Trust Bank South Canterbury Community Trust Inc. Trustee Banks Restructuring Act 1988 Trust Particulars The Trust Bank South Canterbury Community Trust Inc. was incorporated as a charitable trust in accordance with the provisions of the Trustee Banks Restructuring Act 1988. The purpose of the community trust is to provide charitable, cultural, philanthropic and recreational benefits to the community. Trustees Mr J. E. Thompson (Chairperson), Ms R. A. Carruthers, Mr L. K. Cooney, Mr A. R. McKay, Mr P. F. McIlraith, Mrs J. J. Rayne, Mr C. P. Sparrow, Mr J. R. Sutton, M.P., Mr D. B. Timpany and Mr R. J. Underdown. Bankers Westpac Trust, 243 Stafford Street, Timaru. Auditors Martin Wakefield, Chartered Accountants, 26 Canon Street, Timaru. Secretary K. A. Churcher, Chartered Accountant, P.O. Box 591, 39 George Street, Timaru. Trustee's Report for the Year Ended 31 March 1997 On behalf of the trustees of the community trust of South and Mid Canterbury, I am pleased to present this ninth annual report which highlights our activities for the area between the Rakaia and Waitaki Rivers. Objectives of the Trust These are to provide financial assistance to organisations carrying on charitable, cultural and philanthropic and recreational work which is of benefit to the community principally in the regions of Mid and South Canterbury. Policies and Structure of the Trust All purposes of the trusts are deemed to be charitable, to administer capital and to distribute income for charitable purposes in our area. The community trust now comprises 10 trustees who are representative of the Mid and South Canterbury communities. Trustees are appointed by the Minister of Finance and reside in the area. Trustees retire by rotation and during the year the terms of office expired on 31 May 1996 for Mrs J. J. Rayne and Mr L. K. Cooney. Both were reappointed for a term of 4 years. The size of the board remains at 10 trustees. Activities of the Trust During the year under review our trust made the major decision to sell its entire shareholding in Trust Bank New Zealand Limited. The trustees decision to sell is more than vindicated with the publication of the trust's annual accounts. Trustees have during the past year spent a great deal of time selecting an adviser for funds investments and this was finally decided towards the end of the year. Until that time our funds were totally invested in fixed interest securities so taking advantage of the comparative high interest rates which applied for most of the year. Several major donations were committed to during the year such as Aorangi Park Stadium ($1,000,000, payable over 3 years), South Canterbury Hospice ($252,000), South Canterbury Mammography Services Trust ($120,000). These amounts significantly mark the first year following the sale of trust bank shares. With the help of an adviser, however, trustees will be putting in place appropriate policies to provide for fluctuations in income in future years. Trustees are currently reviewing the criteria for donations and in future have plans to adopt a more proactive policy in seeking out appropriate projects for donations. At present trustees are spending much time considering the acquisition of a suitable building to establish as a community house. This would house a variety of voluntary groups who carry out valuable work within our area. It is hoped this will be finalised in the near future and it will be a major project for our trust. Review of Results and Financial Position of the Trust The trust's income during the year was derived totally from interest which provided a gross income of $2,707,813. This is a considerable increase over the previous year when the gross income from interests and dividends amounted to $1,227,309. The net income before donations was $2,530,296 after writing off a debit balance in the investment revaluation reserve of $60,208. Deductions are then made for donations paid or committed to various community groups. A credit is shown of $10,525 received on the winding up of the endowment fund. The surplus of $8,471 after donations, together with the capital profit on the sale of trust bank shares of $24,698,148, was transferred to the trust fund. The trust deeply appreciates the strong support given by its administrator, Mr Ken Churcher, along with other specialist advisers the trust employs. Perhaps the most rewarding aspect for the trust is the understanding we gain of the wonderful voluntary work of so many people for their various activities within our community. J. E. THOMPSON, Chairperson. Consolidated Statement of Financial Performance for the Year Ended 31 March 1997 Note 1997$ 1996$ Income Interest 2,707,813 93,309 Dividends 1,134,000 Total revenue 2,707,813 1,227,309 Less expenditure Advertising 20,649 18,068 Auditor's fees 1,571 481 Investment administration 26,001 Legal fees 2,541 928 