Financial Statements of the Government of New Zealand

Financial Statements of the Government of New Zealand For the Eight Months Ended 28 February 2006 7 April 2006 Prepared by The Treasury Printed by PrintLink ISBN 0-478-18291-0 This document is available on the New Zealand Treasury s Internet site. The URL for this site is http://www.treasury.govt.nz

CONTENTS Commentary Crown Financial Statements February 2006 4 Summary 5 Student Loan Policy 6 New Zealand s liability under the Kyoto Protocol for the first Commitment Period 7 Breakdown of Indicators 8 Comparison with Prior Year 10 Financial Statements Statement of Accounting Policies (including an explanation of changes to presentation) 14 This section outlines the summary accounting policies underpinning the preparation of the Crown financial statements. It includes an explanation of the changes to the basis of these accounts from past presentational formats. Statement of Financial Performance 16 The statement outlines the operating results of the total Crown (ie, revenues and expenses of all departments + Reserve Bank + GSF (core Crown), SOEs (including Air New Zealand) and Crown entities). Expense by sector is also shown for total Crown and core Crown. Statement of Cash Flows 18 Statement of Movements in Equity 19 Statement of Financial Position 20 The statement outlines balance sheet results of the total Crown (ie, assets and liabilities of the core Crown, SOEs and Crown entities added together). Additional information is provided on the NZS Fund and debt indicators. Statement of Borrowings 22 The statement outlines total borrowings (split by sovereign-guaranteed and non-sovereign guaranteed and categorised as domestic and foreign) less all financial assets. The net result does not represent net (core) Crown debt. Net (core) Crown numbers are shown in the information with the Statement of Financial Position and Segment information. Statement of Commitments 23 Statement of Contingent Liabilities and Assets 23 Statement of Segments 24 A new statement that outlines the operating results and balance sheet by each institutional segment (ie, core Crown, SOEs and Crown entities). Notes to the Financial Statements 28 Core Crown Government Bonds Reconciliation 38 The statement outlines the core Crown operating and investing flows and the amount available for debt repayment. It is reconciled to the NZDMO Government Stock programme. Officers for Enquiries Glenn Phillips (phone 64-4-471-5102) (E-mail: glenn.phillips@treasury.govt.nz) Budget and Macroeconomic Branch The Treasury (1 The Terrace) PO Box 3724, Wellington NEW ZEALAND Facsimile: 64-4-499-0992

COMMENTARY

CROWN FINANCIAL STATEMENTS FEBRUARY 2006 The Government of New Zealand has a series of long term fiscal objectives, including objectives on the operating balance, revenue, expenses, debt and net worth, to maintain fiscal responsibility. To enable progress towards these long term objectives, the Government has outlined where its focus will be. Taken together this enables interested parties to assess the picture of the fiscal performance of the Government. In summary, given the long term debt to GDP objective and a policy of prefunding future expenses (i.e. the purpose of the NZS Fund) it requires a level of operating balance sufficient to generate cashflow to cover capital investment. Within the full set of financial statements, each individual statement provides a different set of information to assess the overall performance (e.g. expenses in the operating statement gives an indication of size of Government and the cashflow from operating and investing provides the amount left over or required to be financed after all spending, operating and capital, is taken into account). These financial statements provide a snap-shot of progress towards the long term fiscal objectives and the performance against the latest set of fiscal forecasts released in the Half Year Economic and Fiscal Update on 19 December 2005. A summary of the long term objectives are outlined below. Long-term fiscal objectives Operating balance: Operating surplus on average over the economic cycle sufficient to meet the requirements for contributions to the NZS Fund and ensure consistency with the long-term debt objective. Revenue: Ensure sufficient revenue to meet the operating balance objective. Expenses: Ensure expenses are consistent with the operating balance objective. Debt: Manage total debt at prudent levels. Gross sovereign-issued debt as a percentage of GDP slowly reducing over the longer term and passing through 20% of GDP before 2015. Net worth: Increase net worth consistent with the operating balance objective. To achieve the objectives of fiscal policy, the Government s high-level focus is on: Operating surpluses (measured by the OBERAC) during the build-up phase of the NZS Fund. The focus is on core Crown revenues and expenses, with tax-to-gdp and core Crown expenses-to-gdp around current levels. Because the OBERAC surplus includes the net (after-tax) return on the NZS Fund, which the NZS Fund will retain, the Government is effectively targeting OBERAC surpluses excluding the NZS Fund s retained investment returns. A robust, broad-based tax system that raises revenue in a fair and efficient way. State Owned Enterprises (SOEs) and Crown entities contributing to surpluses, consistent with their legislation and Government policy. SOEs will have debt structures that reflect best commercial practice. Changes in the level of debt will reflect specific circumstances. Gross sovereign-issued debt-to-gdp will be reducing during the period ahead of the major demographic changes associated with population ageing. Net debt, with NZS Fund assets, is expected to fall towards minus 15% of GDP by 2015 (ie, a net financial asset position). Increasing net worth consistent with the operating balance objective will see net worth at above 50% of GDP by 2015. The NZS Fund is expected to be 21% of GDP by 2015. Consistent with the net worth objective, there will also be a focus on quality investment. 4 Financial Statements of the Government of New Zealand eight months ended 28 February 2006

