Consolidated Statement of Financial Performance for the Year Ended 31 March 2001
2001 2000
Note $ $
Total investment income 1 5,274,832 15,190,681
Total expenditure 2 1,513,924 1,695,953
Net surplus before taxation 3,760,908 13,494,728
Taxation 17 - -
Net surplus after taxation 3,760,908 13,494,728
Share of income/(deficit) of Invest South Limited 8 (28,235) 35,808
Net surplus for the year before distribution 3,732,673 13,530,536
Transfer to capital maintenance reserve (5,058,343) (3,034,099)
(1,325,670) 10,496,437
Donations to tax approved entities (8,152,442) (9,039,544)
Net deficit transferred from grants maintenance reserve (9,478,112) 1,456,893
Consolidated Statement of Movements in Trust Funds for the Year Ended 31 March 2001
2001 2000
Note $ $
Trust capital at beginning of year 185,368,175 181,468,346
Less grants paid from capital 4B (765,976) (591,163)
Net deficit for the year transferred from grants maintenance reserve 4 (9,478,112) 1,456,893
Increase in capital maintenance reserve 3 5,058,343 3,034,099
Trust capital at end of year 180,182,430 185,368,175
Consolidated Statement of Financial Position as at 31 March 2001
2001 2000
Note $ $
Funds employed:
Trust capital 4B 158,460,000 158,460,000
Capital maintenance reserve 3 11,137,680 6,845,313
Grants maintenance reserve 4 10,584,750 20,062,862
Total capital and reserves 180,182,430 185,368,175
Liabilities-
Current liabilities:
Accounts payable 171,928 285,844
Grants committed but not paid 7,813,767 9,885,821
Total liabilities 7,985,695 10,171,665
Total capital and liabilities 188,168,125 195,539,840
Assets-
Current assets:
WestpacTrust cheque account 3,603 9,645
Accounts receivable and interest accrued 56,873 19,772
Total current assets 60,476 29,417
Non current assets:
Fixed assets 10 1,111,331 1,117,374
Investment assets:
WestpacTrust call account - 31,553
Trading bank deposits - 8,000,000
Managed funds:
Armstrong Jones 11 47,966,701 46,919,884
Morgan Stanley 11 - 36,788,589
AMP Asset Management 11 83,611,564 78,200,627
State Street Global Advisors 11 52,200,850 21,164,934
Loans 12 713,508 755,532
Invest South Limited 8 2,503,695 2,531,930
Total non current assets 188,107,649 195,510,423
Total assets 188,168,125 195,539,840
Consolidated Statement of Cash Flows as at 31 March 2001
2001 2000
Note $ $
Cash flows from operating activities-
Cash was provided from/(applied to):
Interest and dividends 5,202,074 15,207,198
Administration expenses (1,560,369) (1,774,640)
Grants to the community (10,950,501) (8,592,245)
Net cash in/(out) flow from operating activities 13 (7,308,796) 4,840,313
Cash flows from investing activities-
Cash was provided from/(applied to):
Investments 7,290,611 (5,893,820)
Fixed assets (61,434) (21,599)
Loans 42,024 (339,992)
Net cash in/(out) from investing activities 7,271,201 (6,255,411)
Net increase/(decrease) in cash held (37,595) (1,415,098)
Add cash at beginning of the year 41,198 1,456,296
Total cash balance at end of year 3,603 41,198
Statement of Significant Accounting Policies for the Year Ended 31 March 2001
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 trust's 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 Limited 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 sacrifice assets in the future and those sacrifices 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 Sevices Tax
The group is not registered for Goods and Services Tax. The financial statements are prepared using G.S.T. 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.