Postage and tolls 1,355 746 Printing and stationery 4,350 2,804 Secretarial and accountancy fees 28,948 25,254 Sundry administration expenses 3,567 189 Travelling expenses 9,922 3,225 Trustee's fees 15,339 11,953 Depreciation - marquees8 3,966 2,642 Write off of debit balance in revaluation reserve5 60,208 Total expenditure 178,417 66,290 Net income before donations 2,529,396 1,161,019 Less donations paid (1,780,854[teh]) (470,653[teh]) Less donations approved not yet paid9 (751,496[teh]) (95,120[teh]) Transfer from/(to) endowment fund13 10,525 (5,000[teh]) Net income after donations 7,571 590,246 Plus capital profit on sale of investments 24,698,148 Surplus transferred to the trust fund $24,705,719 $590,246 Consolidated Statement of Movements in Equity for the Year Ended 31 March 1997 1997$ 1996$ Opening equity8,760,245 8,142,997 Net surplus for year24,705,719 590,246 Transfer (from)/to to endowment fund(27,002[teh]) 27,002 Total recognised revenues and expenses for the year24,678,717 617,248 Closing equity$33,438,962 $8,760,245 Consolidated Statement of Financial Position as at 31 March 1997 Notes 1997$ 1996$ Trust capital Capital fund 7,389,000 7,389,000 Capital reserve4 24,698,148 Undistributed income3 1,351,814 1,344,243 Balance 31 March 1997 $33,438,962 $8,733,243 Endowment fund capital13 27,002 $33,438,962 $8,760,245 Represented by: Current assets Westpac Trust Current account 31,470 2,674 Prime call account 1,649 1,557 Term deposits 12,273,436 1,387,330 National Bank of New Zealand term deposits 6,000,000 ANZ Banking Group term deposits 8,892,007 New Zealand Government stock short term2 2,400,000 Sundry debtors 5,873 10,000 Prepayments 1,256 Interest accrued 66,450 19,771 Interest accrued (endowment fund)13 1,018 29,672,141 1,422,350 Less current liabilities Sundry creditors 34,939 35,935 Donations approved not yet paid9 751,496 95,120 Total current liabilities 786,435 131,055 Working capital 28,885,706 1,291,295 Add non current assets Long term advances6 50,000 Investments2 4,553,256 7,414,984 Fixed assets (after depreciation) marquees8 3,966 Net assets $33,438,962 $8,760,245 Signed on behalf of the board of trustees: Chairperson: J. E. THOMPSON. Trustee: R. A. CARRUTHERS. Date: 7 July 1997. Consolidated Statement of Cash Flows for the Year Ended 31 March 1997 1997$ 1996$ Cash flow from operating activities Cash was derived from: Interest on deposits2,662,152 94,574 Dividends 1,134,000 Cash was applied to: Suppliers of goods and services(116,495[teh]) (64,053[teh]) Donations paid(1,835,974[teh]) (662,773[teh]) Contribution to endowment fund (5,000[teh]) Net cash flows from operating activities709,683 496,748 Cash flows from investing activities Cash was provided from: Sale of Trust Bank New Zealand Limited shares32,087,148 Loan repayments: Timaru High Schools hostel 4,000 Mid Canterbury Basketball Association20,000 Proceeds from endowment fund23,358 32,130,506 4,000 Cash was applied to: Purchase of New Zealand Government stock(4,007,081[teh]) Purchase of New Zealand shares(2,009,724[teh]) Purchase of New Zealand property shares(546,861[teh]) Purchase of Australian property shares(449,798[teh]) Reimbursement of contribution from endowment fund(19,724[teh]) (7,033,188[teh]) Net cash flows from investing activities25,097,318 4,000 Net cash flows from financing activities Net increase in cash held25,807,001 500,748 Add opening cash 1 April 19961,391,561 890,813 Cash as at 31 March 1997$27,198,562 $1,391,561 Cash at 31 March 1997 comprises the current account, the prime call account and the money market deposit account at Westpac Trust and deposits at National Bank of New Zealand and ANZ Banking Group. Notes to the Consolidated Financial Statements for the Year Ended 31 March 1997 1. Statement of Accounting Policies Reporting Entity: The Trust Bank South Canterbury Community Trust Inc. is a charitable trust incorporated under the Trustee Banks Restructuring Act 1988. The financial statements have been prepared in accordance with the Financial Reporting Act 1993 and generally accepted accounting policies. General Accounting Policies The general accounting policies adopted in the preparation of these financial statements are: The measurement base adopted is that of historical cost, except for the revaluation of investments. The matching of revenues earned and expenses incurred using accrual accounting except that dividend income is accounted for on a receipts basis. Particular Accounting Policies The following are the particular accounting policies which have a material effect on the measurement of results and financial position: (a) Dividend Income Dividend income is included in the income and expenditure account when it is received. (b) Donations Donations and special projects are included in the income and expenditure account on an accruals basis as from 1 April 1994. An accrual of $751,496 