The Community Trust of Otago Directory for the Year Ended 31 March 2000
Trustees: Clive Matthewson (chairperson), Dunedin; Ross Allan, Middlemarch, Nancy Bamford, Balclutha; Graeme Bell, Alexandra; John Farry, Dunedin (appointed Aug '99); Peter Gibson, Dunedin; Sir Robin Gray, Dunedin (retired Aug '99); Ele Ludemann, Oamaru; Richard McKnight, Dunedin; Alan McLay, Oamaru; James Ng, Dunedin (retired Aug '99); David Shepherd, Ranfurly (appointed Aug '99); Gail Tipa, Dunedin; Richard Walls, Dunedin.
Chief executive: Keith Ellwood.
Registered office: Second Floor, Community Trust House, corner Filleul Street and Moray Place, Dunedin.
Auditor: Taylor McLachlan, Dunedin.
Solicitor: Anderson Lloyd, Dunedin.
Investment advisors: Frank Russell Limited, Auckland.
Bankers: Westpac Trust, Dunedin.
Custodian: Chase Manhattan Bank, Sydney.
The Community Trust of Otago Consolidated Statement of Financial Performance for the Year Ended 31 March 2000
2000 1999
$000 $000
Revenue (note 1) 11,616 17,687
Expenditure (note 2) (1,791) (1,705)
Surplus before donations 9,825 15,982
Donations paid from income (note 4) (10,528) (6,650)
Trustee surplus prior to tax (703) 9,332
Taxation underpaid in prior years 89 -
Trustee (deficit)/surplus ($792) $9,332
This (deficit)/surplus has been allocated to:
Capital maintenance reserve - 10
Uncommitted surplus (792) 9,322
($792) $9,332
The Community Trust of Otago Consolidated Statement of Movement in Trust Funds for the Year Ended 31 March 2000
2000 1999
$000 $000
Opening trust funds 183,922 174,923
Donations paid from capital (note 4) (415) (333)
183,507 174,590
Trustee (deficit)/surplus (792) 9,332
Closing trust funds $182,715 $183,922
The Community Trust of Otago Consolidated Statement of Financial Position as at 31 March 2000
2000 1999
$000 $000
Source of funds
Trust funds (note 3) 182,715 183,922
Current liabilities-
Creditors 112 101
Taxation payable 88 -
$182,915 $184,023
Employment of funds
Current assets-
Current account - WestpacTrust 396 155
Short term bank deposits 144 1,296
Debtors - 3
540 1,454
Non current assets-
Managed funds (note 5) 180,731 181,101
Fixed assets (note 6) 1,394 1,468
Advance to Dunedin Community House Trust (note 11) 250 -
182,375 182,569
$182,915 $184,023
Approved on behalf of the board:
Clive Matthewson Richard McKnight
Chairperson Trustee
8 June 2000 8 June 2000
The Community Trust of Otago Consolidated Statement of Cashflows for the Year Ended 31 March 2000
2000 1999
$000 $000
Cashflows from operating activities
Cash was provided from:
Managed funds 11,456 17,375
Interest received on investments 73 220
Net managed funds withdrawn 370 -
Other 88 90
11,987 17,685
Cash was disbursed on:
Payment to suppliers and staff 884 850
Fund management 815 772
Donations to voluntary organisations 10,943 6,983
Net managed funds reinvested - 9,602
12,642 18,207
Net cash inflow/(outflow) from operating activities (655) (522)
Cashflows from investing activities-
Cash was disbursed on:
Purchase of fixed assets 6 125
Advance to Dunedin Community House Trust 250 -
256 125
Net cash from investing activities (256) (125)
Net (decrease) in cash held (911) (647)
Add opening cash brought forward 1,451 2,098
Ending cash carried forward 540 1,451
Ending cash comprises:
Cheque accounts 396 155
Term Deposits 144 1,296
540 $1,451
The Community Trust of Otago Notes to the Consolidated Financial Statements for the Year Ended 31 March 2000
Basis of preparation
These are the consolidated financial statements of The Community Trust of Otago, Otago Community Trust Charities Limited, The Community Trust Amateur Sports Co Ltd, The Community Trust District Improvement Co Ltd and Fillmor House Limited. The Community Trust of Otago was incorporated as a charitable trust in accordance with the provisions of the Community Trusts Act 1999.
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.
Donations
Donations are accounted for as they are distributed.
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
Income tax is recognised on the surplus after distribution, 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%
G.S.T.
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.
Capital maintenance reserve
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).
Investments
Investments are valued at year end market value. All realised and unrealised gains and losses are recognised in the statement of financial performance.
Hedging instruments
The Trust through its investment managers enters into hedging instruments such as futures, options and 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.
Changes in accounting policies
There have been no changes in accounting policies during this accounting period.
Changes in comparative figures
Where applicable, certain comparatives have been restated to comply with the accounting presentation adopted for the current period.
2000 1999
$000 $000
1. Revenue
Interest 73 222
Managed funds 11,456 17,374
Other 87 91
$11,616 $17,687

