Annual Report and Consolidated Financial Statements for the Year Ended 31 March 2000
Trust particulars
The Community Trust of Mid and South Canterbury 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 P. F. McIlraith (chairperson), Mrs C. E. Brand, Ms R. A. Carruthers, Mr L. K. Cooney, Mr A. R. McKay, Mr T. J. McIntyre, Mrs J. J. Rayne, Mrs M. B. Ross, Mrs H. Weeks.
Bankers: WestpacTrust, 243 Stafford Street, Timaru.
Auditors: Martin Wakefield, Chartered Accountants, 26 Canon Street, Timaru.
Executive director: B. E. C. Strathern, P.O. Box 983, Community House, Timaru.
The Community Trust of Mid and South Canterbury Inc. Chairperson's Report for the Year Ended 31 March 2000
It is with pleasure that I report on the trust's year ended 31 March 2000.
The total net profit was $4,210,393, including unrealised capital gains of $2,156,554. After making provision for transfers into reserves, an amount of $1,830,265 was available for distribution in the Mid and South Canterbury districts.
As signalled in last year's report, New Zealand Guardian Trust assumed responsibility for the investment of trust funds as from the end of April 1999, the investment return for the 12 months to 31 March being a satisfactory 12%.
The appointment of an "active" investment manager was a new venture for the trust, and the year under review was certainly one in which trustees gained valuable experience in this initiative, and learned very quickly about the vagaries of the investment market.
Trustees devote much time and energy into ensuring the trust's capital is invested prudently, to generate the best possible return while focusing on risk minimisation.
Your trust also employs Aon Consultancy to monitor the performance of the investments and assist the trustees on determining asset allocation and risk criteria.
As chairperson, I am satisfied the board policy of investment strategy is correct for an entity of this type where the community money is at stake. Having said that, the investment policy is under constant review.
The environment and function of "not for profit organisations" is experiencing new focus here in New Zealand and indeed, worldwide. Your trust is no exception, as this year we intend to concentrate on corporate governance. The trust is about to embark on a round of strategic planning, looking at aspects of donation criteria and adding creating value to the community we operate in.
During the year, two long-standing trustees completed their terms of office.
Mr Bruce Timpany, who also acted on the former South Canterbury Savings Bank Trust, and Mr Jim Underdown, who latterly assumed the office of chairperson.
Mr Timpany's professional legal experience was invaluable, his contribution to the trust was huge, while Mr Underdown's local knowledge and background, together with his open and friendly personality, brought a new dimension to the office of chairperson. Mr Underdown fostered an atmosphere of goodwill that any incoming chairperson would find a delight to work with. On behalf of all the trustees, I would like to thank the above gentlemen for their contribution, and a job well done.
With the departure of Mr Underdown, I was elected chairperson, with Mrs Carole Brand being elected as deputy chairperson.
We were pleased to welcome Mr Trevor McIntyre as a new trustee, whose experience and skills in the education sector will be of immense value to the trust.
Ms Rosemary Small was also appointed, but after a very brief tenure, she resigned to further business interests in Australia.
The vacancy caused by her resignation has not, as yet, been filled, however the new appointment is due to be announced by the Minister of Finance as this report goes to print.
In an endeavour to raise the profile of the trust, a number of meetings have been held in areas outside Timaru - Ashburton, Waimate and Fairlie, when the opportunity was taken to meet with district organisations, and to inspect facilities partially financed by donations from the trust.
The trust's objective is to provide financial assistance to organisations carrying on charitable, cultural, philanthropic and recreational work which is of benefit to the community principally in the regions of Mid and South Canterbury; and criteria has been established to ensure donations are made on a fair and reasonable basis in the districts.
The trust is conscious of the wonderful and valuable work being undertaken by a large number of individuals in the district who voluntarily work for the welfare of others. The bottom line is that this concept of grant-making can only work as a partnership within a community and the trust wish to thank the community for its contribution to that partnership. Trustees look forward to continuing and expanding their relationship with the district's volunteer organisations.
The more pro-active approach adopted by our organisation has dramatically increased the workload of the trust office at Community House. I wish to thank our executive director, Mr Strathern and his staff for meeting this challenge in such a competent manner.
I thank all trustees for their service and co-operation during the year, and look forward to further serving the community we represent.