has been made for donations approved but not yet paid this year (1996 $95,120). (c) Investments Investments are shown at market value. Unrealised gains or losses from holding such investments are transferred directly to the revaluation reserve. These unrealised gains or losses when realised on subsequent disposal of investments are transferred from the revaluation reserve direct to the statement of financial performance. Differences between sale proceeds and book value of investments are also recorded in the statement of financial performance. (d) Fixed Assets Fixed assets are recorded at cost and depreciated on the straight line method based on the estimated life of the asset. (e) Income Tax The trust 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. (f) Basis of Consolidation The Trust Bank South Canterbury Community Trust Inc. and South Canterbury Community Charities Limited have been consolidated using the purchase method. Changes in Accounting Policies The policy with respect to investments has changed during the year from stating the investments at cost to stating at market value. The value of this charge has resulted in the reduction of the operating surplus of $60,208. The trust has also changed its accounting policy for income tax. There is no monetary effect from the change. The other accounting policies remain unchanged from the previous year. 2. Investments 1997$ 1996$ Shares Trust Bank New Zealand Limited 7,389,000 New Zealand Government stock4,015,616 New Zealand shares1,951,380 New Zealand property shares544,700 Australian property shares441,560 Endowment fund investment 25,984 6,953,256 7,414,984 Less New Zealand Government stock - short term2,400,000 $4,553,256 $7,414,984 3. Undistributed Income 1997$ 1996$ Balance brought forward1,344,243 753,997 Plus current years profits24,705,719 590,246 Less transfers to capital reserve(24,698,148[teh]) $1,351,814 $1,344,243 4. Capital Reserve 1997$ 1996$ Balance brought forward Plus transfer from undistributed income24,698,148 $24,698,148 $ 5. Revaluation Reserve 1997$ 1996$ Balance brought forward Revaluation of investments to market value(60,208[teh]) Transfer of debit balance60,208 $ $ 6. Long Term Advances - Interest Free 1997$ 1996$ Mid Canterbury Basketball Association - debenture repayment September 1996 20,000 St Vianney's Home of Compassion 30,000 $ $50,000 7. Goods and Services Tax The trust is not registered for goods and services tax purposes. Accordingly these financial statements are stated on a G.S.T. inclusive basis. 8. Depreciation Marquees were purchased for use by organisations in the community free of charge for galas, fetes and other fund raising activities. Depreciation has been written off on the straight line basis the life of the asset being estimated at 5 years. In the current year the marquees were fully depreciated as their market value at 31 March 1997 was considered to be nil. 1997$ 1996$ Marquees at cost - October 199213,213 13,214 Less depreciation to 31 March 19969,247 6,605 3,966 6,608 Less depreciation - current year3,966 2,642 Balance at 31 March 1997$ $3,966 9. Donations Approved Not Yet Paid (a) Approved donations not yet paid out include: 1997$ 1996$ Mackenzie Rugby Football Club Inc. 10,000 Methven Anglican Parish2,000 2,000 QEII National Trust2,000 2,000 Sacred Heart Basilica Renovation Project 5,000 St Stephens Community Care Centre (Ashburton) 45,000 S. C. Womens Bowling Centre Inc. 10,000 Task Force Green Community Employment Initiative25,080 21,120 Age Concern Ashburton Inc.5,000 Ashburton Sports Turf Trust15,000 Hinds School on Behalf of Community Organisation1,000 St Andrew Presbyterian Church (Ashburton)1,000 Caroline Bay Seating Cover Project5,000 S C War Memorial Society Inc.5,000 Timaru Squash Club10,000 Glenavy Tennis Club750 Waimate Health and Fitness Trust2,500 Hieracium Control Trust10,000 Cave Pistol Club500 Aorangi Park Trust666,666 $751,496 $95,120 (b) The community trust has undertaken to make a donation of $50,000 to the Cancer Society Canterbury Westland Branch - Davidson House Project. The donation is to be paid in the coming year. 10. Reconciliation of Net Surplus to Net Operating Cash Flow 1997$ 1996$ Net surplus24,705,719 590,246 Adjustments for non cash items in net surplus: Depreciation3,966 2,642 Forgiveness of debt40,000 Capital gain on sale of shares(24,698,148[teh]) Balance of endowment fund(7,278[teh]) Interest on endowment fund(3,247[teh]) Write off debit balance in revaluation reserve60,208 101,220 592,888 Adjustment for changes in working capital: Decrease (increase) in accrued interest(45,661[teh]) 1,265 Increase (decrease) in sundry creditors(996[teh]) (405[teh]) Increase (decrease) in donations payable656,376 (97,000[teh]) Decrease (increase) in prepayments(1,256[teh]) Decrease (increase) in sundry debtors(4,127[teh]) 604,336 (96,140[teh]) 705,556 496,748 Plus items classified as investing: Movement in debtors which relate to investments4,127 Cash flow from operations$709,683 $496,748 11. Capital Commitments There were no capital commitments (1996 nil). 