Annual Report for the Year Ended 31 March 2006
Trust Particulars
The trust was initially incorporated on 5 August 1988 as the Trust Bank Bay of Plenty Community Trust in accordance
with the provisions of the Trustee Banks Restructuring Act 1988. It continues under the provisions of the Community Trusts Act 1999. The purpose of the trust is to provide charitable, cultural, philanthropic, recreational and other benefits to Bay of Plenty communities. In April 1998, the name was changed to the Bay of Plenty Community Trust Inc. In March 2006, the trust adopted the name BayTrust for operational purposes.
Trustees:
Mr R. B. Sharp (Chair), Ms T. J. Eggleton, Ms S. Kai Fong, Mr B. Kerr, Mrs J. Knudsen J.P., Ms E. Leighton Q.S.O.,
Mr L. Martin J.P., Mrs P. J. McLeod M.N.Z.M., Mrs M. Ngatai J.P., Ms A. von Tunzelmann, Ms P. Thompson and Ms M. Waaka M.N.Z.M.
Trust Manager:
Mr B. W. Cronin.
Accountants:
Staples Rodway, Tauranga.
Auditors:
Ingham Mora, Tauranga.
Bankers:
BNZ, Tauranga.
Westpac, Tauranga.
Financial Advisers:
Russell Investment Group Limited, Auckland.
Solicitors:
Sharp Tudhope, Tauranga.
Tax Advisers:
KPMG, Christchurch.
Chairman’s Report for the Year Ended 31 March 2006
The trustees are pleased to report on another successful year for the trust.
The trust has earned a record 14% return on its invested funds for the year to 31 March 2006. This gave the trust a highest ever net income of $17 million (including unrealised gains) and has enabled us to restore our reserves to prudent levels. It has also enabled us to budget for increased donations of $4,035,000 into the Bay of Plenty community in the year ahead. The approved donations into the community over the last 12 months totalled $3,255,000 (not all were actually paid during the year).
The trust retains a policy of growing its funds invested to maintain the real value of this community trust fund relative to inflation and 50% of population growth in the Bay. In addition, reserves are maintained at a prudent level to ensure continued donations into our community in adverse times recognising that investment returns do fluctuate and will not always be at the level achieved in the past year.
The amount added to our reserves this year is much larger than normal. This has arisen because we had an exceptional income year with actual income ending up almost double the long-term expected average. We know that this is the exception and much lower returns can normally be expected. The actual returns are earned throughout the year and in this last year they received a strong boost from the exceptional growth in the value of the trust’s investments, especially over the last quarter of the year. Our budgets are based on much lower long-term expected average returns and this is the way it needs to be for prudent management.
The funds of the trust are maintained in a broadly diversified but relatively low risk portfolio consistent with trustees’ desire to have income flows for donations each year as well as building its investments to maintain this community fund in perpetuity so that its value is not lost over time. The total funds of the trust stood at $135,940,000 at 31 March 2006.
We have relocated the trust offices to improved premises on the corner of Spring and Durham Streets in Tauranga – now enabling us to have meetings in our own offices and improved profile and accessibility to our stakeholders.
We have re-branded the trust to BayTrust to enable us to have better branding opportunities with a new simplified logo.
The trust has continued to be the cornerstone funder of Sport BoP’s Coachforce programme which promotes, supports and plans sporting activity development and coaching development throughout the Bay. It is the foundation of sports development in the Bay and we are very proud to have funded this successful programme from its inception 10 years ago. We thank and congratulate Sport BoP for its success and enthusiasm in this programme which aims to build a significantly healthier, more active, able and proud community.
We have approved major contributions to two significant community development projects with a $1 million donation to the large indoor sports and convention centre development in Rotorua and a $200,000 donation to Opotiki District Council toward its detailed planning for the Opotiki Harbour all weather entrance development. Both of these projects have significant positive economic impact potential for their communities.
