The Community Trust Consolidated Financial Statements for the Year Ended the 31st day of March 1998 Contents: Trust Directory. Trustees' Report. Consolidated Statement of Financial Performance. Consolidated Statement of Movements in Equity. Consolidated Statement of Financial Position. Consolidated Statement of Cash Flows. Notes to the Financial Statements. Auditors' Report. The Community Trust Trust Directory for the Year Ended the 31st day of March 1998 Trust Particulars: The Community Trust 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. Date of Trust Deed: 30 May 1988. Settlor: Minister of Finance. Trustees: I. D. Howell, P. H. Malone, N. A. Allen, J. M. Mckendry, J. C. Bedwell, R. H. Scott, V. S. Buck, F. J. Smith, B. P. Duncan, R. J. Todd, M. I. Gibb, M. W. Wisheart. Administrator: W. Ward (appointed 3 May 1998). Accountants: KPMG, P.O. Box 274, Christchurch (M. J. Hadlee). Auditors: Coopers & Lybrand, P.O. Box 13-244, Christchurch (J. A. Orr). Custodial Trustee: Trustees Executors. Bankers: WestpacTrust. Solicitors: Chapman Tripp Sheffield Young, P.O. Box 2510, Christchurch (C. H. Levin). The Community Trust Trustees' Report for the Year Ended the 31st day of March 1998 Objectives of the Trust and Charitable Company Subsidiary: To provide charitable, cultural, philanthropic and recreational benefits to the communities of Canterbury, Marlborough and Nelson. Policies and Structure of the Trust and Charitable Company Subsidiary: These organisations are structured to include community representatives from the 3 regions. Their policies are to manage and distribute their income and capital to the community they serve. Activities of the Trust: During the period under review the trust and its charitable subsidiary have provided financial assistance to a wide range of community groups in Canterbury, Marlborough and Nelson. In addition to responding to applications for assistance these organisations have initiated several new projects of benefit to community groups. Trustees' Remuneration: During the period the trustees of the trust received fees of $90,121 (1997 $89,945). Review of Results and Financial Position: The total distribution from the Trust and Charitable Company was $17.2 million (1997 $15.8 million) by way of donations to community groups during the last 12 months. Signed on behalf of the board of trustees: Chairperson: I. D. Howell. Trustee: R. H. Scott. Date: 16 June 1998. The Community Trust Consolidated Statement of Financial Performance for the Year Ended the 31st day of March 1998 $ 1998$ 1997$ Revenue Dividend Community Trust Investments Limited 700 WestpacTrust 8,400,000 Rents received 1,834 Interest 11,933,405 27,984,817 Investment income 34,734,175 2,475,257 46,669,414 38,860,774 Less investment fees 1,182,366 123,216 Total revenue(Note 2) 45,487,048 38,737,558 Less expenses Advertising, public relations, distribution and travelling costs 373,986 358,801 Computer and system review costs 157,497 2,477 Audit fees 15,188 12,750 Central administration and support costs 430,353 543,734 Consultants fees 19,178 249,300 Depreciation and loss on sale 106,929 28,301 Professional fees 129,957 185,938 Property costs 31,328 38,516 Trustees fees 90,121 89,945 Change on value of Government securities investment(Note 1) 7,276 Total expenses 1,361,813 1,509,762 Net surplus before taxation 44,125,235 37,227,796 Less retentions Transfer to capital base reserve 9,168,516 8,740,535 Available for distribution 34,956,719 28,487,261 Donations to tax appoved entites(Note 3) 11,606,227 6,194,864 Net surplus transferred to trust funds $23,350,492 $22,292,397 Transferred to: Accumulated income reserve(Note 4) 23,350,492 22,292,397 $23,350,492 $22,292,397 The Community Trust Consolidated Statement of Movements in Trust Funds for the Year Ended the 31st day of March 1998 1998$ 1997$ Total trust funds at beginning of year 393,126,558 325,737,272 Less donations paid from capital(Note 3) (5,655,356) (9,490,218) Plus donations cancelled/refunded from prior years 24,919 37,661 387,496,121 316,284,715 Add net surplus for the year 23,350,492 22,292,397 Prior years donations transferred to long term commitments 0 51,666 Increase in capital base reserve 9,168,516 8,740,535 Revaluation of investments 0 45,757,245 Total