Directory for the Year Ended 31 March 2004
Trustees: John Farry (chairperson), Dunedin; Hilary Allison (deputy chairperson), Dunedin; Duncan Butcher, Cromwell; Sally Hope, Oamaru; Russell Hendry, Dunedin; Alan McLay, Oamaru; Barbara Payton, Dunedin; Raewynne Pedofski, Dunedin; Mark Ryan, Dunedin; David Shepherd, Dunedin; Gail Tipa, Dunedin (resigned May 2003); Bill Thomson, Balclutha.
Chief Executive: Keith Ellwood.
Registered Office: Second Floor, Community Trust House, corner of Filleul Street and Moray Place, Dunedin.
Auditor: Taylor McLachlan, Dunedin.
Solicitor: Anderson Lloyd Caudwell, Dunedin.
Investment Advisors: Russell Investment Group, Auckland.
Bankers: Westpac, Dunedin.
Consolidated Statement of Financial Performance for the Year Ended 31 March 2004
Note 2004 2003
$000 $000
Revenue 1 22,025 (5,632)
Expenditure 2 (1,268) (1,375)
Surplus/(deficit) before tax 20,757 (7,007)
Taxation 8 - -
Net surplus/(deficit) 20,757 (7,007)
This net surplus/(deficit) has been allocated to uncommitted surplus
Consolidated Statement of Movement in Trust Funds for the Year Ended 31 March 2004
Note 2004 2003
$000 $000
Net surplus/(deficit) for the year 20,757 (7,007)
Total recognised revenues and expenses 20,757 (7,007)
Less donations 4 (5,097) (10,918)
Movements in trust funds for the year 15,660 (17,925)
Trust funds at beginning of year 150,356 168,281
Trust funds at end of year 166,016 150,356
Consolidated Statement of Financial Position as at 31 March 2004
Note 2004 2003
$000 $000
Source of funds-
Trust funds 3 166,016 150,356
Current liabilities:
Accounts payable 130 97
Donations payable 6,071 5,380
172,217 155,833
Employment of funds-
Current assets:
Current account 243 174
Short term bank deposits 1,021 31
Debtors 7 111
Stock on hand - 9
Prepayments 9 -
1,280 325
Non current assets:
Managed funds 5 169,505 154,031
Fixed assets 6 1,182 1,227
Advance to Dunedin Community House Trust 11 250 250
170,937 155,508
172,217 155,833
Approved on behalf of the board:
JOHN FARRY RUSSELL HENDRY
Chairperson. Trustee.
28 June 2004 28 June 2004
Consolidated Statement of Cashflows for the Year Ended 31 March 2004
Note 2004 2003
$000 $000
Cashflow from operating activities-
Cash was provided from:
Interest 48 34
Other 222 136
270 170
Cash was disbursed on:
Payment to suppliers and staff 794 945
Fund managers' fees 376 374
(1,170) (1,319)
Net cash inflow/(outflow) from operating activities 9 (900) (1,149)
Cashflow from investing activities-
Cash was provided from:
Receipts from fund managers 6,376 5,941
Cash was disbursed on:
Purchase of fixed assets (10) -
Net cash inflow from investing activities 6,366 5,941
Cashflow from funding activities-
Cash was disbursed on:
Donations to charitable organisations (4,407) (5,538)
Net cash (outflow) from funding activities (4,407) (5,538)
Net cash inflow/(outflow) from activities 1,059 (746)
Add opening cash brought forward 205 951
Ending cash carried forward 1,264 205
Cash comprises:
Cash at bank 243 174
Term deposits 1,021 31
1,264 205
Notes to the Consolidated Financial Statements for the Year Ended 31 March 2004
Basis of Preparation
These are the consolidated financial statements of The Community Trust of Otago and its 100% subsidiaries Otago Community Trust Charities Limited, The Community Trust Amateur Sports Co Limited, The Community Trust District Improvement Co Limited and Fillmor House Limited. The Community Trust of Otago was incorporated as a charitable trust in accordance with the provisions of the Community Trusts Act 1999.
