Annual Report and Consolidated Financial Statements for the Year Ended 31 March 2002
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 B.A. (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 G. J Geering, Q.S.O, 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 for the Year Ended 31 March 2002
It is my pleasure to again fulfil the community trust's statutory obligation to report on the financial accounts and operating activities of the trust for the year ended 31 March 2002.
The function of this trust is very much a double act in that the trustees have the dual responsibilities of distribution of funds to our community and the stewardship of the capital invested.
While these are distinct duties, they both carry the goals of best practice. At first instance, granting money may seem a simple and gratifying task, but the reality is, there are good and not so good outcomes to grant making and the measuring of this is not just in dollar terms. Good partnership relationships formed with community organisations contribute to best practice.
Likewise, trustees spend many hours monitoring the investment market, in conjunction with the trust's investment consultant and investment managers. Your trustees seek the best advice available and set policy in the best strategic interest of the community of Mid and South Canterbury. Again this may seem simple, but it is not, for what is best for short term can be inconsistent with longer-term goals.
Donations
In the year ended, the trust donated $1,027,889 to the districts of:
? Ashburton
? Geraldine
? Mackenzie
? Temuka
? Timaru
? Waimate
This covered the classifications of:
? Community health and welfare
? Schools and child care
? Sport and recreation
? Youth activities
? Culture and heritage
? Environmental
A further $527,967 was granted to the "Secondary Schools Millennium Technology Project" in line with the original commitment.
Financial Results
I regret to report that the trust incurred a deficit of $551,462 for the year under review. The contributing cause of this result was the extremely poor performance of the overseas equity market, with the events of 11 September 2001 compounding the problem.
Early in the year, before the overseas market collapse and the disastrous 11 September event, the trustees resolved to carry out a full review of its statement of investment policies and objectives.
As a result of this review, the trust appointed a new investment consultant, Mr Michael Chamberlain of MCA (NZ) Limited, who recommended a more passive investment approach, and a move to a multi-investment manager structure.
Guardian Trust Funds Management now retains responsibility for managing domestic fixed interest and New Zealand Bonds, Bankers Trust advising on New Zealand equities, with the major off-shore investments being managed by State Street Global Advisers.
It has to be accepted that the community trust is a large international investor, and will always be subject to fluctuations in the international financial markets. We believe we have a system which should provide a good return over a long period with minimal risk.
Appointment of Auditor
The trust appointed Martin Wakefield, Chartered Accountants of Timaru, to act as auditors to the trust.
Donations Assessment Process
To ensure that the trust's donations are channelled into areas of most need, the trust is underwriting the cost of a
socio-economic district survey during the next financial year. The well-known researcher, Dr Gabrielle Maxwell, of the Institute of Criminology, Victoria University of Wellington, will undertake the study and the trust will be involving other district organisations with the study to ensure that all areas are canvassed.
Year of the Volunteer
In 2001, the trust decided to recognise The Year of the Volunteer by sponsoring a number of seminars in conjunction with Aoraki Polytechnic to upgrade the secretarial and accounting skills of district voluntary and non-profit organisations. It is disappointing to record that only minor district interest was expressed in this project. The trust intends to further promote this worthwhile project during the next year.
Trustee Appointment
During the year, Mr Angus McKay retired from the office of trustee. He represented the interests of the greater community
of Methven in a forceful and effective way. On behalf of those communities, I would like to thank Angus for his long service. Mr Geoff Geering, Q.S.O., of Ashburton, was appointed to replace him. There is no doubt Geoff's vast knowledge and the respect in which he is held, will play an important part in the contribution he makes to the activities of the trust in the future.
Appreciation
The year has been a challenging one for all trustees, particularly with regard to managing the complexities associated with a volatile investment market. They have the common objective of enhancing the Mid-South Canterbury region, and I express my sincere thanks for all their co-operation and their professional approach which they bring to the decision-making table.