SUMMARY The Crown financial statements for the eight months ended 28 February 2006 are compared against forecasts based on the 2005 Half Year Economic and Fiscal Update (Half Year Update). Since December 2005, the impact of the Government s student loan policy decision and the subsequent write down to fair value of the student loan portfolio has been incorporated in the monthly results. In addition, the removal of the carbon tax and changes to deforestation projections have increased the Kyoto liability from that reported in the November financial statements. Table 1 Summary Fiscal Indicators $ million February February 2006 2006 Variance June 2006 June 2005 Actual YTD Forecast YTD $m Forecast Actual Net cash flow from core operating and investing activity 1,317 1,344 (27) 492 3,104 Gross sovereign-issued debt 35,780 32,585 3,195 33,275 35,045 % of GDP 23.2 21.1 2.1 21.3 23.2 Net core Crown debt 10,274 10,536 (262) 10,597 10,771 % of GDP 6.7 6.8 (0.1) 6.8 7.1 Total Crown debt 38,817 35,640 3,177 36,054 36,864 Operating balance 6,646 3,991 2,655 5,557 6,247 OBERAC 4,743 3,991 752 5,924 8,873 Net worth 56,620 53,982 2,638 55,555 49,983 Net cash flow from core operating and investing activity was in line with forecast at $1.3 billion. Net cash flows from operations were slightly ahead of forecast due to higher tax and interest receipts being partially offset by higher operating expenditure. There were timing delays in advances and investments into District Health Boards and Housing New Zealand Corporation (these are expected to be made in the next few months). The purchase of Reserve Bank reserves was made for the first time this month. Some of this funding has occurred earlier than previously forecast. Gross sovereign-issued debt (GSID) was $35.8 billion (23.2% of GDP), around $3.2 billion higher than forecast. This was largely due to increased borrowing as a result of: the Reserve Bank raising the settlement cash level to $2 billion (previously $20 million) due to their concerns over liquidity pressures in the payments system created by the February NZ Government Bond maturity (the bond maturity reduces the amount of collateral available for the banks to use). This is likely to remain through to year-end; higher than forecast rollover of repurchase agreements of securities held by the Reserve Bank of around $0.7 billion (the forecast was based on levels as at 31 October 2005); and additional issuance of Government Stock (around $0.3 billion). Net core Crown debt was $10.3 billion, which was around $0.3 billion lower than forecast, largely due to higher issues of circulating currency and unrealised foreign exchange gains (both of which are not forecast as a matter of policy). The operating balance of $6.6 billion in February was higher than forecast by $2.7 billion. This has primarily been driven by higher investment income (which has been the trend since November). This was due to: Meridian Energy s gain on sale of Southern Hydro of around $0.6 billion (as reported in the November 2005 financial statements), which was not forecast; Higher than expected investment returns of the NZS Fund (around $0.7 billion), ACC (around $0.3 billion), EQC (around $0.2 billion) and GSF (around $0.2 billion); and core Crown expenses being $0.5 billion lower than forecast, spread across a number of departments. Since the OBERAC removes the investment gains, it is mainly delays in departmental spending that has resulted in the OBERAC being $0.8 billion ahead of forecast, at $4.7 billion. Financial Statements of the Government of New Zealand eight months ended 28 February 2006 5

Student Loan Policy In November 2005 the Government agreed that interest will not be charged on student loans where certain criteria, largely related to being domiciled in New Zealand, are met. To better reflect the value of student loans under this no-interest policy, the accounting policy for reporting loans has also been updated. The accounting policy is to initially recognise student loans at their fair value and to subsequently report them at amortised cost. This accounting policy is to apply from 2005/06 and is consistent with the loans and receivables designation under International Accounting Standard 39 (IAS 39) for financial instruments. The Crown will be adopting the New Zealand equivalent to IAS 39 for all financial instruments from 1 July 2007. The key changes resulting from the no-interest student loan policy and adopting a new accounting policy are: there is a one-off write-down in 2005/06 of the existing stock of loans to fair value (around $1.5 billion) the difference between the fair value of new loans and the amount lent is recognised as an expense in the year the loan is provided the initial fair value write-down will be unwound (i.e. recognised as income) over the maturity of the loans. The value will be adjusted for any impairment (e.g. non repayments caused, for example by death or bankruptcy of the borrowers). The methodology and data for measuring the unwind of the fair value write-down and impairment under the new accounting policy is being developed. For this economic and fiscal update, the student loans are presented at their forecast fair value with changes in fair value flowing through the statement of financial performance. These forecast changes in fair value may differ to those actually reported under IAS 39 using the amortised cost approach. Fair values have been calculated using a model constructed for the Ministry of Education. This model applies a number of assumptions on future income levels, repayment behaviour in addition to economic assumptions (the discount rate, inflation and so on). As such, the estimated fair value of existing and new loans at initial recognition is sensitive to changes in these assumptions. The difference between net interest accrued (interest less provision for write off) under the previous policy and net interest accrued under the new policy has been included as a Budget 2006 policy decision. Actual results for 2005 were compiled under the previous accounting policy, which was to value the loans at the amounts expected to be ultimately collected in cash. 6 Financial Statements of the Government of New Zealand eight months ended 28 February 2006

New Zealand s liability under the Kyoto Protocol for the first Commitment Period New Zealand is a signatory to the Kyoto Protocol, which imposes binding emission reduction targets on New Zealand, over the First Commitment Period (CP1 2008-2012). The Protocol entered into force on 16 February 2005, as a result of Russia's decision to ratify. The position of each country for CP1 is calculated in an agreed manner. Countries may sell any surplus units to countries that need to purchase units to make up a deficit in meeting their Kyoto obligations. Alternatively, countries can choose to hold on to any surplus emission units to count against emission obligations in future commitment periods. New Zealand s projected net emissions position over the First Commitment Period The estimate of New Zealand s net position as reported in the 30 June 2005 Crown Financial Statements was a net deficit of 36.2 million tonnes (Mt) of CO 2 -e 1 (under a median scenario). This was subsequently updated in the Half Year Update to reflect revised forecasts of deforestation to 21 Mt, which is the Government s deforestation cap under the climate change policy (an increase of 14.7 Mt from 30 June 2005). In addition, the removal of the carbon tax further increased the net liability by 13.1 Mt (as announced on 21 December 2005). Therefore, the estimate incorporated in these accounts of New Zealand s net position is a net deficit of 64 Mt. Accounting for the estimated liability New Zealand s liability under the Kyoto Protocol was recognised on the Crown accounts for the first time in May 2005. It was quantified using three variables: the quantum of our projected emissions units deficit; a price for Kyoto-compliant emission units (in $US per tonne of carbon dioxide equivalent); and the $US/$NZ exchange rate. These have been compiled from a variety of sources. All these variables can be expected to fluctuate over time. Valuing the estimated liability Assuming an exchange rate of $US0.65980 = $NZ1 (based on 28 February 2006 exchange rate) and a carbon price of $US6 per unit, the current valuation for purchasing 64 million units on the international market is around $582 million. 1 Carbon dioxide equivalent the universal unit of measurement used to indicate the global warming potential of each of the six greenhouse gases. Financial Statements of the Government of New Zealand eight months ended 28 February 2006 7

BREAKDOWN OF INDICATORS DEBT Core Crown Cash flow from operating and investing activities (page 38) was $1.3 billion. This represents $34.9 billion of receipts (including tax receipts of $32.7 billion) being utilised on: Operating payments including finance costs of $20 billion; and Subsidies and transfer payments (e.g. NZ Superannuation and Unemployment benefit) of $9.9 billion, giving a cashflow from operating activities of $5 billion. This was then used to fund: Contributions to the NZS Fund for partially funding future NZS payments of $1.5 billion Purchase of physical assets (e.g. prisons, schools) of $1.1 billion; and Other investment activity (including hospitals, housing, student loans and Reserve Bank reserves) of around $1.1 billion. Gross sovereign issued debt (page 21) was $35.8 billion (23.2% of GDP) made up of: $19.4 billion of domestic debt (including Government Stock and Treasury Bills); and $16.4 billion of foreign denominated debt. Net core crown debt (page 21) was $10.3 billion made up of: Gross sovereign issued debt of $35.8 billion; offset by financial assets including Marketable securities and deposits and cash of $17.5 billion; and Advances (including student loans) of $8 billion. The cashflow is the primary driver of the movement in both debt indicators. On a month by month basis, the movement can be seen in net debt only, as the borrowing programme (which drives gross sovereign issued debt) is set on an annual basis, and reviewed six monthly (at the time of the Economic and Fiscal Updates). 8 Financial Statements of the Government of New Zealand eight months ended 28 February 2006