The trust is seeking community projects which will have significant potential to improve the regional economics in its area, especially where employment opportunities are poor. We are maintaining liaison with the BoP local authorities and their development agencies, the energy trusts and Environment BoP to try to ensure that we are aware of development opportunities and initiatives and that our efforts and funding are consistent with the desires and plans of our communities.
We continue to support the many small and larger community organisations throughout the BoP. These are the organisations which support our community in so many ways. Our trustees and staff get much of their reward from their contact with the people in these organisations, many of whom are volunteers. We thank all of these people for their contribution to our communities in the Bay of Plenty and feel gratified that we are able to help them through the trust.
We remind you, in our community, that we also provide funds annually to assist tertiary education costs for persons with disabilities. These are called Dillon Scholarships and application forms for these are available through our trust office.
I thank my trustees for their support of the trust. A great deal of trustee time, care and valuable expertise from a wide range of experience makes this trust very connected and relevant to the BoP community. One of our strengths is the grass roots connectedness of our 12 trustees to their individual communities throughout the BoP. Our system has people who know you and your organisation making decisions on your funding requests.
During the year we saw the retirement of Vaughan Payne and the appointment of Adrienne von Tunzelmann as trustee. Thank you Vaughan for your contribution, wisdom and enthusiasm during your time with the trust. Welcome to Adrienne who has extensive administration and policy development experience. The trust continues to have rejuvenation by a trustee replacement and retirement policy which I think is important.
Thanks also to our staff at the trust who work hard to make this organisation work. Bruce Cronin, Norma Kelly and Margo McCurdy are our staff face to the community. They are eager to assist you with your applications and dealings with our trust.
RAY SHARP, Chairman.
Date: 3 July 2006.
Consolidated Statement of Financial Performance for the Year Ended 31 March 2006
2006 2005
$000 $000
Income:
Dividends 3,495 2,316
Interest 2,594 3,330
Investment gains/(losses) (refer Note 5) 11,107 2,729
Donations cancelled and refunded 4 8
17,200 8,383
Less expenditure:
Advertising/public reporting 54 51
Audit fees 8 7
Accountancy fees 10 9
Portfolio management and advisory fees (refer Note 13) 660 337
Office administration 237 240
Office rental 34 15
Other administration costs 119 75
Trustees’ fees 159 163
Trustees’ expenses 46 56
1,327 953
Depreciation 7 9
Loss on disposal of assets – 1
Total operating costs 1,334 963
Net surplus/(deficit) before donations 15,866 7,420
Donations 2,987 2,808
Net surplus/(deficit) after donations 12,879 4,612
Plus/(less) transfers:
Income fluctuation reserve (9,034) (1,236)
Inflation and population growth reserve (3,577) (3,240)
(12,611) (4,476)
Net surplus/(deficit) after reserve transfers 268 136
The accompanying notes form part of these financial statements.
Consolidated Statement of Movements in Equity for the Year Ended 31 March 2006
2006 2005
$000 $000
Equity at 1 April 2005 123,329 118,853
Less donations paid from capital:
Donations (184) (73)
Dillon Scholarship (84) (63)
123,061 118,717
Net surplus 268 136
Increase/(decrease) income fluctuation reserve 9,034 1,236
Increase/(decrease) inflation and population growth reserve 3,577 3,240
Total recognised revenue and expenses for the year 12,879 4,612
Equity at 31 March 2006 135,940 123,329
The accompanying notes form part of these financial statements.
Consolidated Statement of Financial Position as at 31 March 2006
Note 2006 2005
$000 $000
Equity: 2
Trust capital 89,308 89,308
Income fluctuation reserve 23,919 14,885
Inflation and population reserve 22,713 19,136
Total equity 135,940 123,329
Represented by—
Current assets:
Westpac—
Current account 14 26
Call account – 16
Bank of New Zealand—
Term deposit 664 280
Interest free loans 430 344
Accounts receivable 4 11
1,112 677
Non current assets:
Interest free loans 557 709
Investments 5 135,527 122,885
Fixed assets 3 58 23
136,142 123,617
Total assets 137,254 124,294
Current liabilities:
Accounts payable (1,298) (939)
Employees’ entitlement payable (16) (26)
(1,314) (965)
Total net assets 135,940 123,329
Signed on behalf of the Board of Trustees:
RAY SHARP, Chairman.
