The Hone Tuwhare Trust

Feasibility Study for the Redevelopment of the Hone Tuwhare Crib (Kaka Point)

11 December 2014

Confidential

Prepared for: The Hone Tuwhare Trust

Prepared by: Heta Hudson, Principal, Business Performance

Audit | Tax | Advisory

Contents

1 Purpose ...... 1 1.1 Purpose ...... 1 1.2 Report Use...... 2 1.3 Disclaimer ...... 2 2 Executive Summary ...... 3 2.1 Our Findings ...... 3 2.2 Key Areas to Support this Business Case ...... 3 3 Approach ...... 5 3.1 Our Approach ...... 5 4 A Writers Perspective – Evidence of Need ...... 6 4.1 Provision of Writing Residencies for New Zealanders ...... 6 4.2 Summary ...... 10 5 Financial Analysis ...... 11 5.1 Overview and Assumptions ...... 11 5.2 Revenue Model ...... 12 5.3 Endowment Fund ...... 13 5.4 Project Development ...... 13 6 Sensitivity Analysis...... 14 6.1 Overview ...... 14 7 Operating Risks and Opportunities ...... 15 7.1 Operating Risks ...... 15 7.1.1 Legal and Regulatory Risk ...... 15 7.1.2 Financial Risk ...... 15 7.1.3 Managing Construction Project ...... 15 7.1.4 Maintenance Costs ...... 15 7.2 Trust Operating Opportunities...... 15 7.2.1 Workshops ...... 15 7.2.2 Fundraisers ...... 15 8 Governance & Structure of the Trust...... 16 8.1 Governance ...... 16 9 Conclusion ...... 18

APPENDICES Appendix 1: Profit & Loss Projections and Balance Sheet & Cashflow Statements.

1 Purpose

1.1 Purpose

The Hone Tuwhare Charitable Trust (the Trust) was formed in 2010, under the kaupapa of “…inspiring people through the preservation, promotion and celebration of Hone’s legacy’”

The Trust’s objectives are stated as follows: To purchase and restore Hone Tuwhare’s crib at Kaka Point, South Otago, for use as a writer’s residency — the first to be established in the home of a Maori writer. To create a visitors centre that will be open to the public and available for school visits etc. To support the development of resources for schools and kura kaupapa Maori, in English and Maori, covering poetry, writing, self-expression and Hone’s life and work. To initiate events that celebrate Hone’s contribution to the arts in New Zealand. For example, an out-door concert on Hone’s birthday, performances of his plays, poetry in schools etc.

It is important to note, that while the writer’s residency will be located in South Otago, it is the intention of the Trust that the residency will have a nationwide and international focus.

The Trustees have resolved that an opportunity exists for the establishment of a writer’s residency at Hone Tuwhare’s crib on Kaka Point, South Otago. The Trust is in the process of planning a redevelopment of the site to: Renovate and restore Hone Tuwhare’s crib and grounds situated at Kaka Point; Design and build a residency and visitor education centre; and Establish a residency programme for writers, film makers, musicians, visual artists and curators amongst others.

The purpose of this feasibility study is threefold: 1. To investigate the financial viability of the project based on the proposed designs; 2. Provide the Trustees with an independently-prepared report that identifies any significant risk factors; 3. Provide the Trustees with a financial model that allows for sensitivity analysis and scenario testing.

A financial model was developed to determine the cashflow requirements of the Trust and to determine the on-going financial viability of the development. The underlying methodology behind the model was tested for sensitivity to determine the financial risks and how these may impact on the Trust.

Based on new facility designs and initial costings prepared by Pearson & Associates Architects Limited (Pearson & Associates) and Stan Scott, Building Consultant, Mitre 10 (New Zealand) Limited, we estimate the project to have a capital cost of approximately $775,000 (including GST). We understand that the capital will be raised from grants, private investors and potential strategic partners.

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1.2 Report Use

The findings from our feasibility study that we conducted on behalf of the Trust, have been reported to you solely for the purposes of establishing the feasibility of the project, and highlighting any potential issues that may be of relevance to you in connection with your decision-making processes.

Crowe Horwath (NZ) Limited (“Crowe Horwath”) accept no responsibility for any reliance that may be placed on this report, should it be used by any party or for any purpose that has not been expressly agreed upon in writing by Crowe Horwath.

In preparing our report, we have relied upon and assumed, without independent verification, the accuracy and completeness of all information as furnished to us by the Trust and the Project Managers. We have evaluated that information through analysis, enquiry and examination for the purposes of performing our financial analysis. However, we have not verified the accuracy or completeness of any such information nor conducted an appraisal of any assets. We have not carried out any form of due diligence or audit on the accounting or other records of the Trust. We do not warrant that our enquiries will identify or reveal any matter which an audit, due diligence review or extensive examination might disclose.

1.3 Disclaimer

Our report has been prepared with care and diligence and the statements and conclusions in our report have been given in good faith and in the belief, on reasonable grounds, that such statements and conclusions are not false or misleading. However, in no way will we guarantee or otherwise warrant that any forecasts of future surpluses, cashflows or financial position of the Trust will be achieved. Forecasts are inherently uncertain. They are predictions of future events which cannot be assured. They are based upon assumptions, some of which are beyond the control of the Trust and its management team. Actual results will vary from the forecasts and these variations may be more or less favourable.

We will assume no responsibility arising in any way whatsoever for errors or omissions (including responsibility to any person for negligence) for the preparation of our report to the extent that such errors or omissions result from our reasonable reliance on information provided by others or assumptions disclosed in our report or assumptions reasonably taken as implicit.

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2 Executive Summary

2.1 Our Findings

This feasibility study has been conducted to support the trustees of The Hone Tuwhare Trust to assess the viability of the proposed development of Hone Tuwhare’s crib and grounds situated at Kaka Point. In addition to the financial viability, we have also examined the ‘need’ for the development amongst the target groups and assessed the sustainability and capacity needs of the Trust to undertake this commitment. This study seeks to demonstrate that the Trust has thoroughly examined the project risks and provide trustees with a clear understanding and platform to proceed with the project.

In summary: We are able to conclude that there is a distinctive need for the project, with overwhelming support from various stakeholders to undertake the project. We have modelled the feasibility of the project based on forecast costings and potential revenues. We believe this project should lie in a range from $1.45M to $1.5M, with initial construction costs between $775,000 and $800,000 to complete both the crib and residency construction. As an initial target, we estimate the Trust will need to secure an estimated endowment fund of approximately $678,000 by January 2016 returning an annual income of approximately $51,000 (at 7.5% ROI) in order to provide a degree of financial certainty and sustainability. In mitigating potential risks, we believe the Trust is best advised to confirm legal arrangements regarding the intended usage of the land from the Takutai Trust. We believe a lease agreement would provide the Trust certainty of tenure and clarify any future land uses. Given the sensitivities surrounding revenue and cashflow projections, we believe debt funding is not the best option for the Trust to pursue. In addition, we believe the Trust should begin to identify strategic partners that can assist with promotion, attracting funders and sponsors.

