Annual Report and Consolidated Financial Statements for the Year Ended 31 March 2001
Trust Particulars
The Community Trust of Mid & 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 B.COM., C.A. (RETIRED), Ms R. A. Carruthers LL.B., Mr L. K. Cooney LL.B. NOT PUB., Mr S. J. Dorman LL.B., Mr A. R. McKay, Mr T. J. McIntyre B.AGRI., DIP. TCH., Mrs K. Mattingley CERT.SOC.WK., DIP.GRAD (OTAGO) M.N.Z.A.S.W., Mrs M. B. Ross B.A., 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.
Chairperson's Report
I am pleased to report on the stewardship of The Community Trust of Mid & South Canterbury Inc. for the year ended
31 March 2001.
Financial Results
The net investment returns on our managed funds were a most disappointing $565,124. After making provision for the adminstrative costs of the trust, the net profit was $386,569.
In the previous financial year, our investment returns were excellent, but during the first part of 2001, the international equity markets experienced a major downturn, impacting on the investment performance of the trust.
It must be accepted that the trust is a large domestic and international investor and, as such, will be subject to the vagaries of the market like any other commercial investor.
The trust is comfortable with its active investment policy, a policy which spreads investments between a number of investment classes, both domestically and internationally.
The trust's objective is to generate the best return for a low level of risk, and it accepts that in the long term, some bad years will be experienced.
The trust has been prudent by having a reserving policy to cushion the impact of inflation and fluctuations in investment market returns. However, it is years such as the one we have just experienced that re-emphasises the need for adequate reserves.
The trust devotes a considerable amount of its time to the investment process, and at all times it is in direct consultation with its professional funds manager and its independent investment consultant to monitor investment results, to ensure its current investment policy is still compatible with the trust's objectives and to make amendments considered necessary.
Donations
The trust's policy is to support district organisations carrying out charitable, cultural, philanthropic and recreation work of benefit to Mid and South Canterbury districts. Much time is spent on reviewing the donation criteria to ensure that the changing needs of the community are catered for and that profit is distributed on a fair and reasonable basis.
As a "one-off" millennium project, the trust set aside $1 million to enable new technology to be introduced into the district's secondary schools. An experienced manager was appointed to manage this project and to ensure that the strict criteria laid down by the trust was adhered to before any funds were released.
The project was enthusiastically received by school principals, all progress reports stating that the new technology introduced will enable pupils to keep up with their counterparts in other regions.
The trustees are accountable to the community they serve, and as part of this responsibility, the trust is now auditing donations made to selected applicants to ensure that they are used for the project applied for, and providing the opportunity for them to comment on the criteria applied by the trust, and to suggest where improvements can be made.
This accountability process is further enhanced by the trust holding a number of meetings in districts outside Timaru, meeting with selected district organisations, and inspecting projects which have been part-funded by the trust. I liken this to a partnership with the community which can only reinforce the good work being carried out by a large number of voluntary organisations.
Community House
The previous initiative of the trust in leasing the old Rural Bank Building and renaming it as Community House has proved to be successful.
The interior was renovated to provide the official home of the trust, and to create smaller offices for leasing to a number of community charitable and non-profit organisations. At present, all offices are fully tenanted.
Not only has this resulted in the valuable networking of organisations housed in the building, but the excellent committee room facilities are being used extensively by a wide variety of bodies for meetings and seminars.
Strategic Planning
During the year, the trust completed its first strategic plan which will enable it to focus on its most important functions, to continually review these functions, and to ensure that its administration is flexible enough to cope with the changing needs of the community.
Year of the Volunteer
A number of district charitable and non-profit organisations struggle with modern accounting and secretarial techniques, and the never-ending "red tape" when applying for government and other financial assistance.
The trust decided that the best way to recognise the Year of The Volunteer was to assist those organisations in upgrading their skills in these areas, and it intends to sponsor a number of seminars at which professionals will provide them with knowledge necessary to achieve this objective.
In the near future, the trust will be advertising these seminars, inviting organisations to register their interest.
Communication
The trust is now in the process of developing its own web site which will enable a wider section of the community to access all the information it requires about the services provided by the trust and details of the donation process.
Government Policies
The trust carefully monitors new policies launched by central government to ensure that the independence of community trusts is maintained and to be in a position to make submissions in support of this.
A close liaison is maintained with other community trusts, which is further strengthened by the activities of an informed chairpersons' group.