The financial statements have been prepared to comply with the Financial Reporting Act 1993 and comprise consolidated statements of the following: Financial performance, movement in trust funds, financial position, cashflows, as well as notes to these financial statements.
The financial statements are prepared on the basis of historical cost, except for the revaluation of managed funds.
Specific Accounting Policies
Income
Income from managed funds includes both realised and unrealised income and is recorded gross of fund management expenses.
Interest is recognised on an accrual basis.
Donations
Donations are accounted for once they are approved by the trustees.
Foreign Currencies
All amounts denominated in foreign currencies are converted to New Zealand dollars at balance date. All realised and unrealised gains and losses are recognised in the statement of financial performance.
Taxation
Income tax is recognised on the surplus available for distribution before taxation, adjusting for differences between taxable and accounting income.
Future tax benefits are not recognised unless realisation of the asset is virtually certain.
Fixed Assets
Fixed assets are recorded at cost less accumulated depreciation.
Depreciation
Depreciation has been charged to the financial statement using rates which will write off the cost of assets less their estimated residual value over their estimated economic lives. The depreciation rates used are:
Buildings 4%
Office furniture and equipment 12-48%
Donations Payable
Donations payable represents donations approved by the trustees but unpaid as at balance date.
Receivables
Receivables are stated at estimated realisable value after providing against debts where collection is doubtful. Bad debts are written off during the period in which they are identified.
Stock on Hand
Stock on hand is stated at the lower of cost and net realisable value.
G.S.T.
Subsidiaries of The Community Trust of Otago, Fillmor House Limited and The Community Trust District Improvement Company Limited are registered for G.S.T.
Accordingly, their financial performance and financial position have been consolidated within the accounts on a G.S.T. exclusive basis.
Subject to the above, the trust is not registered for G.S.T. purposes and the financial statements have been prepared on a G.S.T. inclusive basis.
Basis of Consolidation
The Community Trust of Otago, Otago Community Trust Charities Limited, Fillmor House Limited, The District Improvement Company Limited and The Community Trust Amateur Sports Company Limited have been consolidated using the purchase method of consolidation.
Investments
Investments are valued at period end market value. All realised and unrealised gains and losses are recognised in the statement of financial performance.
Hedging Instruments
The trust, through its fund managers, enters into hedging instruments such as forward exchange contracts. These are converted to the New Zealand dollar rate at balance date with all realised and unrealised gains and losses being recognised in the statement of financial performance as income from managed funds.
Statement of Cashflows
Cash comprises cash at bank and call deposits but does not include cash or deposits held by the fund managers.
Financial Instruments
All assets and liabilities of the trust with the exception of fixed assets are financial instruments and are recorgnised in the statement of financial position. All financial instruments are recorded at market value or fair value or are not materially different from market value or fair value.
Fund managers utilise 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.
These are converted to the New Zealand dollar rate at balance date with all realised and unrealised gains and losses being recognised in the statement of financial performance.
The quantitative disclosures required by FRS 31 Disclosure of Information About Financial Instruments, have been included throughout the financial statements where material.
Changes in Accounting Policies
There have been no changes in accounting policies during this accounting period. During the year to 31 March 2003, there was a change in the way the trust accounted for donations approved and not paid. This had the effect of reducing equity by $5,380,295 in the financial year to 31 March 2003. All donations once approved are now included as donations payable.
