Consolidated Statement of Financial Performance for the Year Ended 31 March 2005
2005 2004
Note $ $
Total investment income 1 14,259,728 21,725,134
Expenditure
Audit fees 5 14,288 19,752
Communications 18,971 17,914
Depreciation 66,366 70,457
Loss/(gain) on disposal of fixed assets 10,393 –
Fund manager fees 798,601 570,192
General expenses 90,827 89,630
Insurance 16,792 13,328
Occupancy costs 21,976 19,038
Office expenses 33,009 20,937
Professional fees 252,091 166,913
Promotion, reporting and compliance expenses 66,205 59,674
Personnel costs 249,472 243,231
Trustees’ fees 207,236 196,151
Vehicle expenses 21,116 17,734
Total expenditure 1,867,343 1,504,951
Net surplus/(deficit) before taxation 12,392,385 20,220,183
Taxation 17 – –
Net surplus after taxation 12,392,385 20,220,183
Revaluation of property 10 51,858 (251,228)
Net operating surplus for the year before grants 12,444,243 19,968,955
Grants approved 8 7,138,001 6,923,945
Net surplus/(deficit) for the year after grants 5,306,242 13,045,910
Consolidated Statement of Movements in Trust Funds for the Year Ended 31 March 2005
2005 2004
Note $ $
Trust capital at beginning of year 162,493,897 149,451,844
Add net operating surplus/(deficit) for the year 4 5,306,242 13,045,910
Retained earnings of subsidiary not previously recognised 3 3,857 (3,857)
Trust capital at end of year 167,803,996 162,493,897
Consolidated Statement of Financial Position as at 31 March 2005
2005 2004
Note $ $
Funds employed:
Trust capital 3 158,460,000 158,460,000
Reserves 2 9,343,996 4,033,897
Total capital and reserves 167,803,996 162,493,897
Liabilities—
Current liabilities:
Accounts payable 198,478 131,501
Grants committed but not paid 10,277,629 8,034,804
Total liabilities 10,476,107 8,166,305
Total capital and liabilities 178,280,103 170,660,202
Assets—
Current assets:
Westpac cheque account 128,145 45,454
Accounts receivable and interest accrued 509,540 18,189
Westpac term deposit 103,248 –
Total current assets 740,933 63,643
Non current assets:
Property, plant and equipment 10 782,434 776,933
Investment assets:
Managed funds:
– ING (NZ) Ltd 11 30,943,776 27,946,841
– Tower Asset Management 11 44,135,403 40,696,696
– AMP Asset Management 11 34,049,593 38,097,333
– Capital International 11 25,779,726 26,322,389
– Alliance Bernstein 11 35,038,298 30,324,941
Loans 12 1,040,836 913,385
Invest South Limited 7 5,769,104 5,518,041
Total non current assets 177,539,170 170,596,559
Total assets 178,280,103 170,660,202
Consolidated Statement of Cash Flows as at 31 March 2005
2005 2004
Note $ $
Cash flows from operating activities—
Cash was provided from/(applied to):
Interest and dividends 7,622,436 15,868,690
Revaluation of investments 5,887,721 10,360,923
Administration expenses (1,712,775) (1,418,382)
Grants to the community (4,854,996) (6,917,054)
Net cash inflow/(outflow) from operating activities 13 6,942,386 17,894,177
Cash flows from investing activities—
Cash was provided from/(applied to):
Investments (6,661,844) (12,678,032)
Fixed assets (30,402) (52,826)
Loans (167,449) (18,330)
Net cash inflow/(outflow) from investing activities (6,859,695) (12,749,188)
Cash flows from financing—
Cash was provided from/(applied to):
Purchase of additional Invest South Limited shares – (5,125,000)
Net cash inflow/(outflow) from financing activities – (5,125,000)
Net increase/(decrease) in cash held 82,691 19,988
Add cash at beginning of the year 45,454 25,466
Total cash balance at end of year 128,145 45,454
Statement of Significant Accounting Policies for the Year Ended 31 March 2005
A. Basis of Preparation
The Community Trust of Southland was formed under the Trustee Banks Restructuring Act 1988 and is incorporated under the Charitable Trusts Act 1957. The financial statements presented are those for The Community Trust of Southland Group
(“the group”). The group consists of The Community Trust of Southland (“the trust”), its wholly owned subsidiary company Southland Community Trust Charities Limited and the trust’s interests in associates.