Notes to the Financial Statements
1. Investment Income
2001 1999
Note $ $
Dividends and distributions 6,729,244 2,699,605
Interest 7,415,270 4,451,145
Change in value of investments (8,869,682) 8,039,931
5,274,832 15,190,681
2. Expenditure
2001 2000
$ $
Audit fees 6 5,963 6,189
Communications 25,503 21,095
Conference costs 18,531 7,045
Depreciation 82,848 84,356
Loss/(gain) on disposal of fixed assets (4,121) -
Fund manager fees 582,712 893,697
General expenses 45,716 33,435
Insurance 11,019 10,420
Occupancy costs 14,765 17,308
Office expenses 21,590 20,995
Professional fees 5 285,593 168,048
Promotion, reporting and compliance expenses 65,780 68,913
Salaries and staff costs 215,939 232,990
Trustees' fees 7 119,940 109,190
Vehicle expenses 22,146 22,272
1,513,924 1,695,953
3. Capital Maintenance Reserve
2001 2000
$ $
Opening balance of capital maintenance reserve 6,845,313 4,402,377
Transfer from statement of financial performance 5,058,343 3,034,099
Transfer to capital reserve (765,976) (591,163)
11,137,680 6,845,313
4. Grants Maintenance Reserve
2001 2000
$ $
Opening balance of grants maintenance reserve 20,062,862 18,605,969
Transfer from statement of financial performance (9,478,112) 1,456,893
10,584,750 20,062,862
4B. Trust Capital
2001 2000
$ $
Opening balance of trust capital 158,460,000 158,460,000
Transfer from capital maintenance reserve 765,976 591,163
Less grants paid from capital (765,976) (591,163)
158,460,000 158,460,000
5. Professional Fees
2001 2000
$ $
Financial/taxation advisory 209,779 128,937
Legal 16,999 16,687
Other 58,815 22,424
285,593 168,048
6. Auditor's Remuneration
During the year the following amounts were paid to Ward Wilson, the group's auditors:
2001 2000
$ $
For audit work 5,963 6,189
For other services 2,216 -
8,179 6,189
7. Trustees' Fees
Meeting fees and honorariums were paid to trustees as follows:
Meetings Fees Fees
attended 2001 2000
$ $
C. S. Ballantyne 42 28,809 24,690
W. A. Cambridge 39 14,980 13,830
F. G. Cardno 25 9,950 8,520
P. Duffy 26 10,260 9,130
G. A. Farry (retired September 1999) - - 3,120
J. J. Grant (retired November 2000) 12 4,860 6,120
C. A. McCulloch (retired September 1999) - - 3,640
G. M. Neave (retired November 2000) 11 4,960 9,580
D. J. Stronach (retired November 2000) 11 4,960 9,320
S. G. Palmer 30 11,190 11,320
A. R. McDonald (appointed September 1999) 17 7,570 5,580
J. D. Frampton (appointed September 1999) 24 9,530 4,340
A. A. Broad (appointed November 2000) 10 4,150 -
T. W. Harpur (appointed November 2000) 12 4,570 -
N. J. Wyeth (appointed November 2000) 10 4,150 -
119,939 109,190
8. Investments in Associates
Invest South Limited is a joint venture company, owned 50% each by the group and SBS. Invest South Limited is in the business of investing, principally by way of equity investment, in businesses in the Southland region. Invest South Limited's balance date is 31 March.
The group's investment in Invest South Limited comprises:
2001 2000
$ $
Opening value of investment 2,531,930 1,246,122
Share of operating surplus/(deficit) (28,235) 35,808
Capital called up - 1,250,000
Equity accounted value of investment 2,503,695 2,531,930
The trustees resolved prior to balance date to invest additional capital in Invest South Limited, up to a maximum of $5,000,000, to increase the group's equity holding in Invest South Limited to 75%. As at balance date, this additional capital had not yet been invested.
9. Grants Approved
2001 2000
$ $
Grants approved this year 9,021,189 9,662,348
Less prior year's grants cancelled (102,771) (31,641)
Net grants approved 8,918,418 9,630,707
10. Fixed Assets
Cost Accum depn 2001 value 2000 value
$ $ $ $
Land 457,419 - 457,419 457,419
Buildings 523,063 63,680 459,383 481,242
Office equipment 120,533 87,044 33,489 36,618
Furniture and fittings 145,233 57,125 88,108 106,214
Motor vehicles 110,666 37,734 72,932 35,881
Totals 1,356,914 245,583 1,111,331 1,117,374
11. 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 Invest South Limited. Market values and asset allocations of these investments as at balance date were as follows:
State Street Invest Total Total
Armstrong Global South 2001 2000
AMP Jones Advisors Ltd value value
(NZ$m) (NZ$m) (NZ$m) (NZ$m) (NZ$m) (NZ$m)
NZ equities 8.41 2.50 10.91 13.10
Overseas equities 52.21 52.21 57.95
NZ fixed interest 27.36 27.36 55.81
Overseas fixed interest 30.53 30.53 -
Cash 25.72 39.56 65.28 58.75
Totals 83.61 47.97 52.21 2.50 186.29 185.61
Exposure to currency, interest rate and credit risk arises in the normal course of the fund managers' management of the group's investments. 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.
