Consolidated Statement of Financial Performance for the Year Ended 31 March 2005
Note 2005 2004
$ $
Income:
Income from investments 2 8,901,415 15,410,286
Less expenditure:
Advertising and promotion 168,842 117,331
Auditor fees – Trust audit 12,087 11,238
– Other services – 2,016
Depreciation 24,507 20,877
Rent and occupancy 60,598 42,581
Professional fees 95,962 70,844
Trustee meeting expenses 48,866 53,897
Trustee fees 142,651 151,457
Wages and salaries 284,390 263,308
Other expenses 94,534 70,470
Total expenditure 932,437 804,018
Net surplus 7,968,978 14,606,268
The net surplus has been allocated as follows:
Trust capital maintenance 4 1,200,000 1,200,000
Donation reserve transfer 6,768,978 13,406,268
7,968,978 14,606,268
Consolidated Statement of Movements in Equity for the Year Ended 31 March 2005
Note 2005 2004
$ $
Equity at start of period 115,159,300 105,432,428
Net surplus 7,968,978 14,606,268
Total recognised revenues and expenses 7,968,978 14,606,268
Net community donations 9 (4,584,720) (4,879,396)
Equity at the end of period 118,543,558 115,159,300
Consolidated Statement of Financial Position as at 31 March 2005
Note 2005 2004
$ $
Equity:
Trust capital 4 106,734,667 105,534,667
Donation reserve 5 11,808,891 9,624,633
Total trust funds 118,543,558 115,159,300
Assets:
Investments in managed funds 6 111,923,113 108,540,586
Fixed assets 7 85,201 44,383
Accrued income 129,485 110,368
Cash and bank deposits 8 8,166,464 8,975,886
Total assets 120,304,263 117,671,223
Liabilities:
Sundry payables 166,096 122,580
Employee entitlements 20,759 16,526
Donations payable 9 1,573,850 2,372,817
Total liabilities 1,760,705 2,511,923
Net assets 118,543,558 115,159,300
These financial statements have been authorised for issue by the trustees on 26 May 2005.
JOHN CULLING BRIAN BOURKE
Chairperson Trustee
Consolidated Statement of Cash Flows for the Year Ended 31 March 2005
Note 2005 2004
$ $
Cash flows from operating activities—
Cash was provided from:
Investment income 8,443,143 7,508,421
8,443,143 7,508,421
Cash was applied to:
Trustees and employees (422,808) (409,742)
Suppliers of other goods and services (524,757) (447,362)
Payment of Tax – (193,770)
Net operating cash flows 10 7,495,578 6,457,547
Cash flows from investing activities—
Cash was applied to:
Investment in managed funds (2,855,989) (1,233,934)
Purchase of fixed assets (65,324) (15,637)
(2,921,313) (1,249,571)
Net cash flows from investing activities (2,921,313) (1,249,571)
Cash flows from financing activities—
Cash was applied to:
Community donation payments (5,383,687) (5,681,282)
Net cash flows from financing activities (5,383,687) (5,681,282)
Net increase (decrease) in cash held (809,422) (473,306)
Add cash at 1 April 8,975,886 9,449,192
Cash at 31 March 8 8,166,464 8,975,886
Notes to the Consolidated Financial Statements for the Year Ended 31 March 2005
1. Statement of Accounting Policies
1.1 Reporting Entity
Eastern and Central Community Trust Inc. is a charitable trust incorporated in accordance with the provisions of the Community Trusts Act 1999.
The trust has a wholly owned company – Eastern & Central Community Trust Charities Limited – which is registered under the Companies Act 1993.
The consolidated financial statements have been prepared in accordance with the Financial Reporting Act 1993.
1.2 Measurement Base
The measurement base applied is that of historical cost adjusted for the market valuation of investments.
1.3 Specific Accounting Policies
The following are the particular accounting policies, which have a material effect on the measurement of results and financial position.
1.3.1 Basis of Consolidation
The consolidated financial statements include the trust and its wholly owned company accounted for using the purchase method. All significant inter-entity transactions are eliminated on consolidation. The entities have a common balance date of 31 March.
1.3.2 Investment Income
Investment Income is accounted for on an accruals basis recognising both realised and unrealised gains or losses in value.