Trustee Appointments
During the year, Mrs J. J. Rayne, a valued and long-serving trustee, completed her term of office, being replaced by Mr Simon Dorman of Timaru.
Mrs K. Mattingley was appointed to fill a vacancy which arose during the previous year. The experience of the two new trustees will be of immense value to the trust.
The decision of the Minister of Finance to reappoint long-standing trustee Mr L. K. Cooney for a shortened two-year term was welcomed by trustees.
Appreciation
The trustees of The Community Trust of Mid & South Canterbury make up a committed group of people working with the common objective to enhance the region they serve and to support the multitude of district organisations working for the good of the community. The year under review has been difficult and arduous, yet rewarding, and I express my sincere appreciation for the time and professionalism they bring to the board table.
I record my special thanks to the staff of the trust in coping admirably with the complexities of a busy year.
We all hope that the new year will bring added wealth to the community.
P. F. MCILRAITH, Chairperson.
Date: 27 August 2001.
Consolidated Statement of Financial Performance for the Year Ended 31 March 2001
2001 2000
$ $
Income:
Interest: Managed funds 1,208,010 885,054
Interest: Other 52,124 196,292
Dividends: Managed funds 284,948 455,415
Dividends: Other - 51,638
Capital gains - 504,624
Capital gains: Managed funds 2,356,194 333,321
Sundry income - 21,481
Total income 3,901,276 2,447,825

Less expenses-
Direct investment expenditure:
Management fees 171,674 109,367
Consultancy fees 16,193 18,495
Loss on redemption of government stock - 1,434
Loss on sale of investments - 118,342
Total direct investment expenditure 187,867 247,638
3,713,409 2,200,187
Less operating expenditure:
Advertising 8,024 4,236
Auditor's fees 4,050 4,050
Interest 16 -
Legal fees 6,238 2,252
Postage, tolls and fax 2,381 1,774
Printing and stationery 9,154 12,023
Salary and wages 73,586 57,894
Professional fees:
- Accountancy and advisory 10,850 10,285
- Strategic plan 2,343 -
- Taxation 13,685 -
Sundry administration expenses 14,905 11,695
Trustees:
- Meeting expenses 42,271 25,596
- Travel 10,227 5,466
- Honoraria 13,428 11,077
Trustees insurance 3,375 -
Total operating expenditure 214,533 146,348
Net income 3,498,876 2,053,839
Unrealised capital gains/(losses): Managed funds (3,112,308) 2,156,554
Surplus transferred to the trust fund 386,568 4,210,393
Consolidated Statement of Movements in Equity for the Year Ended 31 March 2001
2001 2000
$ $
Opening equity 38,857,463 35,790,684
Net surplus/(loss) for year 386,568 4,210,393
Plus donations returned 1,700 -
Less donations approved (2,365,011) (1,143,614)
Less prior period tax adjustment (59,566) -
Closing equity 38,857,463 38,857,463
Consolidated Statement of Financial Position as at 31 March 2001
Note 2001 2000
$ $
Trust capital:
General fund 3 32,087,148 32,087,148
Inflation reserve 4 2,539,687 1,498,550
Uncommitted surplus 5 2,194,319 5,271,765
36,821,154 38,857,463
Represented by-
Current assets:
Provision for tax 6 7,501 67,067
WestpacTrust:
- Subsidiary company account 98 22,383
- Current account 90,778 45,848
- Prime call account - 68,342
- Term deposits 784,929 957,312
Sundry debtors 17,445 520,058
Advances 11 120,000 160,000
Interest accrued 214,338 186,431
1,235,089 2,027,441
Less current liabilities:
Sundry creditors 20,974 583,164
Donations approved not yet paid 8 1,230,440 191,740
Total current liabilities 1,251,234 774,904
Working capital (16,145) 1,252,537
Add non current assets-
Investments - Managed funds debt 2 19,545,615 17,717,217
- Managed funds equity 2 17,291,684 19,887,709
Net assets 36,821,154 38,857,463
Signed on behalf of the board of trustees.
P. F. MCILRAITH, Chairperson.
C. E. BRAND, Trustee.
Date: 27 August 2001.
