Directory for the Year Ended 31 March 2005
Trustees: John Farry (chairperson), Dunedin; Hilary Allison (deputy chairperson), Dunedin; Duncan Butcher, Cromwell; Sally Hope, Oamaru; Russell Hendry, Dunedin; Alan McLay, Oamaru; Barbara Payton, Dunedin; Raewynne Pedofski, Dunedin; Mark Ryan, Dunedin; David Shepherd, Dunedin; Bill Thomson, Balclutha.
Chief Executive: Keith Ellwood.
Registered Office: Second Floor, Community Trust House, corner of Filleul Street and Moray Place, Dunedin.
Auditor: Polson Higgs, Dunedin.
Solicitor: Anderson Lloyd Caudwell, Dunedin.
Investment Advisors: Russell Investment Group, Auckland.
Bankers: Westpac, Dunedin.
Consolidated Statement of Financial Performance for the Year Ended 31 March 2005
Note 2005 2004
$000 $000
Revenue 1 11,865 22,025
Expenditure 2 (1,271) (1,268)
Surplus before tax 10,594 20,757
Taxation 7 – –
Net surplus 10,594 20,757
This net surplus has been allocated to uncommitted surplus
Consolidated Statement of Movement in Trust Funds for the Year Ended 31 March 2005
Note 2005 2004
$000 $000
Net surplus for the year 10,594 20,757
Total recognised revenues and expenses 10,594 20,757
Less donations approved (4,694) (5,097)
Movements in trust funds for the year 5,900 15,660
Trust funds opening balance 166,016 150,356
Trust funds closing balance 171,916 166,016
Consolidated Statement of Financial Position as at 31 March 2005
Note 2005 2004
$000 $000
Source of funds—
Trust funds 3 171,916 166,016
Current liabilities:
Accounts payable 70 130
Donations payable 3,667 6,071
175,653 172,217
Employment of funds—
Current assets:
Current account 170 243
Short term bank deposits 371 1,021
Debtors 2 7
Prepayments – 9
543 1,280
Non current assets:
Managed funds 6 173,726 169,505
Fixed assets 5 1,136 1,182
Advance to Dunedin Community House Trust 10 248 250
175,110 170,937
175,653 172,217
Approved on behalf of the board:
JOHN FARRY. RUSSELL HENDRY.
Chairperson. Trustee.
27 June 2005. 27 June 2005.
Consolidated Statement of Cashflows for the Year Ended 31 March 2005
Note 2005 2004
$000 $000
Cashflow from operating activities—
Cash was provided from:
Interest 47 48
Other 115 222
162 270
Cash was disbursed on:
Payment to suppliers and staff 863 794
Fund managers’ fees 409 376
(1,272) (1,170)
Net cash (outflow) from operating activities 8 (1,110) (900)
Cashflow from investing activities—
Cash was provided from:
Receipts from fund managers 7,487 6,376
Cash was disbursed on:
Purchase of fixed assets (4) (10)
Net cash inflow from investing activities 7,483 6,366
Cashflow from funding activities—
Cash was provided from:
Long term loan repayment 2 –
Cash was disbursed on:
Donations paid (7,098) (4,407)
Net cash (outflow) from funding activities (7,096) (4,407)
Net cash inflow/(outflow) from activities (723) 1,059
Add opening cash brought forward 1264 205
Ending cash carried forward 541 1,264
Cash comprises:
Cash at bank 170 243
Term deposits 371 1,021
541 1,264
Notes to the Consolidated Financial Statements for the Year Ended 31 March 2005
Basis of Preparation
The Community Trust of Otago was incorporated as a charitable trust in accordance with the provisions of the Community Trusts Act 1999.
These are the consolidated financial statements of The Community Trust of Otago and its 100% subsidiaries: The Community Trust Amateur Sports Co Limited, The Community Trust District Improvement Company Limited and Fillmor House Limited.
A former subsidiary company of the trust, The Otago Community Trust Charities Limited, was wound up in March 2005 with the surplus distributed back to the trust. The winding up of the company was a consequence of income tax exemption granted to the trust from 1 April 2005.
