Trust Particulars: The Canterbury Community Trust was incorporated as a charitable trust in accordance with the provisions of the trustee provisions of the Community Trusts Act 1999. The purpose of The Canterbury Community Trust is to provide charitable, cultural, philanthropic and recreational benefits to the community.
Date of Trust Deed: 30 May 1988.
Settlor: Minister of Finance.
Trustees: R. J. Todd (Chairperson), D. C. Close, B. C. Dent, A. C. Pitcher, F. M. Jessep, P. B. Lowe-Johnson, M. E. O’Connor,
P. R. Taylor, E. M. Richards, P. J. Richardson, P. J. Sigglekow.
Trust Manager: W. P. Ward.
Accountants: Hadlee Kippenberger & Partners Limited, P.O. Box 577, Christchurch (M. J. Hadlee).
Taxation Consultant: KPMG, P.O. Box 274, Christchurch (O. M. Wallis).
Auditors: PricewaterhouseCoopers, P.O. Box 13-244, Christchurch (R. Harris).
Custodial Trustee: Trustees Executors.
Fund Investment Advisor: Forsyth Barr Funds Management.
Bankers: Westpac, P.O. Box 13-113, Christchurch.
Solicitors: Chapman Tripp Sheffield Young, P.O. Box 2510, Christchurch (J. L. Holland).
The Canterbury Community Trust Trustees’ Report for the Year Ended 31 March 2006
Objectives of the Trust and Charitable Company Subsidiary
To provide charitable, cultural, philanthropic and recreational benefits to the communities of Canterbury, Marlborough, Nelson and the Chatham Islands.
Policies and Structure of the Trust and Charitable Company Subsidiary
These organisations are structured to include community representatives from the four regions. Their policies are to manage and distribute their income and capital to the community they serve.
Activities of the Trust
During the period under review, the trust and its charitable subsidiary have provided financial assistance to a wide range of community groups in Canterbury, Marlborough, Nelson and the Chatham Islands. In addition to responding to applications for assistance, these organisations have initiated several new projects of benefit to community groups.
Trustees’ Remuneration
During the period, the trustees of the trust received fees of $126,541 (2005 – $123,193).
Review of Results and Financial Position
The total distribution from the trust and charitable company was $15.390 million (2005 – $13.280 million) donations to community groups during the last 12 months.
Signed on behalf of the Board of Trustees:
Chairperson: BOB TODD.
Trustee: DAVID CLOSE.
Date: 29 May 2006.
The Canterbury Community Trust Consolidated Statement of Financial Performance for the Year Ended 31 March 2006
Note 2006 2005
Revenue 2 68,264,266 38,119,934
Less investment fees 2 951,255 1,158,150
Less expenses 2 1,077,268 1,026,764
Net surplus before retentions and donations 66,235,743 35,935,020
Less retentions:
Transfer to capital base reserve 4 14,658,200 11,538,595
Available for distribution 51,577,543 24,396,425
Donations to tax approved entities 3 12,525,583 10,838,176
Net surplus transferred to trust funds 39,051,960 13,558,249
The Canterbury Community Trust Consolidated Statement of Movements in Trust Funds for the Year Ended 31 March 2006
Note 2006 2005
Total trust funds at beginning of year 475,979,459 453,324,669
Less donations paid from capital 3 (2,864,744) (2,442,054)
473,114,715 450,882,615
Add net surplus for the year 39,051,960 13,558,249
Increase in capital base reserve 14,658,200 11,538,595
Total trust funds at end of year 526,824,875 475,979,459
Represented by:
Core real capital base reserve 4 371,422,000 371,422,000
Accumulated income reserve 4 81,042,811 44,855,595
Capital base reserve 4 74,360,064 59,701,864
526,824,875 475,979,459
The Canterbury Community Trust Consolidated Statement of Financial Position as at 31 March 2006
Note 2006 2005
Trust funds 4 526,824,875 475,979,459
Represented by—
Current assets:
Westpac operating accounts 56,234 7,503
Bank deposits 1,376,866 1,711,436
Property manager operating account 22 1,168
Accounts receivable 603,076 225,077
Taxation refund due 141 135
2,036,339 1,945,319

Community loans 15 1,335,544 1,199,985

Investments:
Property investments 7 8,700,000 7,850,000
Managed funds 13 513,446,524 463,620,591
522,146,524 471,470,591
Fixed assets 8 1,534,191 1,580,803
Total assets 527,052,598 476,196,698
Current liabilities:
Accounts payable 210,403 203,180
Goods and services tax 17,320 14,059
Total liabilities 227,723 217,239
Net assets 526,824,875 475,979,459
The Canterbury Community Trust Consolidated Statement of Cash Flows for the Year Ended 31 March 2006
Note 2006 2005
Cash was provided by (used for)—
Operations: 5
Income from investments 32,587,425 37,287,360
Payments to suppliers, employees and trustees (1,926,554) (2,037,246)
Donations to the community (15,390,327) (13,280,230)
15,270,544 21,969,884
Investing:
Managed funds investments (15,372,671) (20,158,107)
Movement in term deposits 334,570 (304,900)
Community loans (135,559) (1,199,985)
Sale (purchase) of fixed assets (48,153) (307,115)
(15,221,813) (21,970,107)
Increase (decrease) in cash 48,731 (223)
Cash at beginning of year 7,503 7,726
Cash at end of year 56,234 7,503
Represented by:
Westpac operating accounts 56,234 7,503
The Canterbury Community Trust Notes to the Financial Statements for the Year Ended 31 March 2006
1. Statement of Accounting Policies
General Accounting Policies
The following general accounting policies have been adopted in the preparation of the financial statements.