2.2 Key Areas to Support this Business Case

2.2.1 Strong Governance & Leadership Capability

It is our view that the Trust has the necessary mix of governance and leadership capability to provide guidance for the project and ongoing management. Within the context of this business case, we are satisfied that;

Te Hone Tuwhare Trust provides a robust governance structure that allows for appropriate appointments of experienced, capable representatives to undertake Trust business. Roles and responsibilities are understood and supported. Trust membership is representative of key stakeholder groups with a stakeholder engagement process to solicit feedback and inform strategy development.

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2.2.2 Support & Value Add Opportunities

Due to existing synergies between the Trust and support institutions for the arts, we believe there are some natural value add opportunities that can be leveraged to achieve immediate and wider benefits to the Trusts kaupapa.

We believe there are potential supplementary revenue opportunities afforded to the Trust by hosting writers workshops at the crib and the proposed residency building. Following on from the above, it is foreseeable that the Trust will host fundraising events and activities to promote the crib and celebrate the works of Hone Tuwhare. We believe this will add value to the project and provide an opportunity to access potential individual funders and organisations. Existing relationships – We understand the Trust is engaged in discussions with potential national and international partners regarding residency opportunities and possible sponsorship.

From the initial work performed we are satisfied that the Trust has performed adequate due diligence to fully understand the project risks and financial requirements to ensure successful execution.

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3 Approach

3.1 Our Approach

The approach we followed in performing this analysis was to: Hold discussions with the Trust Project Team to understand the project’s vision, and where the project currently stands and the requirements for the feasibility study, thereby assisting us in our understanding of further research required and for developing financial projections to understand the financial feasibility of the project; Hold discussions with artists and other stakeholders to evidence the need and stakeholder support for the project within the art community and potential funding partners; Develop a Financial Model to determine the feasibility of the project, financial sustainability, capital and operational cost projections and sensitivity analysis; Review governance and management capacity; Identify and assess other potential risks and opportunities associated with the project.

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4 A Writers Perspective – Evidence of Need

4.1 Provision of Writing Residencies for New Zealanders

There are at least 23 writing residencies available annually for New Zealand writers of literature, with a number of these being offered by the same administrator. The Michael King Writer’s Centre (“MKWC”) in Devonport, Auckland invites applications for four residencies throughout the year, of which one is specifically for Maori. Likewise, the newly-formed D’Arcy Writers’ Residencies on Waiheke Island offer three spots throughout the year to essayists of New Zealand culture, and the Grimshaw Sargeson Fellowship, Auckland typically awards two residencies of five months to creative writers (or a single 10-month tenure to a sole writer).

Geographically, the residencies are distributed throughout the country (exempting Northland and the East Coast), with most located in the main centres of Auckland, Wellington and Dunedin. Te Waipounamu/South Island is currently home to:

Caselberg Trust Creative Connections Residency, Otago Peninsula. This is an inter-arts residency at Caselberg House for three months. It has a stipend of $6,000. Robert Lord/Otago College of Education/Creative NZ Children’s Writer in Residence, Dunedin. This is a 6-month long tenure for established writers of children’s literature. It has a stipend of $28,000 attached. Robert Burns Fellowship, Dunedin. A 12-month residency for established creative writers. It has a stipend equivalent to the salary of a full-time lecturer at the University of Otago. Seresin Landfall Residency, Marlborough Sounds. This is a residency at a cottage in Waterfall Bay for four weeks, for writers of all genres of literature. It has no stipend attached. Ursula Bethell Residency in Creative Writing, Christchurch. These are a pair of six month residencies for established writers, and have stipends that are equivalent to the salary of a full-time lecturer at the University of Canterbury.

The location of a residency is an important consideration for writers when they apply. Residencies that are remote or isolated are ideal for some who crave time away from the world to write: “The residency gave me uncluttered time and space to work – I removed myself from home and could focus on writing without other things distracting me.”(1)

Others prefer locations that allow for downtime leisure activities, such as visiting galleries, and easy access to shops, libraries or public transport: “[regarding] location – is it too isolated? Can I go home to visit my family (particularly during longer residencies)? Am I able to be independent – get my own groceries, or go out?”(2)

Undoubtedly what is of benefit to all writers is the opportunity to relocate somewhere new for a period, away from their usual confines and immerse themselves in the creative process. For some, the surrounding natural environment can be a source of inspiration. Certainly, the attractiveness of many current residencies, particularly the shorter ones, is based on their situation in naturally beautiful regions of the country; the Caselberg Trust Residency; the D’Arcy Writers’ Residencies (Waiheke Island); the Peter and Diane Beatson Fellowship (Foxton Beach); Seresin Landfall Residency and the Tu Mai e Kapiti Maori Writers’ Residency (Kapiti Island) all promote the immediate environment as a boon to writers.

(1) Sue Orr (2) Whiti Hereaka

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While privacy is the most important aspect of writing residencies, some writers are attracted to those that offer community engagement or support as well. Residencies attached to universities are all predicated on some form of interaction with campus life, and have conditions which commit the writers to activities ranging from lecture speaking to peer reviews or mentoring within the faculty. Generally, there is an expectation nowadays that writers should somehow contribute to the community they are based in, particularly those that draw on government funding. The Creative New Zealand outcome ‘New Zealanders participate in arts’ puts the onus on funding applicants to demonstrate public involvement, most usually at local level. Therefore, many residencies promote community engagement as a potential creative conduit. The Caselberg Trust Creative Connections Residency and Massey University’s Visiting Artists Scheme in Residence are the two that most explicitly express this, requiring community collaborative projects as outcomes of the residencies. The MKWC offers a number of workshops and talks throughout the year to the public with the purpose of linking writers with their communities.

The balance between community participation and writer’s space is an important consideration for administrators. Writers canvassed for this study were in agreement that private space with no distractions were paramount for short-term residencies, and that the boundaries between the writing and public area should be clearly defined if the residency was based within a larger facility or broader kaupapa. The obligations of the writer would also influence the experience:

“Am I expected to teach/give talks or readings? How much time would that take (including preparation time)? Would the obligations eclipse the time I have to work on my project? Are there on-going obligations to the residency after I’ve left?”(3)

As well as a stipend, a comfortable, warm, easy-to-maintain writing room and accommodation, and facilities such as the internet, printer (with ink), cell phone and/or landline availability were all factors that impacted on the enjoyment of the writers canvassed. These practicalities are all necessary considerations for administrators wanting to maintain a worthwhile residency of good reputation.