The financial statements have been prepared to comply with the Financial Reporting Act 1993 and comprise consolidated statements of the following: Financial performance, movement in trust funds, financial position, cashflows, as well as notes
to these financial statements.
The financial statements are prepared on the basis of historical cost, except for the revaluation of managed funds.
Specific Accounting Policies
Income
Income from managed funds includes both realised and unrealised income and is recorded gross of fund management expenses.
Interest is recognised on an accrual basis.
Foreign Currencies
All amounts denominated in foreign currencies are converted to New Zealand dollars at balance date. All realised and unrealised gains and losses are recognised in the statement of financial performance.
Taxation
With effect from 1 April 2004, community trusts, including The Community Trust of Otago, became exempt from income tax pursuant to section CB4 (1) (m) of the Income Tax Act 1994.
Fillmor House Limited is the only subsidiary liable for income tax. Income tax is recognised on the surplus available for distribution before taxation, adjusting for differences between taxable and accounting income. Future tax benefits are not recognised unless realisation of the asset is virtually certain.
Fixed Assets
Fixed assets are recorded at cost less accumulated depreciation.
Depreciation
Depreciation has been charged to the financial statement using rates which will write off the cost of assets less their estimated residual value over their estimated economic lives. The depreciation rates used are:
Buildings 4%
Office furniture and equipment 12-48%
Donations Payable
Donations payable represents donations approved by the trustees but unpaid as at balance date.
Receivables
Receivables are stated at estimated realisable value after providing against debts where collection is doubtful. Bad debts are written off during the period in which they are identified.
G.S.T.
Subsidiaries of The Community Trust of Otago, Fillmor House Limited and The Community Trust District Improvement Company Limited are registered for G.S.T. Accordingly, their financial performance and financial position have been consolidated within the accounts on a G.S.T. exclusive basis. Subject to the above, the trust is not registered for G.S.T. purposes and the financial statements have been prepared on a G.S.T. inclusive basis.
Basis of Consolidation
The Community Trust of Otago, Fillmor House Limited, The Community Trust District Improvement Company Limited and The Community Trust Amateur Sports Company Limited have been consolidated using the purchase method of consolidation.
Investments
Investments are valued at period end market value. All realised and unrealised gains and losses are recognised in the statement of financial performance.
Hedging Instruments
The trust, through its fund managers, enters into hedging instruments such as forward exchange contracts. These are converted to the New Zealand dollar rate at balance date with all realised and unrealised gains and losses being recognised in the statement of financial performance as income from managed funds.
Statement of Cashflows
Cash comprises cash at bank and call deposits but does not include cash or deposits held by the fund managers.
Financial Instruments
All assets and liabilities of the trust with the exception of fixed assets are financial instruments and are recognised in the statement of financial position. All financial instruments are recorded at market value or fair value or are not materially different from market value or fair value.
Fund managers utilise financial instruments with off balance sheet risk to reduce exposure to fluctuations in foreign currency exchange rates. Forward exchange contracts are entered into to hedge foreign currency transactions. These are converted to
the New Zealand dollar rate at balance date with all realised and unrealised gains and losses being recognised in the statement of financial performance.
The quantitative disclosures required by FRS 31 Disclosure of Information About Financial Instruments have been included throughout the financial statements where material.
Changes in Accounting Policies
Except for the change to the taxation policy arising from the trust becoming income tax exempt, there have been no other changes in accounting policies during the year.
1. Revenue
Note 2005 2004
$000 $000
Interest 3,961 3,545
Pooled managed funds 8,986 17,860
Realised (losses)/gains (572) 769
Unrealised (losses)/gains (620) (276)
Other 110 127
Total operating revenue 11,865 22,025
2. Expenditure
Depreciation 50 55
Fund managers’ fees 409 376
Occupancy 65 73
Other operating 102 109
Professional fees 156 160
Promotion 54 35
Public and statutory reporting 14 19
Staff 266 261
Trustee fees 11 142 158
Trustee expenses 13 22
1,271 1,268
Professional fees—
Audit fees 10 10
Accounting and other support 11 12
Computer support 2 10
Legal advisers 5 1
Professional investment advisers 90 89
Tax advice 19 16
Other professional advice 19 22
156 160
3. Trust Funds
Trust Capital
The trust capital represents the realised value of its original asset, being shares in Trust Bank. They were sold, partly in 1994 when Trust Bank listed on the New Zealand Stock Exchange and the balance in 1996 when Westpac acquired Trust Bank.