The financial statements comply with the Financial Reporting Act 1993 and the Community Trusts Act 1999. They comprise statements of the following: Significant accounting policies, financial performance, movements in trust funds, financial position, cash flows, as well as notes to these statements.
The financial statements are prepared on the basis of historical cost except that investment assets are stated at valuation, as is the trust’s property at 62 Don Street, Invercargill.
B. Consolidation Method
The financial statements of the trust’s wholly owned company Southland Community Trust Charities Limited are included in the financial statements using the purchase method of consolidation.
C. Associates
Associates are entities in which the group has significant influence, but not control over the operating and financial policies. The financial statements include the group’s share of the net surplus of associates on an equity accounted basis.
D. Trust Capital
Following the sale of the group’s shares in Trust Bank New Zealand Limited in April 1996 for $158,460,000, the trustees agreed that the value of the trust at that time should be maintained for the benefit of current and future generations living in the region. For this purpose, the trustees agreed that $158,460,000 would be considered as the “trust capital” value of the group and that this value would be maintained. Trustees further agreed that over the long term, the net assets of the group would not be allowed to reduce to a level below the inflation-adjusted real value of this trust capital.
E. Capital Maintenance Reserve
The capital maintenance reserve represents the additional amount necessary to preserve the real value of the trust capital allowing for inflation as measured by the Consumers Price Index (all groups) and payments of grants out of capital.
F. Grants Maintenance Reserve
While the trustees have adopted a long-term investment strategy, they accept that annual returns from investments are likely to fluctuate from year to year. In recognition of this, a grants maintenance reserve is maintained. In years when net income from investments is higher than the grant levels, surplus income will be transferred to this reserve. In years when there is insufficient income to sustain the level of grants, an appropriate amount will be transferred from the grants maintenance reserve to income.
G. Basis of Recognising Components of the Financial Statements
The following general accounting policies are adopted:
Assets
A transaction results in an asset being recognised in the statement of financial position when it will probably give rise to ongoing benefits for the group and those benefits can be measured with reliability.
Liabilities
A transaction results in a liability being recognised in the statement of financial position when it will probably give rise to the need for the group to sacrifice assets in the future and those sacrifices can be measured with reliability.
Revenue
Revenue is recognised in the statement of financial performance when a transaction gives rise to an increase in the value of the group’s net assets, and that increase can be measured with reliability.
Expenses
An expense is recognised in the statement of financial performance when a transaction results in a decrease in the value of the group’s net assets, and that decrease can be measured with reliability.
Classification of Assets and Liabilities Between Current and Non-current
An amount is classified as current when it is expected to be settled or extinguished within one year of the date of the financial statements. All other amounts are classified as non-current.
H. Fixed Assets
Fixed assets are initially stated at cost and then depreciated on a straight line basis. Land and buildings are stated at valuation as determined by an independent registered valuer. The basis of valuation of the land and buildings is highest and best use. The estimated useful lives of fixed assets are as follows:
Land Indefinite
Buildings 30-40 years
Furniture and fittings 3-15 years
Office equipment 3-8 years
Motor vehicles 5-8 years
I. Investments
Investments are stated at market value and report realised and unrealised gains or losses on holding these investments in the statement of financial performance. These gains or losses are shown in the statement of financial performance as income from revaluation of investments.
J. Accounts Receivable
Accounts receivable are stated at expected realisable value.
K. Grants
Grants are recognised when they are approved by the trustees. Unpaid grants are recorded as a liability.
L. Goods and Services Tax
The group is not registered for goods and services tax. The financial statements are prepared using G.S.T. inclusive accounting.
M. Income Taxation
The group provides for income tax on its net income after adjusting for tax accounting differences and any beneficiaries’ income determinations made pursuant to section OB1 (226) of the Income Tax Act 1994.
N. Statement of Cash Flows
Operating cash flows includes interest and dividends paid or credited to investment funds under management and any upward or downward revaluation of funds during the period. Cash movements in funds invested are recognised in investing activities.