trust funds at end of year $420,015,129 $393,126,558 Represented by: Core real capital base reserve(Note 4) 358,000,000 358,000,000 Accumulated income reserve(Note 4) 44,106,078 26,386,023 Capital base reserve(Note 4) 17,909,051 8,740,535 $420,015,129 $393,126,558 The Community Trust Consolidated Statement of Financial Position as at the 31st day of March 1998 $ 1998$ 1997$ Trust funds 420,015,129 393,126,558 Represented by: Current assets WestpacTrust (58,148) 13,514,076 Accounts receivable 1,024 Bank deposits 5,720,149 350,037,627 Donations paid in advance 70,000 708 Accrued interest 119,449 2,085,340 Prepayments 18,161 15,419 Taxation refund due(Note 12) 1,454,600 4,733,115 Goods and services tax 38,080 Current portion of investments 194,947 7,325,235 370,619,312 Investments Government securities 303,804 450,040 Local authorities securities 51,040 Managed funds 411,915,906 Community loans 251,753 397,142 Armstrong Jones (NZ) Limited 23,378,506 Investment property 1,862,270 412,471,463 26,138,998 Less current portion (194,947) 412,471,463 25,944,051 Fixed assets(Note 7) 3,926,366 84,338 Total assets 423,723,064 396,647,701 Current liabilities Accounts payable 133,131 118,971 Goods and services tax 1,742 Committed special project donations 1,051,501 3,110,972 Committed donations 2,521,561 291,200 Total liabilities 3,707,935 3,521,143 Net assets $420,015,129 $393,126,558 The Community Trust Consolidated Statement of Cash Flows for the Year Ended the 31st day of March 1998 1998$ 1997$ Cash was provided by (used for): Operations (Note 5) Dividend from WestpacTrust0 8,400,000 Income from investments16,212,230 13,624,919 Income from interest and dividends11,933,405 36,385,517 Payments to beneficiaries(3,273,954) (23,964,491) Payments to suppliers and employees(2,328,433) (1,453,187) Payments to trustees(90,121) (119,175) Payments of taxation3,278,515 (4,693,059) Payments of goods and services tax39,823 (32,304) Donations to the community(13,861,115) (15,901,377) 11,910,350 12,246,843 Investing Purchase of Government securities0 (491,000) Sale of Government and local authorities securities197,276 1,121,000 Sale of Armstrong Jones Investment23,378,506 Sale of Trust Bank New Zealand Limited shares0 342,157,244 Managed funds investments(391,434,537) 0 Movement in term deposits344,317,478 (343,504,451) Decrease in term deposits Reduction of Armstrong Jones Investment0 2,244,502 Purchase of investment property0 (1,713,731) Community loans145,389 26,483 Purchase of fixed assets(2,086,687) (11,774) (25,482,575) (171,727) Increase in cash(13,572,225) 12,075,116 Cash at beginning of year13,514,076 1,438,960 Cash at end of year$(58,149) $13,514,076 Represented by: WestpacTrust current account 308,794 WestpacTrust on call account(58,149) 13,205,282 $(58,149) $13,514,076 The notes to the financial statements form part of and are to be read in conjunction with these financial statements. The Community Trust Notes to the Financial Statements for the Year Ended the 31st day of March 1998 1. Statement of Accounting Policies General Accounting Policies: The following general accounting policies have been adopted in the preparation of the financial statements: (i) The Community Trust was incorporated as a charitable trust in accordance with the provisions of the Trustee Banks Restructuring Act 1988. These financial statements have been prepared in accordance with applicable financial reporting standards. (ii) Community Trust Charities Limited is a charitable company incorporated under the Companies Act 1993 as amended and is a reporting entity for the purposes of the Financial Reporting Act 1993. The financial reports of Community Trust Charities Limited have been prepared in accordance with the Financial Reporting Act 1993. (iii) Canterbury Trust House Limited was incorporated on 18 December 1995 under the Companies Act 1993. Canterbury Trust House Limited is a reporting entity for the purposes of the Financial Reporting Act 1993. The financial statements of Canterbury Trust House Limited have been prepared in accordance with the Financial Reporting Act 1993. (iv) The measurement base adopted is that of historical cost, except for the revaluation of investments. Reliance is placed on the fact that the trust is a going concern. (v) The