Notice Type
General Section
Notice Title

The Community Trust of Southland

Financial Statements for the Year Ended 31 March 2000
The trustees are pleased to present the financial statements of the Community Trust of Southland for the year ended 31 March 2000.
Dated this 21st day of August 2000.
For and on behalf of the Board of Trustees:
C. S. BALLANTYNE, Chairman.
W. A. CAMBRIDGE, Trustee.
Consolidated Statement of Financial Performance for the Year Ended 31 March 2000
2000 1999
Note $ $
Total investment income 1 15,190,681 11,378,895
Total expenditure 2 1,695,953 1,672,968
Net surplus before taxation 13,494,728 9,705,927
Taxation 15 - -
Net surplus after taxation 13,494,728 9,705,927
Share of income of Invest South Limited 7 35,808 16,202
Net surplus for the year before distribution 13,530,536 9,722,129
Transfer to capital maintenance reserve (3,034,099) (5,291,823)
10,496,437 4,430,306
Donations to tax approved entities (9,039,544) (8,681,382)
Net surplus transferred to grants maintenance reserve 1,456,893 (4,251,076)
Consolidated Statement of Movements in Trust Funds for the Year Ended 31 March 2000
2000 1999
Note $ $

Trust capital at beginning of year 181,468,346 181,317,045
Less grants paid from capital 4B (591,163) (889,446)
Net surplus for the year transferred to grants maintenance reserve 4 1,456,893 (4,251,076)
Increase in capital maintenance reserve 3 3,034,099 5,291,823
Trust capital at end of year 185,368,175 181,468,346
Consolidated Statement of Financial Position as at 31 March 2000
2000 1999
Note $ $
Funds employed-
Trust capital 4B 158,460,000 158,460,000
Capital maintenance reserve 6,845,313 4,402,377
Grants maintenance reserve 4 20,062,862 18,605,969
Total Capital and Reserves 15 185,368,175 181,468,346
Liabilities-
Current Liabilities
Accounts payable 285,844 448,887
Grants committed but not paid 9,885,821 8,871,349
Total Liabilities 10,171,665 9,320,236
Total capital and liabilities 195,539,840 190,788,582
Assets
Current assets :
WestpacTrust cheque account 9,645 10,224
Accounts receivable and interest accrued 19,772 60,279
Total current assets 29,417 70,503
Non current assets
Fixed assets: 9 1,117,374 1,180,131
Investment assets
WestpacTrust call account 31,553 1,111,072
ASB call account - 335,000
Trading bank deposits 8,000,000 19,500,000
TeNZ fund 10 million units - 9,900,000
Managed funds - -
ANZ Funds Management 10 - 44,234,658
Armstrong Jones 10 46,919,884 44,801,626
Bankers Trust - 24,597,746
Morgan Stanley 10 36,788,589 43,396,184
AMP Asset Management 10 78,200,627 -
State Street Global Advisors 10 21,164,934 -
Loans 11 755,532 415,540
Invest South Limited 7 2,531,930 1,246,122
Total non current assets 195,510,423 190,718,079
Total assets 195,539,840 190,788,582
Consolidated Statement of Cash Flows as at 31 March 2000
2000 1999
Note $ $
Cash flows from operating activities
Cash was provided by (applied to):
Interest and dividends 115,207,198 9,050,591
Administration expenses (1,774,640) (1,332,611)
Grants to the community (8,592,245) (9,261,051)
Net cash flow from operating activities 12 4,840,313 (1,543,071)
Cash flows from investing activities
Cash was provided by (applied to):
Investments (5,893,820) 1,047,184
Fixed Assets (21,599) (186,193)
Loans (339,992) (415,540)
Net cash used in investing activities (6,255,411) 445,451
Net increase (decrease) in cash held (1,415,098) (1,097,620)
Add cash at beginning of the year 1,456,296 2,553,916
Total cash balance at end of year 41,198 1,456,296
Statement of Significant Accounting Policies for the Year Ended 31 March 2000
A. Basis of Preparation
The Community Trust of Southland was formed under the Trustee Banks Restructuring Act 1988 and is incorporated under the Charitable Trusts Act 1957. The financial statements presented are those for The Community Trust of Southland Group (the Group). The Group consists of The Community Trust of Southland (the Trust), its wholly owned subsidiary company Southland Community Trust Charities Limited and the trusts interests in associates.