The duration of residencies is another factor which affects writers differently. While long-term residencies of several months allow for a large output, they are of little use to writers who are in committed employment or have dependents. The most reputable and coveted long-term residencies are for three months to a year, have large stipends attached, and are open to established writers of ‘proven merit’ for whom writing is their full-time occupation most usually. These are:

Berlin Writers’ Residency 2015 – 2016, Berlin. An 11-month residency. Stipend unknown. Fulbright – Creative NZ Pacific Writers’ Residence, Honolulu. A 3-month tenure, with $30,000 attached for accommodation, travel and expenses. Open to New Zealanders of Pacific heritage only. Grimshaw Sargeson Fellowship, Auckland. 5-month tenures for two writers, use of a self-contained flat at the Sargeson Centre, University of Auckland and $10,000 each. Or, a 10-month residency for one writer and $20,000. Katherine Mansfield Menton Fellowship, Menton. A 6-month tenure, use of a private writing room at the Villa Isola Bella, and $75,000 for accommodation, travel and expenses. MKWC University of Auckland Residency, Auckland. Six months with a $30,000 stipend. Randall Cottage Creative NZ Writer in Residence, Wellington. Six months with a $22,000 stipend attached. The writer’s partner and one child may also reside. Robert Burns Fellowship, Dunedin. (See above). Robert Lord/Otago College of Education/Creative NZ Children’s Writer in Residence, Dunedin. (See above).

(3) Whiti Hereaka

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University of Iowa Writers’ Fall Residency, Iowa. Three months accommodation and attendance at the International Writing Programme, with allowance for travel and expenses supplied by Creative NZ and/or other funders. University of Waikato/ Creative NZ Residency, Hamilton. A 12-month tenure, use of a room at the School of Arts and the Michael King Writer’s Retreat, and a $48,000+ stipend. Ursula Bethell Residency in Creative Writing, Christchurch. (See above). Victoria University/ Creative NZ Writer in Residency, Wellington. A 6-month residency with $50,000 attached.

The above long-term residencies form the majority of current residencies available to New Zealand writers. Most awardees in the past have been novelists and poets, with playwrights, short story writers, graphic novelists, historians, biographers and essayists making up a small percentage (although as writers often cross over categories, this makes it difficult to qualify).

Since 1960, a glaringly small number of Maori and Pacific Island writers have been recipients of the larger residencies (excluding the Fulbright – Creative NZ Pacific Writers’ Residence). These include; Albert Belz (2011 Victoria University Writing Fellow, 2010 Waikato University Writer in Residence) Apirana Taylor (2002 Ursula Bethell Resident) Briar Grace-Smith (1998 Massey University Writer in Residence, 2003 Victoria University Writing Fellow) Darren Kamali (2014 University of Iowa Writing Resident) Hone Kouka (1996 Ursula Bethell Resident) Hone Tuwhare (1969 & 1974 Robert Burns Fellow) John Pule (2013 Ursula Bethell Resident, 1996 Waikato University writer in Residence ) Katarina Te Heikoko Mataira (1997 Robert Lord/Otago College of Education Children’s Writer in Residence) Keri Hulme (1985 Ursula Bethell Resident) Patricia Grace (1985 Victoria University Writing Fellow) Rawiri Paratene (1983 Robert Burns Fellow) David Eggleton (1990 Robert Burns Fellow, 2012 Ursula Bethell Resident) Tina Makereti (2014 Randall Cottage Resident) Toa Fraser (2003 Sargeson Fellow) Tusiata Avia (2010 Ursula Bethell Resident) Whiti Hereaka (2007 Randall Cottage Resident, 2012 MKWC Resident, 2013 University of Iowa Writing Resident) Witi Ihimaera (1975 Robert Burns Fellow, 1982 Victoria University Writing Fellow, 1993 Katherine Mansfield Menton Fellow)

The financial security that the larger residencies bring is an enormous asset. Not only does it free writers from the burden of ‘making ends meet’ so that they can focus on writing, it instils a sense of professionalism and confidence. “It’s invaluable for a writer to be able to put writing first for a set period of time, and to [not] have financial anxieties... Fully paid residencies allow for the best possible creative process and the best quality results.”

“The residency… relieved the pressure to find other paying work, so I could focus on the creative work.”

Short-term residences without financial reward have merit if they are not too disruptive, slotting into leave time or school holidays, and allowing the writer to pick up their life again without unnecessary sacrifice.

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The condition that writers be published, established, and ‘of proven merit’ in order to be eligible for the majority of residencies in New Zealand means there is currently little financial support for writers starting out. Further, the academic pathway to writing can be costly, as reputable writing courses are only offered at post- graduate level. Those starting out may be unsure how to network within the writing and publishing communities, or how to access grants, competitions or bursaries available to them. This suggests that writing is a creative field of great financial risk, possibly precluding low-income earners, young people, people from rural areas, or people with many dependents from entering it. Additionally, the emphasis on published works that have been received well (i.e. critically acclaimed or sold well) by most residency administrators does not cater to Maori language writers whose work has been well received by our country’s small Maori speaking audience. (The University of Waikato/Creative NZ Residency is a notable exception, encouraging applicants who write in Te Reo Maori or English). It also is strongly weighted towards novelists, for whom the book- buying public show the most support. For these reasons perhaps there was some support among the writers canvassed for a residency largely targeted at poets or Maori writers; “Given Hone’s name and the particular environment at Kaka Point, I would be supportive of a fellowship targeted towards poets. I have no objection to the other categories, but there is no specific fellow[s]hip for poets, whereas the other categories have some specific support already. Also poets are the poorest of all writers.”(4) “I think it would be great to have a residency that supported Maori writers of any genre but particularly poets in this residency. I think that would be “expected” of a residency at Hone Tuwhare’s crib.”(5) Others disagreed: “I don’t think the Kaka Point residency should be targeted at specific writers… There is the need for as many writing residencies as possible. Different locations and deals will appeal to different writers for different reasons.”(6) “I believe each writer should be considered on his or her merits and needs, rather than by genre/ nationality/ stage of career.”(7) However, what all the writers canvassed did mutually agree on, was the need for more well-administered residencies in New Zealand to engender a supportive, respectful and inspiring literature culture of international stature. “There is a definite need for more residencies in New Zealand...The profession of writing in New Zealand is still not valued very highly, even though New Zealand likes to claim and take credit for their writers on an international stage. Our writers need the fullest possible respect and support – financial and practical – if they are to achieve high-quality work.”(7) It is important to note that at an organisational level, the Trust has engaged with various community and academic institutions to ascertain support for the project. These include: Kaka Point Community Board Dunedin City Council Otago University Auckland University Ngai Tahu Goethe-Institut Takutai Trust

(4) Diane Brown (5) Whiti Hereaka (6) Sue Orr (7) Sarah Quigley

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Support for this project has been forthcoming and unanimous with pledges to partner with the Trust to achieve their objective. Moreover, the residency is viewed as a necessary part of the arts infrastructure and a positive addition to the local community, of which Hone Tuwhare was a beloved member.

4.2 Summary

The proposed Kaka Point Writers’ Residency at Hone Tuwhare’s crib in South Otago has unqualified support from all the writers canvassed for this report. It remains for the Hone Tuwhare Charitable Trust to decide on what the nature of the residency or residencies should be, and for whom.

