standards. Tourism a process that requires it to identify accountable to the board through the New Zealand has in place an employee legislative and business risks arising from Chairman. Tourism New Zealand’s code of conduct, which is signed by its strategic direction and operating Delegated Authorities Policy is set all staff when they join the organisation. environment. Risks identiﬁed are reviewed by the board and reviewed annually. annually by the audit committee. The Tourism New Zealand has developed Appropriate formal processes are in chief executive regularly reports formally a formal code of conduct for its board place for reporting back to the Board. to the board on the matter of new or members, which is consistent with The Chairman and deputy chair meet escalated risks and the processes in the code released by the State annually with the chief executive to review place to manage these appropriately. Services Commission. The qualmark green initiative was launched by tourism 10 TOURISM NEW ZEALAND ANNUAL REPORT 2007–2008 minister Damien O’Conner in may BOARD MEMBERS Greg Muir Sean Murray Malcolm Johns Chairman Director Director Greg was appointed Chairman of the Sean has been a director on the board Malcolm is chief executive of Intercity New Zealand Tourism Board in July of Tourism New Zealand since 2003 Holdings Limited, parent company of 2008. He is currently executive and before that had been the Chairman Intercity Coachlines, Newmans Coach Chairman of Pumpkin Patch. of the Tourism Research Council. Lines, Great Sights New Zealand, Fullers Bay of Islands, Kings Dolphin Cruises and Before that, Greg was chief executive Currently an independent consultant, Eco Tours. Malcolm has extensive ofﬁcer of The Warehouse Group Ltd he was previously Group General commercial experience in international and has held senior management roles Manager Commercial with Tourism tourism and transport businesses having with TNT Australia Pty Ltd, Enerco Holdings Ltd. His principal background held senior management and governance New Zealand Ltd and Lion Nathan Ltd. is in strategic planning, change roles at Discover Canada Holidays, Greg is also currently Chairman of management (including acquisition and Jasons Travel Media, Tourism Holdings, Hanover Group Limited, Pioneer Capital divestment), ﬁnancial and operational Mount Cook Group and Hyatt Management Ltd, the Blues S14 performance, relationship management International Hotels and Resorts. Franchise and a director of the and brand marketing. Auckland Rugby Union. John Barrett Glenys Coughlan Susie Johnstone Director Director Glenys, MA and MBA, is chief executive Deputy Chair John is managing director of Kapiti of NBPR (public relations) and Dazzle Susie is a director of the chartered Island Alive & Kapiti Nature Lodge, Events – both part of the Acumen accountancy ﬁrm Shand Thomson. She a family eco-tourism operation based Group in which she is a co-owner is currently the deputy chair of Otago on Kapiti Island. and director. District Health Board and the Southland John is also currently Chairman of both District Health Board, a board member Glenys has over 20 years experience in the New Zealand Tourism Council of the New Zealand Blood Service and the tourism industry including four and the Wellington Regional a member of the Otago Polytechnic years as chief executive of the Tourism Tourism organisation, Te Ara a Maui. Council. She has also held governance Industry Association and eight years in He also sits on the Board of Aviation roles on the boards of Telford Rural senior management with Air Tourism & Travel Training Organisation Polytechnic, the New Zealand Hockey New Zealand. She is a longstanding (ATTTO) and a number of non-tourism Federation and the Institute of director of Te Papa, chair of Positively related organisations. Chartered Accountants. Wellington Tourism, a director of the Wellington Regional Economic Paul Bingham Kay Mckelvie Development Agency and a trustee of Director Director the PATA New Zealand Trust. Kay has been chair of Waitemata Paul is managing director of Black District Health Board since 2001 and Henry van Asch Cat Group. He is also Chairman of is also chair of Quotable Value and the Christchurch and Canterbury Tourism, Director State Housing Appeal Authority and a a past member of the Tourism Henry joined the board of Tourism director of the Crown Health Financing Research Council New Zealand and New Zealand in September 2008. Agency. She is a qualiﬁed lawyer with the Banks Peninsula Tourism and A co-founder of AJ Hackett Bungy, a Masters in Business Administration Economic Development Board. Paul Henry has been a director of Bungy from Auckland University. has recently been appointed to the New Zealand Ltd since 1997. Henry board of Air New Zealand. He has oversees ownership and operation of previously held positions with Tourism the Bungy New Zealand Group (which Holdings Ltd and Air New Zealand. includes AJ Hackett Bungy and Auckland Bungy & Bridge Climb) along with his latest ventures the High Plains Wine Co and The Winehouse & Kitchen Restaurant. Note: Chairman Wally Stone retired from the board on 30 June 2008 Director Kathy Guy resigned from the board on 14 August 2008 TOURISM NEW ZEALAND ANNUAL REPORT 2007–2008 11 STATEMENT OF SERVICE PERFORMANCE Overview This report covers The New Zealand Tourism Board’s Tourism New Zealand’s Output Agreement for 2007/08, (trading as Tourism New Zealand) service performance agreed with the Minister of Tourism, contains more for the year ending 30 June 2008 against the objectives detailed performance measures. set out in the 2007/08 Statement of Intent. This Statement of Service Performance includes reporting Tourism New Zealand’s resource allocation against priorities in the Statement of Intent (SOI) and decisions were based on the extent to which against the additional performance measures contained in each proposed activity would contribute towards the Output Agreement. its objectives and the delivery of outputs contained in the 2007/08 Statement of Intent. 12 TOURISM NEW ZEALAND ANNUAL REPORT 2007–2008 In 2007/08, Tourism New Zealand’s activities were funded through two Output Classes within Vote Tourism: Marketing of New Zealand as a Visitor Destination ACTUAL S TAT EMEN T OF IN T EN T ACTUAL 2007/ 08 2007/ 08 2006/07 $000 $000 $0001 VOTE TOURISM – MARKETING OF NEW ZEALAND AS A VISITOR DESTINATION Crown Revenue2 $74,850 $74,601 $73,987 3 Other Revenue $13,524 $3,067 $7,719 Total Revenue $88,374 $77,668 $81,706 Total Expenses 4 $84,331 $77,514 $86,325 Marketing services involve promoting New Zealand in international markets as a visitor destination. This includes consumer advertising, promotion through media and events, training for international travel sellers and communication strategies. These activities are supported by product marketing, market research, tourism development and stakeholder communications and are developed in consultation and partnership with the tourism industry. The three major outputs in this Output Class reﬂect the three key components of Tourism New Zealand’s overarching strategy and include: Output One: Campaign Activities within this output are focused on raising awareness of New Zealand as a travel destination, and intent and preference to travel here through the 100% Pure New Zealand global marketing campaign. Output Two: Channel Activities within this output are directed towards converting traveller interest in ‘Destination New Zealand’ into growth in actual travel and activity. This output also covers Tourism New Zealand’s management of the Approved Destination Scheme with the aim of improving the quality of tourism out of the China market. Output Three: Capability Activities within this output focus on assisting the development of the tourism sector to deliver quality visitor experiences and using market research to measure visitor satisfaction and monitor consumer trends, the results of which are used to inform strategy. Implementation of the Tourism Strategy ACTUAL S TAT EMEN T OF IN T EN T ACTUAL 2007/ 08 2007/ 08 2006/07 $000 $000 $000 VOTE TOURISM – IMPLEMENTATION OF THE TOURISM STRATEGY Crown Revenue $220 $220 $259 Total Expenses $220 $220 $194 This Output Class includes various initiatives developed by the Minister of Tourism to implement the New Zealand Tourism Strategy. In 2007/08, Tourism New Zealand was allocated funding from within this appropriation to implement a Qualmark New Zealand environmental accreditation scheme for tourism operators which Tourism New Zealand incorporated into its Capability output activities. The increase in Crown revenue over budget is due to an additional $0.22 million (GST exclusive) allocated to Tourism New Zealand from Vote Environment departmental appropriations for Business Partnerships for Sustainability to assist in the implementation of the Qualmark environmental criteria. 1 Actuals for 2006/07 have been restated to take account of the requirements of NZ IFRS1 “First – time adoption of New Zealand Equivalents to International Financial Reporting Standards”. 2 Crown revenue for the year includes $3 million + GST for strategic tourism marketing of New Zealand in China, and a one-off government grant of $2.6 million + GST for the costs of the New Zealand Rugby Clubrooms at the Rugby World Cup 2007. 3 Other revenue includes grants of $1.3 million from the Cultural Diplomacy International Programme administered by the Ministry of Culture and Heritage to organise the pro- gramme of cultural activities at the rugby ball promotion at the Rugby World Cup 2007 and to manage and organise New Zealand Paradise Week, Tokyo, Japan, 2007. Foreign exchange gains under IFRS reporting, bank interest and partner revenue account for the balance of other revenue. 4 Total expenditure reﬂects the increase in partner income received and foreign exchange gains made during the year which was primarily directed to campaign activity. TOURISM NEW ZEALAND ANNUAL REPORT 2007–2008 13 MARKETING OF NEW ZEALAND AS A VISITOR DESTINATION: The Tourism New Zealand global marketing campaign, 100% Pure New Zealand, seeks to establish New Zealand as a ‘top of mind’ destination for travellers seeking authentic experiences that connect directly with our land and its people. The campaign promotes the core essence of the New Zealand experience, showing visitors how they can interact with our culture and natural environment. The campaign is targeted at potential travellers whose expectations match what New Zealand has to offer. These people travel regularly, participate in a wide range of tourism experiences, actively participate in a natural environment, are environmentally and culturally aware, seek authentic and new experiences and want to share them with others. Tourism New Zealand refers to these visitors as the ‘Interactive Traveller ®’. Prompted Awareness of New Zealand as a Travel Destination Measure Maintain prompted awareness levels for New Zealand as a travel destination expressed in percentage terms in the following markets: Australia, the UK, USA, Japan, China, South Korea and Germany. Trend data will be provided quarterly. Q15 Q26 Q37 Q48 S TAT U S Interactive Travellers (ITs) Achieved Australia9 54% 55% 53% 55% UK 29% 26% 30% 30% USA 16% 17% 21% 17% Japan 13% 14% 28% 22% China 30% 30% 40% 45% South Korea 16% 19% 33% 24% Germany 13% 16% 25% 23% Non-Interactive Travellers (Non-ITs) Australia 48% 50% 54% 52% Long Haul Travel Intenders (LHTIs) UK 28% 23% 27% 27% USA 16% 13% 18% 15% Japan 12% 13% 25% 20% China 26% 30% 36% 39% South Korea 14% 15% 28% 22% Germany 12% 13% 23% 20% 5 Time series for this data is April-June 2007. 6 Time series for this data is October-December 2007. 7 Time series for this data is January-March 2008. 8 Time series for this data is April-June 2008. 9 Data for Australia will compare all holiday travellers and Interactive Travellers. Data for remaining markets compare Long Haul Travel Intenders (LHTIs) and Interactive Travellers. 14 TOURISM NEW ZEALAND ANNUAL REPORT 2007–2008 Prompted Awareness Levels of the 100% Pure New Zealand Campaign Measure Report on prompted awareness levels for the 100% Pure Campaign in percentage terms in the following markets: Australia, the UK, USA, Japan, China, South Korea and Germany. Trend data will be reported quarterly. Q15 Q26 Q37 Q48 S TAT U S Interactive Travellers (ITs) Achieved Australia9 52% 47% 55% 54% UK 24% 26% 31% 30% USA 21% 21% 11% 13% Japan 13% 15% 11% 13% China 28% 22% 28% 41% South Korea 20% 19% 16% 16% Germany 35% 43% 22% 18% Non-Interactive Travellers (Non-ITs) Australia 39% 40% 52% 36% Long Haul Travel Intenders (LHTIs) UK 25% 23% 27% 28% USA 17% 18% 8% 10% Japan 11% 14% 8% 10% China 21% 23% 25% 30% South Korea 22% 19% 12% 12% Germany 32% 34% 18% 20% New Zealand’s Ranking as a Preferred Holiday Destination Measure New Zealand remains in the top ﬁve preferred holiday destinations with Interactive Travellers in Australia and the UK. Trend data will be provided quarterly. Q15 Q26 Q37 Q48 S TAT U S % Ranking % Ranking % Ranking % Ranking Australia 29 1st 27 2nd 27 2nd 29 1st Achieved UK 21 3rd 17 6th = with 20 6th 21 5th Achieved Canada Comment At YE June 2008, New Zealand remains in the top ﬁve preferred holiday destinations with Interactive Travellers from Australia and the UK. AWARENESS CAMPAIGN In Australia the what’s on campaign adds another level to the ioo% pure new zealand message TOURISM NEW ZEALAND ANNUAL REPORT 2007–2008 15 Measure Improve New Zealand’s ranking as a preferred holiday destination with Interactive Travellers in speciﬁed destinations – USA, Japan, China, South Korea and Germany. Trend data will be reported quarterly. Q15 Q26 Q37 Q48 S TAT U S % Ranking % Ranking % Ranking % Ranking 11th = with 10th = with 12th = with Not USA 12 11 Brazil, Greece 18 6th 11 Japan Germany Achieved and Egypt 4th = with 5th = with Japan 18 7th 23 17 6th 21 Achieved Canada Canada 7th = with 6th = with Not China 19 5th 20 23 6th 24 Hong Kong France Achieved 4th = with South 7th = with 10th = with 16 13 23 USA and 24 5th Achieved Korea England Bali Switzerland 3rd = with 11th = with Australia, Partially Germany 21 3rd 22 3rd 14 18 Canada Greece and Achieved Spain Intention to Travel to New Zealand Measure Report on intention to travel to New Zealand expressed in percentage terms for the following markets – Australia, UK, USA, Japan, China, South Korea and Germany. Trend data will be provided quarterly. Q15 Q26 Q37 Q48 S TAT U S Interactive Travellers (ITs) Achieved 9 Australia 7% 11% 7% 8% UK 4% 3% 7% 5% USA 3% 2% 5% 2% Japan 5% 7% 4% 7% China 8% 8% 9% 8% South Korea 2% 3% 9% 7% Germany 3% 5% 4% 6% Non-Interactive Travellers (Non-ITs) Australia 7% 9% 10% 7% Long-Haul Travel Intenders (LHTIs) UK 3% 2% 6% 5% USA 2% 2% 4% 2% Japan 4% 5% 5% 6% China 7% 7% 5% 7% South Korea 3% 4% 9% 7% Germany 4% 4% 3% 5% Comment Interactive Traveller intention to travel to New Zealand remained slightly higher or stable across most markets when compared to Non- Interactive Travellers (Australia) and Long Haul Travel Intenders (other markets). 