O. Changes in Accounting Policies
Uniform accounting policies have been applied throughout the trust and group and on a consistent basis with those of the previous period.
Notes to the Financial Statements for the Year Ended 31 March 2005
1. Investment Income
2005 2004
Note $ $
Dividends and distributions 4,895,478 13,138,165
Interest 2,726,959 2,730,525
Change in value of investments 6,637,291 5,856,444
14,259,728 21,725,134
2. Reserves
(a) Capital Maintenance Reserve
2005 2004
$ $
Opening balance of capital maintenance reserve 3,095,438 7,103,390
Transfer from statement of financial performance 4,914,318 2,866,327
Transfer to capital reserve (6,725,092) (6,874,269)
1,284,664 3,095,438
(b) Grants Maintenance Reserve
2005 2004
$ $
Opening balance of grants maintenance reserve 942,316 (16,111,546)
Transfer from statement of financial performance 7,117,016 17,053,862
8,059,332 942,316
Total reserves 9,343,996 4,037,754
3. Trust Capital
2005 2004
$ $
Opening balance of trust capital 158,460,000 158,460,000
Transfer from capital maintenance reserve 6,725,092 6,874,279
Less grants paid from capital (6,725,092) (6,874,279)
158,460,000 158,460,000
4. Professional Fees
2005 2004
$ $
Financial/taxation advisory 151,193 135,368
Legal 7,069 17,247
Schools’ review mediation 43,243 –
Strategic 31,708 –
Other 18,878 14,298
252,091 166,913
5. Auditor’s Remuneration
During the year, the following amounts were paid to auditors:
2005 2004
$ $
To Ward Wilson, the group’s auditors, for annual audit work 10,688 11,644
To Ward Wilson, the group’s auditors, for other services 3,600 4,927
To other auditors, for grants’ audits – 3,181
14,288 19,752
6. Trustees’ Fees
Meeting fees and honorariums were paid to trustees as follows:
Meetings Fees Fees
Attended 2005 2004
$ $
T. W. Harpur 52 34,122 44,265
C. S. Ballantyne (retired June 2003) 0 – 2,192
A. R. Macdonald (retired June 2003) 0 – 974
F. G. Cardno 34 17,755 16,985
S. G. Palmer 43 20,800 19,450
J. D. Frampton (retired June 2003) 0 – 1,181
A. A. Broad 44 27,196 18,825
N. J. Wyeth 37 19,555 19,495
P. B. Redpath 36 19,985 18,185
D. Williams 38 18,643 17,280
M. Hawes (appointed June 2003) 26 15,495 10,538
K. S. Henderson (appointed June 2003) 30 15,705 12,708
G. M. Neave (appointed June 2003) 39 17,980 14,073
207,236 196,151
Trustee fees and honorariums are set by the Minister of Finance.
7. Investments in Associates
Invest South Limited is in the business of investing, principally by way of equity investment, in businesses in the Southland region. Invest South Limited’s balance date is 31 March. The group owns 100% of Invest South Limited’s 10 million shares
The group’s investment in Invest South Limited comprises:
2005 2004
$ $
Opening value of investment 5,521,898 2,643,193
Additional shares purchased – 5,125,000
Share of operating surplus/(deficit) 247,206 (2,246,295)
Closing value of investment 5,769,104 5,521,898
8. Grants Approved
2005 2004
$ $
Grants approved this year 7,535,654 7,260,486
Less prior year’s grants cancelled (397,653) (337,441)
Net grants approved 7,138,001 6,923,045
9. Trust Area and Purpose
The trust’s specified area includes all of the areas of Invercargill City Council, Southland District Council, Gore District Council, the Heriot and Tapanui areas of Clutha District Council, and the Wakatipu Basin area of Lakes District Council.
The trust’s principal activities are to invest the trust capital, both within the specified area and outside of the region, and to distribute grants for charitable, cultural, philanthropic, recreational and other purposes being purposes beneficial to the community principally within the trust’s specified area.