The Trust should be mindful of Creative New Zealand’s priorities for literature if it intends to compete for government funding alongside the many other residency administrators. These are presently:

increasing and diversifying readership of New Zealand literature; publishing and distributing high-quality New Zealand work through new technology; work that is for, by or with young people (up to the age of 18); innovative or cost-effective use of technology to create work or engage with audiences.

The lack of Maori and Pacific Island writers who have taken up major residencies has been discussed previously. Equally absent are writers of Asian heritage, suggesting the continued inability of most residency administrators to reach a range of writers representative of this country’s diverse make-up.

The majority of opportunities continue to support the traditional and popular forms of published literature most usually consumed by book readers. Only the Caselberg Trust residencies and Massey Visiting Artist Scheme explicitly encourage writers to explore technology and non-traditional modes of consumption when they create.

Although many children’s authors have been recipients of residencies since 1960, only the Robert Lord/ Otago College of Education/ Creative NZ Children’s Writer in Residence is specifically targeted for work written for young people. Similarly, the Tau Mai e Kapiti Maori Writers’ Residency, and MKWC residencies are stand-outs in their provision for beginning, unpublished or young writers.

While there was an assumption amongst the writers questioned for this study that poets were under-represented as residency holders, analysis of previous holders of all the major residencies suggests otherwise, with novelists and poets making up the bulk of occupants since 1960. The current prioritising of new technologies by Creative New Zealand also favours poets as authors of highly flexible, short-form literature. Dramatists, graphic novelists, essayists and biographers were the most under-represented of residency holders in New Zealand over the last fifty years.

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5 Financial Analysis

5.1 Overview and Assumptions

The sections below show the forecast financial analysis for the residency and the assumptions that have been used in developing these forecasts. Forecasts are inherently uncertain. They are predictions of future events which cannot be assured. They are based upon assumptions, many of which are beyond the control of the Trust and their management teams. Actual results will vary from the forecasts and these variations may be more or less favourable. The Trust requires operational funding to manage the project, engage with key personnel, including suitable architects (restoration and new build), builders, plumbers, electricians and other relevant trades people, suppliers and relevant councils (resource and building consents etc) for the purpose of establishing estimates/quotes and overall management of the project. The Trust requires suitable funding to complete remedial work on the Crib and Shed to weather proof and secure the buildings until restoration is undertaken. The Trust requires Capital Expenditure funding for both the restoration and residency projects. It is proposed that the Trust will prioritise the restoration of the crib. However, fundraising for each part of the project will occur concurrently with the goal of achieving full project funding.

There are a number of general assumptions that have been applied in our analysis. These assumptions are as follows: It is assumed for the purposes of this analysis, that the crib refurbishment begins July 2015 and is completed by December 2015. It is assumed the residence development will also begin in July 2015 but will take a year to complete. Residencies will commence upon completion of all building requirements. Revenue streams are based on revenue models for existing, similar residencies. This includes Grants from Charitable Organisations, Individual Donations, Sponsorship (financial and in-kind), Supported Residency options (National and International) and the establishment of an Endowment Fund. It is assumed the Trust will build and manage an endowment fund, with an expected return of no less than 7.5% on a pre-tax nominal basis. We have assumed future inflation at 2%. Cost of construction estimates have been relied upon from Pearson & Associates and Stan Scott, Building Consultant, Mitre 10 (New Zealand) Limited. (It is worth noting that Mitre 10 has verbally committed to providing materials at no cost in support of the project). The costs of the residency fixtures and fittings, the car and incidental equipment have been estimated based on discussions with Chris McBride and our website research. The cost of the website development is estimated based on publically-available information on the cost of website development incurred by similar trusts. The wages and salaries cost of a part-time fund raiser/manager and a part-time person based at Kaka Point are based on discussions with Dr Noel Waite and the publically-available information on wages and salaries costs incurred by similar trust. The artist stipend is based on an expected stipend of $3,000 per month. The phasing of the stipend in the first two years and maximum forecast payments is based on discussion with Dr Noel Waite. It is anticipated that annual audit and insurance will be donated. Other operating costs have been estimated based on discussions with Chris McBride and analysis of publically-available information on the operating costs of similar trusts.

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5.2 Revenue Model

The determination of potential and future revenue is a difficult exercise, and one which should be approached with an appropriate measure of caution. The proposed revenue model has been determined through discussion with the Trust and with reference to existing potential funders of this type of activity. It is proposed that the initial construction cost will be sought from existing funding organisations, including, but not limited to: The Trusts Community Foundation (Clutha Licensing Trust) Alexander McMillan Trust Lotteries Community Facilities Fund Lottery Environment & Heritage Lottery Community Committee Otago Community Trust Louis & Iris Fisher Foundation It is the Trustees intention to also seek support from the following to assist with operational costs and/or supported residencies: Iwi including Ngai Tahu and Nga Puhi Dunedin City Council Community Grants Scheme and Discretionary Arts fund Forsyth Barr Creative NZ Harcourts Foundation Freemasons William & Iris Manchester Trust NZ Community Trust Sargood Bequest Estate of Kathleen Alice Boyd Pub Charity Blue Sky Community Trust Mainland Foundation Lion Foundation University of Otago Auckland University Victoria University of Wellington Transpower International Residencies: Goethe-Institut United Nations Indigenous Fund Sponsors: BNZ Vero Insurance New Zealand Ltd Ernst & Young Simpson Grierson Numerous Patrons of the Arts and ‘Friends and Supporters of Hone Tuwhare’

Based on the likelihood of successful funding applications, we estimate the Trust will need to secure approximately $1,450,000 (this includes the construction cost and initial endowment fund). In addition, the Trust will require annual operational grants and donations of approximately $80,000 per annum.

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5.3 Endowment Fund

The model which accompanies this report utilises input assumptions for all of its calculations. Through simple extrapolation, the model calculates approximate future income and expenses using the inputs made by the user. The size of the endowment fund is an approximation and is calculated as the amount necessary to reach a near break-even position each year. The sensitivity of the endowment fund size is a consequence of all the assumptions, and remains particularly sensitive to:

Expected return on endowment funds Expected future income from all sources Expected future expenses

We estimate the Trust will need to secure an estimated endowment fund of approximately $678,000 by January 2016 returning an annual income of approximately $51,000 (at 7.5% ROI). See Appendix I – Feasibility Model

5.4 Project Development

Project development stages are detailed below.

Stage One — Purchase and Planning

Secure the crib property. We understand the Takutai Trust has provided written indication that it will make the land and property available to the Trust for the purposes of renovating the crib and making available for a writers residency. At this stage no legal agreements have been entered into confirming the nature of this arrangement. Full planning & consultation with Kaka Point locals, local businesses, Clutha District Council officials, Dunedin City Council, Otago Regional Council, Otago University, architects, specialist builders, earth-works contractors and local advisors, including planning permission and consents.

It is our understanding that Stage One is largely complete, with extensive planning and consultation concluded and the granting of both resource and building consents forthcoming.