I also want to pay tribute to the work and commitment of the administration staff, who go well beyond the call of any job description. They display a personal commitment in their employment to enhancing the community values our organisation aspires to.
P. F. MCILRAITH, Chairperson.
Date: 26 August 2002.
Consolidated Statement of Financial Performance for the Year Ended 31 March 2002
2002 2001
$ $
Income:
Interest: Managed funds 1,065,700 1,208,010
Interest: Other 44,701 52,124
Dividends: Managed funds 219,911 284,948
Capital gains/(losses): Managed funds (514,225) 2,356,194
Total income 816,087 3,901,276

Less expenses-
Direct investment expenditure:
Management fees 182,782 171,674
Consultancy fees 21,316 16,193
Total direct investment expenditure 204,098 187,867
611,989 3,713,409
Less operating expenditure:
Advertising 9,855 8,024
Auditors' fees 4,050 4,050
Interest 3 16
Legal fees 1,163 6,238
Postage, tolls and fax 1,511 2,381
Printing and stationery 8,717 9,154
Salary and wages 87,082 73,586
Professional fees:
- Accountancy and advisory 12,932 10,850
- Strategic plan - 2,343
- Taxation 19,287 13,685
Sundry administration expenses 16,206 14,905
Conference expenses 4,644 -
Internal Affairs Department costs 4,388 -
Trustees:
- Meeting expenses 41,070 42,271
- Travel 7,195 10,227
- Honoraria 12,000 13,428
Trustees' insurance 3,391 3,375
Total operating expenditure 233,494 214,533
Net income 378,495 3,498,876
Unrealised capital gains/(losses): Managed funds (929,957) (3,112,308)
Deficit transferred to the trust fund (551,462) 386,568
Consolidated Statement of Movements in Equity for the Year Ended 31 March 2002
2002 2001
$ $
Opening equity 36,821,154 38,857,463
Net surplus/(loss) for year (551,462) 386,568
Plus donations returned 16,040 1,700
Less donations approved (1,555,856) (2,365,011)
Less prior period tax adjustment - (59,566)
Closing equity 34,729,876 36,821,154
Consolidated Statement of Financial Position as at 31 March 2002
Note 2002 2001
$ $
Trust capital:
Capital base 3 32,087,148 32,087,148
Inflation reserve 4 2,539,687 2,539,687
General reserve 5 103,041 2,194,319
34,729,876 36,821,154
Represented by-
Current assets:
Provision for tax 6 7,501 7,501
WestpacTrust:
- Subsidiary company account 9,395 98
- Current account 15,038 90,778
- Ready access 100 -
- Term deposits - 784,929
Sundry debtors 58,799 17,445
Advances 11 80,000 120,000
Interest accrued 154,973 214,338
325,806 1,235,089
Less current liabilities:
Sundry creditors 64,124 20,974
Donations approved not yet paid 8 649,211 1,230,440
Total current liabilities 713,335 1,251,234
Working capital (387,529) (16,145)
Add non current assets-
Investments - Managed funds debt (GT) 2 12,915,261 19,545,615
- Managed funds equity (GT) 2 6,237,789 17,291,684
- Managed funds debt (SSG) 5,334,884 -
- Managed funds equity (SSG) 10,629,471 -
35,117,405 36,837,299
Net assets 34,729,876 36,821,154
Signed on behalf of the board of trustees.
P. F. MCILRAITH, C. E. BRAND,
Chairperson. Trustee.
Dated: 26 August 2002.