9 Data for Australia will compare all holiday travellers and Interactive Travellers. Data for remaining markets compare Long Haul Travel Intenders (LHTIs) and Interactive Travellers. 16 TOURISM NEW ZEALAND ANNUAL REPORT 2007–2008 Conversion Ratio Measure Improve the conversion ratio between awareness, preference and intention – and actual holiday arrivals for speciﬁed markets (Australia, the UK and USA), to be reported annually. Result S TAT U S Australia Partially Conversion Ratio: 34% of this group (Interactive Travellers that were aware of New Zealand Achieved advertising) also had a preference to visit New Zealand (compared to 37% in 2006/07). Conversion ratio: 31% of this group (Interactive Travellers who had a preference to travel to New Zealand) also intended to visit (compared to 29% in 2006/07). change from YE 2007. UK Not Conversion Ratio: 27% of this group (Interactive Travellers that were aware of New Zealand Achieved advertising) also had a preference to visit New Zealand (compared to 38% in 2006/07). Conversion ratio: 25% of this group (Interactive Travellers who had a preference to travel to New Zealand) also intended to visit (compared to 33% in 2006/07). change from YE 2007. USA Partially Conversion Ratio: 32% of this group (Interactive Travellers that were aware of Achieved New Zealand advertising) also had a preference to visit New Zealand (compared to 31% in 2006/07). Conversion ratio: 23% of this group (Interactive Travellers who had a preference to travel to New Zealand) also intended to visit (compared to 30% in 2006/07). change from YE 2007. Holiday Arrivals from Main Markets Measure Provide quarterly trend data for holiday arrivals from main markets including Australia, the UK, USA, Japan, Korea, China and Germany. Result YE JUNE 2007 YE JUNE 2008 % CHANGE S TAT US TOTAL HOLIDAY ARRIVALS 1,213,288 1,209,241 -0.3% Achieved Australia 357,673 382,880 7.0% UK 154,520 146,737 -5.0% Germany 41,380 41,721 0.8% USA 134,736 132,972 -1.3% Canada 26,844 30,455 13.5% Japan 99,375 88,714 -10.7% Korea 78,092 58,835 -24.7% China 68,262 79,184 16.0% Comment For YE June 2008, total holiday arrivals were down by 0.3% compared with the YE June 2007. Trend data was provided quarterly. TOURISM NEW ZEALAND ANNUAL REPORT 2007–2008 17 Campaign Reach and Impact Measure Report bi-annually on the reach, frequency and impressions achieved through brand advertising in Australia, the USA, the UK and Japan. COUNTRY MEDIA POTENTIAL J U LY - D E C 2 0 0 7 A C T U A L JAN-JUNE 2008 ACTUAL AUDIENCE Japan Reach Freq. Impressions Reach Freq. Impressions % % Newspaper 6,515,350 30.50% 1.6 N/A10 N/A and Free paper Web Banner 117,420,316 125,897,587 Web Microsite 184,209 N/A (pageview) COUNTRY MEDIA POTENTIAL J U LY - D E C 2 0 0 7 A C T U A L JAN-JUNE 2008 ACTUAL AUDIENCE USA11 Reach Freq. Impressions Reach Freq. Impressions % % Local TV 6,116,300 22% 1.4 1,976,000 47.3% 2.2 6,361,000 (Los Angeles) Local TV (San 2,669,200 20% 1.2 649,000 47.2% 2.1 2,642,000 Francisco) Local TV 1,058,200 N/A N/A N/A 47.3% 2.1 1,069,000 (San Diego) Online* 35,974,000 31% 1.4 65,570,660 54.6% 2.1 196,100,972 128,902 231,189 Search N/A 5% N/A N/A N/A clicks clicks Cinema N/A N/A N/A N/A N/A N/A 3,912,611 DID YOU KNOW? Tourism New ZealanD's consumer websitE, www.newzealand.coM , receives in the region of oo, ooo visits a month 10 N/A = No Activity 11 USA Local TV Target Audience: Adults 25-49 (Nielsen/Scarborough/IMS). Online Audience: Adults 25-49 w/ $75K+ (2008 comScore Networks, Inc. (Time Period: Winter/Spring of 2008)) *Does not include – Admob, Dedicated Media. 18 TOURISM NEW ZEALAND ANNUAL REPORT 2007–2008 COUNTRY MEDIA POTENTIAL J U LY - D E C 2 0 0 7 A C T U A L AUDIENCE Australia12 Reach % Freq. Impressions Total Television Sydney 306,000 87.1% 10.4 N/A Melbourne 254,000 85.7% 8.08 N/A Brisbane 131,000 94.6% 9.83 N/A What’s On TNZ Only Sydney 306,000 81% 3.41 N/A Melbourne 254,000 77% 4.31 N/A Brisbane 131,000 74% 2.96 N/A 100% Pure NZ TNZ Brand Sydney 306,000 50.53% 3.11 N/A Melbourne 254,000 53.44% 3.11 N/A Brisbane 131,000 44.64% 2.46 N/A APEC Sale Only Sydney 306,000 34% 1+ N/A Auckland Only Sydney 306,000 54% 1+ N/A Brisbane 131,000 44% 2+ N/A Christchurch Sydney 306,000 32.91% 2+ N/A Melbourne 254,000 51.87% 2+ N/A Brisbane 131,000 43.57% 2+ N/A Wellington Sydney 306,000 37.01% 2+ N/A Brisbane 131,000 43.29% 2+ N/A Pay Television National 666,375 68% 3+ N/A Cinema 670,732 – Box National Ofﬁce for Period 21% 1+ N/A Online N/A 27% 4.35 17,300,000 12 Australia TV Target Audience: AB25-54 (Sydney, Melbourne, Brisbane). Pay TV audience: Total AB. Source: MindShare Sydney. TOURISM NEW ZEALAND ANNUAL REPORT 2007–2008 19 COUNTRY MEDIA POTENTIAL JAN-JUNE 2008 ACTUAL AUDIENCE Australia12 Reach % Freq. Projections (000s) / Impressions Total Television Sydney 612,000 91.6% 9.88 6,427 Melbourne 448,000 90.49% 8.87 3,473 Brisbane 258,000 95.83% 9.51 2,353 What’s On TNZ Only Sydney 612,000 91.6% 9.88 6,427 Melbourne 448,000 90.49% 8.87 3,473 Brisbane 258,000 95.83% 9.51 2,353 100% Pure NZ TNZ Brand Sydney N/A N/A N/A N/A Melbourne N/A N/A N/A N/A Brisbane N/A N/A N/A N/A Christchurch Sydney 602,000 55% 2.29 762 Melbourne 473,000 67% 2.67 795 Brisbane 300,000 62% 2.69 430 Christchurch Pay Television 236,000 8.25% 1+ N/A Wellington Sydney 607,000 55% 2.04 680 Melbourne 440,000 51.53% 2.15 505 Brisbane N/A N/A N/A N/A Wellington Pay Television 124,000 5.09% 1+ N/A Pay Television National 408,000 13.07% 1+ N/A Cinema 450,000 – Box National Ofﬁce for Period 9.4% 1+ N/A 24.5 million Online N/A 49% 4.63 impressions DID YOU KNOW? australia is new zealand 's biggest market for international visitors with almost one million arrivals every year 20 TOURISM NEW ZEALAND ANNUAL REPORT 2007–2008 COUNTRY MEDIA POTENTIAL J U LY - D E C 2 0 0 7 A C T U A L JAN-JUNE 2008 ACTUAL AUDIENCE Reach Freq. Impressions Reach Freq. Impressions % % UK TV 23,700,000 38% 2.3 21,112,000 42.3% 2.7 24,089,000 Cinema 23,700,000 5.8% 1.6 2,507,934 N/A N/A N/A OOH DEPS N/A N/A N/A N/A N/A N/A 2,150,232 OOH N/A N/A N/A N/A 10% 3.5 N/A Transvision OOH N/A N/A N/A N/A N/A N/A 441,666 Sidetrack Online N/A N/A N/A N/A N/A 2.81 1,670,739 Ben Fogle Online Brand N/A N/A N/A N/A N/A 2.57 9,625,872 Phase 2 Online N/A N/A N/A N/A N/A 4.08 8,280,265 Rambling Online Brand N/A N/A N/A 34,513,121 N/A N/A N/A Phase 1 Online N/A N/A N/A N/A N/A 2.59 4,232,854 Partners Public Relations and International Media Programme Measure Report quarterly on the size of circulation/audience reached through articles and items broadcast by media representatives hosted by Tourism New Zealand13. Result S TAT U S A total circulation/audience of 998,481,269 was reached during the year (comprising a print circulation of Achieved 103,245,326; broadcast audience of 686,637,606; and online audience of 208,598,337). Measure Report quarterly on the number of international media visits hosted in New Zealand and highlights. Result S TAT U S A total of 524 media were hosted during 2007/08. Achieved Share of Voice Measure Report in Q3 on Tourism New Zealand’s share of voice in the four key markets of Australia, UK, USA and Japan, expressed as a trend since 2003. Result S TAT U S A report on Tourism New Zealand’s share of voice in the four key markets of Australia, UK, USA and Japan was Achieved provided in Quarter Three. Tourism New Zealand’s share of voice 2007 (based on Competitive Ranking Charts 2007 by MindShare) were: Australia 12% UK 3% USA 0.5% Japan 4% 13 TNZ has limited and in most cases no control over when articles or items are published or broadcast by those international media hosted. TNZ will report on the audience or circulation for those items that have been published or broadcast during each quarter. TOURISM NEW ZEALAND ANNUAL REPORT 2007–2008 21 New Zealand’s Share of Voice in Key Markets (2003-2007) 16.00% 14.00% AUSTRALIA 12.00% 10.00% JAPAN 8.00% UK 6.00% 4.00% 2.00% USA 0.00% 2002/2003 2003/2004 2004/2005 2006 2007 Events Measure Events used to leverage off the global brand campaign. Result S TAT U S Tourism New Zealand supported eight events during the year. Achieved Events supported through Tourism New Zealand only: Montana World of WearableArt Awards – Wellington, New Zealand Giant Rugby Ball, Rugby World Cup – Paris, France New Zealand Paradise Week – Roppongi Hills, Tokyo, Japan World Environment Day – Wellington, New Zealand Matariki – Wellington, Northland, New Zealand. Events supported through New Zealand Major Events Funds where Tourism New Zealand was the lead agency: Michael Hill New Zealand Golf Open – Queenstown, New Zealand New Zealand Air Games – Central Otago/Wanaka, New Zealand American Express Queenstown Winter Festival. A full evaluation report was provided on two major events: New Zealand Paradise Week 2007 and Rugby World Cup 2007 – the New Zealand Rugby Clubrooms. Market Evaluation Measure Complete, in partnership with the Ministry, the ﬁrst of the scheduled evaluations, as per agreed evaluation plan (30 June 2008). For 2007/2008, an Australian market evaluation will be completed by Tourism New Zealand in partnership with the Ministry (with the methodology and process to be agreed between TNZ and the Ministry) and the results reported to the Minister of Tourism by 30 June 2008. This evaluation will include an assessment of the effectiveness of TNZ’s objectives for this market. Result S TAT U S During the year, Tourism New Zealand provided the Ministry with data to complete the ﬁrst of the scheduled Deferred market evaluations. The report back to the Minister has been deferred to later in the 2008 calendar year with agreement from the Ministry. The total cost of delivering outputs under the Campaign category is $48,228 million. 14 Data for 2002/03-2004/05 sourced from Mitchell Media; data for 2006-2007 based on Competitive Ranking Charts provided by MindShare. 22 TOURISM NEW ZEALAND ANNUAL REPORT 2007–2008 MARKETING OF NEW ZEALAND AS A VISITOR DESTINATION: The channel component of Tourism New Zealand’s strategy is directed towards converting intention to travel to New Zealand into actual arrivals – using both internet technology and the travel distribution system to assist in the conversion process. Tourism New Zealand’s consumer and trade marketing activities also provide a local presence in key overseas markets that reinforce the messages in the 100% Pure New Zealand campaign. These activities are complemented by online marketing – using Tourism New Zealand’s consumer website, www.newzealand.com, as a tool for providing information about New Zealand and systems to facilitate planning and reservations for travel to our country. Proportion of Interactive Travellers amongst Holiday Arrivals Measure Increase the proportion of Interactive Holiday Travellers® amongst all holiday arrivals from 61% to 65% by 30 June 2008. The latest available Interactive Traveller percentages (year to date) will be reported quarterly in the form of a trend chart. Result S TAT U S In YE June 2008, 62.8% of all holiday arrivals were Interactive Travellers. Trend charts were provided in Not Achieved quarterly reports during the year where new International Visitor Survey (IVS) data was available. Holiday Arrivals Measure Increase holiday arrivals from the 2006/07 target of 1,209,300 to 1,278,500 by 30 June 2008. Result S TAT U S There were 1,209,241 holiday arrivals in YE Jun 2008. Not Achieved Visitor Expenditure Measure Total visitor expenditure exceeds visitor growth by 2.5% (as measured by the International Visitor Survey). Provide quarterly update. Result S TAT U S For the YE June 2008, total visitor expenditure exceeded total visitor growth by 3.8% (ie 1.3% above target). Achieved Quarterly updates were provided. ONLINE A youtube homepage takeover was staged in august TOURISM NEW ZEALAND ANNUAL REPORT 2007–2008 23 Consumer Website Measure Increase the average number of unique users of the www.newzealand.com tourism home page per month. Trend data will be provided on a quarterly basis. Result S TAT U S The average number of unique users of the www.newzealand.com tourism home page per month was Achieved 509,769 (up from a monthly average of 337,258 in 2006/07). Trafﬁc was signiﬁcantly higher in the April-June 2008 quarter which was largely due to new campaign activity in the China market. Trend data was provided on a quarterly basis. Measure Maintain satisfaction levels for www.newzealand.com by visitors to New Zealand at or above 90% by 30 June 2008. Result S TAT U S For 2007/08, satisfaction with www.newzealand.com averaged 7.7 (all visitors) and 7.8 (Interactive Travellers) Not Achieved which is rated on a ten point scale – ten being extremely satisﬁed. For 2006/07, the equivalent scores were 7.8 (all visitors) and 7.9 (Interactive Travellers). This result has been collected as part of the Visitor Experience Monitor project since 2006/07, and prior to that it was taken from the www.newzealand.com Popup Survey. Therefore it is not possible to compare results before and after 2006/07. Trade Marketing Strategy Measure Report on the effectiveness of the Trade Marketing Strategy which is focused on the performance of selected wholesalers and the quality of their representation of the New Zealand tourism product. Result Quarterly reports were provided on the effectiveness of Tourism New Zealand’s Trade Marketing Strategy, which is an ongoing initiative designed to identify the operators in each market who Tourism New Zealand can work with effectively to sell destination New Zealand. Implementation of the Strategy progressed well during the year. Key results are provided: S TAT U S North America – This year conversion-focused partnership work has been undertaken with 12 partners Achieved including Air New Zealand and Qantas to promote travel in April, May and August. Canada trade partners are seeing stronger awareness of New Zealand due to the 100% Pure campaign and this is resulting in business growth. Australia – Approximately 20 key companies and trade partners have been focused on in the Australian market this year. All have been contributors at various times to the ‘What’s On’ campaign, providing travel deals to support the campaign. UK/Europe – There has been signiﬁcant improvement to New Zealand representation in sellers’ programmes over the past 12 months due to the International Marketing Alliance (Regional Tourism Organisation groupings) project process. Improvements have been seen in the depth of product sold in existing regions, the addition of new regions sold and improvements in the way New Zealand programmes are presented in brochures and on websites. Japan – The key partners who have applied the guidance and development from Tourism New Zealand in the last year are now experiencing good growth from the changes that they have implemented. Those partners who have not shown as much willingness to adapt to the changing market needs are now struggling in the challenging market environment. China – With the 100% Pure campaign being launched in China this year and focused key partner trade activity, the interest in selling New Zealand is high. Signiﬁcant focus has been applied to developing deeper New Zealand knowledge both at a product and frontline level and this will be ongoing into the next ﬁnancial year. India – The brochures of Tourism New Zealand’s key partners have seen signiﬁcant improvement compared to the rest of the market. Their business has also seen growth in terms of value and length of stay. 24 TOURISM NEW ZEALAND ANNUAL REPORT 2007–2008 Trade Training Measure Provide a quarterly report on the number of international travel sellers and product planners engaged with through trade training seminars and conferences, roadshows, online training modules and familiarisation visits. Result S TAT U S Quarterly reports were provided on the number of international travel sellers and product planners Tourism Achieved New Zealand engaged with during the year through its trade training programme. In total, 21,356 international travel sellers and product planners undertook training during the year via trade training seminars and conferences, roadshows, online training modules and familiarisation visits. Measure International travel seller and product planner satisfaction with Tourism New Zealand’s trade training activities (target: at or above 90%). Result S TAT U S Average international travel seller and product planner satisfaction with Tourism New Zealand’s trade training Achieved activities was 95% for the year. Measure The number of online training modules completed by 30 June 2008. Result S TAT U S A total of 11,227 online trade training modules were completed in 2007/08 (exceeding the planned target of Achieved 10,000). Tourism Websites Measure Provide quarterly update on development work undertaken on the Japanese and Korean tourism websites. Result S TAT U S During the year, the consumer website was fully translated into Japanese and Korean with all ongoing Achieved changes to the English site now carried through to the Japanese and Korean sites. Measure Provide a quarterly update on progress made towards upgrading the Chinese tourism website (with the upgraded site to be completed by 31 January 2008). Result S TAT U S Quarterly updates were provided during the year on progress towards upgrading the Chinese tourism website. Achieved During the year, the simpliﬁed Chinese consumer website was fully translated, including Qualmark-rated operator listings. All ongoing changes to the English site are carried through to the Chinese site. Approved Destination Status (ADS) Monitoring Unit Establishment Measure Provide a quarterly update on the establishment of an ADS monitoring unit in New Zealand. Result S TAT U S Quarterly updates were provided on the establishment of an ADS monitoring unit in New Zealand. During Achieved the year, Tourism New Zealand’s China Monitoring Unit completed a ﬁrst round of ADS reviews, established systems to monitor compliance with the Code by ADS-approved tour operators, carried out investigations on identiﬁed breaches of the Code, and established relationships with ADS approved tour operators as well as key government and non-government agencies relevant to the Unit’s operations. The total cost of delivering outputs under the Channel category is $16,622 million. TOURISM NEW ZEALAND ANNUAL REPORT 2007–2008 25 MARKETING OF NEW ZEALAND AS A VISITOR DESTINATION: New Zealand will always be a niche player in world tourism given our geographic distance from most main markets and the comparatively high cost to travel here. For this reason, Tourism New Zealand’s goal behind its capability strategy is to focus on ensuring New Zealand provides a quality experience for visitors. This ensures visitor satisfaction levels and word-of-mouth promotion of New Zealand as a destination remains high. Key activities within this output are market research, communication with the industry and other key stakeholders, providing support for the Qualmark quality assurance scheme and visitor information services provided by i-SITE New Zealand. New Zealand as a Holiday Destination Measure At least 80% of Interactive Travellers® are very likely to recommend New Zealand as a holiday destination by 30 June 2008. Result S TAT U S In 2007/08, 85% of Interactive Travellers were very likely to recommend New Zealand as a holiday Achieved destination. Corporate Communications Measure Provide a quarterly report on the number of user sessions for www.tourismnewzealand.com Result S TAT U S Quarterly reports were provided on the number of user sessions for www.tourismnewzealand.com. Tourism Achieved New Zealand’s corporate website attracted a total of 212,885 user sessions during the 2007/08 year. Measure Provide a quarterly report on the number of stakeholder publications (Tourism News, Regional Rap) and face-to-face engagement with the industry undertaken by Tourism New Zealand. Result S TAT U S Quarterly reports were provided on the number of stakeholder publications and face-to-face engagements Achieved with the industry undertaken by Tourism New Zealand during the year. Stakeholder publications: Tourism News: 27,000 copies of Tourism News were distributed during the year. Regional Rap: 5,904 copies of Regional Rap were sent to readers over the year. Face-to-face engagements with the industry over the year totalled 5,826. 26 TOURISM NEW ZEALAND ANNUAL REPORT 2007–2008 Subsidiary Commitments Measure Increase the number of Qualmark licence holders from 1,900 to 2,100 by 30 June 2008. Result S TAT U S There are 2,154 licence holders as at 30 June 2008. Achieved Measure Maintain the attrition rate of Qualmark licence holders below 5% as at 30 June 2008. Result S TAT U S The attrition rate of Qualmark licence holders was maintained below 5% during the year. Achieved Measure Report quarterly on progress made on the development and implementation of Qualmark’s environmental accreditation programme (with additional environmental criteria to be included in Qualmark assessments from January 2008). Result S TAT U S Quarterly reports were provided on progress made on the development and implementation of Qualmark’s Achieved environmental accreditation programme. The programme was launched at TRENZ in May 2008. Measure A total of 44 i-SITE centres are assessed and required to meet the Qualmark-based i-SITE membership standards by 30 June 2008, to ensure network standards are maintained. Result S TAT U S A total of 42 i-SITE centres were assessed during the year and met the requirements of the Qualmark-based Substantially i-SITE membership standards. Assessment of the Hamilton i-SITE was rescheduled from June to July 2008 Achieved due to unforeseen circumstances and the Stewart Island i-SITE was unable to be assessed as work required for the accreditation process was still to be completed at year-end. Measure A total of 44 i-SITE centres are mystery shopped to assess and improve the quality of customer service levels by 30 June 2008. Result S TAT U S All 44 of the scheduled i-SITE centres were mystery shopped by 30 June 2008 and reports subsequently Achieved distributed to i-SITE managers. The total cost of delivering outputs under the Capability category is $19,701 million. DESTINATION NEW ZEALAND new zealand 's i-site visitor centres provide higH-quality information to , over oo ooo international visitors annually TOURISM NEW ZEALAND ANNUAL REPORT 2007–2008 27 MANAGEMENT STATEMENTS Impact of Tourism New Zealand for New Zealand as a holiday destination and making Outputs on International Visitor it easy for them to plan and book their travel through Arrivals and Expenditure online tools The number of visitors to New Zealand and the amount they spend is dependent on many variables. These include: destination New Zealand in order to convert visitor interest into actual travel and the efforts of other National Tourism Ofﬁces including insights into the needs and preferences of international consumers, to better inform their affecting travel and expenditure decisions activities New Zealand’s commitments to Qualmark Limited and routes and ticket pricing i-SITE New Zealand) to ensure the New Zealand tourism industry delivers a quality system which maintains visitor satisfaction at a high level and in countries of origin. encourages positive word-of-mouth about the International visitor arrivals for the year ending New Zealand experience. 30 June 2008 were 2.48 million, a 0.9% increase over the previous year. International visitor expenditure (sourced from the revised International Visitor Survey Equal Employment Opportunities (EEO) excluding airfare receipts) for the year ended 30 June Under Section 151 (1)(g) of the Crown Entities Act 2004, 2008 was $6,177 million, representing a 4.7% increase Tourism New Zealand is required to provide information over the previous year. about compliance with obligations to be a good employer While it is not possible to determine the extent to which (including our Equal Employment Opportunities Tourism New Zealand’s outputs directly impacted on Programme). visitor numbers and spend for the year given the range Women continue to be well represented at all levels in the and complexity of externalities involved, Tourism organisation. Tourism New Zealand recognises the need New Zealand’s delivery of outputs in 2007/08, and in for the greater involvement of , and continues to previous years, will have contributed to the year’s growth promote this through the implementation of our in visitor arrivals and expenditure through: Development Strategy and Graduate Development Programme. destination through continued delivery of the 100% Pure New Zealand campaign in key international markets 28 TOURISM NEW ZEALAND ANNUAL REPORT 2007–2008 Tourism New Zealand Workplace Proﬁle as at 30 June 2008 DIRECT REPORTS TO EXECUTIVE OTHER MANAGERS PROFESSIONAL MANAGERS OR EXECUTIVE W I T H S TA F F AND SUPPORT S TA F F W I T H MANAGEMENT RESPONSIBILITY S TA F F RESPONSIBILITY (4TH TIER) FOR SPECIFIC OUTPUT AREAS NZ European Male 38% 30% 19% 6% Female 50% 48% 38% 42% Male 3% Female 9% 2% Paciﬁc Peoples Male Female 2% Asian (inc South Asian) Male 6% 6% Female 4% 25% 27% Other Male 12% 9% 6% Female 6% 12% Percentage of Group of Total Organisation 7% 20% 14% 59% Leadership, Accountability and Culture Tourism New Zealand is committed to being a good employer and, as such, to managing and leading all staff fairly and properly in all aspects of their employment. Our Executive Team and broader management group is committed to demonstrating leadership and accountability in all areas of EEO, and from an EEO perspective, this means a commitment to and activity in the following areas: Recruitment, Selection and Induction Our recruitment and selection procedure has been developed to ensure that all prospective employees are given the opportunity to participate equally in the recruitment process. Interview questions are drawn from a carefully designed question bank which contains questions designed to ensure that the selected applicant’s skills and abilities are the best ﬁt with the position and organisation. This includes appropriate support for and Paciﬁc peoples and people with English as a second language during the recruitment and selection process. We are now in the second year of running our three-day ‘Welcome to Tourism New Zealand’ programme. This programme runs between three and four times each year and is led by a member of our Executive Team. Each programme includes a cultural component, which explores the signiﬁcance of aspects of tikanga for our organisation, and includes mihi and waiata training. Tourism New Zealand has continued with an active Graduate Recruitment programme and we have recruited a total of ﬁve graduates. Four of these continue to be employed by Tourism New Zealand in a variety of roles, and one has left Tourism New Zealand and is now employed by a Regional Tourism Organisation. TOURISM NEW ZEALAND ANNUAL REPORT 2007–2008 29 Employee Development, Promotion and Exit Tourism New Zealand has an active management and leadership development programme. This includes an annual leadership development programme for those identiﬁed with potential for leadership and management development. Participants are nominated by their managers on the basis of performance and potential. Other training and development needs are identiﬁed on an individual basis and are agreed between the manager and employee. Development programmes are selected based on individual development needs. Te Wiki o Te Reo and Matariki are also actively supported by Tourism New Zealand with a planned programme to provide additional skills training and learning opportunities. Tourism New Zealand has also continued to build on our earlier programme of work designed to develop and grow our organisational capability in tikanga . For the year ending June 2008, it is great to see that our Development Strategy has, through its implementation, become a