TERRI EGGLETON, Trustee.
Date: 3 July 2006.
The accompanying notes form part of these financial statements.
Consolidated Statement of Cash Flows for the Year Ended 31 March 2006
2006 2005
$000 $000
Cash flows from operating activities—
Cash was provided from:
Investment income 10,743 7,720
Other 4 8
10,747 7,728
Cash was dispersed to:
Suppliers of goods and services (1,097) 11
Trustees (204) (175)
Donations to the community (2,847) (2,880)
Dillon Memorial Scholarship (84) (63)
(4,232) (3,107)
Net cash flows from operating activities 6,515 4,621
Cash flows from investing activities—
Cash was provided from:
Sale of investments 54,362 2,250
Sale of fixed assets – –
Cash was applied to:
Purchase of fixed assets (42) (5)
Purchase of investments (60,863) (6,832)
Net cash flows from investing activities (6,543) (4,587)
Increase/(decrease) in cash held (28) 34
Add cash at 1 April 2005 42 8
Cash at 31 March 2006 14 42
Reconciliation of net surplus and net cash flows from operating activities—
Net surplus transferred to/(from) equity 12,879 4,612
Less payments out of capital (net) (268) (136)
Accrued income included in investments (6,460) (645)
Plus non cash items:
Depreciation of fixed assets 7 9
Loss on disposal of assets – 1
Movement in working capital:
Decrease/(increase) in accounts receivable 8 20
Increase/(decrease) in accounts payable 349 760
Net cash flows from operating activities 6,515 4,621
The accompanying notes form part of these financial statements.
Notes to the Financial Statements for the Year Ended 31 March 2006
1. Statement of Accounting Policies
Reporting Entity
The trust is a charitable trust in accordance with the provisions of the Community Trusts Act 1999. The group consists of Bay of Plenty Community Trust Incorporated and its subsidiary Bay of Plenty Community Trust Charities Limited which was wound up on 2 December 2005.
The financial statements have been prepared as required by the Community Trusts Act 1999 and the Trust Deed dated
17 August 2000 and in accordance with the Financial Reporting Act 1993.
Measurement Base
The accounting principles recognised as appropriate for the measurement and reporting of financial performance and financial position on a historical cost basis are followed by the group, with the exception of investments which are stated at market value as at 31 March 2006.
Specific Accounting Policies
The following specific accounting policies which materially affect the measurement of financial performance and the financial position have been applied:
(a) Donations:
Donations made during the year from revenue are included in the statement of financial performance. Those made from trust capital have been included in the statement of movements in equity.
(b) Investments:
All Investments are stated at assessed market value (refer Note 5).
(c) Fixed assets:
Fixed assets are stated at cost less accumulated depreciation.
(d) Depreciation:
Depreciation is charged to write off the cost of fixed assets over their expected economic lives using the diminishing value method at rates from 12% to 50% per annum.
(e) Accounts receivable:
Accounts receivable are recorded at their estimated realisable value.
(f) Financial instruments:
The trust includes all financial instrument arrangements in the balance sheet using the concept of accrual accounting. Financial instruments are valued as per Note 1, measurement base. These instruments arise as a result of everyday operations and include bank, accounts receivable, accounts payable and investments. Revenues and expenses in relation to all financial instruments are recognised in the statement of financial performance. Financial instruments are shown at their fair values.
(g) Consolidation:
The Bay of Plenty Community Trust Incorporated and its subsidiary charitable company, Bay of Plenty Community Trust Charities Limited, have been consolidated using the purchase method of consolidation. The company was wound up on 2 December 2005.
