Statement of Financial Performance for the Year Ended 31 March 2007
Note 2007 2006
$ $
Income:
Income from investments 2 8,676,574 27,487,816
Less expenditure:
Advertising and promotion 162,456 144,400
Auditor fees – Trust audit 11,250 10,246
Depreciation 21,190 22,958
Rent and occupancy 74,075 72,175
Professional expenses 58,430 60,709
Donation expenses (1,791) 19,039
Trustee meeting expenses 44,899 30,722
Trustee liability insurance 11,340 11,250
Trustee fees 137,818 129,638
Wages and salaries 310,877 297,457
Other expenses 66,448 83,824
Total expenditure 896,992 882,418
Net surplus 7,779,582 26,605,398
The net surplus has been allocated as follows:
Trust capital maintenance 4 4,800,000 2,400,000
Donation reserve transfer 2,979,582 24,205,398
7,779,582 26,605,398
Statement of Movements in Equity for the Year Ended 31 March 2007
Note 2007 2006
$ $
Equity at start of period 140,614,057 118,543,559
Net surplus 7,779,582 26,605,398
Total recognised revenues and expenses 7,779,582 26,605,398
Net community donations 9 (4,510,341) (4,534,900)
Equity at the end of period 143,883,298 140,614,057
Statement of Financial Position as at 31 March 2007
Note 2007 2006
$ $
Equity:
Trust capital 4 113,934,668 109,134,668
Donation reserve 5 29,948,630 31,479,389
Total trust funds 143,883,298 140,614,057
Current assets:
Accrued income 133,087 246,773
Cash and bank deposits 8 7,462,596 9,612,290
Total current assets 7,595,683 9,859,063
Non-current assets
Investments in managed funds 6 137,730,430 132,308,727
Fixed assets 7 62,184 81,762
Total non-current assets 137,792,614 132,390,489
Total assets 145,388,297 142,249,552
Current liabilities:
Sundry payables 141,368 170,956
Employee entitlements 18,181 22,389
Donations payable 9 1,345,450 1,442,150
Total liabilities 1,504,999 1,635,495
Net assets 143,883,298 140,614,057
These financial statements have been authorised for issue by the trustees on 24 May 2007.
JOHN CULLING BRIAN BOURKE
Chairperson Trustee
Statement of Cash Flows for the Year Ended 31 March 2007
Note 2007 2006
$ $
Cash flows from operating activities—
Cash was provided from:
Investment income 8,243,881 7,134,242
8,243,881 7,134,242
Cash was applied to:
Trustees and employees (446,192) (432,453)
Suppliers of other goods and services (635,126) (573,893)
Net operating cash flows 10 7,162,563 6,127,896
Cash flows from investing activities—
Cash was applied to:
Investment in managed funds (4,703,604) 10,603
Purchase of fixed assets (1,611) (26,073)
(4,705,215) (15,470)
Net cash flows from investing activities (4,705,215) (15,470)
Cash flows from financing activities—
Cash was applied to:
Community donation payments (4,607,041) (4,666,600)
Net cash flows from financing activities (4,607,041) (4,666,600)
Net increase (decrease) in cash held (2,149,693) 1,445,826
Add cash at 1 April 9,612,290 8,166,464
Cash at 31 March 8 7,462,597 9,612,290
Notes to the Financial Statements for the Year Ended 31 March 2007
1. Statement of Accounting Policies
1.1 Reporting Entity
Eastern and Central Community Trust Incorporated is a charitable trust incorporated in accordance with the provisions of the Community Trusts Act 1999.
The financial statements have been prepared in accordance with the Financial Reporting Act 1993.
1.2 Measurement Base
The measurement base applied is that of historical cost adjusted for the market valuation of investments.
1.3 Specific Accounting Policies
The following are the particular accounting policies, which have a material effect on the measurement of results and financial position:
1.3.1 Investment Income
Investment income is accounted for on an accruals basis recognising both realised and unrealised gains or losses in value.
1.3.2 Foreign Currency
Foreign currency balances are converted to NZD at the year end rate of exchange unless covered by a forward exchange contract. Where such contracts are in place, the contracted rate is adopted. Transactions completed during the year are converted at the rate applying at the approximate date of the transaction. Foreign exchange gains and losses are included within the statement of financial performance.
1.3.3 Investments
Investments are recorded at market value at year-end.