critical, multidimensional part of our organisation. As discussed, our Welcome Programme includes a signiﬁcant cultural element, and this enables Tourism New Zealand to deliver on part of our international marketing promise around the cultural element of the New Zealand experience as our staff have a sound understanding of tikanga and this in infused throughout the organisation. Flexibility and Work Design Tourism New Zealand has an active programme of supporting ﬂexible working arrangements and job design. We continue to: accommodate child care needs; Remuneration, Recognition and Conditions The annual salary review and internal promotions are based on individual skills and experience, and recognise performance regardless of ethnicity, gender or physical ability. Individuals identiﬁed as not meeting the requirements of their role are provided with support, training and development where required to assist them to achieve success in their role. Harassment and Bullying Prevention Tourism New Zealand has a very strictly adhered to policy and procedure for dealing with work place harassment and bullying. In the 12 months, there have been no reported allegations relating to harassment and/or bullying. Safe and Healthy Environment Tourism New Zealand has a good and safe working environment and we have published and well-understood policies which have actively encouraged staff involvement. Additional support for people, particularly those with disabilities, has over the last 12 months included specialist work place assessments and the provision of special equipment to ensure that employees are able to contribute effectively in all aspects of their working life. 30 TOURISM NEW ZEALAND ANNUAL REPORT 2007–2008 FINANCIAL STATEMENTS Statement of Responsibility In terms of the Crown Entities Act 2004, the Board is responsible for the preparation of the New Zealand Tourism Board’s ﬁnancial statements and statement of service performance, and for the judgments made in them. The Board of New Zealand Tourism Board has the responsibility for establishing, and has established, a system of internal control designed to provide reasonable assurance as to the integrity and reliability of ﬁnancial reporting. In the Board’s opinion, these ﬁnancial statements and statement of service performance fairly reﬂect the ﬁnancial position and operation of the New Zealand Tourism Board Group for the year ended 30 June 2008. The Board of Directors of New Zealand Tourism Board and Group authorised these ﬁnancial statements for issue on 31 October 2008. Signed on behalf of the Board of Directors: G. Muir S. Johnstone Chair Deputy Chair 31 October 2008 31 October 2008 TOURISM NEW ZEALAND ANNUAL REPORT 2007–2008 31 Statement of Financial Performance for the year ended 30 June 2008 GROUP PARENT 2008 2008 2007 2008 2008 2007 Notes Actual Budget Actual Actual Budget Actual $000s $000s $000s $000s $000s $000s Income Revenue from Crown 2 75,071 74,821 74,246 75,071 74,821 74,246 Interest income 711 505 866 707 500 859 Other revenue 3 7,093 4,781 6,295 4,817 2,567 4,243 Foreign exchange gains 4 7,999 0 2,617 7,999 0 2,617 Total Income 90,874 80,107 84,024 88,594 77,888 81,965 Expenditure Marketing expenses 63,822 57,342 62,121 63,044 58,081 61,631 Other expenses 5 19,921 21,845 18,633 18,428 18,908 17,022 Depreciation & Impairment 625 751 772 602 745 738 Foreign exchange losses 6 2,477 0 7,128 2,477 0 7,128 Total Expenditure 7 86,845 79,938 88,654 84,551 77,734 86,519 Net Operating Surplus/(Deﬁcit) before Taxation 4,029 169 (4,630) 4,043 154 (4,554) Income tax expense 20 0 0 0 0 0 0 Minority interests in proﬁts/(losses) of subsidiaries 8 (61) 0 18 0 0 0 Share of loss/(gain) of associate company 9 3 0 (5) 0 0 0 Net Surplus/(Deﬁcit) for the year 4,087 169 (4,643) 4,043 154 (4,554) The notes and accounting policies on pages 35 to 56 form part of and are to be read in conjunction with these ﬁnancial statements 32 TOURISM NEW ZEALAND ANNUAL REPORT 2007–2008 Statement of Financial Position as at 30 June 2008 GROUP PARENT 2008 2008 2007 2008 2008 2007 Notes Actual Budget Actual Actual Budget Actual $000s $000s $000s $000s $000s $000s Current Assets Cash 10 5,200 2,951 3,435 5,077 2,809 3,272 Receivables 11 1,324 640 1,193 1,286 600 1,135 Prepayments & other current assets 1,029 320 2,891 1,018 300 2,884 Derivative ﬁnancial instruments 12 1,514 0 0 1,514 0 0 9,067 3,911 7,519 8,895 3,709 7,291 Non-current Assets Property plant and equipment 13 2,165 1,839 1,616 1,943 1,826 1,609 Investment in associate 9 7 5 10 0 0 0 Accommodation bonds 14 343 335 275 343 335 275 2,515 2,179 1,901 2,286 2,161 1,884 Total Assets 11,582 6,090 9,420 11,181 5,870 9,175 Current Liabilities Creditors and other payables 15 4,613 3,135 4,204 4,203 2,935 3,954 Employee entitlements 16 927 785 777 891 760 754 Provisions 17 303 0 220 303 0 220 Derivative ﬁnancial instruments 12 20 0 2,526 20 0 2,526 5,863 3,920 7,727 5,417 3,695 7,454 Total Liabilities 5,863 3,920 7,727 5,417 3,695 7,454 Net Assets 5,719 2,170 1,693 5,764 2,175 1,721 Equity Shareholder's equity 1,805 1,805 1,805 1,805 1,805 1,805 Retained earnings 3,864 365 (223) 3,959 370 (84) Minority interests 8 50 0 111 0 0 0 Total Equity 5,719 2,170 1,693 5,764 2,175 1,721 Statement of Changes in Equity for the year ended 30 June 2008 GROUP PARENT 2008 2008 2007 2008 2008 2007 Notes Actual Budget Actual Actual Budget Actual $000s $000s $000s $000s $000s $000s Balance at 1 July 1,693 2,001 6,318 1,721 2,021 6,275 Movement in minority interest (61) 0 18 0 0 0 Net surplus/(deﬁcit) for the year 4,087 169 (4,643) 4,043 154 (4,554) Balance at 30 June 5,719 2,170 1,693 5,764 2,175 1,721 The notes and accounting policies on pages 35 to 56 form part of and are to be read in conjunction with these ﬁnancial statements TOURISM NEW ZEALAND ANNUAL REPORT 2007–2008 33 Statement of Cash Flows for the year ended 30 June 2008 GROUP PARENT 2008 2008 2007 2008 2008 2007 Notes Actual Budget Actual Actual Budget Actual $000s $000s $000s $000s $000s $000s Cash ﬂows from operating activities Crown revenue 75,071 74,821 74,246 75,071 74,821 74,246 Interest received 687 502 870 683 500 863 Other revenue 6,695 4,640 2,028 4,392 2,450 3,895 Payments to suppliers and employees (79,545) (78,302) (78,466) (77,468) (76,132) (80,298) Goods and services tax (net) 274 0 (86) 306 0 (100) Net cash from operating activities 18 3,182 1,661 (1,408) 2,984 1,639 (1,394) Cash ﬂows from investing activities Sale of property plant and equipment 30 0 9 30 0 9 Repayment of accommodation bonds 10 0 13 10 0 13 Purchase of property plant and equipment (1,551) (840) (683) (1,313) (830) (681) Payments for accommodation bonds (55) 0 (29) (55) 0 (29) Net cash outﬂow from investing activities (1,566) (840) (690) (1,328) (830) (688) Net increase/(decrease) in cash held 1,616 821 (2,098) 1,656 809 (2,082) Effects of exchange rate on foreign currency balances 149 0 (732) 149 0 (732) Opening cash brought forward 3,435 2,130 6,265 3,272 2,000 6,086 Cash at end of year 10 5,200 2,951 3,435 5,077 2,809 3,272 The notes and accounting policies on pages 35 to 56 form part of and are to be read in conjunction with these ﬁnancial statements 34 TOURISM NEW ZEALAND ANNUAL REPORT 2007–2008 Notes to the Financial Statements for the year ended 30 June 2008 Note 1 Statement of accounting policies for the year ended 30 June 2008 (a) Basis of preparation Tourism New Zealand will adopt the amended standard for the Tourism New Zealand is a Crown entity as deﬁned by the Crown year ending 30 June 2009 and expects the impact of adopting Entities Act 2004 and is domiciled in New Zealand. As such, the new standard to be minimal. Tourism New Zealand’s ultimate parent is the New Zealand Crown. (c) Basis of consolidation Tourism New Zealand’s ﬁnancial statements have been prepared The consolidated ﬁnancial statements comprise the ﬁnancial in accordance with New Zealand generally accepted accounting statements of New Zealand Tourism Board trading as Tourism practice and the requirements of the Crown Entities Act 2004. New Zealand and its subsidiaries as at 30 June each year (the The ﬁnancial statements have been prepared on a historical cost Group). basis modiﬁed by the revaluation of certain assets and liabilities as Subsidiaries are combined using the purchase method of identiﬁed in this statement of accounting policies. combination. The ﬁnancial statements of subsidiaries are prepared For the purposes of ﬁnancial reporting, Tourism New Zealand is for the same reporting period as the parent company, using classiﬁed as a Public Beneﬁt Entity. consistent accounting policies. (b) Statement of compliance Adjustments are made to bring into line any dissimilar accounting The ﬁnancial statements have been prepared in accordance with policies that may exist. New Zealand equivalents to International Financial Reporting All intercompany balances and transactions, including unrealised Standards (NZ IFRS) and other applicable Financial Reporting proﬁts arising from intra-group transactions, have been eliminated Standards as appropriate for public beneﬁt entities. in full. Unrealised losses are eliminated unless costs cannot be This is the ﬁrst set of ﬁnancial statements prepared based on NZ recovered. IFRS and comparatives for the year ended 30 June 2007 have Subsidiaries are consolidated from the date on which control is been restated accordingly. Reconciliations of equity at 1 July 2006 transferred to the Group and cease to be consolidated from the date and 30 June 2007 and surplus/deﬁcit for the year ended 30 June on which control is transferred out of the Group. 2007 under NZ IFRS to the balances reported in the 30 June 2007 ﬁnancial statements are detailed in Note 31. Where there is loss of control of a subsidiary, the consolidated ﬁnancial statements include the results for the part of the reporting The ﬁnancial statements are presented in New Zealand dollars and period during which Tourism New Zealand has control. all values are rounded to the nearest thousand dollars ($000). The functional currency is New Zealand dollars. Business combinations that occurred prior to the date of transition to NZ IFRS have not been restated retrospectively. Standards, amendments and interpretations issued but not yet effective that have not been early adopted and which are relevant to (d) Investment in associate Tourism New Zealand include: The Group’s investment in associates is accounted for under the equity method of accounting in the consolidated ﬁnancial Presentation of Financial Statements is effective for statements. reporting periods beginning on or after 1 January 2009. The revised standard requires information in ﬁnancial statements An associate is an entity in which the Group has signiﬁcant to be aggregated on the basis of shared characteristics inﬂuence and which is not a subsidiary nor a joint venture. and introduces a statement of comprehensive income. The The annual ﬁnancial statements of the associate are used by the statement of comprehensive income will enable readers to Group to apply the equity method. The reporting dates of the analyse changes in equity resulting from non-owner changes associate and the Group are identical and both use consistent separately from transactions with the Crown in its capacity as accounting policies. “owner”. The revised standard gives Tourism New Zealand the option of presenting items of income and expense and The investment in the associate is carried in the balance sheet at components of other comprehensive income either in a single cost plus post-acquisition changes in the Group’s share of net assets statement of comprehensive income with subtotals, or in two of the associate, less any impairment in value. The consolidated separate statements (a separate income statement followed by income statement reﬂects the Group’s share of the results of a statement of comprehensive income). Tourism New Zealand operations of the associate. intends to adopt this standard for the year ending 30 June Where there has been a change recognised directly in the 2010, and is yet to decide whether it will prepare a single associate’s equity, the Group recognises its share of any changes statement of comprehensive income or a separate income and discloses this, when applicable in the consolidated statement of statement followed by a statement of comprehensive income. changes in equity. Inventories. In November (e) Foreign currency 2007 the New Zealand Accounting Standards Review Board Where transactions in foreign currencies have been covered by approved an amendment to NZ IAS 2 Inventories, which forward exchange contracts, the rates in those contracts are used requires public beneﬁt entities to measure inventory held for to convert the transactions to New Zealand Currency. Otherwise, distribution at cost, adjusted when applicable for any loss of transactions are recorded in the functional currency at the exchange service potential. Application of the amendment is mandatory rates ruling at the date of the transaction. for reporting periods beginning on or after 1 January 2008. TOURISM NEW ZEALAND ANNUAL REPORT 2007–2008 35 Monetary assets and liabilities denominated in foreign currencies are reimbursement is recognised as a separate asset but only when translated at the rate of exchange ruling at the balance sheet date. the reimbursement is virtually certain. The expense relating to any provision is presented in the Statement of Financial Performance Exchange gains and losses are recognised in the Statement of net of any reimbursement. Financial Performance. If the effect of the time value of money is material, provisions are Non-monetary items that are measured in terms of historical cost in determined by discounting the expected future cash ﬂows at a rate a foreign currency are translated using the exchange rate as at the that reﬂects current market assessments of the time value of money date of the initial transaction. and, where appropriate, the risks speciﬁc to the liability. (f) Property, plant and equipment Where discounting is used, the increase in the provision due to the Plant and equipment is stated at cost less accumulated depreciation passage of time is recognised as a ﬁnance cost. and any impairment in value. (l) Leases Depreciation is calculated on a straight-line basis over the estimated The determination