2. Expenditure
Depreciation 81 81
Fund managers fees 815 772
Loss on sale - 3
Occupancy 50 45
Other Operating 90 101
Professional Fees 252 171
Promotion 32 75
Public & statutory reporting 62 61
Staff 221 206
Trustee fees 152 146
Trustee expenses 36 44
$1,791 $1,705
Professional fees
Payments to auditors
- Audit fees 8 4
- Software and other support 22 13
Computer support 8 -
Legal advisors 5 3
Professional investment advisers 80 68
Tax advice 30 36
Donations project advice 99 47
$252 $171
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 NZ Stock Exchange and the balance in 1996 when Westpac took over Trust Bank.
2000 1999
$000 $000
Opening balance 131,467 131,467
Transfer from uncommitted surplus - -
Closing balance $131,467 131,467
Capital maintenance reserve
Opening balance 9,073 9,063
Transfers 2,108 10
Closing balance $11,181 $9,073
Uncommitted surplus
Opening balance 43,382 34,393

Donations to non profit bodies (415) (333)
Trustee (deficit)/surplus (792) 9,332
Transfer to capital maintenance reserve (2,108) (10)
Closing balance $40,067 $43,382
Total trust funds at 31 March 2000 $182,715 $183,922
2000 1999
$000 $000
4. Donations
Donations paid from income 10,528 6,650
Donations paid from capital 415 333
$10,943 $6,983
Donations which the Trust has conditionally approved but not yet paid are shown in the accounts as a contingent liability (see Note 10).
5. Managed funds
Managed by external managers
Opening balance 181,101 171,499
Gross income 11,456 17,374
Fund managers fees (826) (772)
Withdrawals to fund donations (11,000) (7,000)
Closing balance $180,731 $181,101

Investments comprise:
Cash, deposits and miscellaneous 14,270 27,655
Bonds 88,769 88,445
Equities 77,692 65,001
Total managed funds $180,731 $181,101
Held in: New Zealand 79,747 89,124
Offshore 100,984 91,977
$180,731 $181,101
6. Fixed assets 2000 1999
2000
Cost
$000 Accum.
Depn.
$000 Book
Value
$000 Book
Value
$000
Land 432 - 432 432
Buildings 1,026 143 883 937
Office furniture and equipment 167 88 79 99
$1,625 $231 $1,394 $1,468
7. Financial instruments
The financial instruments are subject to an interest rate risk.
The investment portfolios are treated as lump sum investments. The fund managers or custodians manage both the credit risk and foreign exchange risk.
No comparison is provided between the carrying value and estimated fair value of financial instruments, due to the carrying value reflecting market price.
2000 1999
$000 $000
New Zealand
Bonds and deposits 64,610 77,179
Equities 15,677 13,396
80,287 90,575
Overseas
Bonds and deposits 38,970 40,372
Equities 62,014 51,605
100,984 91,977
Total
Bonds and deposits 103,580 117,551
Equities 77,691 65,001
$181,271 $182,552
8. Taxation
2000 1999
$000 $000
Net surplus before donations as per statement of financial performance 9,825 $15,982

Less: Unrealised equity gains 1,426 -
Charitable business exemption 5,704 10,869

7,130 10,869
2,695 5,113
Plus: Unrealised equity losses - 2,025
Non deductible expenditure 233 309
Accrued AMP dividend (84) -
Imputation & withholding tax credits received 340 373
489 2,707
Total taxable income 3,184 7,820
Less: Distribution of income to beneficiaries 2,429 6,993
Total trustees taxable income 755 827
Less: Losses brought forward (755) (197)
Assessable income for tax purposes - 630
Taxation @ 33% - 208
Less: Overseas withholding tax credits claimed - (51)

Taxation payable before imputation credits - 157
Less: Imputation credits (313) (320)
Excess imputation credits (313) (163)
Losses brought forward 494 197
Plus: Conversion of excess imputation credits to losses 949 494
Prior year adjustment 757 -
Less: Losses claimed this year (755) (197)
Total losses to be carried forward 1,445 494
9. Reconciliation of reported surplus to net cashflow from operating activities
2000 1999
$000 $000
Surplus for the period (792) 9,332
Add:
Non-cash items:
Depreciation 81 81
Net managed funds drawn down 370 -
Less:
Non-cash items:
Net managed funds reinvested - 9,602
Donations paid from capital 415 333
(756) (522)
Movements in working capital items:
Increase/(decrease) in creditors 11 -
(Increase)/decrease in debtors 3 -
Increase/(decrease) in income tax payable 88 -
Effect of rounding (1) -
101 -
Net cashflow from operating activities ($655) ($522)