OPERATING BALANCE The operating balance (page 16) was $6.6 billion, which represents: $36.9 billion of core Crown revenue (including tax revenue of $32.9 billion and $2.6 billion of investment income) $2.9 billion net surpluses (after payment of dividend to the Government) of state-owned enterprises and Crown entities (excluding ACC liability revaluation movements); offset by $22.8 billion of core Crown operating (including finance costs) and personnel expenses; $9.9 billion of subsidies and transfer payments; and $0.5 billion of valuation expense movements of GSF and ACC. The OBERAC was $4.7 billion, which was $1.9 billion lower than the operating balance, reflecting the removal of Meridian Energy s gain on sale of Southern Hydro and net investment gains on the asset portfolios held by the NZS Fund, ACC, EQC and GSF. NET WORTH Net worth is the difference between assets and liabilities. Net worth is currently $56.6 billion. Net worth is affected by two sources: operating balance and revaluations. Revaluations tend to occur at year end and are not forecast as a matter of policy. Therefore the primary driver of variances in net worth during the financial year is the operating balance. The major assets the Government invests in include: Financial assets (including student loans and marketable securities) of $24.6 billion Government Superannuation Fund portfolio of $3.9 billion New Zealand Superannuation Fund of $8.8 billion Physical assets (including prisons and schools) of $22.5 billion, including $8.8 billion of revaluations Investment in state owned enterprises and Crown entities of $24 billion, including asset portfolios in Accident Compensation Corporation and Earthquake Commission, physical assets including roading, hospitals, housing and liabilities including the ACC outstanding claims liability. 2 The Government also has liabilities, primarily gross sovereign issued debt ($35.8 billion), the pension liability of the Government Superannuation Fund ($15.2 billion) and other liabilities of $10 billion. 2 A further breakdown of the nature of the assets and liabilities of State owned enterprises and Crown entities can be found in the statement of segments on pages 24 to 27. Financial Statements of the Government of New Zealand eight months ended 28 February 2006 9

COMPARISON WITH PRIOR YEAR Table 2 Comparison with prior year 28 February 28 February 2006 2005 Actual Actual Change Change $m $m $m % Statement of Financial Performance Core Crown revenue Taxation revenue 32,914 30,701 2,213 7.2 Other revenue 4,022 3,324 698 21.0 Total core Crown Revenue 36,936 34,025 2,911 8.6 Core Crown expenses Social security and welfare 10,138 9,535 (603) (6.3) GSF pension expenses (excl valuation) 1,034 704 (330) (46.9) GSF unfunded liability movement 255 435 180 41.4 Health 6,242 5,559 (683) (12.3) Education 6,952 5,192 (1,760) (33.9) Core government services 1,334 1,247 (87) (7.0) Law and order 1,402 1,272 (130) (10.2) Defence 891 820 (71) (8.7) Transport and communications 1,081 859 (222) (25.8) Economic and industrial services 1,002 887 (115) (13.0) Primary services 269 233 (36) (15.5) Heritage, culture and recreation 808 444 (364) (82.0) Housing and community development 123 92 (31) (33.7) Other 37 19 (18) (94.7) Finance costs 1,587 1,496 (91) (6.1) Net foreign-exchange losses/(gains) (209) 28 237 - Total core Crown Expenses 32,946 28,822 (4,124) (14.3) ACC unfunded liability movement (239) (601) (362) (60.2) Net surplus of SOE/CE's 2,895 1,802 1,093 60.7 Operating Balance 6,646 6,404 242 3.8 OBERAC 4,743 5,789 (1,046) (18.1) Cash flows from operating and investing 1,317 2,382 (1,065) (44.7) Debt indicators Gross sovereign-issued debt 35,780 35,065 (715) (2.0) Net core Crown debt 10,274 12,542 2,268 18.1 Taxation revenue was $2.2 billion (growth of 7.2%) higher than the eight months ended 28 February 2005. This mainly comprised of growth in source deductions reflecting strength in the labour market, growth in companies tax driven by strong returns and growth in goods and services tax. Other revenue was $0.7 billion higher than the previous year, mainly due to higher investment income earned by the NZS Fund and GSF reflecting strong returns in the New Zealand and international equity markets. 10 Financial Statements of the Government of New Zealand eight months ended 28 February 2006

Total core Crown expenses (excluding GSF unfunded liability movement) were $4.3 billion (growth of 15.2%) higher than the eight months ended 28 February 2005. Significant movements within core Crown functional expenses were: Social security and welfare expenses were $0.6 billion higher than the previous year mainly due to the indexation of welfare benefits, partially offset by lower unemployment benefits due to the low unemployment rate; Health expenses were $0.7 billion higher than the previous year mainly due to the increase in payments to District Health Boards, reflecting increased funding to maintain and improve existing services levels; Education expenses were $1.8 billion higher than the previous year largely due to the fair value impact of the interest free student loan scheme (refer page 6); Heritage, culture and recreation expenses were $0.4 billion higher than the previous year, largely due to the impact on the Kyoto liability of the removal of the carbon tax and changes to deforestation projections. In addition all other core Crown functional expenses have increased due to policy initiatives from the 2004 and 2005 Budgets. Net surplus of SOE/CE s were $1.1 billion higher than the previous year, mainly due to the gain on sale of Southern Hydro by Meridian Energy. Cash flow from operating and investing activities were $1.1 billion lower than the previous year, mainly due to lower cashflow from operations, higher advances to District Health Boards, higher capital spending on purchase of physical assets and the purchase of Reserve Bank reserves. Gross sovereign-issued debt (GSID) was $0.7 billion higher than the previous year mainly due to the Reserve Bank raising the settlement cash level. Net core Crown debt has reduced by $2.3 billion mainly due to: accumulating cash flow from operating activity of $8.3 billion; additional issue of circulating currency of $0.2 billion; offset by purchase of physical assets of $1.6 billion; purchase of investments (excluding RB reserves) of $2.8 billion ($2.3 billion in NZSF and $0.5 billion in Crown entities); and student loan fair value write down of $1.5 billion. Financial Statements of the Government of New Zealand eight months ended 28 February 2006 11