12. Loans
Loan balances outstanding as at 31 March were as follows:
2001 2000
$ $
Troopers Memorial Corner Charitable Trust 195,000 -
Topoclimate South Trust 428,525 693,333
Southland Museum and Art Gallery 48,492 62,199
Ringa Ringa Heights Golf Club 39,000 -
Otatara Community Church 2,490 -
713,508 755,532
Each loan is repayable upon demand. All loans are interest free, with the exception of the loan to Topoclimate South Trust, which attracts interest at the 90 Day Bank Bill rate, plus a margin of 2%.
13. Reconciliation with Operating Surplus
2001 2000
$ $
Net surplus before distribution 3,732,673 13,530,536
Less grants (8,918,418) (9,630,707)
(5,185,745) 3,899,829
Add/(less) movement in working capital:
Increase/(decrease) in liabilities (2,185,970) 851,429
(Increase)/decrease in accounts receivable (37,101) 40,507
(2,223,071) 891,936
Add/(less) movement in items classified as investing/financing:
Asset purchases (11,250) 20,886
(11,250) 20,886
Add/(less) movement in non-cash items:
Revaluation of investments 32,543 (56,654)
Depreciation 78,727 84,316
111,270 27,662
Net cash provided by operating activities (7,308,796) 4,840,313
14. 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, from time to time, 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 four 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 its investment allocation and placement 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.
15. Capital Commitments
Commitments of $5,452,390 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. Specific commitments are as follows:
2001 2000
$ $
Southern Institute of Technology 3,452,390 -
Southland Outdoor Stadium Trust 2,000,000 -
Southland Indoor Stadium Trust - 1,000,000
Topoclimate South Charitable Trust - 453,333
5,452,390 1,453,333
The years in which these commitments fall due are as follows:
Year ending 31 March 2001 - 1,453,333
Year ending 31 March 2002 2,774,131 -
Year ending 31 March 2003 1,839,131 -
Year ending 31 March 2004 839,128 -
5,452,390 1,453,333
16. Related Party Transactions
During the year, the group purchased legal services from Preston Russell Law to the value of $5,248.11. One of the group's trustees, Warwick Cambridge, is a partner of Preston Russell Law.
17. Tax Calculation
2001 2000
$ $
Net surplus before taxation as per statement of financial performance 3,732,673 13,530,536
Less Charitable business exemption 1,956,550 1,250,015
Dividend income on black-list 165,264 -
Tax refund included in income 43,635 -
Realised gains loss on black-list 2,303,920 -
4,469,369 1,250,015
(736,696) 12,280,521
Add FIF income 2,334,720 -
Unrealised loss on black-list 134,464 -
Unrealised loss on NZ equities 986,804 (180,802)
Unrealised loss on grey equities 11,388,610 (1,033,505)
Reversal of unrealised loss on currency hedging (31/03/00) 218,175 (218,175)
Non deductible expenditure 486,949 409,584
Imputation credits received 98,510 433,487
NRWT credits received 57,535 128,621
RWT credits received - 10,604
15,705,767 (450,186)
Total taxable income 14,969,071 11,830,335
Less Allocation of beneficiaries' income to the charitable company (11,500,000) (10,500,000)
Allocation of beneficiaries' income to tax exempt entities (2,351,805) (95,000)
(13,851,805) (10,595,000)
Total trustees' income 1,117,266 1,235,335
Less Tax losses brought forward (1,178,263) (710,242)
Assessable income for tax purposes (60,997) 525,093
Taxation at 33% - 173,281
Less Imputation credits received 98,510 (433,487)
Foreign tax credits on overseas dividends 57,535 (128,621)
Resident withholding tax - (10,604)
Taxation payable/refundable due - (399,431)
Made up of:
Resident withholding tax refunded - (10,604)
Excess imputation credits (98,510) (388,827)
(98,510) (399,431)
Excess imputation credits converted to loss to carry forward (298,515) (1,178,263)
Current year loss to carry forward (60,997) -
Total loss to carry forward (359,512) (1,178,263)
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 2001. This information is stated in accordance with the accounting policies set.
Trustees' Responsibilities
The trustees are responsible for the preparation of financial statements which gives a true and fair view of the financial position of the trust as at 31 March 2001 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 trust's 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; and
? give a true and fair view of the financial position of the trust as at 31 March 2001 and the results of its operations and cash flows for the year ended on that date.
Our audit was completed on 30 July 2001 and our unqualified opinion is expressed as at that date.
WARD WILSON, Invercargill.