matching of revenue earned and expenses incurred using accrual accounting concepts. Specific Accounting Policies Depreciation: Depreciation has been charged in the financial statements 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 construction3% c.p. Buildings furniture and fittings4-40% d.v. Computer equipment/software28-36% c.p. Office equipment6-48% c.p. Motor vehicles18-22% c.p. Fixed Assets: Fixed assets are recorded at cost less accumulated depreciation. Investments: Investments are shown at market value. Net income including realised and unrealised gains or losses from holding or trading these investments are recorded in the statement of financial performance. Donations, Special Projects and Community Loans: Donations, special projects and community loans are accounted for on an accruals basis. Dividend Income: Dividend income is included in the statement of financial performance when it is received. Income Tax: Income tax expense is recognised on the surplus available for distribution before taxation, adjusting for differences between taxable and accounting income. Goods and Services Tax: The subsidiary of Community Trust Charities Limited, Canterbury Trust House Limited, is registered for G.S.T. Accordingly its 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 therefore the financial statements have been prepared on a G.S.T. inclusive basis. Financial Instruments: Foreign currency transactions are translated to New Zealand currency at the exchange rate ruling at the dates of the transactions. Amounts receivable and payable in foreign currencies at balance date are translated at the exchange rate at that date. Exchange differences arising from the translation of amounts payable and receivable in foreign currencies are recognised in the statement of financial performance. Off-balance sheet financial instruments that are designated as hedges are recognised on the same basis as the underlying hedged item. Off-balance sheet transactions that do not constitute specific hedges are stated at market value and any resultant gain or loss is recognised in the statement of financial performance. Cash: For the purpose of the statement of cash flows, cash comprises WestpacTrust balances only. Cash excludes bank deposits not used as part of the trust's day-to-day cash management. Basis of Consolidation: The Community Trust, Community Trust Charities Limited and its subsidiary, Canterbury Trust House Limited, have been consolidated using the purchase method of consolidation. Changes in Accounting Policies: There have been no changes in accounting policies apart from the change in recording the property situated at 262 Oxford Terrace as a fixed asset rather than an investment. All policies have been applied on bases consistent with those used last year. 2. Revenue 1998$ 1997$ Dividends received Community Trust Investments Limited 700 WestpacTrust 8,400,000 $8,400,700 Rents received Car parks$1,834 Interest Received Government securities30,917 84,967 WestpacTrust3,757,380 7,605,270 Countrywide833,069 1,131,821 Bank of New Zealand2,650,685 887,407 Bankers' trust 7,489,783 ANZ Bank3,150,835 6,594,709 Inland Revenue Department72 National Bank1,509,430 4,190,860 The Community Trust1,017 $11,933,405 $27,984,817 Investment Income Armstrong Jones realised income2,011,673 1,948,903 Armstrong Jones unrealised income/(loss) 526,354 Dividend income1,771,130 Coupon interest4,646,228 Short term interest7,374,210 Realised gain/(losses)(1,557,711) Unrealised gains/(losses)20,488,645 $34,734,175 $2,475,257 Investment Fees Fund managers fees(1,129,458) (109,191) Custodial fees(52,908) (14,025) (1,182,366) (123,216) Total revenue$45,487,048 $38,737,558 3. Donations: The names of organisations to whom distributions have been made by the trust under section 21 of the Trustee Banks Restucturing Act 1988 during the financial year and the amounts distributed are shown in the annual report. 