Annual Report and Consolidated Financial Statements for the Year Ended 31 March 2004
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 S. J. Dorman LL.B., Mr G. J. Geering Q.S.O., Mrs K. I. Mattingley DIP.GRAD.SOC.WK., M.N.Z.A.S.W., Mrs M. B. Ross B.A., DIP.TCH., Mrs H. A. Sim, Mrs H. Weeks.
Bankers: Westpac Bank, 243 Stafford Street, Timaru.
Auditors: Martin Wakefield, Chartered Accountants, 26 Canon Street, Timaru.
Executive Manager: Mr J. B. Wilson, P.O. Box 983, Community House, Timaru.
Chairperson's Report for the Year Ended 31 March 2004
It is with pleasure that I report to you on the financial accounts and the operations of The Community Trust of Mid & South Canterbury Inc. for the year ended 31 March 2004.
Financial Considerations
After a period of 36 months of indifferent financial returns, I can report the trust's most successful year under its present structure.
The return on investments to the year ending 31 March 2004 was 15.34%. While that is pleasing within itself, the trust exceeded the index benchmark returns by 2.67%
Your trust sets itself a long-term objective of returning an average of 7% p.a. and this year's effort goes a long way to restoring this average.
Those of you who follow our investment strategy will note the trust has stayed with an asset allocation to growth investments of 31%. This allocation alone returned 32.89% for offshore equities and 32.23% for New Zealand shares.
The trust also benefited by being 100% hedged in terms of currency risk from December 2003.
Operational Matters
Management
In June 2003, John Wilson was employed as executive manager of the Mid & South Community Trust. John came to us with
a high profile and as a well-known community person in Timaru holding a number of prominent positions.
The change of management required a period of induction, and John has completed our strategic plan and has integrated
a working annual business plan to guide us through to our long-term objectives.
My thanks also to Sally Marsh, administration officer for the trust. Sally's efficiency is always appreciated and it is very appropriate that she is acknowledged in this report.
The year 2003 was a watershed year in that it saw the retirement of our long-time executive director Bruce Strathern.
Bruce was an asset to this organisation and continues to be an asset to the community where his work with not-for-profit organisations is outstanding. His time with the trust was characterised by the development of best practise policies in the running of the trust administration.
The Trustees
It is a privilege to preside over such an excellent board of trustees. Their wide range of expertise is focused always on ways in which your trust can improve and enhance this community. In October, the trust said goodbye to Trevor McIntyre, This was a bittersweet experience as Trevor was an excellent trustee with a depth of knowledge in youth affairs that is sorely missed.
I wish to thank him for the outstanding contribution he has made to this trust. However, we were collectively very proud that he was appointed as Headmaster of Christchurch Boys' High School. This is an exceptional achievement and we wish Trevor the very best for the challenges ahead.
The trust has been running with a trustee vacancy since October 2003.
Trust Activities
December 2003 saw the launch of a "social research study" that was facilitated and underwritten by your trust. The trustees, identifying there was a lack of co-ordinated information on which to form good donation criteria, felt this restriction most probably applied to other grant makers within this region. The resulting work titled Mid & South Canterbury: A Profile was presented to the community at an event held in Timaru in December and was supported by a large number of community organisations. The trust has been heartened by the feedback and uptake of this research. We wish to acknowledge the financial support of the Timaru District Council and the Department of Internal Affairs in this study.
A number of trustees attended and participated in the annual community trust conference held this year in Taupo. At that meeting, your trust made a commitment, in conjunction with the majority of the other community trusts, to fund our share in
a global research study of not-for-profit organisations conducted by the Johns Hopkins University, Maryland, United States of America. The combined trusts are working in conjunction with the Department of Statistics and the resulting report will enable New Zealand to measure the size and robustness of community volunteering against other nation states on an ongoing basis.
I believe this to be a very worthy initiative and I am proud our trust has made this commitment.
Donations
This financial year has indeed been a busy one for the trustees. You will note that the donation round for the year ending
31 March 2004, is based on the performance of the previous year. While the donation round was smaller in terms of dollars, we endeavoured to be fair and consistent in our distribution. You will also note we have been more severe in restricting new large capital projects in an effort to maintain support to those smaller, valuable organisations that have fewer options and capabilities to resource themselves. We look forward to a much larger distribution in the ensuing year.
Philanthropy New Zealand (PNZ)
Your trust resolved to become a member of this organisation. PNZ is committed to growing the concept of gifting and also provides support for grant-making organisations. This body has a growing membership of community and energy trusts that gain professional development for their directors.
Appointment of Auditor
The trust has again appointed Martin Wakefield, Chartered Accountants of Timaru, to act as auditors to the trust.