Consolidated Statement of Cash Flows for the Year Ended 31 March 2002
2002 2001
$ $
Cash flows from operating activities-
Cash was provided from:
Interest on deposits 75,821 41,430
75,821 41,430
Cash was applied to:
Suppliers of goods and services (236,236) (231,601)
Donations paid (2,081,045) (1,262,700)
(2,317,281) (1,494,301)
Net cash flows from operating activities (2,241,460) (1,452,871)
Cash flows from investing activities-
Cash was provided from:
Withdrawal of managed funds (GT) 17,390,187 1,234,791
17,390,187 1,234,791
Cash was applied to:
Managed funds (SSG) 16,000,000 -
16,000,000 -
Net cash flows from investing activities 1,390,187 1,169,791
Increase/(decrease) in cash held (851,272) (218,080)
Add opening cash 1 April 2001 875,805 1,093,885
Cash as at 31 March 2002 24,533 875,805
Comprised of-
WestpacTrust:
Subsidiary company account 9,395 98
Current account 15,038 90,778
Ready access account 100 -
Term deposit - 784,929
24,533 875,805
Reconciliation of Net Surplus and Net Cash Flows From Operating Activities
2002 2001
$ $
Net surplus transferred to equity (551,462) 386,568
Plus donations returned 16,040 1,700
Less donations approved (1,555,856) (2,365,011)
Less prior period tax adjustment - (59,566)
(2,091,278) (2,036,309)
Plus/(less) non cash items:
Managed funds expenses 182,782 171,731
Unrealised capital losses/(gains) on investments 929,957 3,112,308
Managed fund revenue (771,386) (3,849,152)
Transfer from Aorangi Park Trust 40,000 40,000
381,353 (2,561,422)
Movements in working capital:
Increase/(decrease) in donations approved not yet paid (581,229) 1,038,700
Increase/(decrease) in creditors 21,598 9,744
(Increase)/decrease in accrued interest 31,120 (10,695)
(Increase)/decrease in tax refund due - 59,566
(Increase)/decrease in sundry debtors (3,024) 11,236
Movements in working capital (531,535) 1,108,551
Net cashflow from operating activities (2,241,460) (1,452,871)
Notes to the Consolidated Financial Statements for the Year Ended 31 March 2002
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 - it is intended to increase the inflation reserve 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. There is insufficient profit to allow this action to occur in the current year.
(iii) Uncommitted surplus represents the balance of any profit remaining.
(e) Basis of Consolidation
The Community Trust of Mid & 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) While the trust has not changed its policy with respect to the capital and reserves of the trust, unfortunately there is insufficient profit to increase the inflation reserve by the level of inflation.
(b) There have been no other changes in accounting policy.
2. Investments 2002 2001
$ $
Guardian Trust - debt 12,915,261 19,545,615
Guardian Trust - equity 6,237,789 17,291,684
State Street Global - debt 5,334,884 -
State Street Global - equity 10,629,471 -
35,117,405 36,837,299
3. Capital Fund
Balance at beginning of the year 32,087,148 32,087,148
Balance at end of the year 32,087,148 32,087,148
4. Inflation Reserve
Balance at beginning of the year 2,539,687 1,498,550
Transfer from general reserves - 1,041,137
Balance at end of the year 2,539,687 2,539,687
5. Reserves
Balance at beginning of the year 5,271,765 5,271,765
Add Surplus for the year - 386,568
Add Donations returned 16,040 1,700
2,210,359 5,660,033
Deduct Donations approved (1,555,856) (2,365,011)
Deduct Prior period tax adjustment - (59,566)
Deduct Transfer to inflation reserve - (1,041,137)
Deduct Deficit for the year (551,462) -
Balance at end of the year 103,041 2,194,319
6. Taxation
Net income before donations 378,495 3,498,877
Add: Taxation credits 80,885 96,951
Unrealised gain on debt instruments 30,560 -
Unrealised gains on SSG bonds 34,884 -
Non deductible expenses 81,722 75,086
Unrealised foreign exchange gains 111,047 -
717,593 3,670,914
Deduct: Unrealised loss on debt instruments 115,601 22,321
Charitable company transactions 624,315 447,191
Unrealised loss on black list equities 106,786 237,695
Unrealised FX loss - 458,303