10. Contingent liabilities
Contingent liabilities at 31 March 2000 consist of donations approved but not disbursed of $4,284,000 (1999 $8.828 million).
11. Loan to Dunedin Community House Trust (Inc.)
During the year the Trust advanced the Dunedin Community House Trust (Inc.) an interest free loan of $250,000. The term of the loan is for 10 years and quarterly principal payments of $6,250 are to be made from December 22, 2000.
Chairperson's annual report:
Helping shape the future of Otago
The Community Trust of Otago has had a good year. The funds we hold in trust are safe and we obtained a fair return on those funds. We made a good level of donations that were well balanced and of high quality. But that is nothing more than should be routinely expected, and the work of the Trust does not feel merely routine. The Trust is an adolescent organisation still sensing what maturity could be like - how we can take part in shaping the future of our province, no less. There is a sense of anticipation, even excitement, in that.
Investment performance
The Trust's income for the year was $11.6 million, which is a 6.3% rate of return. This is not spectacular, but it is satisfactory. It reflects the level of risk we are prepared to take and the performance of world markets, in particular a setting in which the market value of fixed interest securities declined in response to rising interest rates. The rate of return is about what we expect on average. We will have better years than this and worse years than this.
Donations
The number of donations approved during the year was 1082. The total amount was $6.4 million, which is less than for each of the previous two years. The donations amount is not connected with the year's income level, because we have sufficient reserves that we do not need to make that connection. The lower amount did not result from any tightening up. At this stage we think it reflects only the lumpiness of our donations stream: whether a single $2 million donation falls at the end of one financial year or the beginning of the next will obviously affect comparisons between the years.
Where we are going
The Trust is still in the growing and developing stage. For the first six years of its existence, it received a small dividend from its ownership interest in Trustbank New Zealand and distributed this income in a reactive fashion.
With the exchange of its bank ownership interest for a balanced portfolio of investments - done in two steps - the trust entered the next stage of its development. We appointed a Chief Executive, obtained premises, changed our name. Donations have totalled $27 million over the last three years compared with $10 million over the previous three. And that $37 million over six years compares with $5 million for the first six.
The way I picture it, this physical growth has been accompanied by intellectual and emotional growth. The Trust has established a set of values and, to some degree, a reputation. We have become tentatively proactive, and we have learnt a lot.
We discover that we are, uniquely, an organisation that is Otago-wide, has a broad mandate, can be flexible and innovative, and has probably more discretionary spending power than anyone else. This means that we are uniquely placed to make strategic investments in Otago communities. We think we can provide leadership, in a modest style, by opening up possibilities.
These ideas are already taking effect. Two very recent examples are the inaugural Otago Festival of the Arts to be held later this year and current consideration of an Otago-wide economic development initiative. Both of these have not only been financially supported by the Trust but also started from discussions initiated by the Trust. Several more examples are currently in the thinking stage.
There are problems and dangers, of course.
An example of a problem is communication. Most people would be rather vague about who we are and what we do. I describe this as a problem because we hold public money on trust and we would like to be accountable, not just formally but also in reality.
We tell local news media what we are doing, of course, but they judge what is news and what we are doing mostly isn't. *
At this stage we are responding to this problem by building linkages with leaders in the arts and culture, sports and recreation, social services, and business communities.
A story will illustrate one possible danger.
Recently, an organisation approached us to almost completely pay for a particular project. Conversation revealed that the project was not thought important enough for the organisation's "own money". They had better uses for their money and so we found better uses for ours.
It is not just that supporting this project would have been an ineffective use of funds. A more subtle danger is that to have supported it would actually have taken something away from the organisation. Independence, self-reliance, and ownership: these qualities are to be found in a healthy community. We would do actual harm if, by being a soft touch, we compromised them.
But the problems and dangers are minor. There are some great things going on in our communities and there are more opportunities for the future. We will work in partnership with others to help shape that future. We are enthusiastic about the prospect and thankful for the opportunity to be involved.
Trustees and staff
This year I again acknowledge and thank fellow trustees for their commitment and their wisdom and the congenial way in which we are able to carry out our business.
And again I acknowledge similar qualities in the people who do the work: Chief Executive Keith Ellwood, Donations Assessor Carol Melville and office staff Fay Jackson and Lynley Stevenson. The Trust is fortunate to have these people, and so is the public.
Clive Matthewson
*There is a typical example in the newspaper on the day I write this. A Government contribution of $50,000 to the Rail Trail is front-page news. Our $100,000 contribution to the Rail Trail was page 14 regional news.
A full list of donations may be obtained from The Chief Executive, The Community Trust of Otago, P.O. Box 5751, Dunedin.