12. Contingent Liabilities There are no contingent liabilities apart from donation commitments as per notes 1 and 9. 13. Endowment Fund A revision of the community trust deed by the Reserve Bank has been completed during the year. During the course of this process it was found that the purpose for which the fund was set up was at variance with the objects clause of the trust deed. The fund has been wound up and the original capital funds received have been returned to the donors. 1997$ 1996$ Balance brought forward27,002 Contributions from TBSC Community Trust Inc. 5,000 Retiring regional board of directors of TBSC Limited 19,724 Mt Cook Marketing Limited shares nil value 27,002 24,724 Income for year3,247 2,278 30,249 27,002 Less repaid to donors Ex directors of TBSC Limited19,724 TBSC Community Trust10,525 $ $27,002 14. Financial Instruments Fair Values Investments are stated at estimated market value at balance date. Interest accrued, sundry debtors, sundry creditors, term loans and donations approved, not yet paid, are stated at the amounts expected to be received or paid. Accordingly, the trustees consider that the fair value of each class of financial assets and financial liabilities is the same as the carrying value in the statement of financial position. Credit Risk Seventy-nine percent of the assets of the trust were represented by term investments and current account balance with Westpac Trust, National Bank of New Zealand and ANZ Banking Group. The trustees consider the risk of non-recovery of these investments at balance date to be within satisfactory guidelines. The maximum exposure to credit risk of other financial instruments are: 1997$ 1996$ Sundry debtors5,873 10,000 Interest accrued66,450 20,789 Long-term advances 50,000 New Zealand Government stock4,015,616 New Zealand shares1,951,380 New Zealand property shares544,700 Australian property shares441,560 Currency Risk The trust incurs currency risk as a result of investment in Australian property shares, i.e., gives rise to currency risk in Australian dollars. Interest Rate Risk The following investments of the trust are sensitive to changes in interest rate : bank call accounts and term deposits and Government and local authority securities. 15. Capital Profit on Sale of Investments The capital profit arose from the difference between the book value of Trustbank New Zealand Limited shares of $7,389,000 and the amount received from them as realisation of these shares of $32,087,148. Audit Report to the Readers of the Financial Report of Trust Bank South Canterbury Community Trust Inc. We have audited the financial report. The financial report provides information about the past financial performance of the trust and its financial position as at 31 March 1997. The information is stated in accordance with the accounting policies as outlined. Board of Trustee Responsibilities The board of trustees are responsible for the preparation of a financial report which gives a true and fair view of the financial position of the trust as at 31 March 1997 and of the results of operations and cash flows for the year ended 31 March 1997. Auditor's Responsibilities It is our responsibility to express an independent opinion on the financial report presented by the trust 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 report. It also includes assessing: the significant estimates and judgments made by the board of trustees in the preparation of the financial report, and whether the accounting policies are appropriate to the trust circumstances, consistently applied and adequately disclosed. We conducted our audit in accordance with generally accepted auditing standards in 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 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 the normal course of business and in our capacity as auditors we have no relationship with or interests 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 report complies with generally accepted accounting practice and gives a true and fair view of the financial position of the trust as at 31 March 1997 and the results of its operations and cash flows for the year ended on that date. Our audit was completed on 11 July 1997 and our unqualified opinion is expressed as at that date. MARTIN WAKEFIELD, Auditor. Timaru. The Hon. Minister of Finance has directed that the Trust Bank South Canterbury Community Trust Inc., need not publish the full list of its donations but a copy of the list is available to anyone upon request to the chairperson, Trust Bank South Canterbury Community Trust Inc., P.O. Box 591, Timaru, or from the office of the Secretary, 39 George Street, Timaru.