The financial statements comply with the Financial Reporting Act 1993 and the Community Trusts Act 1999. They comprise statements of the following: significant accounting policies, financial performance, movements in trust funds, financial position, cash flows, as well as notes to these statements.
The financial statements are prepared on the basis of historical cost except that investment assets are stated at valuation.
B. Consolidation method
The financial statements of the Trust's wholly owned company Southland Community Trust Charities Ltd are included in the financial statements using the purchase method of consolidation.
C. Associates
Associates are entities in which the Group has significant influence, but not control over the operating and financial policies. The financial statements include the Group's share of the net surplus of associates on an equity accounted basis.
D. Trust capital
Following the sale of the Group's shares in Trust Bank New Zealand Limited in April 1996 for $158,460,000, the Trustees agreed that the value of the trust at that time should be maintained for the benefit of current and future generations living in the region. For this purpose, the Trustees agreed that $158,460,000 would be considered as the "Trust Capital" value of the Group and that this value would be maintained.
E. Capital maintenance reserve
The Capital Maintenance Reserve represents the additional amount necessary to preserve the real value of the Trust Capital allowing for inflation as measured by the Consumers Price Index (all groups) and payments of grants out of Capital.
F. Grants maintenance reserve
While the Trustees have adopted a long-term investment strategy, they accept that annual returns from investments are likely to fluctuate from year to year. In recognition of this, a grants maintenance reserve is maintained. In years when net income from investments is higher than the grant levels, surplus income will be transferred to this reserve. In years when there is insufficient income to sustain the level of grants, an appropriate amount will be transferred from the Grants Maintenance Reserve to income.
G. Basis of recognising components of the financial statements
The following general accounting policies are adopted:
Assets
A transaction results in an asset being recognised in the statement of financial position when it will probably give rise to ongoing benefits for the Group and those benefits can be measured with reliability.
Liabilities
A transaction results in a liability being recognised in the statement of financial position when it will probably give rise to the need for the Group to selldown assets in the future, and those selldowns can be measured with reliability.
Revenue
Revenue is recognised in the statement of financial performance when a transaction gives rise to an increase in the value of the Group's net assets, and that increase can be measured with reliability.
Expenses
An expense is recognised in the statement of financial performance when a transaction results in a decrease in the value of the Group's net assets, and that decrease can be measured with reliability.
Classification of assets and liabilities between current and non-current
An amount is classified as current when it is expected to be settled or extinguished within one year of the date of the financial statements. All other amounts are classified as non-current.
H. Fixed assets
Fixed assets are initially stated at cost and then depreciated on a straight line basis. The estimated useful lives of fixed assets are as follows:
Land indefinite
Buildings 30-40 years
Furniture and fittings 3-15 years
Office equipment 3-8 years
Motor vehicles 5-8 years
I. Investments
Investments are stated at market value and reports realised and unrealised gains or losses on holding these investments in the Statement of Financial Performance. These gains or losses are shown in the Statement of Financial Performance as income from revaluation of investments.
J. Accounts Receivable
Accounts receivable are stated at expected realisable value.
K. Grants
Grants are recognised when they are approved by the Trustees. Unpaid grants are recorded as a liability.
L. Goods and services tax
The Group is not registered for goods and services tax. The financial statements are prepared using GST inclusive accounting.
M. Income taxation
The Group 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 1994.
N. Changes in accounting policies
The accounting policies have been consistently applied by the group and are consistent with those of the previous year.
Some comparative information has been changed to conform with the presentation of information in the current year.