of whether an arrangement is or contains a useful life of the asset as follows: lease is based on the substance of the arrangement and requires Ofﬁce equipment 5 years an assessment of whether the fulﬁlment of the arrangement Motor vehicles 4 – 5 years is dependent on the use of a speciﬁc asset or assets and the Furniture and ﬁttings 5 – 8 years arrangement conveys a right to use the asset. Computer equipment 3 years Leases where the lessor retains substantially all the risks and beneﬁts Leasehold improvements Up to term of the lease of ownership of the asset are classiﬁed as operating leases. Operating Realised gains and losses arising from the disposal of property, lease payments are recognised as an expense in the Statement of plant and equipment are recognised in the Statement of Financial Financial Performance on a straight-line basis over the lease term. Performance in the period in which the transaction occurs. The Group does not enter into Finance leases. Impairment (m) Revenue The carrying values of plant and equipment are reviewed for Revenue is recognised to the extent that it is probable that the impairment when events or changes in circumstances indicate the economic beneﬁts will ﬂow to the Group and the revenue can be carrying value may not be recoverable. reliably measured. The following speciﬁc recognition criteria must If any such indication exists and where the carrying values exceed also be met before revenue is recognised: the estimated recoverable amount, the assets are written down to Grants received from the Crown their recoverable amount. Losses resulting from impairment are Grants received from the Crown are recognised as revenue on receipt. reported in the Statement of Financial Performance. (g) Intangible assets Sale of goods and service Intangible assets are recorded at cost at acquisition. Where there Revenue from the supply of goods and services is recognised is no active market for these assets, or they are determined to when the signiﬁcant risks and rewards of ownership of the goods hold no future economic beneﬁt, they are written off in the year of have passed to the buyer and can be measured reliably. Risks and acquisition. Tourism New Zealand has no intangible assets with a rewards are considered passed to the buyer at the time of delivery ﬁnite life. of the goods to the customer. Research and development costs are expensed as incurred. Revenue from the supply of services is recognised on a straight line basis over the speciﬁed period for the service unless an alternative (h) Inventories method better represents the stage of completion of the transaction. Inventories are valued at the lower of cost and net realisable value. Interest (i) Trade and other receivables Interest revenue is recognised as interest accrues using the effective Trade receivables are recognised and carried at original invoice interest method. This is a method of calculating the amortised amount less an allowance for any uncollectible amounts. cost of a ﬁnancial asset and allocating the interest income over the An estimate for doubtful debts is made when collection of the relevant period using the effective interest rate, which is the rate full amount is no longer probable. Bad debts are written off when that exactly discounts estimated future cash receipts through the identiﬁed. expected life of the ﬁnancial asset to the net carrying amount of the ﬁnancial asset. (j) Cash and cash equivalents Cash and short-term deposits in the Statement of Financial Position (n) Income tax comprise cash at bank and in hand and short-term deposits with an Tourism New Zealand is exempt from income tax under the original maturity of three months or less. New Zealand Tourism Board Act 1991. Tourism New Zealand’s subsidiaries are subject to income tax. For the purposes of the Statement of Cash Flows, cash and cash equivalents consist of cash and cash equivalents as deﬁned above. Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid (k) Provisions to the taxation authorities based on the current period’s taxable Provisions are recognised when the Group has a present obligation income. The tax rates and tax laws used to compute the amount are (legal or constructive) as a result of a past event, and it is probable those that are enacted or substantively enacted by the Statement of that an outﬂow of resources embodying economic beneﬁts will be Financial Position date. required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Deferred income tax is provided on all temporary differences at the Statement of Financial Position date between the tax bases of assets Where the Group expects some or all of a provision to be and liabilities and their carrying amounts for ﬁnancial reporting reimbursed, for example under an insurance contract, the purposes. 36 TOURISM NEW ZEALAND ANNUAL REPORT 2007–2008 Deferred income tax liabilities are recognised for all taxable Cash ﬂows are included in the Statement of Cash Flows on a gross temporary differences except: basis and the GST component of cash ﬂows arising from investing and ﬁnancing activities, which is recoverable from, or payable to, the taxation authority are classiﬁed as operating cash ﬂows. recognition of goodwill or of an asset or liability in a transaction that is not a business combination and that, at the time of the Commitments and contingencies are disclosed net of the amount of transaction, affects neither the accounting proﬁt nor taxable GST recoverable from, or payable to, the taxation authority. proﬁt or loss; or (p) Financial instruments Tourism New Zealand uses derivative ﬁnancial instruments such investments in subsidiaries, associates or interests in joint as foreign currency contracts to manage its exposure to foreign ventures, and the timing of the reversal of the temporary exchange risk arising from its operational activities. Tourism difference can be controlled and it is probable that the New Zealand does not hold or issue these ﬁnancial instruments for temporary difference will not reverse in the foreseeable future. trading purposes. Tourism New Zealand has not adopted hedge accounting. Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax credits and Derivatives are initially recognised at fair value on the date a unused tax losses, to the extent that it is probable that taxable proﬁt derivative contract is entered into and are subsequently remeasured will be available against which the deductible temporary differences to their fair value at each balance date. Movements in the fair value and the carry-forward of unused tax credits and unused tax losses of derivative ﬁnancial instruments are recognised in the Statement can be utilised, except: of Financial Performance. Foreign exchange gains and losses resulting from the settlement temporary difference arises from the initial recognition of of derivative ﬁnancial instruments and from the translation at year an asset or liability in a transaction that is not a business end exchange rates of monetary assets and liabilities denominated combination and, at the time of the transaction, affects neither in foreign currencies are recognised in the Statement of Financial the accounting proﬁt nor taxable proﬁt or loss; or Performance. Cash and cash equivalents include cash on hand, cash in transit, investments in subsidiaries, associates or interests in joint bank accounts and deposits with a maturity of no more than three ventures, in which case a deferred tax asset is only recognised months from date of acquisition to the extent that it is probable that the temporary difference The fair value of forward exchange contracts is calculated by will reverse in the foreseeable future and taxable proﬁt will be reference to current forward exchange rates for contracts with available against which the temporary difference can be utilised. similar maturity proﬁles. The carrying amount of deferred income tax assets is reviewed at each Statement of Financial Position date and reduced to the extent (q) Employee Beneﬁts Pension Liabilities. Obligations for contributions to deﬁned that it is no longer probable that sufﬁcient taxable proﬁt will be contribution retirement plans are recognised in the Statement of available to allow all or part of the deferred income tax asset to be Financial Performance as they fall due. utilised. Other Employee Entitlements. Employee entitlements to salaries and Unrecognised deferred income tax assets are reassessed at each wages, annual leave, long service leave, retiring leave and other similar Statement of Financial Position date and are recognised to the beneﬁts are recognised in the Statement of Financial Performance extent that it has become probable that future taxable proﬁt will when they accrue to employees. Employee entitlements to be settled allow the deferred tax asset to be recovered. within 12 months are reported at the amount expected to be paid. The Deferred income tax assets and liabilities are measured at the liability for long-term employee entitlements is reported as the present tax rates that are expected to apply to the year when the asset is value of the estimated future cash ﬂows. realised or the liability is settled, based on tax rates (and tax laws) Termination Beneﬁts. Termination beneﬁts are recognised in that have been enacted or substantively enacted at the Statement of the Statement of Financial Performance only where there is a Financial Position date. demonstrable commitment to either terminate employment prior Deferred tax assets and deferred tax liabilities are offset only if a to normal retirement date or to provide such beneﬁts as a result of legally enforceable right exists to set off current tax assets against an offer to encourage voluntary redundancy. Termination beneﬁts current tax liabilities and the deferred tax assets and liabilities relate settled within 12 months are reported at the amount expected to to the same taxable entity and the same taxation authority. be paid, otherwise they are reported as the present value of the estimated future cash ﬂows. (o) Other taxes Revenues, expenses and assets are recognised net of the amount of (r) Contingent Assets and Contingent Liabilities GST except: Contingent assets and contingent liabilities are recorded in the Notes to the Financial Statements at the point at which the contingency is evident. Contingent liabilities are disclosed if the is not recoverable from the taxation authority, in which case the possibility that they will crystallise is not remote. Contingent assets GST is recognised as part of the cost of acquisition of the asset are disclosed if it is probable that the beneﬁts will be realised. or as part of the expense item as applicable; and (s) Segment Reporting Tourism New Zealand’s primary function is to market New Zealand included. as a tourism destination. To achieve this, Tourism New Zealand The net amount of GST recoverable from, or payable to, the taxation maintains ofﬁces in a number of overseas countries. However, authority is included as part of receivables or payables in the all Tourism New Zealand’s activities are co-ordinated from Statement of Financial Position. New Zealand. TOURISM NEW ZEALAND ANNUAL REPORT 2007–2008 37 GROUP PARENT Note 2 Crown revenue 2008 2007 2008 2007 $000s $000s $000s $000s Crown revenue 70,301 70,301 70,301 70,301 During the year, additional funding was provided by the Crown for the following: China 3,025 0 3,025 0 Rugby World Cup 2,925 0 2,925 0 Qualmark New Zealand Ltd 529 124 529 124 America's Cup Challenge 0 5,000 0 5,000 Visitor Information Network (trading as i-SITE New Zealand) 0 135 0 135 Total revenue received from the Crown 76,780 75,560 76,780 75,560 Less GST 1,709 1,314 1,709 1,314 Net revenue received from the Crown 75,071 74,246 75,071 74,246 Note 3 Other revenue 2008 2007 2008 2007 $000s $000s $000s $000s Sales 2,283 2,058 7 6 Partnership income 4,610 4,129 4,610 4,129 Write back of creditors 187 101 187 101 Gain on sale of property, plant and equipment 13 7 13 7 Total other revenue 7,093 6,295 4,817 4,243 Note 4 Foreign exchange gains 2008 2007 2008 2007 $000s $000s $000s $000s Gains on derivative ﬁnancial instruments 4,040 43 4,040 43 Foreign exchange gains 3,959 2,574 3,959 2,574 Total foreign exchange gains 7,999 2,617 7,999 2,617 Note 5 Other expenses include: 2008 2007 2008 2007 Personnel expenses Number of Permanent and ﬁxed term staff 148 139 124 118 38 TOURISM NEW ZEALAND ANNUAL REPORT 2007–2008 Note 5 continued GROUP PARENT 2008 2007 2008 2007 $000s $000s $000s $000s Salaries and wages 12,062 10,887 11,081 10,019 Employer superannuation contributions 213 186 203 186 Increase/(decrease) in employee entitlements (note 16) 150 (102) 137 (102) Other personnel expenses 1,490 1,689 1,432 1,634 13,915 12,660 12,853 11,737 2008 2007 2008 2007 $000s $000s $000s $000s Personnel costs for New Zealand and Offshore Staff were: New Zealand Personnel Expenses – Tourism New Zealand 7,130 6,430 7,130 6,430 New Zealand Personnel Expenses – Subsidiaries 1,062 923 0 0 Offshore Personnel Expenses 5,723 5,307 5,723 5,307 13,915 12,660 12,853 11,737 2008 2007 2008 2007 Number of ceased Staff paid compensation or other beneﬁts 4 4 4 2 2008 2007 2008 2007 $000s $000s $000s $000s Compensation or other beneﬁts paid to ceased staff 46 79 46 54 2008 2007 2008 2007 $000s $000s $000s $000s Auditor’s remuneration Amounts received or due and receivable by Ernst & Young New Zealand for: The audit of the ﬁnancial report of the Tourism New Zealand Group 81 81 70 67 Other services 39 0 39 0 120 81 109 67 Amounts received or due and receivable by auditors other than Ernst & Young New Zealand for: The audit of the ﬁnancial report of subsidiary entities 5 2 0 0 125 83 109 67 2008 2007 2008 2007 $000s $000s $000s $000s Other expenses Loss on sale of property, plant and equipment 156 26 156 37 Lease expense 2,360 2,215 2,206 2,079 Directors' remuneration for Parent (See also note 30) - - 204 183 TOURISM NEW ZEALAND ANNUAL REPORT 2007–2008 39 GROUP PARENT Note 6 Foreign exchange losses 2008 2007 2008 2007 $000s $000s $000s $000s Losses on derivative ﬁnancial instruments 20 5,037 20 5,037 Foreign exchange losses 2,457 2,091 2,457 2,091 Total foreign exchange losses 2,477 7,128 2,477 7,128 Note 7 Total expenditure of parent 2008 2007 $000s $000s Total expenditure by geographic region: Australia 