2005 2004
$000 $000
Opening balance 131,467 131,467
Closing balance 131,467 131,467
Capital maintenance reserve:
Opening balance 25,913 23,423
Transfers from uncommitted surplus 4,290 2,490
Closing balance 30,203 25,913
The capital maintenance reserve represents the additional amount necessary to preserve the real value of the capital allowing for inflation as measured by the Consumers’ Price Index (CPI).
Uncommitted surplus:
Opening balance 8,636 (4,534)
Donations approved during the year (4,694) (5,097)
Trustee surplus/(deficit) 10,594 20,757
Transfer to capital maintenance reserve (4,290) (2,490)
Closing balance 10,246 8,636
Total closing trust funds 171,916 166,016
Available for non taxable distribution to donees:
Opening balance 1 April 2004 166,016
Deduct donations approved during the year to non tax exempt donees 165
Closing balance 165,851
Balance available for taxable distribution to donees:
Current year surplus 10,594
Deduct donations approved during the year to exempt donees 4,529
Closing balance 6,065
Total trust funds 171,916
4. Managed Funds
2005 2004
$000 $000
Managed by external managers:
Opening balance 169,505 154,031
Gross income 11,708 21,850
Fund managers’ fees – deducted (409) (376)
Withdrawals (7,078) (6,000)
Closing balance 173,726 169,505

Investments comprise:
Cash and deposits 11,396 17,010
Bonds 110,769 101,531
Equities 51,561 50,964
Total managed funds 173,726 169,505
Allocated as follows—
New Zealand:
Bonds and deposits 65,006 68,693
Equities 9,465 9,163
74,471 77,856
Overseas:
Bonds and deposits 57,159 49,848
Equities 42,096 41,801
99,255 91,649
Total:
Bonds and deposits 122,165 118,541
Equities 51,561 50,964
173,726 169,505
5. Fixed Assets
2005 2004
Book Value Book Value
$000 $000
Land:
At cost 432 432
Buildings:
At cost 1,026 1,026
Accumulated depreciation (361) (324)
665 702
Office furniture and equipment:
At cost 237 234
Accumulated depreciation (198) (186)
39 48
Total net carrying value 1,136 1,182
Depreciation:
Buildings 37 43
Office furniture and equipment 13 12
50 55
6. Financial Instruments
Currency Risk
The trust, through its fund managers, invests in securities that are denominated in foreign currencies and therefore result in
a currency risk. The trusts fund managers actively monitor this risk and hedge positions in accordance with their investment guidelines.
Interest Rate Risk
The trust, through its fund managers, invests in securities that are subject to interest rate risk. The trusts fund managers monitor this risk and change asset allocations and maturity profiles in accordance with their investment guidelines.
Credit Risk
The trust, in the normal course of business, enters into arrangements with other parties. These arrangements give rise to credit risk for the trust and hence policies and procedures are maintained so that the risk is minimised. No collateral is required
in respect of financial assets.
For all classes of financial assets held by the trust, the maximum credit risk exposure to the trust is the carrying value
as disclosed in the financial statements at balance date.
Due to the diversification of the investment portfolio and the policies and procedures in place, there are no significant concentrations of credit risk.
Fair Values
All financial instruments are carried at market value.
7. Taxation
2005 2004
$000 $000
Net surplus/(deficit) before donations 10,594 20,757
Less: Charitable business exemptions and donations (10,594) (5,881)
Plus: Unrealised equity (gains) losses – (5,957)
Non-deductible expenditure – 357
Overseas withholding tax credits – 8
Imputation credits received – 142
(10,594) (11,331)
Total taxable income – 9,426
Less: Distribution of income to beneficiaries – (9,160)
Total trustees taxable income – 266
Less: Losses brought forward – (377)
(Loss) for tax purposes – (111)
Excess imputation credits – 142
Losses brought forward – 377
Plus: Conversion of excess imputation credits to losses – 431
Current year loss – 111
Less: Losses claimed this year – (377)
Total losses to be carried forward – 542
With effect from 1 April 2004, community trusts, including the Community Trust of Otago, became exempt from income tax pursuant to section CB4 (1) (m) of the Income Tax Act 1994.
