Statement of Financial Performance for the Year Ended 31 March 2006
Note 2006 2005
$ $
Income:
Income from investments 2 27,487,816 8,901,415
Less expenditure:
Advertising and promotion 144,400 168,842
Auditor fees – Trust audit 10,246 12,087
Depreciation 22,958 24,507
Rent and occupancy 72,175 60,598
Professional expenses 60,709 65,407
Donation expenses 19,039 30,555
Trustee meeting expenses 41,972 48,866
Trustee fees 129,638 142,651
Wages and salaries 297,457 284,390
Other expenses 83,824 94,534
Total expenditure 882,418 932,437
Net surplus 26,605,398 7,968,978
The net surplus has been allocated as follows:
Trust capital maintenance 4 2,400,000 1,200,000
Donation reserve transfer 24,205,398 6,768,978
26,605,398 7,968,978
Statement of Movements in Equity for the Year Ended 31 March 2006
Note 2006 2005
$ $
Equity at start of period 118,543,559 115,159,300
Net surplus 26,605,398 7,968,978
Total recognised revenues and expenses 26,605,398 7,968,978
Net community donations 9 (4,534,900) (4,584,720)
Equity at the end of period 140,614,057 118,543,558
Statement of Financial Position as at 31 March 2006
Note 2006 2005
$ $
Equity:
Trust capital 4 109,134,668 106,734,667
Donation reserve 5 31,479,389 11,808,891
Total trust funds 140,614,057 118,543,558
Current assets:
Accrued income 246,773 129,485
Cash and bank deposits 8 9,612,290 8,166,464
Total current assets 9,859,063 8,295,949
Non-current assets
Investments in managed funds 6 132,308,727 111,923,113
Fixed assets 7 81,762 85,201
Total non-current assets 132,390,489 112,008,314
Total assets 142,249,552 120,304,263
Current liabilities:
Sundry payables 170,956 166,096
Employee entitlements 22,389 20,759
Donations payable 9 1,442,150 1,573,850
Total liabilities 1,635,495 1,760,705
Net assets 140,614,057 118,543,558
These financial statements have been authorised for issue by the trustees on 25 May 2006.
JOHN CULLING BRIAN BOURKE
Chairperson Trustee
Statement of Cash Flows for the Year Ended 31 March 2006
Note 2006 2005
$ $
Cash flows from operating activities—
Cash was provided from:
Investment income 7,134,242 8,443,143
7,134,242 8,443,143
Cash was applied to:
Trustees and employees (432,453) (422,808)
Suppliers of other goods and services (573,893) (524,757)
Net operating cash flows 10 6,127,896 7,495,578
Cash flows from investing activities—
Cash was applied to:
Investment in managed funds 10,603 (2,855,989)
Purchase of fixed assets (26,073) (65,324)
(15,470) (2,921,313)
Net cash flows from investing activities (15,470) (2,921,313)
Cash flows from financing activities—
Cash was applied to:
Community donation payments (4,666,600) (5,383,687)
Net cash flows from financing activities (4,666,600) (5,383,687)
Net increase (decrease) in cash held 1,445,826 (809,422)
Add cash at 1 April 8,166,464 8,975,886
Cash at 31 March 8 9,612,290 8,166,464
Notes to the Financial Statements for the Year Ended 31 March 2006
1. Statement of Accounting Policies
1.1 Reporting Entity
Eastern and Central Community Trust Incorporated is a charitable trust incorporated in accordance with the provisions of the Community Trusts Act 1999.
During the year the Eastern and Central Community Trust Charities Limited was liquidated voluntarily, and the proceeds transferred to the Eastern and Central Community Trust Incorporated.
The 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 Investment Income
Investment income is accounted for on an accruals basis recognising both realised and unrealised gains or losses in value.
1.3.2 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.
1.3.3 Investments
Investments are recorded at market value at year-end.
1.3.4 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.
1.3.5 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.
1.3.6 Fixed Assets
Fixed assets are recorded at cost less accumulated depreciation.
1.3.7 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
Furniture ten years
Office equipment five years
1.3.8 GST inclusive accounting has been adopted, as the trust is not registered for GST.
1.4 Changes in Accounting Policies
There have been no changes in accounting policies. All policies have been consistently applied.
2. Income From Investments
2006 2005
$ $
Realised income
Dividend income 6,113,250 6,075,995
Interest income 488,637 559,821
Gain on disposal of investments 649,643 1,689,610
7,251,530 8,325,426
Unrealised income
Foreign exchange gains/(losses) 9,329,664 (1,367,226)
Revaluation of investments 11,066,554 2,030,598
20,396,218 663,372
Total income from investments 27,647,748 8,988,798
Less fund managers’ fees 159,932 87,383
Total net income from investments 27,487,816 8,901,415
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 $2.4 million. Previous transfers have exceeded inflation and population increases.