Consolidated Statement of Cash Flows for the Year Ended 31 March 2001
2001 2000
$ $
Cash flows from operating activities-
Cash was provided from:
Interest on deposits 41,430 335,662
Dividends - 51,638
Sundry - 21,481
41,430 408,781
Cash was applied to:
Suppliers of goods and services (231,601) (162,286)
Donations paid (1,262,700) (1,198,434)
(1,494,301) (1,360,720)
Net cash flows from operating activities (1,452,871) (951,939)
Cash flows from investing activities-
Cash was provided from:
Redemption of investments - 20,615,983
Withdrawal of managed funds 1,234,791 935,632
1,234,791 21,551,615
Cash was applied to:
Community House Trust - (11,239)
Managed funds - (34,922,352)
- (34,933,591)
Net cash flows from investing activities 1,169,791 (13,381,976)
Increase/(decrease) in cash held (218,080) (14,333,915)
Add opening cash 1 April 2000 1,093,885 15,427,800
Cash as at 31 March 2001 875,805 1,093,885
Comprised of-
WestpacTrust:
Subsidiary company account 98 22,383
Current account 90,778 45,848
Prime call account - 68,342
Term deposit 784,929 957,312
875,805 1,093,885
Reconciliation of Net Surplus and Net Cash Flows From Operating Activities
2001 2000
$ $
Net surplus transferred to equity 386,568 4,210,393
Plus donations returned 1,700 -
Less donations approved (2,365,011) 1,198,434
Less prior period tax adjustment - -
(2,036,309) 3,011,959
Plus/(less) non cash items:
Loss on transfer to managed funds - 119,776
Managed funds expenses 171,731 109,424
Unrealised capital losses/(gains) on investments 3,112,308 (2,156,554)
Managed fund revenue (3,849,152) (1,673,790)
Gains on transfer to managed funds - (504,629)
Transfer from Aorangi Park Trust 40,000 -
(2,561,422) (1,093,814)
Movements in working capital:
Increase/(decrease) in donations approved not yet paid 1,038,700 -
Increase/(decrease) in creditors 9,744 2,500
(Increase)/decrease in accrued interest (10,695) 139,734
(Increase)/decrease in tax refund due 59,566 (359)
(Increase)/decrease in sundry debtors 11,236 -
Net cashflow from operating activities (1,452,871) 951,939
Notes to the Consolidated Financial Statements for the Year Ended 31 March 2001
1. Statement of Accounting Policies
Reporting Entity
The Community Trust of Mid & 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:
? 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.
? 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 consolidated statement of financial performance when it is received.
(b) Donations
Donations, special projects and community loans are accounted for when 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 consolidated statement of financial performance.
(d) Trust Capital
Trust capital is made up of:
(i) Capital fund - which records initial capital fund (being the realised value of trust bank shares).
(ii) Inflation reserve - this is increased each year by applying the consumer price index to the sum of the initial capital fund and opening inflation reserve. The amount is to be allocated from trust profit on an annual basis.
(iii) Uncommitted surplus - this is the balance of the profit.
(e) Basis of Consolidation
The Community Trust of Mid and South Canterbury Inc. and its subsidiary the Trust Bank South Canterbury Community Trust Charities Limited have been consolidated using the purchase method of consolidation.
Changes in Accounting Policies
(a) The trustees have changed its policy with respect to the capital and reserves of the trust. The change in policy, as described in Note 1 (d) above, will enable initial capital to be preserved in real terms and a consistent maintainable annual donations level.
(b) There have been no other changes in accounting policy.
2. Investments 2001 2000
$ $
Managed funds - debt 19,545,615 17,717,217
Managed funds - equity 17,291,684 19,887,709
36,837,299 37,604,926
3. Capital Fund
Balance at beginning of the year 32,087,148 32,087,148
Transfers - -
Balance at end of the year 32,087,148 32,087,148
4. Inflation Reserve
Balance at beginning of the year 1,498,550 1,002,210
Plus transfer from uncommitted surplus 1,041,137 496,340
2,539,687 1,498,550
5. Uncommitted Surplus
Balance at beginning of the year 5,271,765 2,701,326
Surplus for the year 386,568 4,210,393
5,658,333 6,911,719
Plus donations returned 1,700 -
Less donations approved (2,365,011) (1,143,614)
Less prior period tax adjustment (59,566) -
Less transfer to inflation reserve (1,041,137) (496,340)
2,194,319 5,271,765
6. Taxation
Net income before donations 3,498,877 2,053,839
Add Taxation credits 96,951 160,405
Loss on realisation of passive investments - 40,724
Non deductible expenditure 75,086 52,732
Unrealised gains on blacklist equities - 344,481
Unrealised foreign exchange gains - 404,811