(i) The Canterbury Community Trust was incorporated as a charitable trust in accordance with the provisions of the Community Trusts Act 1999. These financial statements have been prepared in accordance with applicable financial reporting standards.
(ii) 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.
Specific Accounting Policies
Depreciation
Depreciation has been charged in the financial statements using rates allowed by the Inland Revenue Department which will write off the cost of assets less their estimated residual value over their estimated economic lives.
The depreciation rates used are:
Buildings 3% c.p.
Office equipment 6-60% d.v.
Furniture and fittings 14-40% d.v.
Computer 28-48% d.v
Fixed Assets
Fixed assets are recorded at cost less accumulated depreciation.
Investments
Where there is a quoted market value for the underlying investment, these are recorded at market value. Where there is no quoted market value then proxy valuations are used based on underlying yields. For certain investments net asset value is used. Where there is no quoted value and a reliable estimate cannot be determined then cost is used. Net income including realised and unrealised gains or losses from holding or trading these investments are recorded in the statement of financial performance.
Investment properties are stated at open market value less estimated costs of disposal as determined by independent valuers at balance date. Unrealised changes in the value of investment properties are included in revenue. Investment properties are not depreciated.
Donations
Donations are accounted for on a cash basis.
Dividend Income
Dividend income is included in the statement of financial performance when it is received.
Income Tax
For non exempt entities, income tax expense is recognised on the surplus available for distribution before taxation, adjusting for differences between taxable and accounting income.
Goods and Services Tax
The subsidiary of The Canterbury Community Trust, Canterbury Trust House Limited, is registered for GST. Accordingly, its financial performance and financial position have been consolidated within the accounts on a GST exclusive basis.
Subject to the above, the trust is not registered for GST purposes and therefore the financial statements have been prepared on a GST inclusive basis.
Financial Instruments
Foreign currency transactions are translated to New Zealand currency at the exchange rate ruling at the dates of the transactions. Amounts receivable and payable in foreign currencies at balance date are translated at the exchange rate at that date. Exchange differences arising from the translation of amounts payable and receivable in foreign currencies are recognised in the statement of financial performance.
Off-balance sheet financial instruments that are designated as hedges are recognised on the same basis as the underlying hedged item. Off-balance sheet transactions that do not constitute specific hedges are stated at market value and any resultant gain or loss is recognised in the statement of financial performance.
Cash
For the purpose of the statement of cash flows, cash comprises Westpac balances only. Cash excludes bank deposits not used as part of the trust’s day-to-day cash management.
Basis of Consolidation
The Canterbury Community Trust and its subsidiaries, Community Trust Charities Limited, Canterbury Trust House Limited, Canterbury Direct Investments Limited, Amateur Game or Sport Promoter Limited and District Improvement Organisation Limited have been consolidated using the purchase method of consolidation.
Changes in Accounting Policies
There have been no changes in accounting policies.
All policies have been applied on bases consistent with those used last year.