1. Revenue
Note 2004 2003
$000 $000
Interest 3,545 3,678
Pooled managed funds 17,860 (11,413)
Realised gains 769 503
Unrealised (losses)/gains (276) 1,358
Other 127 242
Total operating revenue 22,025 (5,632)
2. Expenditure
Depreciation 55 77
Fund managers' fees 376 374
Occupancy 73 52
Other operating 109 169
Professional fees 160 157
Promotion 35 39
Public and statutory reporting 19 66
Staff 261 248
Trustee fees 12 158 165
Trustee expenses 22 28
1,268 1,375
Professional fees-
Payments to auditors:
Audit fees 10 8
Accounting and other support 12 10
Computer support 10 15
Legal advisers 1 5
Professional investment advisers 89 87
Tax advice 16 22
Other professional advice 22 10
160 157
3. Trust Funds
Trust Capital
The trust capital represents the realised value of its original asset, being shares in Trust Bank. They were sold, partly in 1994 when Trust Bank listed on the New Zealand Stock Exchange and the balance in 1996 when Westpac acquired Trust Bank.
2004 2003
$000 $000
Opening balance 131,467 131,467
Closing balance 131,467 131,467
Capital maintenance reserve:
Opening balance 23,423 19,613
Transfers from uncommitted surplus 2,490 3,810
Closing balance 25,913 23,423
The capital maintenance reserve represents the additional amount necessary to preserve the real value of the capital allowing for inflation as measured by the Consumers' Price Index (CPI).

Uncommitted surplus:
Opening balance (4,534) 17,201
Donations - paid from capital (4,377) (5,538)
- increase in unpaid approved donations (720) (5,380)
Trustee surplus/(deficit) 20,757 (7,007)
Transfer to capital maintenance reserve (2,490) (3,810)
Closing balance 8,636 (4,534)
Total closing trust funds 166,016 150,356
4. Donations
2004 2003
$000 $000
Paid from capital 4,377 5,538
Increase in unpaid approved donations 865 5,380
Donations withdrawn (145) -
5,097 10,918
During the year ended 31 March 2003, the trust changed its policy to include donations approved but unpaid as a current liability in the statement of financial position. Previously, they were recognised as a contingent liability in the notes to financial statements.
5. Managed Funds
2004 2003
$000 $000
Managed by external managers:
Opening balance 154,031 165,880
Gross income 21,850 (5,908)
Fund managers' fees - deducted (376) (374)
Withdrawals (6,000) (5,567)
Closing balance 169,505 154,031

Investments comprise:
Cash and deposits 17,010 17,091
Bonds 101,531 92,473
Equities 50,964 44,467
Total managed funds 169,505 154,031
Allocated as follows-
New Zealand:
Bonds and deposits 68,693 61,750
Equities 9,163 8,284
77,856 70,034
Overseas:
Bonds and deposits 49,848 47,815
Equities 41,801 36,182
91,649 83,997
Total:
Bonds and deposits 118,541 109,564
Equities 50,964 44,467
169,505 154,031
6. Fixed Assets
2004 2003
$000 $000
Land:
At cost 432 432
Buildings:
At cost 1,026 1,026
Accumulated depreciation (324) (285)
702 741
Office furniture and equipment:
At cost 234 226
Accumulated depreciation (186) (172)
48 54
Total net carrying value 1,182 1,227
Depreciation:
Buildings 43 44
Office furniture and equipment 12 33
55 77
7. Financial Instruments
Currency Risk
The trust, through its fund managers, invests in securities that are denominated in foreign currencies and therefore result in a currency risk. The trusts fund managers actively monitor this risk and hedge positions in accordance with their investment guidelines.
Interest Rate Risk
The trust, through its fund managers, invests in securities that are subject to interest rate risk. The trusts fund managers monitor this risk and change asset allocations and maturity profiles in accordance with their investment guidelines.
Credit Risk
The trust, in the normal course of business, enters into arrangements with other parties. These arrangements give rise to credit risk for the trust and hence policies and procedures are maintained so that the risk is minimised. No collateral is required in respect of financial assets.
For all classes of financial assets held by the trust, the maximum credit risk exposure to the trust is the carrying value as disclosed in the financial statements at balance date.
Due to the diversification of the investment portfolio and the policies and procedures in place, there are no significant concentrations of credit risk.
Fair Values
All financial instruments are carried at market value.