P. F. MCILRAITH, Chairperson.
Consolidated Statement of Financial Performance for the Year Ended 31 March 2000
2000 1999
$ $
Income:
Interest: Managed funds 885,054 -
Interest: Other 196,292 2,022,865
Dividends: Managed funds 455,415 -
Dividends: Other 51,638 326,579
Capital gains 504,624 13,045
Capital gains: Managed funds 333,321 -
Sundry income 21,481
Total income 2,447,825 2,362,489

Less expenses:
Direct investment expenditure
Investment administration 127,862 35,895
Loss on redemption of government stock 1,434 3,513
Loss on sale of investments 118,342 9,202
Total direct investment expenditure 247,638 48,610
2,200,187 2,313,879
Less operating expenditure
Advertising 4,236 9,673
Auditor's fees 4,050 6,412
Legal fees 2,252 3,148
Postage, tolls and fax 1,774 3,810
Printing and stationery 12,023 20,640
Secretarial and accountancy fees 68,179 70,920
Special reports - 14,270
Sundry administration expenses 11,695 11,064
Trustees fees and travel 42,139 44,395
Total operating expenditure 146,348 184,332
Net income 2,053,839 2,129,547
Unrealised capital gains: Managed funds 2,156,554 64,864
Surplus transferred to the trust fund 4,210,393 2,194,411
Consolidated Statement of Movements in Equity for the Year Ended 31 March 2000
2000 1999
$ $
Opening equity 35,790,684 34,994,644
Net surplus for year 4,210,393 2,194,411
Less donations (1,143,614) (1,398,371)
Closing equity 38,857,463 35,790,684
Consolidated Statement of Financial Position as at 31 March 2000
Note 2000 1999
$ $
Trust capital-
General fund 3 34,136,194 33,526,105
Donations reserve 4 2,564,715 1,878,064
Unrealised revenue reserve 5 2,156,554 386,515
38,857,463 35,790,684
Represented by-
Current assets:
Provision for tax 6 67,067 66,708
WestpacTrust
- Subsidiary company account 22,383 9,205
- Current account 45,848 232,933
- Prime call account 68,342 66,206
- Term deposits 957,312 6,784,512
National Bank of NZ - term deposits - 5,477,579
ANZ Banking Group - term deposits - 2,857,365
Sundry debtors 520,058 0
Advances 11 160,000 200,000
Interest accrued 186,431 345,490
Short term debt investments 2 - 1,632,845
2,027,441 17,672,843
Less current liabilities
Sundry creditors 583,164 8,550
Donations approved not yet paid 8 191,740 286,560
Total current liabilities 774,904 295,110
Working capital 1,252,537 17,377,733
Add non current assets - -
Investments - Debt 2 - 10,996,815
- Equity 2 - 7,416,136
- Managed funds debt 2 17,717,217 -
- Managed funds equity 2 19,091,263 -
- Managed funds property 2 796,446 -
Net assets 38,857,463 35,790,684
Signed on behalf of the board of trustees.
P. F. MCILRAITH, Chairperson.
C. E. BRAND, Trustee.
Date: 30 August 2000.
Consolidated Statement of Cash Flows for the Year Ended 31 March 2000
2000 1999
$ $
Cash flows from operating activities-
Cash was provided from:
Interest on deposits 335,662 2,045,304
Dividends 51,638 287,238
Debtors - 32,547
Sundry 21,481 -
408,781 2,365,089

Cash was applied to:
Suppliers of goods and services (162,286) (213,948)
Donations paid (1,198,434) (1,181,441)
Advances made - (200,000)
(1,360,720) (1,595,389)
Net cash flows from operating activities (951,939) 769,700

Cash flows from investing activities-
Cash was provided from:
Redemption of investments 20,615,983 2,610,954
Withdrawal of managed funds 935,632 -
21,551,615 2,610,954
Cash was applied to:
Community House Trust (11,236) -
Managed funds (34,922,352) -
Purchase of Australian shares (83,963)
Purchase of NZ shares (50,000)
Purchase of NZ property shares (154,592)
Purchase of Australian property shares (38,359)
Purchase of other debt investments (2,875,669)
(34,933,588) (3,202,583)
Net cash flows from investing activities (13,381,973) (591,629)
Increase/(decrease) in cash held (14,333,915) 178,071
Add opening cash 1 April 1999 15,427,800 15,249,729
Cash as at 31 March 2000 1,093,885 15,427,800
Comprised of-
WestpacTrust
Subsidiary company account 22,383 9,205
Current account 45,848 232,933
Prime call account 68,342 66,206
Term deposit 957,312 6,784,512
National Bank - 5,477,579
ANZ Banking Group - 2,857,365
1,093,885 15,427,800
Reconciliation of net surplus and net cash flows from operating activities-
2000 1999
$ $
Net surplus transferred to equity 4,210,393 2,129,547
Add
Increase in creditors 2,500 -
Decrease in debtors - 32,547
Decrease in prepayments - 13,770
Decrease in accrued interest 139,734 23,050
Loss on sale of investments - 9,203
Loss on transfer to managed funds 119,776 -
Managed fund expenses 109,424 -
4,581,827 2,208,117
Deduct
Unrealised capital gain on equity investments 2,156,554 -
Donations paid 1,198,434 1,181,441
Advances made - 200,000
Managed fund revenue 1,673,790 -
Gain on transfer to managed funds 504,629 -
Movements in working capital
Decrease in creditors: - 8,102
- Increase in tax refund due 359 39,341
- Net gain on redemption of government stock - 9,533
5,533,766 1,438,417
Net cashflow from operating activities (951,939) 769,700
Cash at 31 March 2000 comprises the Subsidiary Company Account, Current Account, the Prime Call Account and the Money Market Deposit Account at WestpacTrust and deposits at National Bank of NZ and ANZ Banking Group.