10,199 10,005 North America 9,674 11,140 UK & Europe 14,614 10,853 Japan 5,849 5,981 Asia 8,599 5,655 Other markets 112 142 New Zealand (a) 35,504 42,743 Total Expenditure of Parent 84,551 86,519 (a) New Zealand expenditure includes costs that cannot accurately be allocated to markets including the America's Cup Challenge, the cost of servicing the 100% Pure New Zealand Campaign, the International Media Programme and the newzealand.com website 2008 2007 $000s $000s Total expenditure by the three strategic categories outlined in the Statement of Service Performance: Campaign 48,228 47,955 Channel 16,622 16,861 Capability 19,701 21,703 Total Expenditure of Parent 84,551 86,519 Note 8 Subsidiary companies Interest Held Interest Held 2008 2007 2008 2007 Qualmark New Zealand Limited 60% 60% 60% 60% Visitor Information Network Incorporated (trading as i-SITE NZ) 0% 0% 0% 0% 40 TOURISM NEW ZEALAND ANNUAL REPORT 2007–2008 Note 8 continued GROUP PARENT The ﬁnancial year-end of both subsidiaries is 30 June. Tourism New Zealand has a 60% shareholding in Qualmark New Zealand Limited with the other 40% held by the New Zealand Automobile Association. Tourism New Zealand has control of Visitor Information Network Incorporated (VIN Inc), trading as i-SITE New Zealand, effective 21 August 2002. Qualmark New Zealand Limited is New Zealand Tourism’s ofﬁcial quality agency. It is a government – private sector partnership between Tourism New Zealand and New Zealand Automobile Association. Qualmark licenses professional and trustworthy New Zealand tourism businesses to use the Qualmark® – tourism’s ofﬁcial quality mark – to help international and domestic travellers select places to stay, things to do and ways to get around. Qualmark’s core activities are based around determining the eligibility of businesses to enter the licensing system. This is achieved by way of assessment, promoting and working with Qualmark® licensees and working closely with other organisations and sectors within the tourism industry. By doing so, quality standards are raised and New Zealand tourism businesses improved based on best-practice. The assets, liabilities, revenue and deﬁcit/surplus of Qualmark New Zealand which are included in the ﬁnancial statements are as follows: 2008 2007 2008 2007 $000s $000s $000s $000s Current assets 80 78 - - Non-current assets 222 7 - - 302 85 - - Current liabilities 404 234 - - Non-current liabilities 0 0 - - 404 234 - - Net assets (102) (149) - - Revenue 2,990 2,446 - - Surplus/(deﬁcit) 47 (94) - - Tourism New Zealand and i-SITE New Zealand have a relationship agreement that recognises the importance of having an effective and high quality network of visitor information centres, dedicated to delivering free, comprehensive and objective information. The terms and conditions of the relationship agreement mean that Tourism New Zealand meets the criteria determined in NZ IFRS 3 for consolidating investments in subsidiaries. The i-SITE brand creates a distinctive look, which distinguishes the ofﬁcial network from other information centres. The i-SITE Visitor Centres provide on-the-ground information to ensure the visitor experience is as enjoyable as possible. The assets, liabilities, revenue and deﬁcit/surplus of Visitor Information Network Incorporated which are included in the ﬁnancial statements are as follows: 2008 2007 2008 2007 $000s $000s $000s $000s Current assets 120 164 - - Non-current assets 0 0 - - 120 164 - - Current liabilities 70 53 - - Non-current liabilities 0 0 - - 70 53 - - Net assets 50 111 - - Revenue 841 0 - - (Deﬁcit)/surplus (61) 17 - - TOURISM NEW ZEALAND ANNUAL REPORT 2007–2008 41 GROUP PARENT Note 9 Associate company 2008 2007 2008 2007 $000s $000s $000s $000s The New Zealand Way Limited 7 10 - - The ﬁnancial year-end of The New Zealand Way Limited is 30 June. Tourism New Zealand has a 50% shareholding in The New Zealand Way Limited. This company is the operating entity of a joint venture between Tourism New Zealand and New Zealand Trade & Enterprise. The New Zealand Way Brand provides marketing opportunities to those companies which meet quality and environmental standards. The Brand is promoted as a mark of outstanding quality, superior service and unique New Zealand characteristics. There were no impairment losses relating to the investment in associate and no capital commitments or other commitments relating to the associate. The following table illustrates summarised information of the investment in The New Zealand Way Limited: 2008 2007 2008 2007 $000s $000s $000s $000s Share of associate's balance sheet: Current assets 10 13 - - Current liabilities 3 3 - - Net assets 7 10 - - Share of associate’s revenue and (deﬁcit)/surplus: Revenue 0 15 - - (Deﬁcit)/surplus (3) 5 - - Carrying amount at beginning of year 10 5 - - Carrying amount at end of year 7 10 - - Note 10 Cash 2008 2007 2008 2007 $000s $000s $000s $000s Cash Holdings: Cash at bank and in hand 1,488 1,194 1,365 1,076 Call accounts – foreign currencies 2,265 1,911 2,265 1,911 Call accounts – New Zealand dollar 1,447 330 1,447 285 5,200 3,435 5,077 3,272 Cash at bank and in hand generally earns interest at ﬂoating rates based on daily bank deposit rates. Call account deposits are made depending on the immediate cash requirements of the Group, and earn interest at the respective money market call rates. Cash Holdings by Currency: New Zealand Dollar 2,181 574 2,058 411 United States Dollar 336 158 336 158 British Pound 677 1,238 677 1,238 42 TOURISM NEW ZEALAND ANNUAL REPORT 2007–2008 Note 10 continued GROUP PARENT Australian Dollar 287 685 287 685 European Euro 359 57 359 57 Japanese Yen 210 179 210 179 Singapore Dollar 707 141 707 141 Canadian Dollar 203 88 203 88 Indian Rupee 171 171 171 171 Other Asian Currencies 69 144 69 144 5,200 3,435 5,077 3,272 Cash Holdings by Bank: HSBC Bank 3,020 2,793 2,986 2,766 National Bank of New Zealand 736 243 736 243 Bank of New Zealand 1,253 207 1,164 71 Deutsche Bank 91 39 91 39 Tokyo Mitsubishi 100 153 100 153 5,200 3,435 5,077 3,272 The fair value of cash and cash equivalents is $5,200,000 (2007: $3.435,000). Note 11 Receivables 2008 2007 2008 2007 $000s $000s $000s $000s Receivables 1,331 1,200 1,289 1,138 Less: Provision for impairment (7) (7) (3) (3) 1,324 1,193 1,286 1,135 Trade receivables are non-interest bearing and are generally on 50-day terms. The carrying value of receivables approximates their fair value. As at 30 June 2008 and 2007, all overdue receivables have been assessed for impairment and appropriate provisions applied, as detailed below: PARENT 2008 2007 Gross Impairment Net Gross Impairment Net $000s $000s $000s $000s $000s $000s Not past due 1,219 0 1,219 1,039 0 1,039 Past due 1 – 30 days 1 0 1 78 0 78 Past due 31 – 60 days 55 0 55 0 0 0 Past due 61 – 90 days 2 0 2 0 0 0 Past due > 91 days 12 (3) 9 21 (3) 18 1,289 (3) 1,286 1,138 (3) 1,135 GROUP 2008 2007 Gross Impairment Net Gross Impairment Net $000s $000s $000s $000s $000s $000s Not past due 1,215 0 1,215 1,089 0 1,089 Past due 1 – 30 days 27 0 27 82 0 82 Past due 31 – 60 days 56 0 56 0 0 0 Past due 61 – 90 days 19 0 19 6 0 6 Past due > 91 days 14 (7) 7 23 (7) 16 1,331 (7) 1,324 1,200 (7) 1,193 TOURISM NEW ZEALAND ANNUAL REPORT 2007–2008 43 Note 11 continued GROUP PARENT The provision for impairment has been calculated based on expected losses determined by an analysis of losses in previous periods and a review of speciﬁc debtors. Receivables for the Group include GST/VAT refunds comprising 46% (57% in 2007) of total receivables as follows: 2008 2007 2008 2007 $000s $000s $000s $000s GST Refund due from NZ Inland Revenue Department 536 604 523 604 GST Refund due from Australian Taxation Ofﬁce 32 24 32 24 VAT Refund due from UK Customs & Excise 38 56 38 56 606 684 593 684 Note 12 Derivative ﬁnancial instruments Tourism New Zealand uses foreign exchange instruments in order to manage its exposure to ﬂuctuations in foreign currency exchange rates on normal operating activities. The instruments are matched with anticipated future cash ﬂows in foreign currencies. Tourism New Zealand does not use ﬁnancial instruments for speculative purposes. At balance date Tourism New Zealand had 36 (2007: 48) foreign exchange contracts maturing at various dates over the next 12 months. The contracts are designated as held for trading ﬁnancial instruments with fair value gains or losses recognised in the Statement of Financial Performance. Foreign currency forward exchange contracts: 2008 2007 2008 2007 $000s $000s $000s $000s Foreign exchange contracts at 30th June – Sell Value 35,800 34,450 35,800 34,450 Fair value Derivatives in Gain 1,514 0 1,514 0 Fair value Derivatives in Loss (20) (2,526) (20) (2,526) Foreign exchange contracts at 30th June 37,294 31,924 37,294 31,924 Foreign exchange contracts by currency: United States Dollar 12,303 9,638 12,303 9,638 British Pound 8,044 6,398 8,044 6,398 Australian Dollar 9,959 7,932 9,959 7,932 European Euro 2,156 2,487 2,156 2,487 Japanese Yen 2,842 3,516 2,842 3,516 Canadian Dollar 1,990 0 1,990 0 Singapore Dollar 0 1,319 0 1,319 Hong Kong Dollar 0 384 0 384 Thai Baht 0 250 0 250 37,294 31,924 37,294 31,924 Note 13 Property plant and equipment 2008 2007 2008 2007 $000s $000s $000s $000s All property plant and equipment At cost 5,843 5,772 5,419 5,586 Accumulated depreciation (3,678) (4,156) (3,476) (3,977) Net carrying amount of furniture and ﬁttings 2,165 1,616 1,943 1,609 44 TOURISM NEW ZEALAND ANNUAL REPORT 2007–2008 Note 13 continued GROUP PARENT Property plant and equipment for each class: Furniture and ﬁttings At cost 997 876 959 838 Accumulated depreciation (327) (369) (292) (336) Net carrying amount of furniture and ﬁttings 670 507 667 502 Leasehold improvements At cost 1,654 1,896 1,544 1,786 Accumulated depreciation (882) (1,210) (772) (1,100) Impairment 0 (126) 0 (126) Net carrying amount of leasehold improvements 772 560 772 560 Ofﬁce equipment At cost 609 589 609 589 Accumulated depreciation (447) (420) (447) (420) Net carrying amount of ofﬁce equipment 162 169 162 169 Motor vehicles At cost 112 115 112 115 Accumulated depreciation (61) (83) (61) (83) Net carrying amount of motor vehicles 51 32 51 32 Computer equipment At cost 2,471 2,296 2,195 2,258 Accumulated depreciation (1,961) (1,948) (1,904) (1,912) Net carrying amount of computer equipment 510 348 291 346 Total property plant and equipment 2,165 1,616 1,943 1,609 All property plant and equipment reconciliation At 1 July, net of accumulated depreciation 1,616 1,510 1,609 1,469 Additions 1,348 920 1,110 918 Disposals (174) (42) (174) (40) Depreciation charge for the year (625) (646) (602) (612) Impairment 0 (126) 0 (126) At 30 June, net of accumulated depreciation 2,165 1,616 1,943 1,609 Depreciation by asset class: Furniture and ﬁttings 108 85 106 81 Leasehold improvements 173 245 173 220 Ofﬁce equipment 89 92 89 92 Motor vehicles 12 16 12 16 Computer equipment 243 208 222 203 Total Depreciation 625 646 602 612 Impairment Losses 0 126 0 126 Total Depreciation and Impairment 625 772 602 738 TOURISM NEW ZEALAND ANNUAL REPORT 2007–2008 45 GROUP PARENT Note 14 Accommodation bonds Accommodation bonds are refundable deposits or key money paid for the lease of ofﬁce and housing premises. 2008 2007 2008 2007 $000s $000s $000s $000s UK & Europe 9 9 9 9 Japan 155 128 155 128 Asia 179 138 179 138 343 275 343 275 Note 15 Creditors and other payables Payables are non-interest bearing and are normally settled on 30-day terms, therefore the carrying value of creditors and other payables approximates their fair value. 2008 2007 2008 2007 $000s $000s $000s $000s Creditors 1,426 1,870 1,301 1,846 Income in advance 335 78 310 54 Accrued expenses 2,852 2,256 2,592 2,054 4,613 4,204 4,203 3,954 Note 16 Employee entitlements 2008 2007 2008 2007 $000s $000s $000s $000s Annual Leave 430 370 394 347 Retirement Leave 437 354 437 354 Long Service Leave 58 51 58 51 Sick Leave 2 2 2 2 927 777 891 754 Note 17 Provisions Tourism New Zealand has a number of potential future restoration costs relating to make good clauses on ofﬁce rental leases. The provision recognises the present value of expected future payments for amounts in relation to make good. The provision relates to seven Tourism New Zealand ofﬁces and is expected to be incurred over the next 12 years. 