Consolidated Statement of Financial Performance for the Year Ended 31 March 2002
2002 2001
Note $ $
Total investment income 1 1,845,912 5,274,832
Total expenditure 2 1,302,801 1,513,924
Net surplus before taxation 543,111 3,760,908
Taxation 17 - -
Net surplus after taxation 543,111 3,760,908
Share of income/(deficit) of Invest South Limited 8 (72,326) (28,235)
Net surplus for the year before distribution 470,785 3,732,673
Transfer to capital maintenance reserve (4,412,418) (5,058,343)
(3,941,633) (1,325,670)
Donations to tax approved entities (4,718,060) (8,152,442)
Net deficit transferred from grants maintenance reserve (8,659,693) (9,478,112)
Consolidated Statement of Movements in Trust Funds for the Year Ended 31 March 2002
2002 2001
Note $ $
Trust capital at beginning of year 180,182,430 185,368,175
Less grants paid from capital 4 (5,510,418) (765,976)
Net deficit for the year transferred from grants maintenance reserve 3 (8,659,693) (9,478,112)
Increase in capital maintenance reserve 3 4,412,418 5,058,343
Trust capital at end of year 170,424,737 180,182,430
Consolidated Statement of Financial Position as at 31 March 2002
2002 2001
Note $ $
Funds employed:
Trust capital 4 158,460,000 158,460,000
Reserves 3 11,964,737 21,722,430
Total capital and reserves 170,424,737 180,182,430
Liabilities-
Current liabilities:
Accounts payable 133,968 171,928
Grants committed but not paid 6,737,647 7,813,767
Total liabilities 6,871,615 7,985,695
Total capital and liabilities 177,296,352 188,168,125
Assets-
Current assets:
WestpacTrust cheque account (15,282) 3,603
Accounts receivable and interest accrued 77,303 56,873
Total current assets 62,021 60,476
Non current assets:
Fixed assets 10 1,095,448 1,111,331
Investment assets:
WestpacTrust call account 4 -
Trading bank deposits 745,000 -
Managed funds:
- ING (NZ) Ltd 11 23,797,583 47,966,701
- Tower Asset Management 11 46,211,894 -
- AMP Asset Management 11 38,619,139 83,611,564
- State Street Global Advisors 11 62,565,123 52,200,850
Loans 12 1,768,771 713,508
Invest South Limited 8 2,431,369 2,503,695
Total non current assets 177,234,331 188,107,649
Total assets 177,296,352 188,168,125
Consolidated Statement of Cash Flows as at 31 March 2002
2002 2001
Note $ $
Cash flows from operating activities-
Cash was provided from/(applied to):
Interest and dividends 5,439,695 14,067,442
Revaluation of investments (3,635,361) (8,886,368)
Administration expenses (1,261,979) (1,560,369)
Grants to the community (11,284,459) (10,950,501)
Net cash inflow/(outflow) from operating activities 13 (10,742,104) (7,308,796)
Cash flows from investing activities-
Cash was provided from/(applied to):
Investments 11,840,372 7,290,611
Fixed assets (61,890) (61,434)
Loans (1,055,263) 42,024
Net cash inflow/(outflow) from investing activities 10,723,219 7,271,201
Net increase/(decrease) in cash held (18,885) (37,595)
Add cash at beginning of the year 3,603 41,198
Total cash balance at end of year (15,282) 3,603
Statement of Significant Accounting Policies for the Year Ended 31 March 2002
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 report 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 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. Statement of Cash Flows
Operating cash flows includes interest and dividends paid or credited to investment funds under management and any upward or downward revaluation of funds during the period. Cash movements in funds invested are recognised in investing activities.