Stage Two — Development Sensitive restoration of Hone’s home, so that it is warm and comfortable for one or two people to stay in (same floor plan, insulate, rewire, update plumbing/drainage etc. and the raise kitchen floor by approximately 40mm to the same height as the rest of house). Install wooden triple-glazed windows. Tile bathroom. Recreate art work for walls and restore basic furniture. Fixed assets purchased Restore back shed for use as a studio. Building of a 40m2 residency dwelling. Retain front of section, link to mains sewerage, improve drainage and driveway, and install gates.

Stage Three — Establishment of Residency Determining structure of residency and level of support Forming partnerships with other agencies and institutions Organising administration and maintenance of residence Celebrating launch of Hone Tuwhare Writers’ Residency

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6 Sensitivity Analysis

6.1 Overview

We carried out sensitivity analysis on the residency to determine the financial impact of reduced funding scenarios. We examined the results of the following sensitivities: Decreased income of 10% Increased construction costs of 15% Increasing expenditure by 10% Reduction in return on the endowment fund by 2.5% (i.e. a 5% annual return)

If the forecast donations and grants were to decrease by 10%, the size of the endowment fund would need to increase from $678,000 to $789,000.

If construction costs increased by 15%, a total of $891,000 would be needed to fund the construction and fixed asset. The size of the endowment fund would remain the same as this income is used to fund the annual running costs as opposed to the capital investment.

If expenditure rose by 10%, the endowment fund would need to increase to approximately $725,000.

If the expected return on the endowment fund reduced to 5%, the endowment fund would need to increase to approximately $1,069,000.

We note that our sensitivity analysis does not necessarily demonstrate the full range of possible outcomes. The purpose of the sensitivity analysis is to demonstrate some possible scenarios and the extent to which these changes effect the input assumptions and the quantum of the endowment fund required.

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7 Operating Risks and Opportunities

There are a number of risks and opportunities that need to be considered by the Trust for this project. A number of risks and opportunities have been outlined below.

7.1 Operating Risks

7.1.1 Legal and Regulatory Risk As mentioned above, we believe the Trust is best advised to confirm legal arrangements regarding the intended usage of the land from the Takutai Trust. Albeit that letters of intention from Takutai Trust are explicit in their commitment to assisting in the establishment of a writers crib and residency, we believe a lease agreement would provide the Trust certainty of tenure and clarify any future land uses. In our view, the Trust has taken a prudent and professional approach to managing these matters and potential risks. 7.1.2 Financial Risk Success for this project is heavily dependant on the ability of the Trust to secure the necessary funds to implement the Trust’s plans. We have reviewed the funding plan prepared by Chris McBride and believe the Trust has been strategic in their understanding of potential funding sources and application processes. We understand it is the intention of the Trust to not borrow funds for the development, thus limiting potential financial risk factors. We understand that the necessary and appropriate insurances will be implemented as part of the financial risk strategy. 7.1.3 Managing Construction Project It is our experience that projects of this nature benefit from professional support to ensure the project is delivered on time and to budget. We understand the architects responsible for the final design will be commissioned to manage the project in its entirety alongside the builders. 7.1.4 Maintenance Costs Anticipated ongoing maintenance and operational costs have been factored into the financial analysis.

7.2 Trust Operating Opportunities

7.2.1 Workshops We believe there are potential supplementary revenue opportunities afforded to the Trust by hosting writers workshops at the crib and the proposed residency building.

7.2.2 Fundraisers

Following on from the above, it is foreseeable that the Trust will host fundraising events and activities to promote the crib and celebrate the works of Hone Tuwhare. We believe this will add value to the project and provide an opportunity to access potential individual funders and organisations.

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8 Governance & Structure of the Trust

8.1 Governance

We have reviewed the structure and governance of the Trust and believe the Trust is well positioned to undertake this project.

The Trust has clear objectives that meet its charitable requirements and have appointed a Board that bring both commercial and cultural strengths to the planning and operation of this project.

Patron:

Lieutenant General Sir Jeremaiah (Jerry) Mateparae – Ngati Tuwharetoa, Ngati Kahungunu Governor General of New Zealand (2011-current), Former Chief of the New Zealand Defence Force (2006-2011).

Trustees:

Robert Tuwhare – (Nga Puhi, Scottish) Hone’s son and literary executor, family representative, writer, carpenter. Matt Shirtcliffe Creative Director. Worked for leading advertising agencies both here and in Canada. Founding member Kowhai Trust. Matt has created many highly successful not-for-profit campaigns and recently formed his own advertising and marketing consultancy. Suze Keith (Secretary) Suze came across Hone’s works when she was at Wellington Girls College and, recognising the significance of his contribution to New Zealand, leapt at the chance to help with the delivery of the Trust’s kaupapa. She has a BA in English and an MA (Applied) in Recreation and Leisure Studies. With a wide background in event management and communications, she most recently worked for the Department of Conservation’s Otago Conservancy in a communications role, and is now based in Wellington. Dr Noel Waite (Chair) Dr Waite is a Senior Lecturer in Design in the Department of Applied Sciences at the University of Otago. He has a special research interest in the imaginative possibilities of heritage. In 2011, his 4th- year design students worked with the Trust, and he became a trustee shortly thereafter. He is also on the Steering Committee of Dunedin's successful bid (announced in December 2014) to be recognised as a UNESCO Creative City of Literature. Jeanette Wikaera - (Ngāpuhi, Ngāti Pukenga, Ngāti Tamatera) Jeanette is a heritage professional working at the Hocken Library and is Co-Director of Digital Kaitiaki with colleagues from the University of Otago who share an interest in exploring the intersection of cultural heritage with traditional Māori knowledge through the use of digital technologies. Jeanette holds postgraduate qualifications in Māori Studies and Museum Studies and has had much experience in working in the cultural heritage sector and with Maori communities across the country.

16

Stan Scott

A qualified, licensed building practitioner for nearly thirty years, Stan has spent most of his building career renovating and restoring villas and bungalows and historic buildings. More recently he has been teaching DIYers how to build for Mitre 10. An unlikely poetry lover, Stan discovered Hone Tuwhare’s work at high school and even published his own book of poetry at age 17. Assisted by (ex officio): CE/Manager: Chris McBride

Arts manager and consultant; curator Kauri Art/Science Community Engagement Project with Auckland Council Bio-security and Kauri Dieback Management Programme; former manager McCahon House Trust - 2009-2012 Honorary Solicitors: Anderson Lloyd, Vanessa Robb, Partner. Vanessa Robb joined Anderson Lloyd’s Queenstown office in August 2004. She is a property specialist with expertise in consents and approvals, conservation estate, district and regional plans, environmental due diligence, Environment Court representations, mining, prosecution and enforcement and tourism. She has a broad range of experience both in New Zealand and in the UK, and is a member and treasurer of the Central Otago/Queenstown branch of the Resource Management Law Association. http://www.andersonlloyd.co.nz/vanessa-robb/ Honorary Accountant: B.R. & Associates Ltd., A.J. (Butch) Reichelmann

Suite 9, 2nd Floor, Axis Building 1 Cleveland Road, Parnell P.O. Box 37 850, Parnell Auckland 1052