2008 2007 2008 2007 $000s $000s $000s $000s Provisions are represented by: Lease make-good 303 220 303 220 Total Provisions 303 220 303 220 46 TOURISM NEW ZEALAND ANNUAL REPORT 2007–2008 Note 17 continued GROUP PARENT 2008 2008 2008 2007 Lease Lease Lease Lease make-good make-good make-good make-good Movements for provisions are as follows: $000s $000s $000s $000s Balance at 1 July 220 320 220 320 Additional provisions made 165 0 165 0 Amounts used (82) (100) (82) (100) Unused amounts reversed 0 0 0 0 Discount unwind 0 0 0 0 Balance at 30 June 303 220 303 220 Note 18 Reconciliation of surplus (deﬁcit) to net cash from operating activities 2008 2007 2008 2007 $000s $000s $000s $000s Net operating surplus (deﬁcit) 4,029 (4,630) 4,043 (4,554) Add/(less) non-cash items Depreciation and impairment 624 772 602 738 Net (gains) on derivative ﬁnancial instruments (4,040) 5,037 (4,040) 5,037 Net losses on derivative ﬁnancial instruments 20 (43) 20 (43) Net foreign exchange (gains)/losses (149) 732 (149) 732 Total non-cash items (3,545) 6,498 (3,567) 6,464 Add/(less) items classiﬁed as investing or ﬁnancing activities Net Loss/(Gain) on disposal of assets 143 32 143 30 Net Loss/(Gain) on foreign currency accommodation bonds (23) 82 (23) 82 Total items classiﬁed as investing or ﬁnancing activities 120 114 120 112 Add/(less) movements in working capital items Debtors and other receivables (150) (276) (151) (253) Prepayments 1,869 (2,275) 1,866 (2,289) Payables & accruals 626 (638) 453 (672) Provisions 83 (100) 83 (100) Employee entitlements 150 (101) 137 (102) Net movements in working capital items 2,578 (3,390) 2,388 (3,416) Net cash from operating activities 3,182 (1,408) 2,984 (1,394) Note 19 Contingent liabilities and contingent assets There are no known contingencies for the Group or Parent as at 30 June 2008 (2007: Nil). TOURISM NEW ZEALAND ANNUAL REPORT 2007–2008 47 Note 20 Income tax Tourism New Zealand is exempt from income tax under the New Zealand Tourism Board Act 1991. Tourism New Zealand’s subsidiaries are subject to income tax. The Group has tax losses unrecognised that can be used to offset future assessable income of $129,407 (2007: $246,445) Note 21 Management of risk Tourism New Zealand has developed a risk management framework and has undertaken a full risk assessment of its business. Management is required to sign off on a half yearly basis that no new exposures have arisen and that existing risks are being properly managed. Written policies and procedures exist covering those aspects of business which have the potential to generate risk for Tourism New Zealand. Adherence to these policies minimises potential risk to Tourism New Zealand. Employees are required as part of employment contracts to adhere to Tourism New Zealand policies and procedures. Tourism New Zealand carries comprehensive insurance covering all normal business risks including Public Liability. Tourism New Zealand has purchased insurance to provide Directors and Ofﬁcers Liability, Employers Liability and Professional Indemnity cover for Board members and employees. Tourism New Zealand also provides cover for its staff for off shore travel. Insured values are reviewed annually and adjusted to reﬂect changes in business operations. Note 22 Signiﬁcant accounting judgements, estimates and assumptions The preparation of the ﬁnancial statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the ﬁnancial statements. Management continually evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. These judgements and estimates are based on historical experience and other factors that are reasonable under the circumstances and form the basis for the carrying values of assets and liabilities. Actual results may differ from these estimates under different assumptions and conditions. Management has identiﬁed the following critical accounting policy for which signiﬁcant judgements, estimates and assumptions have been made. Make good provision A provision has been made for a number of potential future restoration costs relating to make good clauses on seven ofﬁce rental leases. The calculation of this provision requires assumptions such as the extent, if any, that Landlords will enforce the make good clauses in the leases and building and demolition cost estimates. These uncertainties may result in future actual expenditure differing from the amounts currently provided. The provision recognised for each lease is periodically reviewed and updated based on the facts and circumstances available at the time. Changes to the estimated future costs for make good are recognised in the balance sheet by adjusting both the expense or asset and provision. The related carrying amounts are disclosed in note 17. Note 23 Capital management Tourism New Zealand’s capital is its equity, which comprises accumulated funds and other reserves. Equity is represented by net assets. Tourism New Zealand is subject to the ﬁnancial management and accountability provisions of the Crown Entities Act 2004, which impose restrictions in relation to borrowings, acquisition of securities, issuing guarantees and indemnities and the use of derivatives. Tourism New Zealand manages its equity as a by-product of prudently managing revenues, expenses, assets, liabilities, investments and general ﬁnancial dealings to ensure that Tourism New Zealand effectively achieves its objectives and purpose, whilst remaining a going concern. 48 TOURISM NEW ZEALAND ANNUAL REPORT 2007–2008 GROUP PARENT Note 24 Categories of ﬁnancial assets and liabilities The carrying amounts of ﬁnancial assets and liabilities in each of the NZ IAS 39 categories are as follows: 2008 2007 2008 2007 $000s $000s $000s $000s Loans and receivables: Cash and cash equivalents 5,200 3,435 5,077 3,272 Debtors and other receivables 1,324 1,193 1,286 1,135 Total Loans and receivables 6,524 4,628 6,363 4,407 Fair value through proﬁt and loss: Derivative ﬁnancial instrument assets 1,514 0 1,514 0 Derivative ﬁnancial instrument liabilities 20 2,526 20 2,526 Financial liabilities measured at amortised cost: Creditors and other payables 4,613 4,204 4,203 3,954 Total ﬁnancial liabilities measured at amortised cost 4,613 4,204 4,203 3,954 Note 25 Capital commitments 2008 2007 2008 2007 $000s $000s $000s $000s Total capital expenditure contracted for at balance date but not provided for in the ﬁnancial statements 0 0 0 0 Note 26 Operating commitments Operating commitments include non-cancellable lease payments for premises, motor vehicles and ofﬁce equipment and non-cancellable contracts for services like equipment maintenance and public relations. 2008 2007 2008 2007 $000s $000s $000s $000s Operating Commitments payable after balance date on: Non-Cancellable Accommodation Leases: Up to One Year 2,095 1,585 2,020 1,520 One to Two Years 1,698 993 1,698 993 Two to Five Years 2,866 2,117 2,866 2,117 Over Five Years 4,108 4,217 4,108 4,217 10,767 8,912 10,692 8,847 Non-Cancellable Motor Vehicle & Equipment Leases Up to One Year 286 175 210 147 One to Two Years 230 105 154 99 Two to Five Years 322 97 131 88 Over Five Years 0 0 0 0 838 377 495 334 TOURISM NEW ZEALAND ANNUAL REPORT 2007–2008 49 Note 26 continued GROUP PARENT Non-Cancellable Contracts for Goods & Services Up to One Year 107 105 107 105 One to Two Years 0 0 0 0 Two to Five Years 0 0 0 0 Over Five Years 0 0 0 0 107 105 107 105 Total Commitments 11,712 9,394 11,294 9,286 Note 27 Related party transactions Tourism New Zealand is a wholly owned entity of the Crown which has the ability to signiﬁcantly inﬂuence its role. The Crown is Tourism New Zealand’s major source of revenue. Tourism New Zealand enters into transactions with government departments, state-owned enterprises and other Crown entities. Those transactions that occur within a normal supplier or client relationship on terms and conditions no more or less favourable than those which it is reasonable to expect Tourism New Zealand would have adopted if dealing with that entity at arm’s length in the same circumstances have not been disclosed as related party transactions. Tourism New Zealand also enters into transactions with its subsidiaries and associate. These transactions occur within a normal supplier or client relationship on terms and conditions no more or less favourable than those which it is reasonable to expect Tourism New Zealand would have adopted if dealing with that entity at arm’s length. The following table provides the total amount of transactions that were entered into with these related parties. Transaction value Balance outstanding year ended 30 June year ended 30 June 2008 2007 2008 2007 $000s $000s $000s $000s Related Party and Transaction Subsidiary – Qualmark New Zealand Limited: Shareholder income provided by Tourism New Zealand 1,046 716 0 0 Purchases from Tourism New Zealand 52 53 28 14 Subsidiary – Visitor Information Network Inc: Shareholder income provided by Tourism New Zealand 500 250 0 0 Sales to Tourism New Zealand 0 6 0 0 Purchases from Tourism New Zealand 5 11 0 0 Associate – The New Zealand Way Limited: Shareholder income provided by Tourism New Zealand 0 15 0 0 Tourism New Zealand also enters into transactions with Directors and entities over which they have control or signiﬁcant inﬂuence. These transactions occur within a normal supplier or client relationship on terms and conditions no more or less favourable than those which it is reasonable to expect Tourism New Zealand would have adopted if dealing with that entity at arm's length. The following table provides the total amount of transactions that were entered into with these related parties. 50 TOURISM NEW ZEALAND ANNUAL REPORT 2007–2008 Note 27 continued Transaction value Balance outstanding year ended 30 June year ended 30 June 2008 2007 2008 2007 $000s $000s $000s $000s Related Party and Transaction Income has been received by Tourism New Zealand from: G Coughlan (Director): Positively Wellington Tourism – Income received by TNZ for joint advertising campaigns and other tourism related services. 441 468 P Bingham (Director): Christchurch & Canterbury Marketing Ltd and Christchurch & Canterbury Convention Bureau Ltd – Income received by TNZ for joint advertising campaigns and other tourism related services. 767 145 Payments have been made by Tourism New Zealand to: W Stone (Chairman): Whalewatch Kaikoura, Shotover Jet, Dart River Safaries, Franz Josef Glacier Guides, Huka Jet, Rainbow Springs – Provision of tourism related services to TNZ. 5 8 0 0 K Guy (Director): Bayview International Group of Hotels and Resorts – Provision of conference and accomodation services to TNZ 76 33 0 17 G Coughlan (Director): Te Papa – Provision of conference and tourism related service to TNZ. 21 51 P Bingham (Director): Black Cat Group and Christchurch & Canterbury Marketing Ltd – Provision of tourism related services to TNZ. 3 6 S Murray (Director): Maui Rentals – Provision of tourism related services to TNZ 15 4 0 0 J Barrett (Director): Kapiti Island Alive & Kapiti Nature Lodge – Provision of tourism related services to TNZ 3 4 0 0 PARENT 2008 2007 $000s $000s Key management personnel compensation Salaries and other short-term employee beneﬁts 1,877 1,775 Post-employment beneﬁts 0 0 Other long-term beneﬁts 42 53 Termination beneﬁts 0 0 Total key management personnel compensation 1,919 1,828 Key management personnel includes all board members, the Chief Executive and the 6 members of the Executive Team. TOURISM NEW ZEALAND ANNUAL REPORT 2007–2008 51 Note 28 Financial instrument risks Tourism New Zealand’s activities expose it to a variety of ﬁnancial instrument risks, including market risk, credit risk and liquidity risk. Tourism New Zealand has a series of policies to manage the risks associated with ﬁnancial instruments and seeks to minimise exposure from ﬁnancial instruments. These policies do not allow any transactions that are speculative in nature. Market Risk Fair value interest rate risk – Fair value interest rate risk is the risk that the value of a ﬁnancial instrument will ﬂuctuate due to changes in market rates. Tourism New Zealand has no exposure to fair value interest rate risk as all bank deposits are held at call rates. Currency risk – Currency risk is the risk that the fair value or future cash ﬂows of a ﬁnancial instrument will ﬂuctuate due to changes in foreign exchange rates. As a result of signiﬁcant operations around the world, Tourism New Zealand is required to enter into transactions denominated in foreign currencies. As a result of these activities, exposure to currency risk arises. It is Tourism New Zealand's policy to manage foreign currency risks arising from contractual commitments and liabilities by entering into foreign exchange forward contracts to cover the foreign currency exposure. Currency risk sensitivity analysis – Tourism New Zealand is subject to volatility in ﬁnancial performance associated with foreign currency rates, especially when recognising fair value movements associated with forward foreign exchange contracts. As at 30 June 2008, if the NZ Dollar had weakened/strengthened by 5% against the basket of foreign currencies used by Tourism New Zealand with all other variables held constant, the surplus would have been: This movement is attributable to foreign exchange gains/losses on translation of forward foreign exchange contracts and excludes other foreign currency denominated assets and liabilities which would have had a less signiﬁcant effect on the surplus. Credit risk Credit risk is the risk that a third party will default on its obligations to Tourism New Zealand, causing Tourism New Zealand to incur a loss. Tourism New Zealand has no signiﬁcant concentrations of credit risk, as it has a small number of credit customers and only places funds with registered banks. With respect to foreign exchange instruments, Tourism New Zealand reduces its risk by limiting the counter parties to major trading banks and does not expect to incur any signiﬁcant losses as a result of non performance by these counter parties. Tourism New Zealand's maximum credit exposure for each class of ﬁnancial instrument is represented by the total carrying amount of cash (note 10), net debtors (note 11) and derivative ﬁnancial instruments (note 12). There is no collateral held as security against these ﬁnancial instruments, including those instruments that are overdue or impaired. Liquidity risk Liquidity risk is the risk that Tourism New Zealand will encounter difﬁculty raising liquid funds to meet commitments as they fall due. Tourism New Zealand has no signiﬁcant concentrations of liquidity risk. Tourism New Zealand annually agrees a funding schedule with the Crown which matches the estimated timing of its commitments and close out of market positions. Note 29 Remuneration of employees During 2007/2008 32 (2007: 33) employees received remuneration and beneﬁts which exceeded $100,000 per annum as follows: PARENT $ 2008 2007 100,000 - 109,999 7 7 110,000 - 119,999 5 4 120,000 - 129,999 3 3 130,000 - 139,999 2 4 140,000 - 149,999 2 1 150,000 - 159,999 1 1 160,000 - 169,999 1 1 170,000 - 179,999 0 2 180,000 - 189,999 1 1 190,000 - 199,999 0 1 52 TOURISM NEW ZEALAND ANNUAL REPORT 2007–2008 Note 29 continued PARENT 200,000 - 209,999 2 1 220,000 - 229,999 0 2 240,000 - 249,999 2 2 250,000 - 259,999 1 0 260,000 - 269,999 1 0 280,000 - 289,999 1 1 290,000 - 299,999 0 1 300,000 - 309,999 2 0 380,000 - 389,999 0 1 390,000 - 399,999 1 0 32 33 Average remuneration of above employees $170,514 $164,341 Note: A number of Tourism New Zealand employees are based offshore and are paid in local currency at appropriate remuneration levels within the respective countries. This remuneration has been translated at the exchange rates of forward exchange contracts used to cover this expenditure. Note 30 Remuneration of directors of parent 2008 2007 $000s $000s Board members earned the following fees during the year: W Stone (Chair) 39 35 S Johnstone (Deputy Chair) 25 18 P Bingham 20 18 K Guy 20 18 S Murray 20 18 G Coughlan 20 8 K McKelvie 20 8 J Barrett 20 8 M Johns 20 0 P Stubbs 0 22 M Boyd 0 10 K Johnston 0 10 M Tamaki 0 10 204 183 Changes in Directors: W Stone retired on 30 June 2008. G Muir was appointed Chairman on 15 July 2008. K Guy resigned as a Director on 14 August 2008. Henry van Asch was appointed a Director on 1 September 2008. TOURISM NEW ZEALAND ANNUAL REPORT 