Changes in Accounting Policies
There have been no changes in accounting policies. All policies have been applied on bases consistent with those used in previous years.
2006 2005
$000 $000
2. Equity
Trust capital— 89,308 89,308
General funds:
Opening balance – –
Less donations from trust capital (268) (136)
Plus transfer from current year surplus 268 136
– –
Income fluctuation reserve:
Opening balance 14,885 13,649
Increase/(decrease) in reserve 9,034 1,236
23,919 14,885
Inflation and population growth reserve:
Opening balance 19,136 15,896
Increase in reserve 3,577 3,240
22,713 19,136
Total equity 135,940 123,329
2006 2005
$000 $000
3. Fixed Assets
Office furniture and equipment:
Cost 107 67
Accumulated depreciation 49 44
Book value 58 23
4. Financial Instruments
Investments are stated at market value as at balance date. Accrued interest, accounts payable 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 financial position.
Concentration of Investments
Ninety-eight point five percent (98.5%) of the assets of the trust are represented by investments held with a range of financial institutions (2005 – 98.9%). However, the trustees consider the risk of non-recovery of these investments to be minimal. Maximum exposure to credit risk as at balance date is:
2006 2005
$000 $000
Bank balances 14 42
Bank term deposits 664 280
Accounts receivable 4 11
Interest free loans 987 1,053
Investments 135,527 122,885
Currency Risk
The trust incurs currency risk as a result of investment transactions entered into by fund managers. The trust has a policy of fully hedging global bonds and global equities.
Interest Rate Risk
The investments of the trust are sensitive to changes in interest rates: Bank call accounts and deposits, government and local authority securities, and securities held by fund managers.
Fair Value
The carrying value is considered to be the fair value for financial instruments.
5. Investments
The value of investments which are held in equities, fixed interest, property and hedge funds are subject to market
fluctuations. The total investment portfolio is diversified in such a way that over time reductions in value in particular asset classes should be more than offset by increases in other classes. Investments are disclosed at market value at balance date and any gains (losses) arising from that treatment are shown as “investment gains (losses)” in the statement of financial performance. Therefore, no provision has been made for potential gains or losses that could occur due to future market fluctuations. The investment portfolio as at 31 March 2006 is diversified as follows:
TowerAsset Management AMPCapital Investors Russell Investment Group Total
$000 $000 $000 $000
New Zealand equities 7,196 – – 7,196
New Zealand fixed interest – 31,027 – 31,027
New Zealand cash 3,174 5,008 – 8,182
Global bonds (fully hedged) 34,432 – – 34,432
Global equities (fully hedged) – – 40,732 40,732
Global property – – 7,258 7,258
Hedge fund of funds* – – 6,700 6,700
Total 2006 44,802 36,035 54,690 135,527
Total 2005 49,975 39,808 33,102 122,885
*Hedge funds: NZD $6.7 million was placed with the manager in March, but not physically invested until April.
The balance date figures above are reflected in the trust’s asset allocations:
2006 2005
Policy Actual Policy Actual
(%) (%) (%) (%)
New Zealand equities 5 5 5 5
New Zealand fixed interest 25 23 20 19
New Zealand cash 5 6 25 26
Global bonds (fully hedged) 25 26 20 23
Global equities (fully hedged) 30 30 30 27
Global property 5 5 – –
Hedge fund of funds* 5 5 – –
100 100 100 100
6. Taxation
Bay of Plenty Community Trust is exempt from income tax with effect from 1 April 2004, under section CW 44 of the Income Tax Act 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 GST inclusive basis.
8. Related Party Transactions
Bay of Plenty Community Trust Charities Limited (the company) was wholly owned by Bay of Plenty Community Trust Incorporated (the trust). No related party debts have been written off or forgiven during the year. The company was wound up during the year and assets were distributed to the trust.