10. Property, Plant and Equipment
Cost Accum depn 2005 value 2004 value
$ $ $ $
Land 457,419 227,419 180,000 160,000
Buildings 523,063 73,063 450,000 440,000
Office equipment 210,996 157,949 53,047 48,397
Furniture and fittings 153,841 124,627 29,214 43,636
Motor vehicles 87,363 17,191 70,172 84,900
Totals 1,432,682 650,249 782,433 776,933
Land and buildings have been revalued as at 31 March 2005, and are stated at their revalued amounts as determined by an independent registered valuer.
11. Investments Managed by Fund Managers
The group has funds with five investment managers (fund managers), being Alliance Bernstein, AMP Capital, Capital International, ING (NZ) Limited, Tower Asset Management and Invest South Limited. Market values and asset allocations of these investments as at balance date were as follows:
Alliance Bernstein (NZ$m) AMP (NZ$m) Capital Inter-national (NZ$m) ING(NZ)Ltd(NZ$m) Tower AssetMgmt (NZ$m) InvestSouthLtd(NZ$m) Total2005value (NZ$m) Total2004value (NZ$m)
NZ equities 19.74 5.77 25.51 22.85
Overseas equities 35.04 25.78 60.82 56.64
NZ fixed interest 27.93 27.93 33.92
Overseas fixed interest 44.14 44.14 40.70
Property 1.32 1.32 0.50
Cash 4.80 11.20 16.00 14.28
Totals 35.04 34.05 25.78 30.94 44.14 5.77 175.72 168.89
Exposure to currency, interest rate and credit risk arises in the normal course of the fund managers’ management of the group’s investments. A range of hedging policies are in place whereby the fund managers use derivative financial instruments as a means of managing exposure to fluctuations in foreign exchange rates and interest rates. While these financial instruments are subject to the risk of market rates changing subsequent to acquisition, such changes would generally be offset by opposite effects on the items being hedged.
12. Loans
Loan balances outstanding as at 31 March were as follows:
2005 2004
$ $
Troopers Memorial Corner Charitable Trust 195,000 195,000
Topoclimate South Trust – 33,513
Southland Museum & Art Gallery 29,115 29,115
Ringa Ringa Heights Golf Club 36,000 36,000
Nga Hau E Wha Society 42,219 43,257
Croydon Aviation Museum 280,000 280,000
Tuatapere Hump Ridge Track 80,000 120,000
Invercargill Artificial Sport Surface Trust 96,500 96,500
Northern Southland Medical Trust 50,000 50,000
Otautau Comunity Health Trust 27,000 30,000
Troopers Memorial Corner Charitable Trust – Yule House 180,000 –
Southland Heritage Buildings Preservation Trust 25,000 –
1,040,834 913,385
Each loan is repayable upon demand. All loans are interest free, with the exception of the loan to Topoclimate South Trust, which attracts interest at the 90 day bank bill rate plus a margin of 2%, and the loan to Nga Hau E Wha Society, which attracts interest of 7%.
13. Reconciliation with Operating Surplus
2005 2004
$ $
Net surplus before distribution 12,196,855 22,215,250
Less grants (7,138,001) (6,923,045)
5,058,854 15,292,205
Add/(less) movement in working capital:
Increase/(decrease) in liabilities 2,309,982 2,228,640
(Increase)/decrease in accounts receivable (491,351) (7,353)
1,818,631 2,221,287
Add/(less) movement in non-cash items:
Revaluation of investments – –
Depreciation 66,366 70,044
Loss/(gain) on sale of fixed assets 10,393 413
Revaluation of property (51,858) 251,228
24,901 321,865
Add/(less) items classified as investing/financing activities:
Accounts receivable amount relating to sale of asset – 16,000
Loan repayment by way of grant approval 40,000 43,000
Net cash provided by operating activities 6,942,386 17,894,177
14. Financial Instruments
General
The group states its investments at balance date at estimated market value. The trustees consider that the fair value of the financial assets is identical to the value in the statement of financial position.
Concentration of Credit Risk
The group, from time to time, has significant funds in trading bank deposits. The group limits risk by spreading the deposits over several trading banks. The group has not required collateral or other security to support its financial statements.
The group further limits risk through its policy of placing investment funds with five separate fund managers, with each fund manager having an investment mandate which requires that they diversify their investments on the group’s behalf. The group has sought and obtained the advice of professional financial advisers prior to making its investment allocation and placement decisions.