2007–2008 53 Note 31 Explanation of transition to NZ IFRS The New Zealand Accounting Standards Review Board announced on 19 December 2002 that New Zealand International Financial Reporting Standards (NZ IFRS) will apply for reporting periods commencing on or after 1 January 2007. These are Tourism New Zealand’s ﬁrst ﬁnancial statements to be prepared in accordance with NZ IFRS. Tourism New Zealand’s transition date is 1 July 2006 and the opening NZ IFRS balance sheet has been prepared as at that date. Tourism New Zealand’s adoption date is 1 July 2007. Transition from existing NZ GAAP to NZ IFRS has been made in accordance with NZ IFRS 1 "First-time Adoption of New Zealand Equivalents to International Financial Reporting Standards." Comparative information has been restated to conform with the requirements of NZ IFRS. Reconciliation of equity The following table shows the changes in equity, resulting from the transition from previous NZ GAAP to NZ IFRS as at 1 July 2006 and 30 June 2007: Note 1 July 2006 Group 30 June 2007 Group Effect on Effect on Previous NZ Transition Previous Transition GAAP to NZ IFRS NZ IFRS NZ GAAP to NZ IFRS NZ IFRS $000s $000s $000s $000s $000s $000s Current Assets Cash 6,265 0 6,265 3,435 0 3,435 Receivables 913 0 913 1,193 0 1,193 Prepayments & other current assets a 299 320 619 2,726 165 2,891 Derivative ﬁnancial instruments b 0 2,512 2,512 0 0 0 7,477 2,832 10,309 7,354 165 7,519 Non-current Assets Property plant and equipment 1,510 0 1,510 1,616 0 1,616 Investment in associate 5 0 5 10 0 10 Accommodation bonds 340 0 340 275 0 275 1,855 0 1,855 1,901 0 1,901 Total Assets 9,332 2,832 12,164 9,255 165 9,420 Current Liabilities Creditors and other payables 4,603 0 4,603 4,204 0 4,204 Employee entitlements c 380 500 880 370 407 777 Provisions a 0 320 320 0 220 220 Derivative ﬁnancial instruments b 0 43 43 0 2,526 2,526 4,983 863 5,846 4,574 3,153 7,727 Total Liabilities 4,983 863 5,846 4,574 3,153 7,727 Net Assets 4,349 1,969 6,318 4,681 (2,988) 1,693 Equity Shareholder's equity 1,805 0 1,805 1,805 0 1,805 Retained earnings 2,451 1,969 4,420 2,765 (2,988) (223) Minority interests 93 0 93 111 0 111 Total Equity 4,349 1,969 6,318 4,681 (2,988) 1,693 54 TOURISM NEW ZEALAND ANNUAL REPORT 2007–2008 Note 31 continued a. Lease Make Good Provision Tourism New Zealand has a number of potential future restoration costs relating to make good clauses on ofﬁce rental leases. A liability provision and an asset lease for these costs were not recognised under NZ GAAP. NZ IFRS requires Tourism New Zealand to recognise the present value of expected future payments for amounts in relation to make good. The asset lease is amortised over the expected term of the lease. The provision relates to seven Tourism New Zealand ofﬁces and are expected to be incurred over the next 12 years. b. Derivative ﬁnancial instruments Financial derivatives were not recognised in the statement of ﬁnancial position under previous NZ GAAP. NZ IFRS requires ﬁnancial derivatives to be recognised in the statement of ﬁnancial position at their fair value. c. Employee entitlements Retirement, long service and sick leave were not recognised as a liability under previous NZ GAAP. NZ IFRS requires Tourism New Zealand to recognise employees retirement, long service and sick leave. Retirement and long service leave obligations are calculated based on a number of assumptions including the discount rate and the salary inﬂation factor. The amount of unused employees sick leave entitlement that can be carried forward at balance date is recognised to the extent that Tourism New Zealand anticipates it will be used by staff to cover future absences. Reconciliation of surplus for the year ending 30 June 2007 The following table shows the changes in the Tourism New Zealand surplus, resulting from the transition from previous NZ GAAP to NZ IFRS for the year ending 30 June 2007: Effect on Previous NZ Transition to Note GAAP NZ IFRS NZ IFRS $000s $000s $000s Income Revenue from Crown 74,246 0 74,246 Interest income 866 0 866 Other revenue 6,295 0 6,295 Net foreign exchange gains a 2,574 43 2,617 Total Income 83,981 43 84,024 Expenditure Marketing expenses 62,121 0 62,121 Other expenses b, c 18,670 (37) 18,633 Depreciation & Impairment 772 0 772 Net foreign exchange losses d 2,091 5,037 7,128 Total Expenditure 83,654 5,000 88,654 Net Operating Surplus/(Deﬁcit) before Taxation 327 (4,957) (4,630) Income tax expense 0 0 0 Minority interests in proﬁts/(losses) of subsidiaries 18 0 18 Share of loss/(gain) of associate company (5) 0 (5) Net Surplus/(Deﬁcit) for the year 314 (4,957) (4,643) TOURISM NEW ZEALAND ANNUAL REPORT 2007–2008 55 Note 31 continued a. Gains – Net gain on derivative ﬁnancial instruments This represents fair value movements associated with forward foreign exchange contracts, which are required to be recognised in the statement of ﬁnancial performance. Under previous NZ GAAP unrecognised gains on forward exchange contracts were deferred (off balance sheet) and were subsequently recognised as an adjustment to the recognition value of the relevant assets. b. Other expenses – long service, retirement and sick leave This represents the increase in the long service leave, retirement leave and sick leave provisions which were not recognised under previous NZ GAAP c. Other expenses – Lease asset and make good provision This represents the increase in the lease asset and make good provision together with depreciation of the lease asset which were not recognised under previous NZ GAAP d. Other expenses – Net loss on derivative ﬁnancial instruments This represents fair value movements associated with forward foreign exchange contracts, which are required to be recognised in the statement of ﬁnancial performance. Under previous NZ GAAP unrecognised losses on forward exchange contracts were deferred (off balance sheet) and were subsequently recognised as an adjustment to the recognition value of the relevant assets. Explanation of material adjustments to the statements of cash ﬂows There are no material differences between the cash ﬂow statement presented under NZ IFRS and the cash ﬂow statement presented under previous NZ GAAP. 56 TOURISM NEW ZEALAND ANNUAL REPORT 2007–2008 Five Year Financial Summary for Parent Statement of Financial Position 2004 2005 2006 2007 2008 Actual Actual Actual Actual Actual $000s $000s $000s $000s $000s Current Assets Cash 4,062 6,673 6,086 3,272 5,077 Receivables 655 1,133 882 1,135 1,286 Prepayments & other current assets 684 600 275 2,884 1,018 Derivative ﬁnancial instruments - - - 0 1,514 5,401 8,406 7,243 7,291 8,895 Non-current Assets Property plant and equipment 1,725 1,223 1,469 1,609 1,943 Accommodation bonds 298 228 340 275 343 2,023 1,451 1,809 1,884 2,286 Total Assets 7,424 9,857 9,052 9,175 11,181 Current Liabilities Creditors and other payables 2,499 4,614 4,389 3,954 4,203 Provisions 626 0 0 220 303 Employee entitlements 371 333 357 754 891 Derivative ﬁnancial instruments - - - 2,526 20 3,496 4,947 4,746 7,454 5,417 Total Liabilities 3,496 4,947 4,746 7,454 5,417 Net Assets 3,928 4,910 4,306 1,721 5,764 Equity Shareholder's equity 1,805 1,805 1,805 1,805 1,805 Retained earnings 2,123 3,105 2,501 (84) 3,959 Total Equity 3,928 4,910 4,306 1,721 5,764 Statement of Financial Performance 2004 2005 2006 2007 2008 Actual Actual Actual Actual Actual $000s $000s $000s $000s $000s Revenue Government grants 60,230 69,754 79,358 74,246 75,071 Interest 419 627 745 859 707 Other revenue 310 289 474 4,243 4,817 Foreign exchange gains - - - 2,617 7,999 60,959 70,670 80,577 81,965 88,594 Expenditure Marketing expenses 47,498 52,213 63,202 61,631 63,044 Other expenses 15,841 16,808 17,427 17,022 18,428 Depreciation & Impairment 714 667 552 738 602 Foreign exchange losses - - - 7,128 2,477 64,053 69,688 81,181 86,519 84,551 Net Operating Surplus/(Deﬁcit) (3,094) 982 (604) (4,554) 4,043 The 2008 ﬁnancial year was Tourism New Zealand’s ﬁrst set of ﬁnancial statements to be prepared in accordance with New Zealand International Financial Reporting Standards (NZ IFRS.) The comparative ﬁgures for 2007 have been restated accordingly to NZ IFRS. Note however that the comparatives ﬁgures from 2004 to 2006 in the above table have not been restated to NZ IFRS. TOURISM NEW ZEALAND ANNUAL REPORT 2007–2008 57 AUDIT REPORT TO THE READERS OF NEW ZEALAND TOURISM BOARD AND GROUP’S FINANCIAL STATEMENTS AND STATEMENT OF SERVICE PERFORMANCE FOR THE YEAR ENDED 30 JUNE 2008 The Auditor-General is the auditor of the New Zealand Tourism Board (the Audit procedures generally include: Board) and group. The Auditor-General has appointed me, Grant Taylor, - determining whether signiﬁcant ﬁnancial and management controls using the staff and resources of Ernst and Young, to carry out the audit on are working and can be relied on to produce complete and accurate his behalf. The audit covers the ﬁnancial statements and statement of data; service performance included in the annual report of the Board and group for the year ended 30 June 2008. - verifying samples of transactions and account balances; Unqualiﬁed Opinion - performing analyses to identify anomalies in the reported data; In our opinion: - reviewing signiﬁcant estimates and judgements made by the Board of – The ﬁnancial statements of the Board and group on pages 32 to 56: Directors; – comply with generally accepted accounting practice in - conﬁrming year-end balances; New Zealand; - determining whether accounting policies are appropriate and – give a true and fair view of: consistently applied; and – the Board and group’s ﬁnancial position as at 30 June 2008; - determining whether all ﬁnancial statement and statement of service and performance disclosures are adequate. – the results of operations and cash ﬂows for the year ended We did not examine every transaction, nor do we guarantee complete on that date. accuracy of the ﬁnancial statements and statement of service – The statement of service performance of the Board and group on performance. pages 12 to 27: We evaluated the overall adequacy of the presentation of information in – complies with generally accepted accounting practice in the ﬁnancial statements and statement of service performance. We New Zealand; and obtained all the information and explanations we required to support our opinion above. – gives a true and fair view of, for each class of outputs: – standards of delivery performance achieved, as compared Responsibilities of the Board of Directors and the Auditor with the forecast standards outlined in the statement of The Board of Directors is responsible for preparing the ﬁnancial forecast service performance adopted at the start of the statements and statement of service performance in accordance with ﬁnancial year; and generally accepted accounting practice in New Zealand. The ﬁnancial statements must give a true and fair view of the ﬁnancial position of the – actual revenue earned and output expenses incurred, as Board and group as at 30 June 2008 and the results of operations and compared with the forecast revenues and output expenses cash ﬂows for the year ended on that date. The statement of service outlined in the statement of forecast service performance performance must give a true and fair view of, for each class of outputs, adopted at the start of the ﬁnancial year. the Board and group’s standards of delivery performance achieved and – Based on our examination the Board and group kept proper revenue earned and expenses incurred, as compared with the forecast accounting records. standards, revenue and expenses adopted at the start of the ﬁnancial The audit was completed on 31 October 2008, and is the date at which year. The Board of Director’s responsibilities arise from the Crown Entities our opinion is expressed. Act 2004 and the New Zealand Tourism Board Act 1991. The basis of our opinion is explained below. In addition, we outline the We are responsible for expressing an independent opinion on the ﬁnancial responsibilities of the Board of Directors and the Auditor, and explain our statements and statement of service performance and reporting that independence. opinion to you. This responsibility arises from section 15 of the Public Audit Act 2001 and the Crown Entities Act 2004. Basis of Opinion We carried out the audit in accordance with the Auditor-General’s Auditing Independence Standards, which incorporate the New Zealand Auditing Standards. When carrying out the audit we followed the independence requirements of the Auditor-General, which incorporate the independence requirements We planned and performed the audit to obtain all the information and of the Institute of Chartered Accountants of New Zealand. explanations we considered necessary in order to obtain reasonable assurance that the ﬁnancial statements and statement of service performance Other than the audit, we have no relationship with or interests in the did not have material misstatements, whether caused by fraud or error. Board or any of its subsidiaries. Material misstatements are differences or omissions of amounts and disclosures that would affect a reader’s overall understanding of the ﬁnancial statements and statement of service performance. If we had found material misstatements that were not corrected, we would have referred to them in our opinion. Grant Taylor The audit involved performing procedures to test the information presented Ernst & Young in the ﬁnancial statements and statement of service performance. On behalf of the Auditor-General We assessed the results of those procedures in forming our opinion. Wellington, New Zealand 58 TOURISM NEW ZEALAND ANNUAL REPORT 2007–2008 visit www.tourismnewzealand.com Tourism N ew Zealand Manaakitanga Aot ear oa, P Bo x 9 5 Lev el 22, 157 Lambton Quay, Wellington, New Ze and Touris Ze n Mana kitanga Aotearoa, Tou i m New Zea lan d M an aki g A e a PO Box 95, Level 22e l ambton We llingt o Zealand Lamb o Qu , W lli ngton, Ne Zealan +64 462 8000 www.t ourismnew ealan d www.tourismnewzealand.com www.new a lan d.c om Tel : + 64 4 4 62 800 ww w. our newzea la d.c om w newzea l d. m www.newzealand.com This Annual Report has been printed on 100% recycled paper, made up of 30% pre-consumer printer and converting waste and 70% post-consumer waste from old milk cartons. 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