Notes to the Consolidated Financial Statements for the Year Ended 31 March 2000
1. Statement of accounting policies
Reporting entity
The Community Trust of Mid and South Canterbury 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:
o 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.
o The matching of revenues earned and expenses incurred using accrual accounting.
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 Statement of Financial Performance when it is received.
(b) Donations
Donations, special projects and community loans are accounted for as they are distributed.
(c) Investments
Investments held as managed funds are shown at market value. Net income including unrealised gains or losses from holding such investments are recorded in the Statement of Financial Performance.
(d) Fixed assets
Fixed assets are recorded at cost less accumulated depreciation.
(e) Donations reserve
The donations reserve is credited with 75% of the net profit of the trust for each year or lesser sum to maintain the trust's general reserve in terms of the consumer price index. The intended effect of this reserve is to withhold from donations each year a sum sufficient to preserve the trust's capital in real terms to provide for maintenance of current donation levels in future years.
(f) Basis of consolidation
The Community Trust of Mid and South Canterbury Inc. and its subsidiary the South Canterbury Community Trust Charities Ltd have been consolidated using the purchase method of consolidation.
Changes in accounting policies
(a) The trustees have entered into an "Investment Management Agreement" with the New Zealand Guardian Trust Company Limited (NZGT) from 29 April 1999. This agreement appoints NZGT as Manager and Custodian of the Trustees Investment Portfolio and empowers NZGT to actively manage (buy, sell or hold) the investment portfolio in accordance with the Trustees Policy Guidelines and Objectives as set out in Annex B (Investment Objectives) to said "Investment Management Agreement". NZGT is required to promptly remedy any non compliance with trustees investment objectives which may arise.
(b) There have been no other changes in accounting policy.
2. Investments 2000 1999
New Zealand government stock - 6,824,353
New Zealand Local Authority Stock - 1,589,243
New Zealand debentures - 1,088,392
New Zealand capital notes and bonds - 3,127,672
New Zealand shares - 3,877,112
Australian shares - 1,115,500
New Zealand property shares - 1,150,815
Australian property shares - 1,272,709
Managed funds - debt 17,717,217 -
Managed funds - equity 19,091,263 -
Managed funds - property 796,446 -
37,604,926 20,045,796
Less NZ Government stock - short term - (1,632,845)
37,604,926 18,412,951
3. General fund
Balance at beginning of the year 33,526,105 32,993,718
Plus Transfer from statement of financial performance 513,460 532,387
Transfer from unrealised revenue reserve 96,629
Balance at end of the year 34,136,194 33,526,105
4. Donations reserve
Balance at beginning of the year 1,878,064 1,733,613
Plus Transfer from statement of financial performance 1,540,379 1,597,160
Unrealised revenue reserve 289,886 0
3,708,329 3,330,773
Less donations approved (1,143,614) (1,398,371)
Transfer to unrealised revenue 0 (54,338)
Balance at end of the year 2,564,715 1,878,064
5. Unrealised revenue reserve
Balance at beginning of the year 386,515 267,313
Transfer from statement of financial performance 2,156,554 64,864
Transfer from donations reserve 0 54,338
2,543,069 386,515
Transfer to general fund 96,629 0
Donations reserve 289,886 0
Balance at end of the year 2,156,554 386,515

6. Taxation
Net income before donations 2,053,839 2,129,547
Add Imputation credits 154,841 70,319
Loss on realisation of passive investments 118,342
Unrealised foreign exchange gains 404,811 0
Non deductible expenditure 0 14,690
2,731,833 2,214,136
Deduct Unrealised loss on debt instruments 678,697 0
Capital gain on realisation of passive investments 504,624 0
Distributed as beneficiaries income to Trust Bank South Canterbury Community Trust Charities Ltd
1,079,297
2,001,048
Taxable income 469,215 213,088
Tax at 33% 154,841 70,319
Less tax credits 155,200 109,660
359 39,341
Prior year refund due 66,708 27,367
Tax refund due 67,067 66,708
7. Goods and services tax
The trust is not registered for goods and services Ttax purposes. Accordingly these financial statements are stated on a G.S.T. inclusive basis.