Interest Rate Risk
The bank deposits are sensitive to changes in interest rates, as is a proportion of the funds managed by the fund managers, and the loans to Topoclimate South Trust and Nga Hau E Wha Society.
15. Capital Commitments
Commitments of $5,050,000 exist for grants which will be distributed from either capital or future income sources in future years. These grants have not been recorded in either the statements of financial performance or financial position. Specific commitments are as follows:
2005 2004
$ $
Wakatipu Trails Trust 300,000 –
Child Health Research Foundation 200,000 –
South Catlins Environment and Development Trust 750,000 –
Murihiku Whanau Services 100,000 –
Tuatapere Hump Ridge Track 80,000 120,000
Venture Southland – Broadband – 223,320
Invercargill City Council – Civic Theatre 600,000 3,000,000
Croydon Aviation Museum 280,000 280,000
Queenstown Aquatic Centre 1,500,000 –
Southland District Health Board 1,000,000 –
Families First Trust 80,000 –
Southland Indoor Leisure Centre Charitable Trust 160,000 –
5,050,000 3,623,320
The years in which these commitments fall due are as follows:
Year ending 31 March 2005 – 1,543,320
Year ending 31 March 2006 1,865,000 1,040,000
Year ending 31 March 2007 1,435,000 1,040,000
Year ending 31 March 2008 550,000 –
Year ending 31 March 2009 350,000 –
Year ending 31 March 2010 400,000 –
Year ending 31 March 2011 450,000 –
5,050,000 3,623,320
Commitments of up to $4,908,850 exist for loans which trustees have approved, but which had not been drawn down as at balance date. The approved loans are as follows:
2005 2004
$ $
Borland Lodge 293,850 293,850
Wyndham & Districts Community Rest Home 100,000 100,000
Queenstown Childcare Centre – 24,000
Troopers Memorial Trust – 179,000
South Catlins Environment and Development Trust 600,000 –
Southland Heritage Building Preservation Trust – 50,000
Living Fiordland Charitable Ttrust 3,700,000 –
Awarua Social Services 200,000 –
Parata Anglican Charitable Trust 15,000 –
4,908,850 646,850
A commitment has been made to invest up to $2,000,000 in the AMP Property Opportunity Fund. As at 31 March 2005, $1,319,807 of this committed amount had been paid.
16. Related Party Transactions
There were no related party transactions during the year.
17. Tax Calculation
With effect from 1 April 2004, community trusts, including the Community Trust of Southland, became exempt from income tax pursuant to section CB4 (1) (m) of the Income Tax Act 1994.
Audit Report
To the Trustees of the Community Trust of Southland
We have audited the financial statements. The financial statements provide information about the past financial performance and financial position of the trust and the group as at 31 March 2005. This information is stated in accordance with the accounting policies set out.
Trustees’ Responsibilities
The trustees are responsible for the preparation of financial statements which give a true and fair view of the financial position of the trust and group as 31 March 2003 and the results of their operations and cash flows for the year ended on that date.
Auditors’ Responsibilities
It is our responsibility to express an independent opinion on the financial statements presented by the trustees and report our opinion to you.
Basis of Opinion
An audit includes examining, on a test basis, evidence relevant to the amounts and disclosures in the financial statements.
It also includes assessing:
? the significant estimates and judgements made by the trustees in the preparation of the financial statements;
? whether the accounting policies are appropriate to the trust’s and group’s circumstances, consistently applied and adequately disclosed.
We conducted our audit in accordance with New Zealand Auditing Standards issued by the Institute of Chartered Accountants of New Zealand. 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 statements are 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 statements.
Our firm carries out other assignments for the trust and certain of its subsidiaries in the area of grant audits. The firm has no other 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:
? proper accounting records have been kept by the trust as far as appears from our examination of those records;
? the financial statements:
– comply with New Zealand generally accepted accounting practice; and
– give a true and fair view of the financial position of the trust and group as at 31 March 2005 and the results of their operations and cash flows for the year ended on that date.
Our audit was completed on 15 August 2005 and our unqualified opinion is expressed as at that date.
WARD WILSON, Invercargill.
———————
(A list of all distributions of income and capital approved by The Community Trust of Southland during the year ended
31 March 2005 is available, on request, from the trust’s office.)