O. 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 for the Year Ended 31 March 2002
1. Investment Income
2002 2001
Note $ $
Dividends and distributions 359,710 6,729,244
Interest 5,121,563 7,415,270
Change in value of investments (3,635,361) (8,869,682)
1,845,912 5,274,832
2. Expenditure
2002 2001
$ $
Audit fees 6 14,104 5,963
Communications 21,830 25,503
Conference costs 13,522 18,531
Depreciation 83,496 82,848
Loss/(gain) on disposal of fixed assets (5,725) (4,121)
Fund manager fees 386,632 582,712
General expenses 41,300 45,716
Insurance 12,131 11,019
Occupancy costs 17,205 14,765
Office expenses 24,139 21,590
Professional fees 5 210,158 285,593
Promotion, reporting and compliance expenses 65,334 65,780
Salaries and staff costs 250,273 215,939
Trustees' fees 7 150,697 119,940
Vehicle expenses 17,705 22,146
1,302,801 1,513,924
3. Reserves
(a) Capital Maintenance Reserve
2002 2001
$ $
Opening balance of capital maintenance reserve 11,137,680 6,845,313
Transfer from statement of financial performance 4,412,418 5,058,343
Transfer to capital reserve (5,510,418) (765,976)
10,039,680 11,137,680
(b) Grants Maintenance Reserve
2002 2001
$ $
Opening balance of grants maintenance reserve 10,584,750 20,062,862
Transfer from statement of financial performance (8,659,693) (9,478,112)
1,925,057 10,584,750
Total reserves 11,964,737 21,722,430
4. Trust Capital
2002 2001
$ $
Opening balance of trust capital 158,460,000 158,460,000
Transfer from capital maintenance reserve 5,510,418 765,976
Less grants paid from capital (5,510,418) (765,976)
158,460,000 158,460,000
5. Professional Fees
2002 2001
$ $
Financial/taxation advisory 165,959 209,779
Legal 18,297 16,999
Other 25,902 58,815
210,158 285,593
6. Auditor's Remuneration
During the year the following amounts were paid to Ward Wilson, the group's auditors:
2002 2001
$ $
For audit work 14,104 5,963
For other services - 2,216
7. Trustees' Fees
Meeting fees and honorariums were paid to trustees as follows:
Meetings Fees Fees
attended 2002 2001
$ $
T. W. Harpur (appointed November 2000) 50 27,547 4,570
C. S. Ballantyne 35 19,677 28,810
A. R. Macdonald 22 11,213 7,570
F. G. Cardno 23 10,600 9,950
S. G. Palmer 34 14,240 11,190
J. D. Frampton 26 11,650 9,530
A. A. Broad (appointed November 2000) 24 11,120 4,150
N. J. Wyeth (appointed November 2000) 39 15,490 4,150
P. Redpath (appointed June 2001) 30 12,900 -
D. Williams (appointed June 2001) 25 11,450 -
W. A. Cambridge (retired June 2001) 4 2,500 14,980
P. Duffy (retired June 2001) 4 2,310 10,260
J. J. Grant (retired November 2000) - - 4,860
G. M. Neave (retired November 2000) - - 4,960
D. J. Stronach (retired November 2000) - - 4,960
150,697 119,940
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:
2002 2001
$ $
Opening value of investment 2,503,695 2,531,930
Share of operating surplus/(deficit) (72,326) (28,235)
Equity accounted value of investment 2,431,369 2,503,695
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.
The equity investments held by Invest South Limited in Southern Flora (New Zealand) Limited and Abalone New Zealand Limited were sold subsequent to balance date.
The sale prices represented a write-up of $355,466 from the values ascribed to these investments as at 31 March 2002. The group's share of this increase in value was 50%, or $177,733.
9. Grants Approved
2002 2001
$ $
Grants approved this year 10,675,693 9,021,189
Less prior year's grants cancelled (447,215) (102,771)
Net grants approved 10,228,478 8,918,418
10. Fixed Assets
Cost Accum depn 2002 value 2001 value
$ $ $ $
Land 457,419 - 457,419 457,419
Buildings 523,063 85,538 437,525 459,383
Office equipment 156,054 105,387 50,667 33,489
Furniture and fittings 150,607 75,915 74,692 88,108
Motor vehicles 113,712 38,567 75,145 72,932
Totals 1,400,855 305,407 1,095,448 1,111,331
11. Investments Managed by Fund Managers
The group has funds with five investment managers (fund managers), being AMP Asset Management, ING (NZ) Ltd, State Street Global Advisors, Tower Asset Management, and Invest South Limited. Market values and asset allocations of these investments as at balance date were as follows:
AMP (NZ$m) ING
(NZ)
Ltd
(NZ$m) State Street Global Advisors (NZ$m) Tower
Asset Management (NZ$m) Invest
South
Ltd
(NZ$m) Total
2002
value (NZ$m) Total
2001
value (NZ$m)
NZ equities 15.89 2.50 18.29 10.91
Overseas equities 62.57 62.57 52.21
NZ fixed interest 36.85 36.85 27.36
Overseas fixed interest 46.21 46.21 30.53
Cash 1.77 7.90 9.67 65.28
Totals 38.62 23.79 62.57 46.21 2.50 173.69 186.29
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:
2002 2001
$ $
Troopers Memorial Corner Charitable Trust 195,000 195,000
Topoclimate South Trust 146,525 428,525
Southland Museum & Art Gallery 41,746 48,493
Ringa Ringa Heights Golf Club 39,000 39,000
Otatara Community Church - 2,490
Southland Outdoor Stadium Trust 1,000,000 -
Tuatapere Hump Ridge Track 200,000 -
Invercargill Artificial Sport Surface Trust 96,500 -
Ice Sports Southland 50,000 -
1,768,771 713,508
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%, and the loan to the Southland Outdoor Stadium
Trust, which attracts interest at the 90 day bank bill rate.