FINANCIAL STATEMENTS

STATEMENT OF ACCOUNTING POLICIES as at 28 February 2006 1 Reporting Entity These Financial Statements are for the Crown reporting entity as specified in Part III of the Public Finance Act 1989. This comprises: Ministers of the Crown Reserve Bank of New Zealand Government Superannuation Fund Crown entities Departments State-owned enterprises Air New Zealand Limited New Zealand Superannuation Fund A schedule of entities included in the Crown reporting entity was set out on pages 98 and 99 of the Financial Statements of the Government of New Zealand for the year ended 30 June 2005. 2 General Accounting Policies These Financial Statements comply with generally accepted accounting practice. The measurement base applied is historical cost adjusted for revaluations of property, plant and equipment (where appropriate), commercial forests and marketable securities, deposits & equity investments held for trading purposes. The accrual basis of accounting has been used unless otherwise stated. These Financial Statements have been prepared on a going concern basis and the policies have been applied consistently throughout the period. 3 Specific Accounting Policies The specific accounting policies of the Crown were described on pages 41 to 48 of the Financial Statements of the Government of New Zealand for the year ended 30 June 2005. There has been a change in the accounting policy for student loans to better reflect their value under the new no-interest policy. Further information on the nature of the change is disclosed in the Student Loan Policy box on page 6 and the impact of the change is reflected in note 9 on page 33. 4 Forecast Results and Assumptions The forecast results in these Financial Statements have been derived from the forecasts released in the 2005 Half Year Economic and Fiscal Update (Half Year Update), on 19 December 2005. The assumptions underlying the preparation of forecasts are set out in the Statement of Accounting Policies and Forecast Assumptions reproduced in full on Treasury s website www.treasury.govt.nz/forecasts/hyefu/2005/. 14 Financial Statements of the Government of New Zealand eight months ended 28 February 2006

STATEMENT OF ACCOUNTING POLICIES (CONTINUED) as at 28 February 2006 5 Comparative Figures Comparative figures for the previous financial year to 30 June 2005 and comparative year-to-date period are presented in these Financial Statements. Percentage variances between the actual and prior year balances exceeding 500% are not shown. 6 Outstanding Issues While the fully consolidated Crown actuals and forecasts include the same reporting entities as previously, there are some issues still to be worked through. These issues may impact on the final form of the fully consolidated Crown forecasts and Crown Financial Statements. The most significant issue is whether to combine tertiary education institution s (TEIs) in the Crown Financial Statements. The issue is not clear-cut. The Treasury, the Ministry of Education and TEIs are currently working through the issue, as outlined on page 59 of the 30 June 2005 Crown Financial Statements. The forecasts and actuals are continuing with the method of equity accounting TEIs. Financial Statements of the Government of New Zealand eight months ended 28 February 2006 15

STATEMENT OF FINANCIAL PERFORMANCE for the eight months ended 28 February 2006 Prior Year Actual Annual 30 28 Current Year Actual vs Forecast Forecast June February 2005 2005 Note Actual Forecast Variance $m $m $m $m $m % $m Revenue Levied through the Crown s Sovereign Power 46,624 30,327 Taxation revenue 1 32,548 32,496 52 0.2 49,249 3,115 2,083 Levies, fees, fines and penalties 1 2,160 2,131 29 1.4 3,158 Total Revenue Levied through 49,739 32,410 the Crown's Sovereign Power 1 34,708 34,627 81 0.2 52,407 Earned through the Crown s Operations 11,331 7,064 Sales of goods and services 2 8,333 7,817 516 6.6 12,225 3,814 2,508 Investment income 3 4,377 2,299 2,078 90.4 3,293 2,181 1,665 Other revenue 4 1,774 1,787 (13) (0.7) 1,850 Total Revenue Earned through 17,326 11,237 the Crown s Operations 14,484 11,903 2,581 21.7 17,368 67,065 43,647 Total Crown Revenue 49,192 46,530 2,662 5.7 69,775 Expenses By input type 15,844 10,367 Subsidies and transfer payments 5 11,016 11,140 124 1.1 17,077 13,562 8,856 Personnel expenses 6 10,021 10,053 32 0.3 14,656 25,314 15,254 Operating expenses 7 19,453 18,985 (468) (2.5) 29,062 - - Forecast for future new spending - - - - 106 2,760 1,784 Finance costs 1,924 1,960 36 1.8 2,795 Net foreign-exchange (17) 37 (gains)/losses (274) (5) 269-4 1,410 435 Movement in total GSF liability 14 255 255 - - 293 2,037 601 Movement in total ACC liability 15 239 239 - - 358 60,910 37,334 Total Crown Expenses 42,634 42,627 (7) - 64,351 6,155 6,313 Revenues less Expenses 6,558 3,903 2,655 5.7 5,424 133 91 Net surplus TEIs 88 88 - - 133 Operating Balance (including 6,288 6,404 minority interest) 6,646 3,991 2,655 66.5 5,557 (41) - Minority interest - - - - - 6,247 6,404 Operating Balance 6,646 3,991 2,655 66.5 5,557 The accompanying Notes and Accounting policies are an integral part of these Statements. 16 Financial Statements of the Government of New Zealand eight months ended 28 February 2006

STATEMENT OF FINANCIAL PERFORMANCE (CONTINUED) for the eight months ended 28 February 2006 Below is an analysis of total Crown expenses and core Crown expenses by functional classification. This information reconciles to the segment information within the Statement of Segments. Prior Year Actual Annual 30 28 Current Year Actual vs Forecast Forecast June February 2005 2005 Note Actual Forecast Variance $m $m $m $m $m % $m Total Crown expenses By functional classification 18,522 11,272 Social security and welfare 11,710 11,722 12 0.1 18,194 2,442 1,139 GSF pension expenses 1,289 1,213 (76) (6.3) 1,429 8,444 5,517 Health 6,063 5,971 (92) (1.5) 9,436 8,619 5,521 Education 7,619 7,733 114 1.5 10,467 2,085 1,200 Core government services 1,233 1,277 44 3.4 2,019 2,131 1,382 Law and order 1,511 1,535 24 1.6 2,394 1,229 789 Defence 861 823 (38) (4.6) 1,347 5,948 3,574 Transport and communications 3,854 4,017 163 4.1 6,400 Economic and industrial 4,859 2,818 services 3,942 3,592 (350) (9.7) 5,665 1,128 743 Primary services 843 803 (40) (5.0) 1,225 2,032 1,096 Heritage, culture and recreation 1,534 1,450 (84) (5.8) 2,038 Housing and community 697 443 development 488 495 7 1.4 781 31 19 Other 37 41 4 9.8 51 2,760 1,784 Finance costs 1,924 1,960 36 1.8 2,795 Net foreign-exchange (17) 37 (gains)/losses (274) (5) 269-4 - - Forecast for future new spending - - - - 106 60,910 37,334 Total Crown Expenses 42,634 42,627 (7) - 64,351 Core Crown expenses By functional classification 14,682 9,535 Social security and welfare 10,138 10,217 79 0.8 15,850 2,442 1,139 GSF pension expenses 1,289 1,213 (76) (6.3) 1,430 8,813 5,559 Health 6,242 6,352 110 1.7 9,839 7,930 5,192 Education 6,952 7,014 62 0.9 10,033 2,217 1,247 Core government services 1,334 1,384 50 3.6 2,182 1,977 1,272 Law and order 1,402 1,426 24 1.7 2,193 1,275 820 Defence 891 860 (31) (3.6) 1,377 1,635 859 Transport and communications 1,081 1,071 (10) (0.9) 1,893 Economic and industrial 1,444 887 services 1,002 1,088 86 7.9 1,711 394 233 Primary services 269 283 14 4.9 473 991 444 Heritage, culture and recreation 808 752 (56) (7.4) 1,042 Housing and community 163 92 development 123 128 5 3.9 218 32 19 Other 37 41 4 9.8 51 2,274 1,496 Finance costs 1,587 1,596 9 0.6 2,250 Net foreign-exchange (35) 28 losses/(gains) (209) 18 227-17 - - Forecast for future new spending - - - - 106 46,234 28,822 Total Expenses 32,946 33,443 497 1.5 50,665 The accompanying Notes and Accounting policies are an integral part of these Statements. Financial Statements of the Government of New Zealand eight months ended 28 February 2006 17