3,670,914 3,056,993
Deduct Unrealised loss on debt instruments 22,321 678,697
Charitable company transactions 447,191 952,324
Non taxable capital gain - 21,481
Unrealised loss on black list equities 237,695 -
Capital gain on realisation of passive investments - 474,106
Unrealised FX loss 458,303 -
Distributed as beneficiaries' income 2,211,613 444,279
Taxable income 293,791 408,106
Tax at 33% 96,951 160,415
Less tax credits 96,951 160,774
- 359
Prior year adjustment 59,566 -
Prior year refund due 67,067 66,708
Tax refund due 7,501 67,067
7. Goods and Services Tax
The trust is not registered for Goods and Services Tax 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:
2001 2000
$ $
Ashburton Highland & National Dancing Association 300 300
Task Force Green Community Employment Initiative 3,740 3,740
Temuka/Geraldine A & P Assn. - 2,000
Ashburton Domain Oval Pavilion 40,000 40,000
St Andrew's Presbyterian Church (Ashburton) 1,000 1,000
Ashburton Senior Centre Trust Inc. - 30,000
Ashburton Youth Steering Committee 5,000 5,000
K88 Trust Inc. - 35,000
Ashburton Athletics Club - 1,000
Albury Ice Hockey Association - 6,000
SC Aviation Heritage Centre 2,000 2,000
Temuka Community Care - 4,700
Farmers Irrigation Management Group Trust - 12,500
Starship Foundation 20,000 20,000
Sport South Canterbury - 11,900
Sport Mid Canterbury - 6,600
Sound Shell Roof Cover Project 10,000 10,000
Ashburton College STAR Programme 7,500 -
Ashburton Safer Community Council 8,000 -
Ashburton Steam and Model Engineering Club 2,400 -
Mid Canterbury Cricket Assn Inc. 14,000 -
Mid Canterbury Netball Courts Upgrade Project 40,000 -
Fairlie Beautifying Society 10,000 -
Lake Tekapo Promotion Association 5,000 -
Lake Tekapo Squash Club 5,000 -
Pathways Trust 2,000 -
Te Puna Whaihua 1,000 -
Aoraki Polytechnic 4,000 -
Caroline House Inc. 10,000 -
IHC South Canterbury 1,500 -
Kodiak Wrestling Club 1,000 -
Sacred Heart Basilica Restoration Trust 15,000 -
SC Car Club 5,000 -
SC Cricket Development Trust 75,000 -
SC Heritage Trails Inc. 2,000 -
SC Sports Stadium Trust 100,000 -
Timaru Beautifying Society Assn. 20,000 -
Timaru Bowling Club Inc. 10,000 -
Project Waimate 25,000 -
St. Augustines Anglican Church 25,000 -
Waimate Community Vehicle Trust 10,000 -
Ashburton Aquatic Park 750,000 -
1,230,440 191,740
9. Capital Commitments
There were no capital commitments (2000 - $Nil).
10. Contingent Liabilities
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.
To date $174,649 (2000 - $Nil) has been paid out, the balance of $825,351 (2000 - $1,000,000) remains as contingent liability.
11. Advances
The trust made an advance to the Aorangi Park Trust. The balance outstanding at balance date was $120,000 (2000
- $160,000). The advance is reduced each year by a donation from the trust of $40,000. The final donation will be made during the year ended 31 March 2004.
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
Fifty-five per cent 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:
2001 2000
$ $
Debtors 24,946 587,125
Advances 120,000 160,000
Interest accrued 214,338 186,431
Managed fund equities 17,291,684 19,887,709
17,650,968 20,821,265
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 & 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 2001. 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 2001 and of the results of operations for the year ended 31 March 2001.
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:
? the significant estimates and judgements made by the trustees in the preparation of the financial report; and
? 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 in 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 & South Canterbury's investment portfolio. Specifically, values published in the NZGT's financial statements to 31 March 2001 for:
(a) The value of investment income earned and accrued from 1 April 2000 to 31 March 2001.
(b) The value of investments held by NZGT as Fund Manager for The Community Trust of Mid & South Canterbury as at 31 March 2001. The financial statements of NZGT to 31 March 2001 have been subject to an internal controls audit by PricewaterhouseCoopers. Their unqualified audit opinions were issued on 7 February 2001 and 30 June 2001.
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 as far as appears from our examination of those records: and
? the financial report
- complies with generally accepted accounting practice; and
- gives a true and fair view of the financial position of trust as at 31 March 2001 and the results of its operations for the year ended on that date.
Our audit was completed on 16 August 2001 and our unqualified opinion is expressed as at that date.
MARTIN WAKEFIELD, Auditor, Timaru.