1998$ 1997$ Donations paid from income Canterbury7,878,895 2,481,765 Nelson1,408,254 252,188 Marlborough446,665 90,212 Total donations paid from income$9,733,814 $2,824,165 Special projects paid from income Canterbury1,579,493 2,369,147 Nelson208,580 756,536 Marlborough117,907 368,505 Total special projects paid from income$1,905,980 $3,494,188 Donations approved from prior years(25,832) Donations paid from income Cancelled/refunded(7,735) (123,489) $(33,567) $(123,489) $11,606,227 $6,194,864 Donations paid from capital Canterbury27,674 2,533,379 Nelson1,242,154 635,779 Marlborough486,802 227,177 Total donations paid from capital$1,756,630 $3,396,335 Special projects paid from capital Canterbury3,709,228 4,983,738 Nelson35,904 589,365 Marlborough153,594 520,780 Total special projects paid from capital$3,898,726 $6,093,883 Donations paid from capital Cancelled/refunded(24,919) (37,661) $5,630,437 $9,452,557 Future donation commitments$5,573,061 $3,402,171 Funds carried forward as accumulated income are available for the payment of donations in future years. Budgeted donations unspent in the current year are to be distributed in the following year. Future donation commitments represent donations approved in the current or previous years which are to be distributed from either capital or future income sources. 4. Trust Funds: 1998$ 1997$ Core real capital base reserve Balance brought forward358,000,000 61,968,961 Capital gain on sale of shares 290,248,013 Reserve funds transferred from Canterbury Community Trust Charities Limited 872,935 Transfer from accumulated income reserve5,630,437 14,362,648 Donations paid from capital(5,630,437) (9,452,557) $358,000,000 $358,000,000 Accumulated Income Reserve Balance brought forward26,386,023 13,228,061 Transfer from future donations reserve 5,176,546 Transfer to core real capital base reserve(5,630,437) (14,362,648) Net surplus for year23,350,492 22,292,397 Prior years donations transferred to long term commitments 51,667 $44,106,078 $26,386,023 Future donations reserve balance brought forward 5,176,546 Transfer to accumulated income reserve (5,176,546) Capital base reserve Balance brought forward8,740,535 872,935 Retention as per statement of financial performance9,168,516 8,740,535 Transfer of reserves to Trust Bank Canterbury Community Trust Inc. (872,935) $17,909,051 $8,740,535 The capital base reserve is an allowance for the erosion of the value of the core real capital base reserve, due to inflation. For 1998 this was calculated based on inflation at 2.50 percent on a core real capital base reserve of $366,740,535 (being original reserve of $358,000,000 and the 1997 retention of $8,740,535) for 12 months. Revaluation Reserve Balance brought forward 244,490,769 Investment revaluation reserve (290,248,013) Revaluation of shares 45,757,244 Between the cost of Government and local authorities securities and the market value as at balance date are shown in the statement of financial performance. 5. Reconciliation of Net Surplus to Net Operating Cash Flow 1998$ 1997$ Net surplus23,350,492 22,292,397 Adjustments for non cash items in net surplus Armstrong Jones Investment income (2,473,404) Depreciation106,929 28,301 Revaluation of Government securities investment7,276 Managed funds income unrealised(20,488,645) Prior years donations transferred to long term commitments 51,667 2,976,052 19,898,961 Adjustments for changes in Working Capital Decrease/(increase) in accounts receivable(1,024) Decrease/(increase) in accrued interest1,965,891 (1,941,425) Decrease/(increase) in prepayments(2,742) (15,419) Increase/(decrease) in accrued charges 1,563 Increase/(decrease) in accounts payable14,161 (3,329) Increase/(decrease) in donations payable170,889 (304,915) Increase/(decrease) in taxation payable3,278,515 (4,693,059) Increase/(decrease) in goods and services tax39,822 (26,804) Increase/(decrease) in donations paid in advance(69,292) (708) 8,372,272 12,914,865 Add capital base reserve transfer9,168,516 8,740,535 Deduct donations paid from capital(5,630,438) (9,452,557) Capital items included in working capital adjustments 44,000 Cash flow from operations$11,910,350 $12,246,843 6. Capital Commitments: There are no capital commitents at balance date (1997 $1,740,086). 7. Fixed Assets: Cost$ AccumulatedDepreciation$ 1998BookValue$ 1997BookValue$ Buildings3,907,435 67,230 3,840,205 Plant and equipment68,721 44,059 24,662 35,357 Computer37,614 10,440 27,174 Motor vehicles72,654 38,329 34,325 48,981 $4,086,424 $160,058 $3,926,366 $84,338 8. Contingent Liabilities: There are no contingent liabilities at balance date (1997 nil) apart from donation commitments as per note 3. 