8. Donations approved not yet paid
Approved donations not yet paid out include:
2000 1999
S.C. Dare Association 0 2,000
Ashburton Highland & National Dancing Association 300 0
S.C. Museum Development Trust 0 250,000
Mensline S.C. 0 1,000
Task Force Green Community Employment Initiative 3,740 5,060
Temuka/Geraldine A & P Assn 2,000 2,000
Ashburton Domain Oval Pavilion 40,000 10,000
St Andrew's Presbyterian Church (Ashburton) 1,000 1,000
Ashburton Senior Centre Trust Inc 30,000 0
Ashburton Youth Steering Committee 5,000 5,000
K88 Trust Inc 35,000 0
Ashburton Athletics Club 1,000 0
Albury Ice Hockey Association 6,000 0
SC Aviation Heritage Centre 2,000 0
Temuka Community Care 4,700 0
Farmers Irrigation Management Group Trust 12,500 0
Starship Foundation 20,000 0
Sport South Canterbury 11,900 0
Sport Mid Canterbury 6,600 0
Sound Shell Roof Cover project 10,000 10,000
South Rangitata Reserve 0 500
191,740 286,560
9. Capital commitments
There were no capital commitments (1999 Nil).
10. Contingent liabilities
The trust is committed to providing $750,000 over three years to the Ashburton Acquatic Park Trust contingent upon certain conditions being met.
The trust has agreed to set aside $1,000,000 in a technology fund which will be distributed on application by secondary and high schools to improve the standard of technology in the region's schools.
11. Advances
The trust made an advance to the Aorangi Park Trust. The balance outstanding at balance date was $160,000.
12. 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
Forty-eight percent of the net assets of the trust are represented by debt investments and current account balances with WestpacTrust and through managed funds. 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:
2000 1999
Debtors 587,125 66,708
Advances 160,000 200,000
Interest accrued 186,431 345,490
New Zealand shares 0 3,877,112
New Zealand property shares 0 1,150,815
Australian property shares 0 1,272,709
Australian shares 0 1,115,500
Managed fund equities 19,091,263 0
Managed fund property 796,447 0
20,754,199 8,028,334
Currency risk
The trust is party, through its managed funds, to financial instruments with off balance sheet risk to reduce exposure to fluctuations in foreign currency exchange rates. Forward exchange contracts are entered into to hedge foreign currency transactions.
The trust is also party, through its managed funds, to financial instruments with off balance sheet risk to reduce exposure to fluctuations in foreign currency interest rates. Futures contracts are entered into to hedge foreign currency fixed interest transactions.
Interest rate risk
The following investments of the trust are sensitive to changes in interest rate: Bank call accounts and term deposits, and various managed fund investments.
Audit Report
To the readers of the financial report of The Community Trust of Mid and South Canterbury 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 2000. The information is stated in accordance with the accounting policies.
Trustees responsibilities
The 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 2000 and of the results of operations for the year ended 31 March 2000.
Auditor's responsibilities
It is our responsibility to express an independent opinion on the financial report 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 report. It also includes assessing:
o the significant estimates and judgements made by the trustees in the preparation of the financial report; and
o 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 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 to 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 interest in the trust.
In forming our unqualified audit opinion, we have placed reliance upon values supplied by the New Zealand Guardian Trust Company Limited, in respect of the Community Trust of Mid and South Canterbury's Investment Portfolio. Specifically values published in the NZGT's Financial Statements to 31 March 2000 for:
a) The value of investments taken over by NZGT at 29 April 1999.
b) The value of investment income earned and accrued from 29 April 1999 to 31 March 2000.
c) The value of investments held by NZGT as Fund Manager for the Community Trust of Mid and South Canterbury as at
31 March 2000. The Financial Statements of NZGT to 31 March 2000 have been subject to an internal controls audit by PricewaterhouseCoopers. Their unqualified audit opinion was issued on 3 August 2000.
Unqualified opinion
We have obtained all the information and explanations we have required.
In our opinion:
o proper accounting records have been kept by the trust as far as appears from our examination of those records: and
o the financial report
- complies with generally accepted accounting practice;
- gives a true and fair view of the financial position of trust as at 31 March 2000 and the results of its operations for the year ended on that date.
Our audit was completed on 9 August 2000 and our unqualified opinion is expressed as at that date.
MARTIN WAKEFIELD, Auditor, Timaru.