[email protected]

Advisors: Iwi Advisors: Ngai Tahu: Tahu Potiki, Nga Puhi: Patu Hohepa Writers’ Advisors: Peter Olds and Cilla McQueen Advisor: Ella Henry

17

9 Conclusion

We are able to conclude that there is a distinctive need for the project, with overwhelming support from various stakeholders to undertake the project. We have modelled the feasibility of the project based on forecast costings and potential revenue sourced supplied by the Trust. We believe this project should lie in a range from $1.45M to $1.5M, with initial construction costs between $775,000 and $800,000 to complete both the crib and residency construction. As an initial target, it is our view that the Trust should look to secure an initial endowment fund of approximate $700,000 in order to provide a degree of financial certainty and sustainability. Obviously, this fund will need to be managed appropriately with a view to growing the fund over time. Further to the above, without secure funding streams in place, it is difficult to assess the overall feasibility of the project with any degree of certainty as the Trust will rely largely on philanthropic sources of funding as opposed to ongoing revenue-generating activity. Albeit, we are largely in a “post-Global Financial Crisis” environment, we would submit that there is ever-increasing competition for cultural philanthropic funding. Therefore, there still remains a significant task to build the financial base by the Trust. On this matter, we believe the Trust is methodically investigating all possible funding avenues with the assistance of Chris McBride. Upon securing funding, we would anticipate that the Trust will undertake the project in stages to manage risks and allow the Trust to build on its financial base. We would recommend that if the project progresses, that budgets are set with monthly reporting back on actual results, including variance analysis, so should any problems emerge, they can be identified and mitigated in a timely manner. We would recommend that the Trust move to identify funding and/or equity partners to raise the necessary capital to progress this project. Given the sensitivities surrounding revenue and cashflow projections, we believe debt funding is not the best option for the Trust to pursue. In addition, we believe the Trust should begin to identify strategic partners that can assist with promotion, attracting funders and sponsors.

* * * *

Crowe Horwath (NZ) Limited

Heta Hudson Principal - Business Performance Phone +64 9 968 8547 Mobile +64 27 355 6745 Fax +64 9 309 1198 Email [email protected]

18

APPENDIX 1 Profit & Loss Projections and Balance Sheet and Cashflow Statements

Dashboard

Hone Tuwhare Immediate funds for construction $ 774,670 ## Start of construction 1-Jul-15 Approximate size of the Endowment required - going forward 677,990 ## Length of construction b) 6 months 6

End of construction 30-Dec-15

Start of tenancy 31-Jan-16 Check Endowment Size

LVR (Loan to Value Ratio) How much will be borrowed? 0%

Expected return on endowment's funds 7.5%

Expected future inflation 2.0% retur

Construction loan interest rate 7.5%

Income - Year 1 Income - Next 10 years

Donations, Donations, 30,000 342,000

Endowment Endowment Returns, Returns, 50,849 432,000

Cash Outflows - Year 1 Cash Outflows - Next 10 Years Operating Expenses, 32,694 Operating Expenses, 357,990

Capital Expenditures, Capital 774,670 Expenditures, 795,120

Year 1 Next 10 years Donations 30,000 342,000 Endowment Returns 50,849 432,000 Operating Expenses 32,694 357,990 Capital Expenditures 774,670 795,120

Page | 1 of 4 1

APPENDIX 1 Profit & Loss Projections and Balance Sheet and Cashflow Statements

1. Assumptions Inputs1. Assumptions 1. Assumptions Relevant Dates 1-Nov-14 1. Assumptions Relevant1. Assumptions Dates 1-Nov-141-Jan-15 Relevant Dates 1-Nov-14 Relevant Dates 1-Jan-151-Jul-15 Relevant Dates 1-Nov-141-Jan-15 Relevant Dates 1-Nov-141-Jan-161-Jul-15 Relevant Dates 1-Jan-15 Relevant Dates 1-Jan-161-Jan-151-Jul-161-Jul-15 Relevant Dates 1-Jan-171-Jan-161-Jul-161-Jul-15 Relevant Dates 1-Jan-171-Jan-161-Jul-16 Relevant2. Construction Dates Expenses 1-Jan-171-Jul-16 2.Relevant Construction Dates Expenses 1-Jan-17 2. Construction Expenses 2.Total Construction Expenses $ 704,220 TotalProfessional and P&G $ 704,220 - ProfessionalConsentsTotal and and regulatory P&G costs $ 704,220 1,000 - ConsentsTotalCribProfessional renovation and and regulatory - BallP&G park costs estimate $ 704,220100,000 1,000 - CribProfessionalConsents renovationfitout and- Pearson and regulatory - BallP&G & park Assoc costs estimate $ 100,000 50,000 1,000 - CribConsentsNew fitoutrenovationWriter's and- Pearson residence regulatory - Ball & park Assoc - costsPearson estimate and Assoc $ 459,200100,000 50,000 1,000 NewCribLandscaping renovationfitoutWriter's - Pearson residence - Ball & park Assoc - Pearson estimate and Assoc $ 459,200100,000 50,00010,000 LandscapingCribNewUpgrading fitoutWriter's -existing Pearson residence drainage & Assoc - Pearson and Assoc $ 459,200 10,00050,00020,000 UpgradingNewLandscapingContingencies Writer's existing residence - 10% drainage - Pearson and Assoc $ 459,200 20,00010,00064,020 ContingenciesLandscapingUpgradingOther costs? existing - 10% drainage $ 64,02010,00020,000 OtherUpgradingContingencies costs? existing - 10% drainage $ 20,00064,020 ContingenciesOther costs? - 10% $ 64,020 Other3. Fixed costs? Assets 3. Fixed Assets 3. Fixed Assets 2015 2016 2017 2018 2019 2020 2021 2022 3. Fixed Assets 2015 2016 2017 2018 2019 2020 2021 2022 Residency fixtures and fittings $ 38,500.002015 $ 2016 500.00 $ 1,000.002017 $ 2018 1,000.00 $ 20191,000.00 $ 20205,000.00 $ 1,000.00 2021 $ 1,000.00 2022 Car for resident $ 10,000.00 $ 8,000.00 Residency fixtures and fittings $ 38,500.002015 $ 2016 500.00 $ 1,000.002017 $ 2018 1,000.00 $ 20191,000.00 $ 20205,000.00 $ 1,000.00 2021 $ 1,000.00 2022 Phone/iPad for staff $ 2015 950.00 2016 2017 2018 $ 2019 950.00 2020 2021 2022 CarResidency for resident fixtures and fittings $ 10,000.0038,500.00 $ 500.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 8,000.005,000.00 $ 1,000.00 $ 1,000.00 Cleaning and gardening equipment $ 1,000.00 $ 1,000.00 Phone/iPadResidencyCar for resident fixtures for staff and fittings $ 38,500.0010,000.00 950.00 $ 500.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 950.00 $ 5,000.008,000.00 $ 1,000.00 $ 1,000.00 WebsiteResidency development fixtures and fittings $ 20,000.0038,500.00 $ 500.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 5,000.00 $ 1,000.00 $ 1,000.00 CleaningCarPhone/iPad for resident and for gardening staff equipment $ 10,000.00 1,000.00 950.00 $ 950.00 $ 1,000.008,000.00 Car for resident $ 10,000.00 $ 8,000.00 WebsitePhone/iPadCleaning developmentand for gardening staff equipment $ 20,000.00 1,000.00 950.00 $ 950.00 $ 1,000.00 CleaningWebsite developmentand gardening equipment $ 20,000.00 1,000.00 $ 1,000.00 Website development $ 20,000.00 4. Variable Annual Income and Expenses