8. Taxation
2004 2003
$000 $000
Net surplus/(deficit) before donations 20,757 (7,007)
Less: Charitable business exemptions and donations (5,881) (5,673)
Plus: Unrealised equity (gains) losses (5,957) 15,677
Non-deductible expenditure 357 525
Overseas withholding tax credits 8 -
Imputation credits received 142 125
(5,450) 10,654
Total taxable income 9,426 3,647
Less: Distribution of income to beneficiaries (9,160) (3,300)
Total trustees taxable income 266 347
Less: Losses brought forward (377) (354)
(Loss) for tax purposes (111) (7)

Excess imputation credits 142 122
Losses brought forward 377 354
Plus: Conversion of excess imputation credits to losses 431 369
Current year loss 111 7
Less: Losses claimed this year (377) (354)
Total losses to be carried forward 542 377
9. Reconciliation of Reported Surplus to Net Cashflow From Operating Activities
2004 2003
$000 $000
Surplus/(deficit) for the period 20,757 (7,007)
Add:
Non-cash items:
Depreciation 55 77
Managed fund (revaluation)/devaluation (21,850) 5,908
(1,038) (1,022)
Movements in working capital items:
Increase/(decrease) in creditors 34 (23)
(Increase)/decrease in debtors 95 (107)
Increase/(decrease) in stock 9 3
138 (127)
Net cashflow (outflow) from operating activities (900) (1,149)
10. Contingent Liabilities
Contingent liabilities at 31 March 2004 - Nil (2003 - Nil).
11. Loan to Dunedin Community House Trust (Inc.)
The loan was advanced interest free in December 1999. It has a 10-year term. Trustees have agreed that the commencement date for principal repayments can be extended from December 2003 to December 2004.
12. Trustees Fees
Rates of trustees' remuneration are set by the Minister of Finance. Remuneration includes the honorarium together with meeting fees.
Board Meetings Other Official Honorarium and
No. Held No. Attended Meetings Attended Meeting Fees Paid
$
Hilary Allison 11 11 22 15,681
Duncan Butcher 11 8 13 10,420
John Farry 11 9 30 28,780
Russell Hendry 11 11 28 16,425
Sally Hope 11 10 19 13,220
Alan McLay 11 10 14 12,680
Barbara Payton 11 10 21 11,610
Raewynne Pedofski 11 11 21 12,310
Mark Ryan 11 10 11 8,740
David Shepherd 11 11 23 14,340
Bill Thomson 11 11 19 13,150
Gail Tipa (resigned May 2003) 2 1 0 1,002
Total remuneration 158,358
13. Trustee Register of Interests
The trust maintains a "Register of Interests" which is held at its office and which is available for public inspection.
14. Trustee Liability Insurance
The trust has insured its trustees against liability to other parties that may arise from their position as trustees. The insurance does not cover liabilities arising from criminal actions.
Audit Report
To the Trustees of The Community Trust of Otago
We have audited the financial statements. The financial statements provide information about the past consolidated financial performance and financial position of the trust as at 31 March 2004. This information is stated in accordance with the accounting policies.
Trustees' Responsibilities
The trustees are responsible for the preparation of consolidated financial statements which give a true and fair view of the financial position of the trust as at 31 March 2004, and the results of its operations and cashflows 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; and
? 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.
Our firm carries out other assignments for the trust in the area of special consultancy projects, taxation and general accounting services. These matters have not impaired our independence as auditors of the trust. The firm has no other relationship with or interest in the trust.
Unqualified Opinion
We have obtained all the information and explanations we have required.
In our opinion, the consolidated financial statements:
? comply with New Zealand generally accepted accounting practice; and
? give a true and fair view of the consolidated financial position of the trust as at 31 March 2004 and the results of its operations and cash flows for the year ended on that date.
Our audit was completed on 28 June 2004 and our unqualified opinion is expressed as at that date.
TAYLOR MCLACHLAN, Dunedin.