STATEMENT OF CASH FLOWS for the eight months ended 28 February 2006 Prior Year Actual Annual 30 28 Current Year Actual vs Forecast Forecast June February 2005 2005 Actual Forecast Variance $m $m $m $m $m % $m Cash Flows From Operations Cash was provided from 46,867 30,296 Total tax receipts (refer Note 1) 32,158 32,183 (25) (0.1) 49,152 2,974 2,174 Total other sovereign receipts (refer Note 1) 2,281 2,281 - - 3,109 1,642 995 Interest 1,356 843 513 60.9 1,156 66 40 Dividends 50 68 (18) (26.5) 105 11,517 7,152 Sales of goods and services 8,634 8,177 457 5.6 12,443 2,186 1,536 Other operating receipts 1,656 1,787 (131) (7.3) 2,419 65,252 42,193 Total cash provided from operations 46,135 45,339 796 1.8 68,384 Cash was disbursed to 15,717 10,267 Subsidies and transfer payments 10,979 11,123 144 1.3 17,334 35,052 22,951 Personnel and operating payments 25,785 25,141 (644) (2.6) 38,175 2,294 1,471 Finance costs 1,660 1,577 (83) (5.3) 2,209 - - Forecast for future new spending - - - - 106 53,063 34,689 Total cash disbursed to operations 38,424 37,841 (583) (1.5) 57,824 12,189 7,504 Net Cash Flows From Operations 7,711 7,498 213 2.8 10,560 Cash Flows From Investing Activities Cash was provided from 316 146 Sale of physical assets 1,765 194 1,571-310 316 146 Total cash provided from investing activities 1,765 194 1,571-310 Cash was disbursed to 4,862 2,918 Purchase of physical assets 3,683 4,403 720 16.4 7,159 1,061 521 Net increase in advances 1,151 1,241 90 7.3 1,947 Net purchase/(sale) of marketable securities, 6,677 4,712 deposits & equity investments 4,909 2,785 (2,124) (76.3) 3,604 - - Capital contingency provision - - - - 65 12,600 8,151 Total cash disbursed to investing activities 9,743 8,429 (1,314) (15.6) 12,775 (12,284) (8,005) Net Cash Flows From Investing Activities (7,978) (8,235) 257 3.1 (12,465) Net Cash Flows From (95) (501) Operating and Investing Activities (267) (737) 470 63.8 (1,905) Cash Flows From Financing Activities Cash was Provided From 188 205 Issues of circulating currency 211 19 192-18 1,913 (1,488) Net issues/(repayment) of Government stock 1 (1,216) (1,158) (58) (5.0) (184) 2,101 (1,283) Total cash provided from financing activities (1,005) (1,139) 134 11.8 (166) Cash was Disbursed to Net repayment/(issues) of other New Zealand- 829 (2,040) dollar borrowing 593 301 (292) (97.0) (402) Net (issues)/repayment of foreign-currency 951 98 borrowing (2,793) (2,269) 524 23.1 (752) 1,780 (1,942) Total cash disbursed to financing activities (2,200) (1,968) 232 11.8 (1,154) 321 659 Net Cash Flows From Financing Activities 1,195 829 366 44.1 988 226 158 Net Movement in Cash 928 92 836 - (917) 3,450 3,450 Opening Cash Balance 3,710 3,710 - - 3,710 Foreign-exchange (losses)/gains on 34 15 opening cash 13 (6) 19 316.7-3,710 3,623 Closing Cash Balance 4,651 3,796 855 22.5 2,793 1 Net issues of Government stock include movements within government stock holdings of entities such as NZS Fund, GSF, ACC and EQC. The Bonds reconciliation at the end of these accounts outlines NZDMO issues. The accompanying Notes and Accounting policies are an integral part of these Statements. 18 Financial Statements of the Government of New Zealand eight months ended 28 February 2006