PETER MCILRAITH, Chairperson.
Date: 23 August 2004.
Consolidated Statement of Financial Performance for the Year Ended 31 March 2004
2004 2003
$ $
Income:
Interest: Managed funds 978,393 881,073
Interest: Other 825 416
Dividends: Managed funds 187,246 142,209
Total income 1,166,464 1,023,698

Less expenses-
Direct investment expenditure:
Management fees 63,350 78,554
Consultancy fees 14,882 42,431
Total direct investment expenditure 78,232 120,985
1,088,232 902,713
Less operating expenditure:
Advertising 8,941 7,834
Auditors' fees 4,950 4,050
Interest - 184
Legal fees 738 546
Postage, tolls and fax 354 1,668
Printing and stationery 2,318 7,944
Salary and wages 96,301 87,860
Professional fees:
- Accountancy and advisory 13,056 10,401
- Socio-economic study 4,243 16,740
- Taxation 17,349 11,643
- Bequest programme 448 -
- Angoa project 516 -
Sundry administration expenses 9,313 20,876
Conference expenses 7,356 7,342
Internal Affairs Department costs 4,919 6,625
Trustees:
- Meeting expenses 45,297 45,018
- Travel 3,595 6,115
- Honoraria 21,029 18,968
Trustees' insurance 4,569 3,847
Trustees' training - 2,105
Staff recruitment 10,159 7,945
Total operating expenditure 255,451 267,711
Net income before movement in managed funds 832,781 635,002
Movement in Managed Funds
Offshore debt 46,358 669,981
Offshore equity 2,770,406 (3,958,844)
New Zealand debt 93,865 397,939
New Zealand equity 767,655 (639,577)
3,678,284 (3,530,501)
Net surplus/(deficit) transferred to trust fund 4,511,065 (2,895,499)
Consolidated Statement of Movements in Equity for the Year Ended 31 March 2004
2004 2003
$ $
Opening equity: 31,136,967 34,729,876
Net surplus/(loss) for year 4,511,065 (2,895,499)
Plus donations lapsed 23,897 26,000
Less donations approved (342,292) (723,410)
Closing equity 35,329,637 31,136,967
Consolidated Statement of Financial Position as at 31 March 2004
Note 2004 2003
$ $
Trust capital:
Capital base 2 32,087,148 31,136,967
Inflation reserve 3 3,242,489 -
General reserves 4 - -
35,329,637 31,136,967
Represented by-
Current assets:
Provision for tax 6 4,319 11,232
Westpac Bank:
- Subsidiary company account 1,143 3,141
- Current account 41,400 74,401
Sundry debtors 15,425 31,652
Advances 10 - 40,000
62,287 160,426
Less current liabilities:
Sundry creditors 51,639 96,612
Donations approved not yet paid 5 105,400 461,904
Total current liabilities 157,039 558,516
Working capital (94,752) (398,090)
Add non current assets-
Managed Funds Investments:
- New Zealand debt 2 18,426,714 14,470,443
- New Zealand equity 2 3,701,056 2,916,785
- Offshore debt 6,001,900 6,021,337
- Offshore equity 7,294,719 8,126,492
35,424,389 31,535,057
Net assets 35,329,637 31,136,967
Signed on behalf of the board of trustees.
Chairperson: C. E. BRAND.
Trustee: Trustee.
Dated: 23 August 2004.
Consolidated Statement of Cash Flows for the Year Ended 31 March 2004
2004 2003
$ $
Cash flows from operating activities-
Cash was provided from:
Interest on deposits 825 417
Taxation refund 4,763 589
5,588 1,006
Cash was applied to:
Suppliers of goods and services (281,180) (320,421)
Donations paid (674,899) (844,717)
(956,079) (1,165,138)
Net cash flows from operating activities (950,491) (1,164,133)
Cash flows from investing activities-
Cash was provided from:
Withdrawal of managed funds 915,492 1,217,141
915,492 1,217,141
Cash was applied to:
Managed funds - -
915,492 1,217,141
Net cash flows from investing activities 915,492 1,217,141
Increase/(decrease) in cash held (34,999) 53,009
Add opening cash 1 April 2003 77,542 24,533
Cash as at 31 March 2004 42,543 77,542
Comprised of-
Westpac Bank:
Subsidiary company account 1,143 3,141
Current account 41,400 74,401
42,543 77,542
Reconciliation of Net Surplus and Net Cash Flows From Operating Activities
2004 2003
$ $
Net surplus transferred to equity 4,511,065 (2,899,679)
Plus donations returned 23,897 26,000
Less donations approved (342,292) (723,410)
4,192,670 (3,597,089)
Plus/(less) non cash items:
Managed funds gains/losses (4,804,824) 2,369,387
Transfer from Aorangi Park Trust 40,000 40,000
(4,764,824) 2,409,387
(572,154) (1,187,702)
Movements in working capital:
Increase/(decrease) in donations approved not yet paid (356,504) (187,308)
Increase/(decrease) in creditors (44,973) 32,488
(Increase)/decrease in accrued interest - 154,973
(Increase)/decrease in tax refund due 6,913 (3,731)
(Increase)/decrease in sundry debtors 16,227 27,147
Movements in working capital (378,337) 23,569
Net cashflow from operating activities (950,491) (1,164,133)
Notes to the Consolidated Financial Statements for the Year Ended 31 March 2004
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 approved for payment.