2. Revenue and Expenses
2006 2005
Revenue:
Rents received 776,379 751,682
Interest received 233,045 163,151
Investment income 66,407,063 36,746,924
Commissions received 1,054 4,580
Gain on revaluation of investment properties 846,725 453,597
68,264,266 38,119,934
Investment fees:
Fund managers’ fees 656,857 862,945
Custodial fees 141,160 149,609
Advisory fees 153,238 145,596
951,255 1,158,150
Expenses:
Advertising, public relations, distribution and other costs 248,927 233,471
Computer and system review costs 25,111 26,987
Depreciation, loss on sale and depreciation recovered 91,490 100,939
Professional fees 100,907 102,254
Property costs 173,061 153,232
Salaries and staff recruiting fees 311,231 286,688
Trustees’ fees 126,541 123,193
1,077,268 1,026,764
3. Donations
The names of organisations to whom distributions have been made by the trust under section 13 of the Community Trusts Act 1999 during the financial year and the amounts distributed are shown in the annual report.
2006 2005
Donations paid from income 12,525,583 10,838,176
Donations paid from capital 2,864,744 2,442,054
(Includes prior year adjustments for cancellation, refunds, etc.) 15,390,327 13,280,230
Future commitments 5,488,500 835,000
Donations approved from income 12,318,279 11,329,961
Donations approved from capital 2,861,189 2,541,607
Donations approved for year 15,179,468 13,871,568
Funds carried forward as accumulated income are available for the payment of donations in future years. Budgeted donations unspent in the current year are to be distributed in the following year.
Future donation commitments represent donations approved in the current or previous years which are to be distributed from either capital or future income sources.
The trustees recognise that there is a need to ensure a fairness and equity between the regions as far as payments of donations are concerned in relation to budgetary allocations. The allocation of donations between regions is based on population statistics for each region.
4. Trust Funds
2006 2005
Core real capital base reserve:
Balance brought forward 371,422,000 371,422,000
Donations paid from capital (2,864,744) (2,442,054)
Transfer from accumulated income reserve 2,864,744 2,442,054
371,422,000 371,422,000
Accumulated income reserve:
Balance brought forward 44,855,595 33,739,400
Net surplus for year 39,051,960 13,558,249
Transfer to core real capital base reserve (2,864,744) (2,442,054)
81,042,811 44,855,595
Capital base reserve:
Balance brought forward 59,701,864 48,163,269
Retention as per statement of financial performance 14,658,200 11,538,595
74,360,064 59,701,864
Total trust funds 526,824,875 475,979,459
Available for tax free distribution 512,192,326 458,482,166
Available for taxable distribution 14,632,549 17,497,293
Total trust funds 526,824,875 475,979,459
The capital base reserve is an allowance for the erosion of the value of the core real capital base reserve, due to inflation.
For 2006, this was calculated based on inflation at 3.4% on a core real capital base reserve of $431,123,864, being the original core real capital base reserve of $371,422,000 plus the adjusted capital base reserve of $59,701,864.
Even though The Canterbury Community Trust is exempt from income tax with effect from 1 April 2004, all taxable distributions after that date will still be subject to tax in the donee’s hands, if the donee does not have tax exempt status.
5. Reconciliation of Net Surplus to Net Operating Cashflow
2006 2005
Net surplus from statement of financial performance 39,051,960 13,558,249
Adjustments for non cash items in net surplus:
Depreciation 91,490 100,939
Gain on revalution of investment properties (846,725) (453,597)
Managed funds income unrealised (34,453,262) (257,076)
3,843,463 12,948,515
Adjustments for changes in working capital:
Decrease/(increase) in accounts receivable (378,000) (187,453)
Decrease/(increase) in Colliers operating account 1,146 20,552
Increase/(decrease) in accounts payable, rents received in advance, and goods andservices tax 10,479 91,729
3,477,088 12,873,343
Add capital base reserve transfer 14,658,200 11,538,595
Deduct donations paid from capital (2,864,744) (2,442,054)
Net operating cash flow 15,270,544 21,969,884
6. Capital Commitments
At balance date, the trust had capital commitments of $9.44 million (2005 – $0).
7. Investment Properties
The investment properties held at 31 March 2006 are valued at market value as follows:
2006 2005
262 Oxford Terrace 5,520,000 4,720,000
141 Hereford Street 3,180,000 3,130,000
8,700,000 7,850,000
Investment properties were valued at 31 March 2006 by an independent valuer, G. R. Sellars of Fright Aubrey, who is
a Fellow of the New Zealand Institute of Valuers.
8. Fixed Assets
Cost AccumulatedDepreciation 2006BookValue 2005BookValue
Land and Buildings – 95 Oxford Terrace, Christchurch 1,828,198 358,697 1,469,501 1,505,549
Computer 118,782 90,847 27,935 31,040
Office equipment 33,239 22,854 10,384 11,635
Furniture and fittings 103,164 76,793 26,371 32,579
Fixed assets 2,083,383 549,191 1,534,191 1,580,803
9. Contingent Liabilities
There are no contingent liabilities at balance date (2005 – Nil) apart from donation commitments as per Note 3.