Distributed as beneficiaries' income - 2,457,677
Taxable income/(loss) (129,109) 47,727
Tax at 33% - 15,750
Less: Tax credits - 15,750
- -
Prior year refund due 7,501 7,501
Tax refund due 7,501 7,501
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:
2002 2001
$ $
Ashburton Highland & National Dancing Association - 300
Task Force Green Community Employment Initiative - 3,740
Ashburton Domain Oval Pavilion - 40,000
St Andrew's Presbyterian Church (Ashburton) - 1,000
Ashburton Youth Steering Committee 5,000 5,000
Temuka High School (Millennium Grant) 58,021 -
Waihi School 1,125 -
SC Aviation Heritage Centre 2,000 2,000
Starship Foundation - 20,000
Sound Shell Roof Cover Project 10,000 10,000
Ashburton College STAR Programme 7,500 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 10,000
Lake Tekapo Promotion Association 5,000 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 10,000
IHC South Canterbury 1,500 1,500
Kodiak Wrestling Club 1,000 1,000
Sacred Heart Basilica Restoration Trust - 15,000
SC Car Club 5,000 5,000
SC Cricket Development Trust 75,000 75,000
SC Heritage Trails Inc. - 2,000
SC Sports Stadium Trust 100,000 100,000
Timaru Beautifying Society Assn. - 20,000
Timaru Bowling Club Inc. - 10,000
Project Waimate - 25,000
St. Augustines Anglican Church 25,000 25,000
Waimate Community Vehicle Trust - 10,000
Ashburton Aquatic Park - 750,000
Ashburton Area Equestrian Federation 1,000 -
Ashburton Sports Hall 15,000 -
Ashburton Eastern United Soccer Club 450 -
Ashburton Hockey Assn 900 -
Ashburton Musical Parenting 165 -
Ashburton Sports Turf Trust 4,000 -
Mania-o-roto Rover Scout Crew 20,000 -
Methven Soccer Club 300 -
Mic Canterbury Soccer 500 -
Mt Somers/Mayfield Order of St. John 8,000 -
Geraldine Amateur Swimming Club 30,000 -
Fairlie Museum Inc. 500 -
Mackenzie Junior Netball 500 -
Twizel Community Board - Project 2000 100,000 -
S C Aviation Heritage Centre 2,000 -
Temuka Community Care Trust 5,000 -
Air Training Corp 15th Squadron 200 -
Athletics S C All Weather Track Trust 100,000 -
Caroline House Inc. 36,000 -
Parenting With Confidence 2,500 -
S C Victim Support 750 -
Project Waimate 5,000 -
Waimate Community Youth Groups 300 -
649,211 1,230,440
9. Capital Commitments
There were no capital commitments (2001 - $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 $702,616 (2001 - $174,649) has been paid out, the balance of $297,384 (2001 - $825,351) remains as contingent liability.
11. Advances
The trust made an advance to the Aorangi Park Trust. The balance outstanding at balance date was $80,000 (2001
- $120,000). 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:
2002 2001
$ $
Debtors 58,799 24,946
Advances 80,000 120,000
Interest accrued 154,973 214,338
Managed fund equities 16,448,081 17,291,684
16,741,853 17,650,968
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 2002. 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 2002 and of the results of operations for the year ended 31 March 2002.
Auditors' 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 and State Street Global Advisors Australia 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 2002 for:
(a) the value of investment income earned and accrued from 1 April 2001 to 31 March 2002.
(b) the value of investments held by NZGT as fund manager for The Community Trust of Mid & South Canterbury as at 31 March 2002. The financial statements of NZGT to 31 March 2002 have been subject to an internal controls audit by PricewaterhouseCoopers. Their unqualified audit opinions were issued on 31 January 2002 and 30 June 2002.
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 2002 and the results of its operations for the year ended on that date.
Our audit was completed on 21 August 2002 and our unqualified opinion is expressed as at that date.
MARTIN WAKEFIELD, Auditor, Timaru.
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(A full list of all distributions of income by way of donations for the year ended 31 March 2002 is available from the trust's office on request.)