Add4. Variable any expenses Annual as (-) Income and Expenses negative amounts 2015 2016 2017 2018 2019 2020 2021 2022 Add any expenses as (-) 4. Variable Annual Income and Expenses negative amounts 4. Variable Annual Income and Expenses 2015 2016 2017 2018 2019 2020 2021 2022 Add any expenses as (-) 4. VariableDonations Annual Income and Expenses $ 30,000.00 $ 31,000.00 $ 32,000.00 $ 33,000.00 $ 34,000.00 $ 35,000.00 $ 36,000.00 $ 37,000.00 Addnegative any expensesamounts as (-) 4. VariableGrants Annual Income and Expenses $ - $ 48,000.00 $ 48,000.00 $ 48,000.00 $ 48,000.00 $ 48,000.00 $ 48,000.00 $ 48,000.00 Donations $ 30,000.002015 $ 31,000.002016 $ 32,000.002017 $ 33,000.00 2018 $ 34,000.002019 $ 35,000.00 2020 $ 36,000.002021 $ 37,000.002022 negativeAdd any expensesamounts as (-) Guaranteed residency organisations' contributions Add any expenses as (-) Grants $ 2015 - $ 48,000.002016 $ 48,000.002017 $ 48,000.00 2018 $ 48,000.002019 $ 48,000.00 2020 $ 48,000.002021 $ 48,000.002022 negative amounts Other contributions Donations $ 30,000.002015 $ 31,000.002016 $ 32,000.002017 $ 33,000.00 2018 $ 34,000.002019 $ 35,000.00 2020 $ 36,000.002021 $ 37,000.002022 GuaranteedFund raising residency manager organisations' contributions -$ 2015 30,000.00 -$ 2016 30,600.00 -$ 2017 31,212.00 -$ 2018 31,836.24 -$ 201932,472.96 -$ 202033,122.42 -$ 33,784.872021 -$ 34,460.572022 GrantsDonations $ 30,000.00 - $ 48,000.0031,000.00 $ 48,000.0032,000.00 $ 48,000.00 33,000.00 $ 48,000.0034,000.00 $ 48,000.00 35,000.00 $ 48,000.0036,000.00 $ 48,000.0037,000.00 OtherOther contributions wages and salaries -$ 3,000.00 -$ 3,000.00 -$ 30,000.00 -$ 30,600.00 -$ 31,212.00 -$ 31,836.24 -$ 32,472.96 -$ 33,122.42 DonationsFundGrants raising manager -$$ 30,000.00 - -$$ 31,000.0030,600.0048,000.00 -$$ 32,000.0031,212.0048,000.00 -$$ 33,000.00 31,836.2448,000.00 -$$ 34,000.0032,472.9648,000.00 -$$ 35,000.00 33,122.4248,000.00 -$$ 36,000.0033,784.8748,000.00 -$$ 37,000.0034,460.5748,000.00 GuaranteedDonationsArtist Stipend residency organisations' contributions $ $ 30,000.00 - $ -$ 31,000.00 12,000.00$ -$ 32,000.00 18,000.00 $-$ 33,000.00 24,000.00 $-$ 34,000.00 30,000.00 $-$ 35,000.00 30,000.00 $-$ 36,000.00 30,000.00 -$$ 37,000.00 30,000.00 OtherGrantsGuaranteed contributionswages residency and salaries organisations' contributions -$$ 3,000.00 - -$$ 48,000.00 3,000.00 -$$ 48,000.0030,000.00 -$$ 48,000.00 30,600.00 -$$ 48,000.0031,212.00 -$$ 48,000.00 31,836.24 -$$ 48,000.0032,472.96 -$$ 48,000.0033,122.42 FundGuaranteedArtistOther raisingStipendcontributions residencymanager organisations' contributions -$$ 30,000.00 - -$ 30,600.0012,000.00 -$ 31,212.0018,000.00 -$ 31,836.24 24,000.00 -$ 32,472.9630,000.00 -$ 33,122.42 30,000.00 -$ 33,784.8730,000.00 -$ 34,460.5730,000.00 OtherFund raisingwagescontributions managerand salaries -$ 30,000.00 3,000.00 -$ 30,600.00 3,000.00 -$ 30,000.0031,212.00 -$ 30,600.00 31,836.24 -$ 31,212.0032,472.96 -$ 31,836.24 33,122.42 -$ 32,472.9633,784.87 -$ 33,122.4234,460.57 ArtistFundOther raisingStipendwages managerand salaries -$$ 30,000.00 3,000.00 - -$ 12,000.0030,600.00 3,000.00 -$ 18,000.0031,212.0030,000.00 -$ 24,000.00 31,836.2430,600.00 -$ 30,000.0032,472.9631,212.00 -$ 30,000.00 33,122.4231,836.24 -$ 30,000.0033,784.8732,472.96 -$ 30,000.0034,460.5733,122.42 OtherArtist Stipendwages and salaries -$$ 3,000.00 - -$ 12,000.00 3,000.00 -$ 30,000.0018,000.00 -$ 30,600.00 24,000.00 -$ 31,212.0030,000.00 -$ 31,836.24 30,000.00 -$ 32,472.9630,000.00 -$ 33,122.4230,000.00 Artist Stipend $ - -$ 12,000.00 -$ 18,000.00 -$ 24,000.00 -$ 30,000.00 -$ 30,000.00 -$ 30,000.00 -$ 30,000.00 Page | 2 of 4

2 1. Assumptions

Relevant Dates 1-Nov-14 Relevant Dates 1-Jan-15 Relevant Dates 1-Jul-15 Relevant Dates 1-Jan-16 Relevant Dates 1-Jul-16 Relevant Dates 1-Jan-17

2. Construction Expenses

Total $ 704,220 Professional and P&G $ - Consents and regulatory costs $ 1,000 Crib renovation - Ball park estimate $ 100,000 Crib fitout - Pearson & Assoc $ 50,000 New Writer's residence - Pearson and Assoc $ 459,200 Landscaping $ 10,000 Upgrading existing drainage $ 20,000 Contingencies - 10% $ 64,020 Other costs?