10. Segmental Reporting
The trust operates as a charitable trust in the Canterbury, Marlborough, Nelson and Chatham Islands. As all operations occur within New Zealand, segmental reporting is not required.
11. Related Party
In the normal course of business, the trust has no related parties with any entity, other than those advised in Note 1.
12. Financial Instruments
Investments are stated at market value at balance date. Accounts receivable and accounts payable 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 financial position.
Concentration of Investments
Ninety-eight percent (98%) of the assets of the trust are represented by investments held with a range of financial institutions. The trustees consider the risk of non-recovery of these investments to be mitigated by prudent investment strategies and an appropriately diversified portfolio.
Currency Risk
The trust incurs currency risk as a result of investment transactions entered into by fund managers. Such risks are mitigated
by foreign currency hedges where appropriate. At 31 March 2006, the trust had entered into foreign exchange contracts to hedge foreign denominated investments in the amount of $50,745,975 (2005 – $36,044,881).
Interest Rate Risk
The following investments of the trust are sensitive to changes in interest rates: Bank call accounts and deposits, government and local authority and securities held by fund managers. Interest rate risk is mitigated by the use of interest rate swaps where appropriate. At as 31 March 2006, the trust had entered into interest rate swaps contracts in the amount of $98,048,914.
13. Managed Funds Investment
2006 2005
The trust held the following funds at balance date:
Managed funds – NZ Cash 116,884,833 109,235,153
Managed funds – NZ Fixed Interest 135,205,193 122,924,462
Managed funds – NZ Equities 33,617,009 31,114,597
Managed funds – NZ Property 12,815,506 12,315,590
Managed funds – Australian Equities 41,889,603 36,715,837
Managed funds – Global Bonds 28,132,939 43,328,475
Managed funds – Global Equities 60,076,552 42,980,164
Managed funds – Emerging Market Debt 13,425,678 9,765,627
Managed funds – Emerging Market Equities 4,583,676 –
Managed funds – Alternative Assets 66,815,535 55,240,686
513,446,524 463,620,591
14. Taxation
The Canterbury Community Trust is exempt from income tax with effect from 1 April 2004. This means that Canterbury Trust House Limited is now the only taxable entity in the group. Canterbury Trust House Limited has a tax loss to carry forward as at 31 March 2006 of $1,689,421 (2005 – $1,298,887). The benefit of these losses is not recognised.
15. Community Loans
The trust has approved three community loans during the year ended 31 March 2006. The loans have been approved with an average term of 10 years and incur an average interest rate of 3% per annum. Where appropriate, the loans have been secured by registered instruments. The loan obligations at balance date were all current and considered collectable.
Auditors’ Report to the Trustees of The Canterbury Community Trust
We have audited the consolidated financial statements. The consolidated financial statements provide information about the past financial performance and cash flows of the trust and subsidiaries for the year ended 31 March 2006 and their financial position as at that date. This information is stated in accordance with the accounting policies set out in Note 1.
Trustees’ Responsibilities
The trustees are responsible for the preparation and presentation of the consolidated financial statements which present fairly the financial position of the trust and subsidiaries as at 31 March 2006, and their financial performance and cash flows for the year ended on that date.
Auditors’ Responsibilities
We are responsible for expressing an independent opinion on the consolidated financial statements presented by the trustees and reporting our opinion to you.
Basis of Opinion
An audit includes examining, on a test basis, evidence relevant to the amounts and disclosures in the consolidated financial statements. It also includes assessing:
? the significant estimates and judgements made by the trustees in the preparation of the consolidated financial statements; and
? whether the accounting policies are appropriate to the circumstances of the trust and subsidiaries, 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 to provide us with sufficient evidence to give reasonable assurance that the consolidated 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.
We have no relationship with or interests in the trust and subsidiaries other than in our capacity as auditors.
Unqualified Opinion
We have obtained all the information and explanations we have required.
In our opinion, the consolidated financial statements:
? comply with generally accepted accounting practice in New Zealand; and
? present fairly the financial position of the trust and subsidiaries as at 31 March 2006, and their financial performance and cash flows for the year ended on that date.
Our audit was completed on 29 May 2006 and our unqualified opinion is expressed as at that date.
PRICEWATERHOUSECOOPERS, Chartered Accountants, Christchurch.
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A full list of all distributions of income by way of donations for the year ended 31 March 2006 is available from the trust’s office on request.