1.3.4 Cash
Cash comprises cash at bank, call deposits and short-term deposits but does not include cash held by fund managers. Cash flows from operations include withdrawals of income from managed funds.
1.3.5 Donations
Donations are recognised as a liability of the trust when they are approved by trustees and notified to applicants notwithstanding that the applicants may still have to fulfil some conditions.
1.3.6 Fixed Assets
Fixed assets are recorded at cost less accumulated depreciation.
1.3.7 Depreciation
Depreciation is provided on a straight line basis on all tangible fixed assets at rates calculated to allocate the assets’ cost less estimated residual value over their estimated useful lives.
The depreciation periods are:
Computer equipment three years
Furniture ten years
Office equipment five years
1.3.8 GST inclusive accounting has been adopted, as the trust is not registered for GST.
1.4 Changes in Accounting Policies
There have been no changes in accounting policies. All policies have been consistently applied.
2. Income From Investments
2007 2006
$ $
Realised income
Dividend income 6,262,381 6,113,250
Interest income 618,196 488,637
Gain on disposal of investments 1,249,618 649,643
8,130,195 7,251,530
Unrealised income
Foreign exchange gains/(losses) (11,144,071) 9,329,664
Revaluation of investments 11,862,170 11,066,554
718,099 20,396,218
Total income from investments 8,848,294 27,647,748
Less fund managers’ fees 171,720 159,932
Total net income from investments 8,676,574 27,487,816
3. Taxation
The trust is exempt from income tax as provided in the Income Tax Act 2004.
4. Trust Capital
The initial trust capital was set at $90 million in 1997. The trust capital has been increased over time as a surrogate for inflation and population growth within the region administered by the trust. The trustees periodically review the capital maintenance transfer and this year the trustees have determined to increase the capital by $4.8 million. Previous transfers have exceeded inflation and population increases.
2007 2006
$ $
Balance at the beginning of the year 109,134,668 106,734,668
Allocation of surplus to capital maintenance 4,800,000 2,400,000
Balance at the end of the year 113,934,668 109,134,668
5. Donation Reserve
The trustees retain all undistributed income in the donation reserve.
2007 2006
$ $
Balance at the beginning of the year 31,479,389 11,808,891
Transfer from income 2,979,582 24,205,398
34,458,971 36,014,289
Less donations 4,510,341 4,534,900
Balance at the end of the year 29,948,630 31,479,389
6. Investments in Managed Funds
2007 2006
$ $
Opening balance 132,308,727 111,923,113
Gross income 8,238,936 26,467,331
Withdrawals (2,817,233) (6,081,717)
Closing balance 137,730,430 132,308,727
Investments comprise:
Bonds 55,597,631 53,679,030
Equities 82,132,799 78,629,697
Total managed funds 137,730,430 132,308,727
Held in:
New Zealand Bonds 55,597,631 53,679,030
Equities 10,440,957 9,632,030
66,038,588 63,311,060
Off shore Equities 71,691,842 68,997,667
71,691,842 68,997,667
137,730,430 132,308,727
7. Fixed Assets
2007 2006
$ $
Fixtures, fittings and equipment at cost 157,108 155,496
Less accumulated depreciation 94,924 73,734
62,184 81,762
8. Cash and Bank Deposits
2007 2006
$ $
Current accounts 7,705 6,460
Call account 954,733 1,605,729
Petty cash 158 101
Short term deposits 6,500,000 8,000,000
7,462,596 9,612,290
9. Donations
2007 2006
$ $
Standard donations 1,235,640 1,173,600
Special donations 3,586,050 3,650,600
Total community donations 4,821,690 4,824,200
Less donations written back 311,349 289,300
Net community donations 4,510,341 4,534,900
Total donations payable at year end was $1,345,450 ($1,422,150 – 2006). Included in donations payable is $890,250 ($1,119,250 – 2006) of donations, which are subject to the applicants fulfilling certain conditions.
10. Reconciliation of Net Surplus With Operating Cash Flows
2007 2006
$ $
Net surplus for the period 7,779,582 26,605,398
Adjust for non-cash items:
Income on investments (718,099) (20,396,218)
Depreciation 21,190 22,958
Loss on sale of assets – 6,555
Movements in net current assets:
Accrued income 113,686 (117,288)
Sundry payables (33,795) 6,491
Net operating cash flows 7,162,563 6,127,896
11. Contingent Liabilities and Commitments
Commitments
The trust has no commitments (nil – 2006).