9. Segmental Reporting: The trust operates as a charitable trust in the Canterbury, Marlborough and Nelson areas. As all operations occur within New Zealand, segmental reporting is not required. 10. Related Party: In the normal course of business the trust has no related parties with any entity. In the previous year the trust had related parties with WestpacTrust (1997 interest received $7,605,270, 1997 balance date bank balance $13,514,076 and deposits $97,227,768) 11. Financial Instruments: Investments are stated at estimated market value at balance date. Accrued interest, accounts payable, community loans, and donations approved not yet paid are stated at the amounts expected to be received or paid. Accordingly, the trustees consider that the fair value of each class of financial assets and financial liabilities is the same as the carrying value in the statement of financial position. Concentration of Investments Ninety-seven percent of the assets of the trust are represented by investments held with a range of financial institutions. However the trustees consider the risk of non-recovery of these investments to be minimal. Currency Risk The trust incurs currency risk as a result of investment transactions entered into by fund managers. Interest Rate Risk The following investments of the trust are sensitive to changes in interest rates: Bank call accounts and deposits, governments and local authority and securities held by fund managers. Loans and advances with related parties do not carry interest and therefore do not hold any interest rate risk. 12. Taxation: 1998$ 1997$ Net income before taxation as per statement of financial performance44,125,235 37,227,796 Add: non deductible expenditure356,997 145,752 Imputation credits received402,187 4,137,658 Canterbury Trust House Limited loss non deductible 6,093 Less: revaluation of equities(13,774,939) Allocated as beneficiaries income(17,767,105) (22,913,047) Donations to tax approved entities(11,606,227) (6,194,864) Assessable income for tax purposes1,736,148 12,409,388 Less: loss carry forward entitlement(170,242) Taxable income1,565,906 12,409,388 Taxation 33 percent516,749 4,095,098 Less: imputation credits received(402,187) (4,137,658) Tax credits on overseas dividends(114,562) Taxation as per statement of financial performance Excess imputation credits (42,560) Converted to loss to carry forward (128,970) Voluntary tax paid 20,941 Resident withholding tax1,454,600 4,712,174 Taxation payable (refund) as per the statement of financial position$(1,454,600) $(4,733,115) Auditors' Report We have audited the consolidated financial statements. The consolidated financial statements provide information about the past financial performance and financial position of the trust and subsidiaries as at 31 March 1998. This information is stated in accordance with the accounting policies set out therein. Trustees' Responsibilities: The trustees are responsible for the preparation of the consolidated financial statements which give a true and fair view of the financial position of the trust and subsidiaries as at 31 March 1998 and the results of its 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 judgments made by the trustees in the preparation of the financial statements; and whether the accounting policies are appropriate to the trust and subsidiaries' circumstances, and are 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 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 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 and subsidiaries as far as appears from our examination of those records; and the consolidated financial statements comply with generally accepted accounting practice; and give a true and fair view of the financial position of the trust and subsidiaries as at 31 March 1998 and the results of their operations and cash flows for the year ended on that date. Our audit was completed on 16 June 1998 and our unqualified opinion is expressed as at that date. COOPERS & LYBRAND, Chartered Accountants, Christchurch, New Zealand. A full list of donation recipients is available on request from the Community Trust, Level Four, Trust House, 262 Oxford Terrace (P.O. Box 13-744), Christchurch.