Notes to the Financial Statements
1. Investment Income
2000 1999
Note $ $
Dividends and distributions 2,699,605 4,204,641
Interest 4,451,145 4,619,395
Revaluation of investments 8,039,931 2,554,859
15,190,681 11,378,895
2. Expenditure
2000 1999
$ $
Audit fees 6,189 5,834
Communications 21,095 14,412
Conference costs 7,045 14,917
Depreciation 84,356 71,004
Fund manager fees 893,697 906,733
General expenses 43,855 52,429
Occupancy costs 17,308 18,330
Office expenses 20,995 20,016
Professional fees 5 168,048 152,784
Promotion, reporting and compliance expenses 68,913 63,022
Salaries and staff costs 232,990 214,220
Trustees' fees 6 109,190 124,345
Vehicle expenses 22,272 14,922
1,695,953 1,672,968
3. Capital maintenance reserve
2000 1999
$ $
Opening value of capital maintenance reserve 4,402,377 -
Transfer from statement of financial performance 3,034,099 5,291,823
Transfer to capital reserve (591,163) (889,446)
6,845,313 4,402,377
4. Grants maintenance reserve
2000 1999
$ $
Opening balance of grants maintenance reserve 18,605,969 22,857,045
Surplus from statement of financial performance 1,456,893 (4,251,076)
20,062,862 18,605,969
4b. Capital reserve
2000 1999
$ $
Opening balance of capital reserve 158,460,000 158,460,000
Transfer from capital maintenance reserve 591,163 889,446
Less Grants paid from capital (591,163) (889,446)
158,460,000 158,460,000
Notes to the Financial Statements
5. Professional fees
2000 1999
$ $
Financial/taxation advisory 128,937 83,241
Legal 16,687 23,560
Other 22,424 45,983
168,048 152,784
6. Trustees' fees
Meeting fees and honorariums were paid to trustees as follows:
Meetings
Attended 2000 1999
$ $
C. S. Ballantyne 41 24,690 28,144
W. A. Cambridge 36 13,830 14,650
F. G. Cardno 23 8,520 11,666
P. Duffy 23 9,130 10,312
G. A. Farry (retired September 1999) 8 3,120 6,496
J. J. Grant 12 6,120 6,886
C. A. McCulloch (retired September 1999) 11 3,640 11,620
B. J. Mackay (retired August 1998) - - 4,914
G. M. Neave 29 9,580 12,434
D. J. Stronach 24 9,320 11,323
S. G. Palmer (appointed August 1998) 32 11,320 5,900
A. R. McDonald (appointed September 1999) 13 5,580 0
J. D. Frampton (appointed September 1999) 10 4,340 0
109,190 124,345
7. Investments in associates
The total investment in Invest South Limited comprises:
2000 1999
$ $
Opening value of investment 1,246,122 1,229,920
Share of operating surplus 35,808 16,202
Capital called up 1,250,000 -
Equity accounted value of investment 2,531,930 1,246,122
8. Grants approved
2000 1999
$ $
Grants approved this year 9,662,348 9,885,045
Less prior year's grants cancelled (31,641) (314,217)
Net grants approved 9,630,707 9,570,828
9. Fixed assets
2000 1999
$ $
Grants approved this year 9,662,348 9,885,045

Cost Accum depn 2000 value 1999 value
Land 457,419 0 457,419 457,419
Buildings 523,063 41,821 481,242 488,833
Office 102,156 65,538 36,618 58,906
Furniture and Fittings 144,658 38,444 106,214 120,041
Motor vehicles 86,644 50,763 35,881 54,932
1,313,940 196,566 1,117,374 1,180,131
10. Investments managed by fund managers
The Group has funds invested with institutional investment managers (fund managers), AMP Asset Management, Armstrong Jones (NZ) Ltd, State Street Global Advisors and Morgan Stanley Dean Witter. Market values and asset allocations of these investments as at 31 March 2000 were as follows:
AMP Armstrong State Street Morgan Total Total
(NZ$m) Jones Global Stanley 2000 1999
(NZ$m) Advisors (NZ$m)
NZ Equities 10.56 10.56 33.10
Overseas Equities 21.16 36.79 57.95 61.34
NZ Fixed interest 55.81 55.81 40.47
Overseas Fixed interest 13.99
Cash 22.39 36.36 58.75 18.04
Total 78.2 46.92 21.16 36.79 183.07 166.94
Exposure to currency, interest rate and credit risk arises in the normal course of the fund managers' management of the Group's investment portfolio. A range of hedging policies are in place whereby the fund managers use derivative financial instruments as a means of managing exposure to fluctuations in foreign exchange rates and interest rates. While these financial instruments are subject to the risk of market rates changing subsequent to acquisition, such changes would generally be offset by opposite effects on the items being hedged.
11. Loans
Loan balances outstanding as at 31 March were as follows:
2000 1999
$ $
Southland Life Education Trust - 20,000
Topoclimate South Trust 693,333 320,037
Southland Museum and Art Gallery 62,199 75,503
755,532 415,540
Each loan is repayable upon demand. The loan to the Southland Museum and Art Gallery is interest free as is $453,333 of the $693,333 loan to Topoclimate South Trust. The balance, $240,000, attracts interest at the 90 Day Bank Bill rate, plus a margin of 2%.