Lease Commitments
2007 2006
$ $
Within 1 year 47,592 44,898
1–2 years 47,592 44,898
2–5 years 142,774 134,693
237,958 224,489
The lease on the present Westerman’s premises commenced on 1 July 2004 and expires on 30 June 2016. The rent payable
was reviewed at the conclusion of the second year and adjusted in accordance with the increase in the consumer price index. The next rent review will occur in July 2008 and will be adjusted, if necessary, in accordance with the increase in the consumer price index.
Contingencies
There are no contingent liabilities or contingent assets at balance date (nil – 2006).
12. Related Part Transactions
The trust’s premises are leased from a company in which Mr K. Atkinson, trustee, has a financial interest (refer note 11). The rent paid for the period was $46,918 ($44,898 for the 2006 year). The trust has also used IMS, a company in which
Mr K. Atkinson, trustee, has a financial interest. IMS provided the payroll software for the trust and through the year, IMS wrote the tender specifications for a proposed donations database. The payments to IMS for the period totalled $4,030 ($259 for the 2006 year). All of the transactions were on normal commercial terms.
13. Segmental Reporting
The trust operates as a tax-exempt philanthropic trust distributing funds to the community in the central North Island region.
14. Financial Instruments
Financial instruments include short-term deposits, New Zealand bonds, international bonds, derivatives and investments in managed funds both within New Zealand and overseas.
14.1 Credit Risk
The trustees regularly review their investment strategy. The investment strategy ensures an appropriate diversification of investments so that the trust has no significant concentration of counterparty or credit risk.
14.2 Fair Values
The trust has recorded its financial assets and liabilities at current market values, which represent estimated fair values and credit risk exposure.
14.3 Credit Facilities
The trust has no credit facilities.
14.4 Interest Rate Risk
The trust investments in fixed rate securities are subject to interest rate risk.
14.5 Currency Risk
The trust has exposure to currency risk through its investments in offshore equities. The current investment policy requires full hedging of currency risk for overseas bonds, when held, and 50% hedging of currency risk for overseas equities. There was no currency hedging on overseas equities throughout the year after a resolution to this effect was passed by the board. Currency risk is managed by fund managers with a range of tolerance.
Offshore investments are denominated into the following foreign currency groupings:
2007 2006
$ $
USA/Canada 16,298,653 17,087,572
UK/Europe 25,010,255 23,324,099
Japan/Asia 19,451,622 18,866,201
Australia 10,931,312 9,719,795
71,691,842 68,997,667
15. Net Current Assets
Cash, bank deposits and accrued income are expected to be realised within 12 months. All liabilities are due within 12 months.
16. International Financial Reporting Standards
The trust is undertaking a review of its accounting policies to determine the changes that will be required on adoption of International Financial Reporting Standards (IFRS) in 2008. It is not anticipated that IFRS will materially affect the trust’s reported results.
Audit Report
To the Trustees of Eastern & Central Community Trust Incorporated
We have audited the financial statements. The financial statements provide information about the past financial performance of the Eastern & Central Community Trust (Inc) and its financial position as at 31 March 2007. This information is stated in accordance with the accounting policies set out in note 1 to the financial statements.
The Trustees’ Responsibilities
The trustees are responsible for the preparation of financial statements that give a true and fair view of the financial position
of the trust and the results of its operations and cash flows for the year ended 31 March 2007.
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; and
? whether the accounting policies are appropriate to the trust’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 give 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.
Other than in our capacity as auditors, we have no relationship with or interest in the trust.
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; and
? 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 as at 31 March 2007 and the results of its operations and cash flows for the year ended on that date.
Our audit was completed on 24 May 2007 and our unqualified opinion is expressed as at that date.
PALAIRET PEARSON, Chartered Accountants, Napier.
Schedule of Community Payments for the Year Ended 31 March 2006
Donations by Region
2007 2006
$ $
Poverty Bay 664,100 549,250
Hawke’s Bay 1,676,400 1,645,650
Tararua 171,750 265,500
Wairarapa 448,000 477,850
Manawatu 1,224,140 1,200,400
Horowhenua 365,800 433,550
Regional 271,500 252,000
Total donations 4,821,690 4,824,200
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An itemised list of all donations is available at www.ecct.org.nz or free of charge from the Trust Manager, Eastern & Central Community Trust Incorporated, PO Box 1058, Hastings.