STATEMENT OF CASH FLOWS (CONTINUED) for the eight months ended 28 February 2006 Prior Year Actual Annual 30 28 Current Year Actual vs Forecast Forecast June February 2005 2005 Actual Forecast Variance $m $m $m $m $m % $m Reconciliation Between the Net Cash Flows from Operations and the Operating Balance 12,189 7,504 Net Cash Flows from Operations 7,711 7,498 213 3 10,560 Items included in the operating balance but not in net cash flows from operations Valuation changes (1,410) (435) (Increase)/decrease in pension liabilities (255) (255) - - (293) (2,037) (601) (Increase)/decrease in ACC liabilities (239) (239) - - (358) (53) - National Provident Fund guarantee - - - - - (23) - Revaluation of commercial forests - - - - - 4 60 Unrealised net foreign-exchange (losses)/gains 107 64 43 67 (59) 1,020 928 Other valuation changes 1,007 304 703 231 455 (2,499) (48) Total valuation changes 620 (126) 746 - (255) Property, plant & equipment asset movements (2,528) (1,630) Depreciation (1,752) (1,790) 38 2.1 (2,779) - - Gain/(loss) on sale of Southern Hydro 630-630 - - (2) - Gain/(loss) on sale of physical assets - - - - - (2,530) (1,630) Total property, plant & equipment movements (1,122) (1,790) 668 37.3 (2,779) Other Non-cash Items (188) 18 Student loans (1,519) (1,488) (31) (2.1) (1,704) (97) (62) Amortisation of goodwill (59) (60) 1 1.7 (89) - - Accrued income from NZS Fund 706 272 434 159.6 506 133 91 Other 88 88 - - 133 (152) 47 Total Other Non-cash Items (784) (1,188) 404 34.0 (1,154) Movements in Working Capital (202) 104 Increase/(decrease) in taxes receivable 537 469 68 14.5 2 498 388 (Decrease)/increase in other receivables (340) (719) 379 52.7 (707) 58 45 Increase/(decrease) in inventories 15 67 (52) (77.6) 90 (1,115) (6) Decrease/(increase) in payables 9 (220) 229 104.1 (200) (761) 531 Total movements in working capital 221 (403) 624 154.8 (815) 6,247 6,404 Operating Balance 6,646 3,991 2,655 66.5 5,557 STATEMENT OF MOVEMENTS IN EQUITY for the eight months ended 28 February 2006 35,463 35,463 Opening Crown Balance 49,983 49,983 - - 49,983 6,247 6,404 Operating balance for the period 6,646 3,991 2,655 66.5 5,557 41 - Minority interest in operating balance - - - - - 35 - Increase in minority interest - - - - - 8,197 2 Net revaluations (9) 8 (17) (212.5) 15 Total Recognised Revenues 14,520 6,406 and Expenses 6,637 3,999 2,638 66.0 5,572 49,983 41,869 Closing Crown Balance 56,620 53,982 2,638 4.9 55,555 The accompanying Notes and Accounting policies are an integral part of these Statements. Financial Statements of the Government of New Zealand eight months ended 28 February 2006 19

STATEMENT OF FINANCIAL POSITION as at 28 February 2006 Prior Year Actual Annual 30 28 Current Year Actual vs Forecast Forecast June February 2005 2005 Note Actual Forecast Variance $m $m $m $m $m % $m Assets 3,710 3,623 Cash and bank balances 8 4,651 3,796 855 22.5 2,793 Marketable securities, deposits 33,062 30,371 & equity investments 8 39,830 33,574 6,256 18.6 35,322 8,536 8,249 Advances 9 8,079 8,097 (18) (0.2) 8,563 10,883 11,079 Receivables 10 11,080 10,830 250 2.3 10,178 946 933 Inventories 961 1,013 (52) (5.1) 1,036 221 211 Other investments 11 231 236 (5) (2.1) 258 67,494 58,907 Property, plant & equipment 12 68,444 70,020 (1,576) (2.3) 71,770 232 250 Commercial forests 233 232 1 0.4 232 5,010 4,471 Investment in TEIs 5,099 5,099 - - 5,185 737 766 Intangible assets 538 660 (122) (18.5) 630 - - Forecast for new capital - - - - 65 130,831 118,860 Total Assets 139,146 133,557 5,589 4.2 136,032 Liabilities 14,451 13,305 Payables and provisions 13 13,461 13,890 429 3.1 14,221 3,197 3,214 Currency issued 3,408 3,215 (193) (6.0) 3,215 Borrowings - sovereign 28,645 28,949 guaranteed 29,988 26,594 (3,394) (12.8) 26,653 Borrowings - non-sovereign 8,219 7,598 guaranteed 8,829 9,046 217 2.4 9,401 14,952 13,977 GSF Pension liability 14 15,207 15,207 - - 15,245 11,384 9,948 ACC liability 15 11,633 11,623 (10) (0.1) 11,742 80,848 76,991 Total Liabilities 82,526 79,575 (2,951) (3.7) 80,477 Total Assets less 49,983 41,869 Total Liabilities 56,620 53,982 2,638 4.9 55,555 Net Worth 21,780 21,909 Taxpayer funds 28,443 25,772 2,671 10.4 27,552 27,988 19,821 Revaluation reserve 16 27,962 27,995 (33) (0.1) 28,003 215 139 Minority interest 215 215 - - - 49,983 41,869 Net Worth 56,620 53,982 2,638 4.9 55,555 The accompanying Notes and Accounting policies are an integral part of these Statements. 20 Financial Statements of the Government of New Zealand eight months ended 28 February 2006

STATEMENT OF FINANCIAL POSITION (CONTINUED) as at 28 February 2006 Following is an analysis of the NZS Fund and Gross and Net Debt information. The notes to the accounts provide breakdown of other key items. Prior Year Actual Annual 30 28 Current Year Actual vs Forecast Forecast June February 2005 2005 Actual Forecast Variance $m $m $m $m $m % $m New Zealand Superannuation Fund Within MSDs & equity investments is the NZS Fund (except for cross holdings of investments with other parts of the Crown, for example the NZS Fund may hold NZ Government Stock). The following information includes all investments and income, including cross-holdings of NZ Government Stock and accrued interest on such stock. 3,956 3,956 Opening balance 6,555 6,555 - - 6,555 2,107 1,378 Gross contribution 1,528 1,528 - - 2,337 492 348 Income after tax 706 272 434 159.6 506 6,555 5,682 NZS Fund balance 8,789 8,355 434 5.2 9,398 Gross and Net Debt information Definitions of debt: Total Crown gross debt is the total borrowings (both sovereign-guaranteed and non-sovereign guaranteed) of the total Crown. This equates to the amount in the total Crown balance sheet and represents the complete picture of whole-of-crown debt obligations to external parties. The balance sheet splits total Crown debt into sovereign-guaranteed and non-sovereign-guaranteed debt. This split reflects the fact that debt held by SOEs and Crown entities is not explicitly guaranteed by the Crown. Any such debt that may be guaranteed is included in the sovereign-guaranteed total. No debt of SOEs and Crown entities is currently guaranteed by the Crown. Gross sovereign-issued debt is debt issued by the sovereign (i.e., core Crown) and includes Government stock held by the NZS Fund, GSF, ACC or EQC for example. In other words, the total sovereign-issued debt does not eliminate any internal cross-holdings held by these entities. The Government's debt objective uses this measure of debt. Total Crown Debt 36,864 36,547 Total Crown gross debt 38,817 35,640 3,177 8.9 36,054 35,045 35,065 Gross sovereign-issued debt 35,780 32,585 3,195 9.8 33,275 Core Crown Debt 35,045 35,065 Gross sovereign-issued debt 35,780 32,585 3,195 9.8 33,275 (33,078) (30,923) Financial assets (37,326) (32,909) (4,417) (13.4) (34,351) 1,967 4,142 (1,546) (324) (1,222) (377.2) (1,076) NZS Fund and GSF 8,804 8,400 financial assets 11,820 10,860 960 8.8 11,673 10,771 12,542 Net Core Crown Debt 10,274 10,536 (262) (2.5) 10,597 The accompanying Notes and Accounting policies are an integral part of these Statements. Financial Statements of the Government of New Zealand eight months ended 28 February 2006 21