2006 2005
$ $
Balance at the beginning of the year 106,734,668 105,534,667
Allocation of surplus to capital maintenance 2,400,000 1,200,000
Balance at the end of the year 109,134,668 106,734,667
5. Donation Reserve
The trustees retain all undistributed income in the donation reserve.
2006 2005
$ $
Balance at the beginning of the year 11,808,891 9,624,633
Transfer from income 24,205,398 6,768,978
36,014,289 16,393,611
Less donations 4,534,900 4,584,720
Balance at the end of the year 31,479,389 11,808,891
6. Investments in Managed Funds
2006 2005
$ $
Opening balance 111,923,113 108,540,586
Gross income 26,467,331 8,465,975
Withdrawals to fund donations (net) (6,081,717) (5,083,448)
Closing balance 132,308,727 111,923,113
Investments comprise:
Bonds 53,679,030 65,019,670
Equities 78,629,697 46,903,443
Total managed funds 132,308,727 111,923,113
Held in:
New Zealand Bonds 53,679,030 65,019,670
Equities 9,632,030 8,873,869
63,311,060 73,893,539

Off shore Equities 68,997,667 38,029,574
68,997,667 38,029,574
132,308,727 111,923,113
7. Fixed Assets
2006 2005
$ $
Fixtures, fittings and equipment at cost 155,496 187,781
Less accumulated depreciation 73,734 102,580
81,762 85,201
8. Cash and Bank Deposits
2006 2005
$ $
Current accounts 6,460 14,467
Call accounts 1,605,729 3,151,805
Petty cash 101 192
Short term deposits 8,000,000 5,000,000
9,612,290 8,166,464
9. Donations
2006 2005
$ $
Standard donations 1,173,600 1,145,810
Special donations 3,650,600 3,527,285
Shooting Star – 38,000
Total community donations 4,824,200 4,711,095
Less donations written back 289,300 126,375
Net community donations 4,534,900 4,584,720
Total donations payable at year end was $1,442,150. Included in donations payable is $1,119,250 ($1,131,600 – 2005) of donations, which are subject to the applicants fulfilling certain conditions.
10. Reconciliation of Net Surplus With Operating Cash Flows
2006 2005
$ $
Net surplus for the period 26,605,398 7,968,978
Adjust for non-cash items:
Income on investments (20,396,218) (526,538)
Depreciation 22,958 24,507
Loss on sale of assets 6,555 –
Movements in net current assets:
Accrued income (117,288) (19,117)
Sundry payables 6,491 (47,748)
Net operating cash flows 6,127,896 7,495,578
11. Contingent Liabilities and Commitments
Commitments
The trust has no commitments (nil – 2005).
Lease Commitments
2006 2005
$ $
Within 1 year 44,898 44,898
1-2 years 44,898 44,898
2-5 years 134,693 134,693
224,489 224,489
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 – 2005).
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 was $44,898 ($31,900 for part of the 2005 year).
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. The current investment policy requires full hedging of currency risk for overseas bonds when held and 50% hedging of currency risk for overseas equities. There was no currency hedging on overseas equities throughout the year 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:
2006 2005
$ $
USA/Canada 17,087,572 7,193,346
UK/Europe 23,324,099 12,619,128
Japan/Asia 18,866,201 11,318,951
Australia 9,719,795 6,898,149
68,997,667 38,029,574
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.
16. International Financial Reporting Standards
The trust is undertaking a review of its accounting policies to determine the changes that will be required on adoption of International Financial Reporting Standards (IFRS). It is not anticipated that IFRS will materially affect the trust’s reported results.
Audit Report
To the Trustees of Eastern & Central Community Trust Incorporated
We have audited the financial statements. The financial statements provide information about the past financial performance of the Eastern & Central Community Trust (Inc) and its financial position as at 31 March 2006. This information is stated in accordance with the accounting policies set out in note 1 to the 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 2006.
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 in 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 2006 and the results of its operations and cash flows for the year ended on that date.
Our audit was completed on 25 May 2006 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 2006
Donations by Region
2006 2005
$ $
Poverty Bay 549,250 517,900
Hawke’s Bay 1,645,650 1,784,250
Tararua 265,500 107,600
Wairarapa 477,850 603,410
Manawatu 1,200,400 1,120,135
Horowhenua 433,550 249,300
Regional 252,000 328,500
Total donations 4,824,200 4,711,095
–––––––––––––––
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.