12. Reconciliation with operating surplus
2000 1999
$ $
Net surplus 13,530,536 9,722,129
Less grants (9,630,707) (9,570,828)
3,899,829 151,301
Add/(less) movement in working capital
Increase (decrease) in liabilities 851,429 560,901
(Increase) decrease in accounts receivable 40,507 197,647
891,936 758,548
Add/(less) movement in items classified as investing/financing
Asset purchases 20,886 47,137
20,886 47,137
Add/(less) movement in non-cash items
Revaluation of investments (56,654) (2,571,061)
Depreciation 84,316 71,004
27,662 (2,500,057)

Net cash provided by operating activities 4,840,313 (1,543,071)
13. Financial instruments
General
The Group states its investments at balance date at estimated market value. The trustees consider that the fair value of the financial assets is identical to the value in the statement of financial position.
Concentration of credit risk
The Group has significant funds in trading bank deposits. The Group limits risk by spreading the deposits over several trading banks. The Group has not required collateral or other security to support its financial statements. The Group further limits risk through its policy of placing investment funds with separate fund managers, with each fund manager having an investment mandate which requires that they diversify their investments on the group's behalf. The Group has sought and obtained the advice of a professional financial adviser prior to making investment allocations and placing decisions.
Interest rate risk
The bank deposits are sensitive to changes in interest rates, as are a proportion of the funds managed by the fund managers and a portion of the loan to Topoclimate South Trust.
14. Capital commitments
Commitments of $1,453,333 exist for grants which will be distributed from either capital or future income sources in future years. These grants have not been recorded in either the statements of financial performance or financial position.
15. Taxation
2000 1999
$ $
Net surplus as per statement of financial performance 13,530,536 9,722,129
Less Charitable business exemption (1,250,015) (911,404)
Unrealised (gain)/loss on grey list equities (1,033,505) 2,411,197
Unrealised (loss)/gain on currency hedging (218,175) 0
Unrealised (gain)/loss on New Zealand equities (180,802) 68,485
(2,682,497) 1,568,278
Add Non deductible expenditure 409,584 391,430
Imputation credits received 433,487 494,665
RWT credits received 10,604 43,635
NRWT credits received 128,621 102,894
Total taxable income 11,830,335 12,323,031
Less Allocation of beneficiaries' income to the charitable company (10,500,000) (11,100,000)
Non-taxable equity accounting income - (16,202)
Allocation of beneficiaries' income to tax exempt entities (95,000) (106,284)
(10,595,000) (11,222,486)
Total Trustees' income 1,235,335 1,100,545
Less: Tax losses brought forward (710,242) -
Assessable income for tax purposes 525,093 1,100,545
Taxation at 33% 173,281 363,180
Less: Imputation credits received (433,487) (494,665)
Foreign tax credits on overseas dividends (128,621) (102,894)
Resident withholding tax (10,604) (43,635)
Taxation payable/refundable and excess inputation credits (399,431) (278,014)
Made up of:
Resident withholding tax refunded (10,604) (43,635)
Excess imputation credits (388,827) (234,379)
(399,431) (278,014)
Excess imputation credits converted to loss to carry forward (1,178,263) (710,242)
Total loss to carry forward (1,178,263) (710,242)
Audit Report
To the readers of the financial report of the Community Trust of Southland
We have audited the financial statements that provide information about the past financial performance of the trust and its financial position as at 31 March 2000. This information is stated in accordance with the accounting policies set.
Trustees' responsibilities
The trustees are responsible for the preparation of financial sytatements which gives a true and fair view of the financial position of the trust as at 31 March 2000 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 judgements made by the trustees in the preparation of the financial statements;
· whether the accounting policies are appropriate to the trustees' 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 obtain 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.
Partners and employees of our firm may deal with the trust on normal terms within the ordinary course of business with the trust. Our firm has no other interest in the trust.
Unqualified opinion
We have obtained all the information and explanations we have required.
In our opinion the financial statements:
· comply with generally accepted accounting practice;
· give a true and fair view of the financial position of the trust as at 31 March 2000 and the results of its operations and cash flows for the year ended on that date.
Our audit was completed on 21 August 2000 and our unqualified opinion is expressed as at that date.
WARD WILSON, Invercargill.