3. Fixed Assets

2015 2016 2017 2018 2019 2020 2021 2022

Residency fixtures and fittings $ 38,500.00 $ 500.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 5,000.00 $ 1,000.00 $ 1,000.00 Car for resident $ 10,000.00 $ 8,000.00 Phone/iPad for staff $ 950.00 $ 950.00 Cleaning and gardening equipment $ 1,000.00 $ 1,000.00 Website development $ 20,000.00

4. Variable Annual Income and Expenses

Add any expenses as (-) negative amounts 2015 2016 2017 2018 2019 2020 2021 2022

Donations $ 30,000.00 $ 31,000.00 $ 32,000.00 $ 33,000.00 $ 34,000.00 $ 35,000.00 $ 36,000.00 $ 37,000.00 Grants $ - $ 48,000.00 $ 48,000.00 $ 48,000.00 $ 48,000.00 $ 48,000.00 $ 48,000.00 $ 48,000.00 Guaranteed residency organisations' contributions Other contributions APPENDIX 1 Fund raising manager -$ 30,000.00 -$ 30,600.00 -$ 31,212.00 -$ 31,836.24 -$ 32,472.96 -$ 33,122.42 -$ 33,784.87 -$ 34,460.57 Other wages and salaries -$ 3,000.00 -$ 3,000.00 -$ 30,000.00 -$ 30,600.00 -$ 31,212.00 -$ Profit 31,836.24 & -$Loss 32,472.96 Projections-$ 33,122.42 and Artist Stipend $ - -$ 12,000.00 -$ 18,000.00 -$ 24,000.00 Balance-$ 30,000.00 Sheet-$ 30,000.00 and Cashflow-$ 30,000.00 -$ Statements 30,000.00

5. Annual Expenses - IN FIRST YEAR OF TENANCY

$ Accounting Fees $ 3,250.00 Accounting software (e.g. Zero) $ 300.00 Audit - donated $ - Advertising and Promotion $ 3,000.00

Bank Charges $ 500.00 Catering $ 1,000.00 Cleaning supplies $ 500.00 Computer Expenses $ 1,200.00 Contractors $ - Education and Training $ 100.00 General $ 1,000.00 Insurance - donated $ - Motor vehicle expenses $ 1,500.00 Postage $ 200.00 Power $ 2,900.00 Printing and Stationary $ 1,000.00 Rates $ 2,800.00 Repairs and Maintenance $ 2,500.00 Security $ 600.00 Telephone $ 3,500.00 Travel and Entertainment $ 750.00 Casual wages for crib open days $ 1,104.00 Water Rates $ 600.00 Website costs $ 1,000.00 Endowment management fees (0.5%) $ 3,389.95

6. Other assumptions

Depreciable Life of the building (years) 40 Interest rate on mortgage (construction) 7.5% Loan amount / Construction mortgage $ - Tax rate 0%

Page | 3 of 4

3

APPENDIX 1 Profit & Loss Projections and Balance Sheet and Cashflow Statements

Calculations January to December of each year Income Statement 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027

Capital Expenditure - Nominal Capital Expenditure - Real 774,670 500 1,000 1,000 1,950 14,000 1,000 1,000 1,950 14,000 1,000 1,000 1,950

2. Construction Expenses 704,220 3. Fixed Assets 70,450 500 1,000 1,000 1,950 14,000 1,000 1,000 1,950 14,000 1,000 1,000 1,950

Income and varying expenses - Nominal 47,849 85,934 53,723 48,193 42,393 42,938 43,460 43,956 44,835 45,732 46,646 47,579 48,531 Income and varying expenses - Real 47,849 84,249 51,637 45,413 39,164 38,891 38,591 38,266 38,266 38,266 38,266 38,266 38,266

Donations 30,000 31,000 32,000 33,000 34,000 35,000 36,000 37,000 37,000 37,000 37,000 37,000 37,000 Grants 0 48,000 48,000 48,000 48,000 48,000 48,000 48,000 48,000 48,000 48,000 48,000 48,000 Guaranteed residency organisations' contributions 0 0 0 0 0 0 0 0 0 0 0 0 0 Other contributions 0 0 0 0 0 0 0 0 0 0 0 0 0 Fund raising manager (30,000) (30,600) (31,212) (31,836) (32,473) (33,122) (33,785) (34,461) (34,461) (34,461) (34,461) (34,461) (34,461) Other wages and salaries (3,000) (3,000) (30,000) (30,600) (31,212) (31,836) (32,473) (33,122) (33,122) (33,122) (33,122) (33,122) (33,122) Artist Stipend 0 (12,000) (18,000) (24,000) (30,000) (30,000) (30,000) (30,000) (30,000) (30,000) (30,000) (30,000) (30,000) Endowment income 50,849 50,849 50,849 50,849 50,849 50,849 50,849 50,849 50,849 50,849 50,849 50,849 50,849

Non-Varying Expenses - Nominal 32,694 33,348 34,015 34,695 35,389 36,097 36,819 37,555 38,306 39,072 39,854 40,651 41,464 Non-Varying Expenses - Real 32,694 32,694 32,694 32,694 32,694 32,694 32,694 32,694 32,694 32,694 32,694 32,694 32,694 Accounting Fees 3,250 3,250 3,250 3,250 3,250 3,250 3,250 3,250 3,250 3,250 3,250 3,250 3,250 Accounting software (e.g. Zero) 300 300 300 300 300 300 300 300 300 300 300 300 300 Audit - donated 0 0 0 0 0 0 0 0 0 0 0 0 0 Advertising and Promotion 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 Bank Charges 500 500 500 500 500 500 500 500 500 500 500 500 500 Catering 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 Cleaning supplies 500 500 500 500 500 500 500 500 500 500 500 500 500 Computer Expenses 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 Contractors 0 0 0 0 0 0 0 0 0 0 0 0 0 Education and Training 100 100 100 100 100 100 100 100 100 100 100 100 100 General 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 Insurance - donated 0 0 0 0 0 0 0 0 0 0 0 0 0 Motor vehicle expenses 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 Postage 200 200 200 200 200 200 200 200 200 200 200 200 200 Power 2,900 2,900 2,900 2,900 2,900 2,900 2,900 2,900 2,900 2,900 2,900 2,900 2,900 Printing and Stationary 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 Rates 2,800 2,800 2,800 2,800 2,800 2,800 2,800 2,800 2,800 2,800 2,800 2,800 2,800 Repairs and Maintenance 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 Security 600 600 600 600 600 600 600 600 600 600 600 600 600 Telephone 3,500 3,500 3,500 3,500 3,500 3,500 3,500 3,500 3,500 3,500 3,500 3,500 3,500 Travel and Entertainment 750 750 750 750 750 750 750 750 750 750 750 750 750 Casual wages for crib open days 1,104 1,104 1,104 1,104 1,104 1,104 1,104 1,104 1,104 1,104 1,104 1,104 1,104 Water Rates 600 600 600 600 600 600 600 600 600 600 600 600 600 Website costs 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 Endowment management fees (0.5%) 3,390 3,390 3,390 3,390 3,390 3,390 3,390 3,390 3,390 3,390 3,390 3,390 3,390

Page | 4 of 4

4

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