(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. This amount to be allocated from trust profit on an annual basis.
(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 prior year financial results depleted the capital and reserves:
(i) Capital fund - The initial capital fund (being the realised value of trust bank shares) was $32,087,148.
(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 nominal inflation reserve required under this policy at 31 March 2004 is $4,892,604 and it is the trustees intention to restore the inflation reserve accordingly.
(b) There have been no other changes in accounting policy.
2. Capital Fund 2004 2003
$ $
Initial capital fund 31,136,967 32,087,148
Transfer from/to general reserves 950,181 (950,181)
Balance at end of the year 32,087,148 31,136,967
3. Inflation Reserve
Balance at beginning of the year - 2,539,687
Transfer from/to general reserves 3,242,489 (2,539,687)
Balance at end of year 3,242,489 -
4. General Reserves
Balance at beginning of the year - 103,041
Add: Surplus for the year 4,511,065 -
Transfer from capital - 950,181
Transfer from inflation reserve - 2,539,687
Add: Donations returned 23,897 26,000
4,534,962 3,618,909
Deduct: Donations approved (342,292) (723,410)
Deduct: Deficit for the year - (2,895,499)
Transfer to capital (950,181) -
Transfer to inflation reserve (3,242,489) -
Balance at end of the year - -
5. Donations Approved Not Yet Paid
Approved donations not yet paid out include:
2004 2003
$ $
Fairlie Beautifying Society - 10,000
Lake Tekapo Promotion Association 5,000 5,000
Caroline House Inc. - 10,000
IHC South Canterbury 1,500 1,500
SC Car Club - 5,000
SC Cricket Development Trust 75,000 75,000
SC Sports Stadium Trust - 100,000
Ashburton Area Equestrian Federation - 1,000
Ashburton Eastern United Soccer Club - 450
Ashburton Hockey Assn - 900
Ashburton Musical Parenting - 165
Mania-o-roto Rover Scout Crew - 20,000
Mid Canterbury Soccer - 500
Fairlie Museum Inc. - 500
Mackenzie Junior Netball - 500
Air Training Corp 15th Squadron - 200
Athletics S C All Weather Track Trust - 100,000
Caroline House Inc. - 36,000
Project Waimate - 5,000
SC Conservation Trust 500 500
Aoraki Polytechnic - 7,000
Caroline House Inc. - 5,000
Studholme District History Committee - 1,000
Geraldine Amateur Swim Club - 30,000
Ashburton College Technology - 46,689
Ashburton Community Pool 20,000 -
Mid Canterbury Cricket Association 1,000 -
Hockey South Canterbury 1,000 -
Sport South Canterbury 1,400 -
105,400 461,904
6. Taxation
The trust is exempt from tax with effect from 1 April 2004 in accordance with section CB 4 (1) (m) of the Income Tax Act 1994. The trust was in a tax loss position up to 31 March 2004.
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. Capital Commitments
There were no capital commitments (2003 - $Nil).
9. Contingent Liabilities
There were no contingent liabilities at 31 March 2004 (2003 - $Nil).
10. Advances
There were no advances outstanding at balance date.
11. 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
Sixty-six per cent of the assets of the trust are represented by debt investments and current account balances with Westpac Bank 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:
2004 2003
$ $
Debtors 15,425 31,652
Advances - 40,000
Managed fund equities 10,995,775 11,043,277
11,011,200 11,114,929
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 Community Trust of Mid & South Canterbury Inc. and its financial position as at 31 March 2004. The information is stated in accordance with the accounting policies set out above.
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 2004 and of the results of operations for the year ended 31 March 2004.
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 Community Trust of Mid & South Canterbury Inc.
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 2004 and the results of its operations for the year ended on that date.
Our audit was completed on 6 August 2004 and our unqualified opinion is expressed as at that date.
MARTIN WAKEFIELD, Chartered Accountants, Auditor, Timaru.
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(A full list of all distributions of income by way of donations for the year ended 31 March 2004 is available from the trust's office on request.)