13. Reconciliation with Operating Surplus
2002 2001
$ $
Net surplus before distribution 470,785 3,732,673
Less grants (10,228,478) (8,918,418)
(9,757,693) (5,185,745)
Add/(less) movement in working capital:
Increase/(decrease) in liabilities (1,114,078) (2,185,970)
(Increase)/decrease in accounts receivable (20,430) (37,101)
(1,134,508) (2,223,071)
Add/(less) movement in items classified as investing/financing:
Asset purchases - (11,250)
- (11,250)
Add/(less) movement in non-cash items:
Revaluation of investments 72,326 32,543
Depreciation 83,496 82,848
Loss/(gain) on sale of fixed assets (5,725) (4,121)
150,097 111,270
Net cash provided by operating activities (10,742,104) (7,308,796)
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 five 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 professional financial advisers 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 the loans to Topoclimate South Trust and the Southland Outdoor Stadium Trust.
15. Capital Commitments
Commitments of $5,443,724 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:
2002 2001
$ $
Southern Institute of Technology 1,678,259 3,452,390
Southland Outdoor Stadium Trust 1,000,000 2,000,000
Gore Multi Sport Complex 1,065,465 -
Eastern Southland Art Gallery 400,000 -
Southland Hospice 375,000 -
Tuatapere Hump Ridge Track 200,000 -
Fiordland Community Events Centre 400,000 -
Fiordland Medical Trust 325,000 -
5,443,724 5,452,390
The years in which these commitments fall due are as follows:
Year ending 31 March 2002 - 2,774,131
Year ending 31 March 2003 5,283,724 1,839,131
Year ending 31 March 2004 40,000 839,128
Year ending 31 March 2005 40,000 -
Year ending 31 March 2006 40,000 -
Year ending 31 March 2007 40,000 -
5,443,724 5,452,390
16. Related Party Transactions
During the year, the group purchased legal services from Preston Russell Law to the value of $5,562.11. One of the group's trustees, Warwick Cambridge, is a partner of Preston Russell Law. Warwick Cambridge retired as a trustee as at 31 May 2001.
17. Tax Calculation
2002 2001
$ $
Net surplus/(deficit) before taxation as per statement of financial performance 470,785 3,732,673
Less: Charitable business exemption 1,866,081 1,956,550
Dividend income on black-list - 165,264
Tax refund included in income - 43,635
Realised gains loss on black-list - 2,303,920
Unrealised gains on NZ equities 569,423 -
2,435,504 4,469,369
(1,964,719) (736,696)
Add: FIF income - 2,334,720
Unrealised loss on black-list - 134,464
Unrealised loss on NZ equities - 986,804
Unrealised loss on grey equities 12,854,750 11,388,610
Reversal of unrealised loss on currency hedging (31/03/00) - 218,175
Non deductible expenditure 483,082 486,949
Imputation credits received 125,678 98,510
NRWT credits received - 57,535
13,463,510 15,705,767
Total taxable income 11,498,791 14,969,071
Less: Allocation of beneficiaries' income to the charitable company (5,800,000) (11,500,000)
Allocation of beneficiaries' income to tax exempt entities (4,718,060) (2,351,805)
(10,518,060) (13,851,805)
Total trustees' income 980,731 1,117,266
Less: Tax losses brought forward ($1,019,106): amount claimed (980,731) (1,178,263)
Assessable income for tax purposes - (60,997)
Taxation at 33% - -
Less: Imputation credits received - -
Foreign tax credits on overseas dividends - -
Resident withholding tax - -
Taxation payable/refund due - -
Excess imputation credits converted to loss to carry forward (380,841) (298,515)
Current year loss to carry forward (loss brought forward from 2001 unclaimed) (38,375) (60,997)
Total loss to carry forward (419,216) (359,512)
Audit Report
To the Readers of the Financial Statements 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 2002. This information is stated in accordance with the accounting policies set.
Trustees' Responsibilities
The trustees are responsible for the preparation of financial statements which give a true and fair view of the financial position of the trust as at 31 March 2002 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 2002 and the results of its operations and cash flows 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.
WARD WILSON, Invercargill.
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(A list of all distributions of income and capital approved by The Community Trust of Southland during the year ended
31 March 2002 is available, on request, from the trust's office.)