1.3.3 Foreign Currency
Foreign Currency balances are converted to NZD at the year end rate of exchange unless covered by
a forward exchange contract. Where such contracts are in place, the contracted rate is adopted. Transactions completed during the year are converted at the rate applying at the approximate date of the transaction. Foreign exchange gains and losses are included within the statement of financial performance.
1.3.4 Investments
Investments are recorded at market value at year-end.
1.3.5 Cash
Cash comprises cash at bank, call deposits and short-term deposits but does not include cash held by fund managers. Cash flows from operations include withdrawals of income from managed funds.
1.3.6 Donations
Donations are recognised as a liability of the trust when they are approved by trustees and notified to applicants notwithstanding that the applicants may still have to fulfil some conditions.
1.3.7 Fixed Assets
Fixed assets are recorded at cost less accumulated depreciation.
1.3.8 Depreciation
Depreciation is provided on a straight line basis on all tangible fixed assets at rates calculated to allocate the assets’ cost less estimated residual value over their estimated useful lives.
The depreciation periods are:
Computer equipment three years
Fixtures and fittings nine years
Furniture ten years
Office equipment five years
1.3.9 G.S.T. inclusive accounting has been adopted, as the trust is not registered for G.S.T.
1.4 Changes in Accounting Policies
There have been no changes in accounting policies. All policies have been consistently applied.
2. Income From Investments
2005 2004
$ $
Unrealised income 526,538 6,463,839
Realised income 7,902,439 8,528,654
Less fund managers’ expenses 87,383 73,115
8,341,594 14,919,378
Plus interest 559,821 490,909
8,901,415 15,410,286
3. Taxation
The trust is exempt from income tax as provided in the Income Tax Act 2004.
4. Trust Capital
The initial trust capital was set at $90 million in 1997. The trust capital has been increased over time as a surrogate for inflation and population growth within the region administered by the trust. The trustees periodically review the capital maintenance transfer and this year the trustees have determined to increase the capital by $1.2 million. Previous transfers have exceeded inflation and population increases.
2005 2004
$ $
Balance at the beginning of the year 105,534,667 104,334,667
Allocation of surplus to capital maintenance 1,200,000 1,200,000
Balance at the end of the year 106,734,667 105,534,667
5. Donation Reserve
The trustees retain all undistributed income in the donation reserve.
2005 2004
$ $
Balance at the beginning of the year 9,624,633 1,097,761
Transfer from income 6,768,978 13,406,268
16,393,611 14,504,029
Less donations 4,584,720 4,879,396
Balance at the end of the year 11,808,891 9,624,633
6. Investments in Managed Funds
2005 2004
$ $
Opening balance 108,540,586 99,369,106
Gross income 8,465,975 14,992,493
Withdrawals to fund donations (net) (5,083,448) (5,821,013)
Closing balance 111,923,113 108,540,586
Investments comprise:
Bonds 65,019,670 71,449,273
Equities 46,903,443 37,091,313
Total managed funds 111,923,113 108,540,586
Held in:
New Zealand Bonds 65,019,670 71,449,273
Equities 8,873,869 10,504,888
73,893,539 81,954,161

Off shore Equities 38,029,574 26,586,425
38,029,574 26,586,425
111,923,113 108,540,586
7. Fixed Assets
2005 2004
$ $
Fixtures, fittings and equipment at cost 187,781 147,561
Less accumulated depreciation 102,580 103,178
85,201 44,383
8. Cash and Bank Deposits
2005 2004
$ $
Current accounts 14,466 8,061
Call accounts 3,151,805 1,267,682
Petty cash 192 143
Short term deposits 5,000,000 7,700,000
8,166,464 8,975,886
9. Donations
2005 2004
$ $
Standard donations 1,145,810 1,103,300
Special donations 3,527,285 3,089,100
Flood relief – 300,000
Shooting Star 38,000 787,340
Total community donations 4,711,095 5,279,740
Less donations written back 126,375 400,344
Net community donations 4,584,720 4,879,396
Total donations payable at year end was $1,573,850. Included in donations payable is $1,131,600 ($1,661,281 – 2004) of donations, which are subject to the applicants fulfilling certain conditions.