9. Adoption of International Financial Reporting Standards (NZ IFRS)
In December 2002, the New Zealand Accounting Standards Review Board announced that International Reporting Standards (NZ IFRS) will apply to all New Zealand entities for periods beginning on or after 1 January 2007. Entities also have the option of a voluntary early adoption of NZ IFRS for periods beginning on or after 1 January 2005.
While NZ IFRS are similar to New Zealand Financial Reporting Standards, there are a number of significant differences mainly in the areas of accounting for financial instruments, leases, financial liabilities and taxation. These differences may affect the results of Bay of Plenty Community Trust upon adoption of NZ IFRS.
A project team will be established to identify the financial implications, disclosures, presentation or classification differences that would impact the manner in which transactions or events are recorded and reported. At this time, the trustees are not able to quantify the effects of the differences discussed above.
Bay of Plenty Community Trust currently intends to adopt NZ IFRS for the year ending 31 March 2008. To comply with
NZ IFRS for the first time, the trust will need to restate the comparative balances applying the new standards. This will affect the earnings and cash flow statement and the statement of financial position. Most adjustments required on transition to
NZ IFRS will be made retrospectively to equity. The actual impact of adopting NZ IFRS may vary from the information presented, and that variation may be material.
10. Segment Information
The trust’s activity is to receive income to allocate for charitable, cultural, philanthropic, recreational and other purposes beneficial to the community, principally in the Bay of Plenty area.
11. Contingent Liabilities
The following future donations have been approved but are subject in each case to the applicants satisfying particular criteria specific to each recipient.
Year Ending
Donation Recipient 31 Mar 07 31 Mar 08
$ $
Waihau Bay Volunteer Rural Fire Force 30,000 –
Shakti Ethnic Women’s Group (Central Region) 5,000 –
Homedale Kindergarten 3,500 –
Jambalaya Education Charitable Trust 10,000 –
Te Wharekura o Huiarau 20,000 –
Total contingent liabilities 68,500 –
12. Commitments
Capital commitments:
There are no capital commitments (2005 – Nil).
Lease commitments:
Lease commitments under non-cancellable operating leases:
Less than one year $45,082
(2005 – $7,000).
13. Investment Income and Advisory Fees
An investment fee is charged by Russell Investment Group before distributions are made from a Russell unit trust. In previous years, the investment fee has not been disclosed separately in the statement of financial performance. In 2006, the investment fee has been disclosed separately, increasing income from Russell Investment Group accordingly, whereas the 2005 comparatives show the investment fee deducted from income. For 2005, the fee is estimated to have been $277,000. The additional disclosure does not have any impact on the net surplus.
Auditor’s Report
To the Trustees of Bay of Plenty Community Trust Incorporated:
We have audited the financial statements. The financial statements provide information about the past financial performance and financial position of the trust and group and its financial position as at 31 March 2006. This information is stated in accordance with the accounting policies set out in Note 1 of the accounts.
Trustees’ Responsibilities
The trustees are responsible for the preparation of financial statements, which give a true and fair view of the financial position of the trust and group as at 31 March 2006, and of the results of operations and cash flows for the year ended on that date.
Auditors’ Responsibilities
It is our responsibility to express to you an independent opinion on the financial statements presented by the trustees.
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 judgments made by the trustees in the preparation of the financial statements; and
? whether the accounting policies are appropriate to the trust and group’s circumstances, consistently applied and adequately disclosed.
We conducted our audit in accordance with New Zealand Auditing Standards. 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 or any of its subsidiaries.
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 and group as far as appears from our examination of those records; and
? the financial statements:
– comply with generally accepted accounting practice in New Zealand; and
– give a true and fair view of the financial position of the trust and group as at 31 March 2006 and the results of operations and cash flows for the year ended on that date.
Our audit was completed on 3 July 2006 and our unqualified opinion is expressed as at that date.
INGHAM MORA, Tauranga.
———————
(A full list of all distributions by way of donations for the year ended 31 March 2006 is available from the trust office on request, info@baytrust.org.nz or telephone (07) 578 6546.)