8. Reconciliation of Reported Surplus to Net Cashflow From Operating Activities
2005 2004
$000 $000
Surplus/(deficit) for the period 10,594 20,757
Add:
Non-cash items:
Depreciation 50 55
Managed fund (revaluation)/devaluation (11,708) (21,850)
(11,658) (21,795)
Movements in working capital items:
Increase/(decrease) in creditors (60) 34
(Increase)/decrease in debtors 14 95
Increase/(decrease) in stock – 9
(46) 138
Net cashflow (outflow) from operating activities (1,110) (900)
9. Contingent Liabilities
Contingent liabilities at 31 March 2005 (Nil). (2004: Nil).
10. Advance to Dunedin Community House Trust (Inc.)
A 10-year term, interest free advance was made to the Dunedin Community House Trust (Inc.) in December 1999. Trustees had agreed that the commencement date for principal repayments could be extended from December 2003 to December 2004.
A repayment of $2,500 was received during the year.
11. Trustees Fees
Rates of trustees’ remuneration are set by the Minister of Finance. Remuneration includes the honoraria together with meeting fees.
Board Meetings Other Official Honorarium and
No. Held No. Attended Meetings Attended Meeting Fees Paid
$
Hilary Allison 11 11 20 15,612
Duncan Butcher 11 8 14 11,120
John Farry 11 8 20 24,380
Russell Hendry 11 11 20 14,420
Sally Hope 11 11 10 10,770
Alan McLay 11 9 13 12,050
Barbara Payton 11 10 14 9,930
Raewynne Pedofski 11 11 19 11,820
Mark Ryan 11 9 10 8,040
David Shepherd 11 11 18 11,470
Bill Thomson 11 11 17 12,870
Total remuneration 142,482
12. Trustee Register of Interests
The trust maintains a “Register of Interests” which is held at its office and which is available for public inspection.
13. Trustee Liability Insurance
The trust has insured its trustees against liability to other parties that may arise from their position as trustees. The insurance does not cover liabilities arising from criminal actions.
Audit Report
To the Trustees of The Community Trust of Otago
We have audited the financial reports. The financial reports provide information about the past financial performance and financial position of the trust and group as at 31 March 2005. This information is stated in accordance with the accounting policies.
Trustees’ Responsibilities
The trustees are responsible for the preparation of a financial report which fairly reflects the financial position of the trust and group as at 31 March 2005, and the results of its operations and cashflows for the year ended on that date.
Auditors’ Responsibilities
It is our responsibility to express an independent opinion on the financial report presented by the trustees.
Basis of Opinion
An audit includes examining, on a test basis, evidence relevant to the amounts and disclosures in the financial report. It also includes assessing:
? the significant estimates and judgements made by the trustees in the preparation of the financial report; and
? whether the accounting policies are appropriate to the trust’s and group’s circumstances, consistently applied and adequately disclosed.
We have conducted our audit in accordance with New Zealand Auditing Standards. We planned and performed our audit so
as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to obtain reasonable assurance that the financial report is free from material misstatements, whether caused by fraud or error. In forming our opinion, we also evaluated the overall adequacy of the presentation of information in the financial report.
Other than in our capacity as auditor we have no relationship with, or interest in the trust or any of its subsidiaries.
Unqualified Opinion
We have obtained all the information and explanations we have required.
In our opinion, the financial report fairly reflects the financial position of the trust and group as at 31 March 2005 and the results of its operations and cash flows for the year ended on that date.
Our audit was completed on 27 June 2005 and our unqualified opinion is expressed as at that date.
POLSON HIGGS, Chartered Accountants, Dunedin.
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(A summary of donations approved during the financial year ended 31 March 2005 is available on request from the office of the trust – freephone 0800 101 240 or email info@cto.org.nz or by writing to the Trust at P.O. Box 5751, Dunedin.)