10. Reconciliation of Net Surplus With Operating Cash Flows
2005 2004
$ $
Net surplus for the period 7,968,978 14,606,268
Adjust for non-cash items:
Income on investments (526,538) (7,937,426)
Depreciation 24,507 20,877
Movements in net current assets:
Accrued income (19,117) (37,554)
Sundry payables (47,748) (848)
Provision for taxation – (193,770)
Net operating cash flows 7,495,578 6,457,547
11. Contingent Liabilities and Commitments
Commitments
The trust has no commitments (nil – 2004).
Lease Commitments
2005 2004
$ $
Within 1 year 44,898 41,741
1-2 years 44,898 48,155
2-5 years 134,693 144,465
224,489 234,361
The lease on the present Westerman’s premises commenced on 1 July 2004 and expires on 30 June 2016. The rent payable
is to be reviewed at the conclusion of the second and fourth years and the rental will be adjusted, if necessary, in accordance
to any increase in the consumer price index.
Contingencies
There are no contingent liabilities or contingent assets at balance date (nil – 2004).
12. Related Part Transactions
The trust’s premises are leased from a company in which Mr K. Atkinson, trustee, has a financial interest (refer note 11). The rent paid for the period from July 2004 was $31,900.
13. Segmental Reporting
The trust operates as a tax-exempt philanthropic trust distributing funds to the community in the central North Island region.
14. Financial Instruments
Financial instruments include short-term deposits, New Zealand bonds, international bonds, derivatives and investments in managed funds both within New Zealand and overseas.
14.1 Credit Risk
The trustees regularly review their investment strategy. The investment strategy ensures an appropriate diversification of investments so that the trust has no significant concentration of counterparty or credit risk.
14.2 Fair Values
The trust has recorded its financial assets and liabilities at current market values, which represent estimated fair values and credit risk exposure.
14.3 Currency Risk
The trust has exposure to currency risk through its investments in offshore equities managed funds. The current investment policy requires full hedging of currency risk for overseas bonds when held and 50% hedging of currency risk for overseas equities. Since October 2004, all hedging on overseas equities was removed after a resolution to this effect was passed by the board. Currency risk is managed by fund managers with a range of tolerance.
Offshore investments are denominated into the following foreign currency groupings:
2005 2004
$ $
USA/Canada 7,193,346 7,314,439
UK/Europe 12,619,128 7,819,186
Japan/Asia 11,318,951 5,613,856
Australia 6,898,149 5,838,944
38,029,574 26,586,425
14.4 Credit Facilities
The trust has no credit facilities.
14.5 Interest Rate Risk
The trust investments in fixed rate securities are subject to interest rate risk.
15. Net Current Assets
Cash, bank deposits and accrued income are expected to be realised within 12 months. All liabilities are due within 12 months.
Audit Report
To the Trustees of Eastern & Central Community Trust Incorporated
We have audited the financial statements. The consolidated financial statements provide information about the past financial performance of the Eastern & Central Community Trust (Inc) and its financial position as at 31 March 2005. This information is stated in accordance with the accounting policies set out in note 1 to the consolidated financial statements.
The Trustees’ Responsibilities
The trustees are responsible for the preparation of financial statements that give a true and fair view of the financial position of the trust and the results of its operations and cash flows for the year ended 31 March 2005.
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 give 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.
Other than our capacity as auditors, we have no relationship with or interest in the trust.
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 statements:
– comply with New Zealand generally accepted accounting practice; and
– give a true and fair view of the financial position of the trust as at 31 March 2005 and the results of its operations and cash flows for the year ended on that date.
Our audit was completed on 26 May 2005 and our unqualified opinion is expressed as at that date.
PALAIRET PEARSON, Chartered Accountants, Napier.
Schedule of Community Payments for the Year Ended 31 March 2005
Donations by Region
2005 2004
$ $
Poverty Bay 517,900 665,400
Hawke’s Bay 1,784,250 1,735,050
Tararua 107,600 148,900
Wairarapa 603,410 413,936
Manawatu 1,120,135 1,269,800
Horowhenua 249,300 488,654
Regional 328,500 558,000
Total donations 4,711,095 5,279,740
–––––––––––––––
An itemised list of all donations is available at www.ecct.org.nz or free of charge from the Trust Manager, Eastern & Central Community Trust Incorporated, P.O. Box 1058, Hastings.