STATEMENT OF BORROWINGS as at 28 February 2006 Prior Year Actual Annual 30 28 Current Year Actual vs Forecast Forecast June February 2005 2005 Actual Forecast Variance $m $m $m $m $m % $m Sovereign-Guaranteed Debt New Zealand-Dollar Debt 16,058 15,548 Government stock 15,704 15,268 (436) (2.9) 15,894 5,245 5,542 Treasury bills 5,914 5,764 (150) (2.6) 5,240 (6,123) 2,872 Loans and foreign-exchange contracts (8,519) 970 9,489-538 583 604 Retail stock 539 582 43 7.4 600 15,763 24,566 Total New Zealand-Dollar Debt 13,638 22,584 8,946 39.6 22,272 Foreign-Currency Debt 7,906 (451) United States dollars 8,673 2,074 (6,599) (318.2) 2,474 252 382 Japanese yen 508 (415) (923) (222.4) (415) 4,724 4,452 European and other currencies 7,169 2,351 (4,818) (204.9) 2,322 12,882 4,383 Total Foreign-Currency Debt 16,350 4,010 (12,340) (307.7) 4,381 28,645 28,949 Total Sovereign-Guaranteed Debt 29,988 26,594 (3,394) (12.8) 26,653 Non-Sovereign-Guaranteed Debt 5,601 5,157 New Zealand dollars 6,470 6,502 32 0.5 6,500 1,541 1,650 United States dollars 2,098 1,804 (294) (16.3) 1,978 324 184 Japanese yen 138 - (138) - - 753 607 European and other currencies 123 740 617 83.4 923 8,219 7,598 Total Non-Sovereign Debt 8,829 9,046 217 2.4 9,401 36,864 36,547 Total Borrowings (Gross Debt) 38,817 35,640 (3,177) (8.9) 36,054 Less Financial Assets (including restricted assets) Marketable Securities, Deposits and Equity Investments 6,487 13,793 New Zealand dollars 6,830 14,372 (7,542) (52.5) 14,564 9,733 654 United States dollars 10,227 3,961 6,266 158.2 4,505 789 636 Japanese yen 773 18 755-90 4,455 4,104 European and other currencies 7,179 1,775 5,404 304.5 2,108 702 790 Reserve position at IMF 405 494 (89) (18.0) 495 2,385 2,262 NZ equity investments 2,702 2,598 104 4.0 3,136 8,511 8,132 Foreign equity investments 11,714 10,356 1,358 13.1 10,424 Total Marketable Securities 33,062 30,371 Deposits & Equity Investments 39,830 33,574 6,256 18.6 35,322 Advances and Cash 6,465 6,346 Student loans 5,327 5,337 (10) (0.2) 5,540 2,071 1,903 Other advances 2,752 2,760 (8) (0.3) 3,023 3,710 3,623 Cash 4,651 3,796 855 22.5 2,793 12,246 11,872 Total Advances and Cash 12,730 11,893 837 7.0 11,356 45,308 42,243 Total Financial Assets 52,560 45,467 7,093 15.6 46,678 (8,444) (5,696) Borrowings less Financial Assets (13,743) (9,827) 3,916 39.8 (10,624) (13) 1,869 Net New Zealand-dollar debt (2,690) (263) 2,427 - (1,133) (8,431) (7,565) Net foreign-currency debt (11,053) (9,564) 1,489 15.6 (9,491) (8,444) (5,696) Borrowings less Financial Assets (13,743) (9,827) 3,916 39.8 (10,624) The accompanying Notes and Accounting policies are an integral part of these Statements. 22 Financial Statements of the Government of New Zealand eight months ended 28 February 2006

STATEMENT OF COMMITMENTS as at 28 February 2006 As at As at As at 28 February 30 June 28 February 2006 2005 2005 $m $m $m Capital Commitments Specialist military equipment 662 825 940 Land and buildings 1,408 1,440 1,819 Other property, plant and equipment 2,419 2,432 876 Other capital commitments 310 69 108 TEIs 125 125 60 Total Capital Commitments 4,924 4,891 3,803 Operating Commitments Non-cancellable accommodation leases 2,191 1,972 1,461 Other non-cancellable leases 2,420 2,606 2,349 Non-cancellable contracts for the supply of goods and services 3,922 1,721 3,913 Other operating commitments 2,826 4,054 2,534 TEIs 1,052 1,052 325 Total Operating Commitments 12,411 11,405 10,582 Total Commitments 17,335 16,296 14,385 Total Commitments by Institutional Segment Core Crown 7,153 2,627 4,715 Crown entities 6,715 10,061 7,485 State-owned enterprises 3,467 3,608 2,185 Total Commitments 17,335 16,296 14,385 STATEMENT OF CONTINGENT LIABILITIES AND ASSETS as at 28 February 2006 Quantifiable Contingent Liabilities As at As at As at 28 February 30 June 28 February 2006 2005 2005 $m $m $m Guarantees and Indemnities 149 149 208 Uncalled Capital 2,372 2,233 2,172 Legal Proceedings and Disputes 660 586 810 Other Contingent Liabilities 1,855 1,502 1,499 Total Quantifiable Contingent Liabilities 5,036 4,470 4,689 Total Quantifiable Contingent Liabilities by Institutional Segment Core Crown 4,906 4,330 4,418 Crown entities 15 36 11 State-owned enterprises 115 104 260 Total Quantifiable Contingent Liabilities 5,036 4,470 4,689 Quantifiable Contingent Assets Core Crown - Education and Transport 111 107 121 Total Quantifiable Contingent Assets 111 107 121 The accompanying Notes and Accounting policies are an integral part of these Statements. Financial Statements of the Government of New Zealand eight months ended 28 February 2006 23

STATEMENT OF SEGMENTS Financial Performance and Financial Position by institutional form Statement of Financial Performance (institutional form) for the eight months ended 28 February 2006 (actual to forecast) Current Year-To-Date Actual vs Forecast Core Crown Crown entities Actual Forecast Actual Forecast February February February February 2005/06 2005/06 2005/06 2005/06 ($ million) $m $m $m $m Revenue Taxation revenue 32,914 32,825 - - Other sovereign levied income 444 469 1,751 1,696 Sales of goods and services 573 497 1,166 1,176 Investment income 2,623 1,720 1,280 758 Other revenues 382 495 12,260 12,287 Total revenue 36,936 36,006 16,457 15,917 Expenses by input type Subsidies and transfer payments 9,901 10,006 1,115 1,134 Personnel expenses 3,895 3,884 4,935 4,938 Operating expenses 17,517 17,684 8,365 8,376 Finance costs 1,587 1,596 195 202 FX losses/(gains) (209) 18 (41) - GSF and ACC liability revaluation movts 255 255 239 239 Total expenses 32,946 33,443 14,808 14,889 Expenses by functional classification Social security and welfare 10,138 10,217 1,855 1,864 Health 6,242 6,352 5,317 5,218 Education 6,952 7,014 4,376 4,424 Other functional classifications 8,236 8,246 3,106 3,181 Forecast for future new spending - - - - Finance costs and FX losses/(gains) 1,378 1,614 154 202 Total expenses 32,946 33,443 14,808 14,889 Net surplus of TEIs - - 88 88 Minority interest - - - - Operating balance 3,990 2,563 1,737 1,116 Statement of Financial Position (institutional form) as at 28 February 2006 (actual to forecast) Core Crown Crown entities Actual Forecast Actual Forecast February February February February 2005/06 2005/06 2005/06 2005/06 ($ million) $m $m $m $m Assets Financial assets 37,326 32,909 16,551 16,115 Physical assets 22,486 22,475 32,696 32,944 Investment in SOEs & CE (including TEIs) 23,961 23,905 5,099 5,099 Other assets 9,526 9,111 1,974 2,256 Total assets 93,299 88,400 56,320 56,414 Liabilities Borrowings 34,685 31,461 3,899 4,221 Other liabilities 26,334 26,068 15,866 16,124 Total liabilities 61,019 57,529 19,765 20,345 Net worth 32,280 30,871 36,555 36,069 Taxpayer funds 23,491 22,067 21,032 20,533 Revaluation reserves 8,789 8,804 15,523 15,536 Minority interest - - - - Net worth 32,280 30,871 36,555 36,069 Analysis of financial assets and borrowings Advances and cash 8,250 8,809 2,198 2,112 MSDs and equity investments 29,076 24,100 14,353 14,003 Total financial assets 37,326 32,909 16,551 16,115 Borrowings - Sovereign guaranteed 34,685 31,461 - - Borrowings - Non-sovereign guaranteed - - 3,899 4,221 Total borrowings 34,685 31,461 3,899 4,221 Borrowings less financial assets (2,641) (1,448) (12,652) (11,894) Net Crown debt 10,274 10,536 Net Crown debt and gross sovereign-issued debt differ from the analysis above due to elimination of cross-holdings of Govt Gross sovereign-issued debt 35,780 32,585 stock and adding back the NZS Fund and GSF assets. 24 Financial Statements of the Government of New Zealand eight months ended 28 February 2006

STATEMENT OF SEGMENTS (CONTINUED) Financial Performance and Financial Position by institutional form Statement of Financial Performance (institutional form) for the eight months ended 28 February 2006 (actual to forecast) Current Year-To-Date Actual vs Forecast State-owned enterprises Inter-segment elimins Total Crown Actual Forecast Actual Forecast Actual Forecast February February February February February February 2005/06 2005/06 2005/06 2005/06 2005/06 2005/06 ($ million) $m $m $m $m $m $m Revenue Taxation revenue - - (366) (329) 32,548 32,496 Other sovereign levied income - - (35) (34) 2,160 2,131 Sales of goods and services 6,934 6,478 (340) (334) 8,333 7,817 Investment income 907 172 (433) (351) 4,377 2,299 Other revenues 536 595 (11,404) (11,590) 1,774 1,787 Total revenue 8,377 7,245 (12,578) (12,638) 49,192 46,530 Expenses by input type Subsidies and transfer payments - - - - 11,016 11,140 Personnel expenses 1,195 1,235 (4) (4) 10,021 10,053 Operating expenses 5,712 5,210 (12,141) (12,285) 19,453 18,985 Finance costs 338 278 (196) (116) 1,924 1,960 FX losses/(gains) (24) (23) - - (274) (5) GSF and ACC liability revaluation movts - - - - 494 494 Total expenses 7,221 6,700 (12,341) (12,405) 42,634 42,627 Expenses by functional classification Social security and welfare - - (283) (359) 11,710 11,722 Health - - (5,496) (5,599) 6,063 5,971 Education 10 10 (3,719) (3,715) 7,619 7,733 Other functional classifications 6,896 6,435 (2,646) (2,616) 15,592 15,246 Forecast for future new spending - - - - - - Finance costs and FX losses/(gains) 315 255 (197) (116) 1,650 1,955 Total expenses 7,221 6,700 (12,341) (12,405) 42,634 42,627 Net surplus of TEIs - - - - 88 88 Minority interest - - - - Operating balance 1,156 545 (237) (233) 6,646 3,991 Statement of Financial Position (institutional form) as at 28 February 2006 (actual to forecast) State-owned enterprises Inter-segment elimins Total Crown Actual Forecast Actual Forecast Actual Forecast February February February February February February 2005/06 2005/06 2005/06 2005/06 2005/06 2005/06 ($ million) $m $m $m $m $m $m Assets Financial assets 5,785 3,833 (7,102) (7,390) 52,560 45,467 Physical assets 13,262 14,601 - - 68,444 70,020 Investment in SOEs & CE (including TEIs) - - (23,961) (23,905) 5,099 5,099 Other assets 2,219 2,196 (676) (592) 13,043 12,971 Total assets 21,266 20,630 (31,739) (31,887) 139,146 133,557 Liabilities Borrowings 7,335 7,348 (7,102) (7,390) 38,817 35,640 Other liabilities 2,904 2,893 (1,395) (1,150) 43,709 43,935 Total liabilities 10,239 10,241 (8,497) (8,540) 82,526 79,575 Net worth 11,027 10,389 (23,242) (23,347) 56,620 53,982 Taxpayer funds 7,162 6,519 (23,242) (23,347) 28,443 25,772 Revaluation reserves 3,650 3,655 - - 27,962 27,995 Minority interest 215 215 - - 215 215 Net worth 11,027 10,389 (23,242) (23,347) 56,620 53,982 Analysis of financial assets and borrowings Advances and cash 4,555 3,373 (2,273) (2,401) 12,730 11,893 MSDs and equity investments 1,230 460 (4,829) (4,989) 39,830 33,574 Total financial assets 5,785 3,833 (7,102) (7,390) 52,560 45,467 Borrowings - Sovereign guaranteed - - (4,697) (4,867) 29,988 26,594 Borrowings - Non-sovereign guaranteed 7,335 7,348 (2,405) (2,523) 8,829 9,046 Total borrowings 7,335 7,348 (7,102) (7,390) 38,817 35,640 Borrowings less financial assets 1,550 3,515 - - (13,743) (9,827) Financial Statements of the Government of New Zealand eight months ended 28 February 2006 25