Notice Type
General Section
Notice Title

The Community Trust of Otago

Directory for the Year Ended 31 March 2008
Trustees: Bill Thomson (chairperson), Balclutha; Hilary Allison, Dunedin; Duncan Butcher, Cromwell; Louise Croot, Dunedin (appointed May 2007); John Farry, Dunedin (retired May 2007); Sally Hope, Oamaru; Russell Hendry, Dunedin; Barbara Payton, Dunedin; Raewynne Pedofski, Dunedin; Louise Rosson, Cromwell (appointed May 2007); Mark Ryan, Dunedin; David Shepherd, Dunedin (retired May 2007); Nicola Taylor, Dunedin; Stuart Walker, Dunedin.
Chief Executive: Keith Ellwood.
Registered Office: 2nd Floor, Community Trust House, corner of Filleul Street and Moray Place, Dunedin.
Auditor: Polson Higgs, Dunedin.
Solicitor: Anderson Lloyd, Dunedin.
Investment Adviser: Russell Investment Goup Limited, Auckland.
Bankers: Westpac, Dunedin.
Income Statement for the Year Ended 31 March 2008 in New Zealand Dollars ($000s)
Group Parent
Note 2008 2007 2008 2007
Revenue 5 5,135 12,110 5,102 12,071
Investment fees 7 (584) (539) (584) (539)
4,551 11,571 4,518 11,532
Other income 6 100 60 – –
Other expenses 8 (791) (741) (762) (811)
Surplus before taxation 3,860 10,890 3,756 10,721
Income tax expense 13 31 28 – –
Surplus for the year 3,829 10,862 3,756 10,721
Statement of Changes in Trust Funds for the Year Ended 31 March 2008 in New Zealand Dollars ($000s)
Group Parent
Note 2008 2007 2008 2007
Total trust funds at the beginning of the year 192,604 189,490 192,221 187,495
Surplus for the year 3,829 10,862 3,756 10,721
Total recognised income and expense for the year 3,829 10,862 3,756 10,721
Donations approved during the year 9 (6,174) (7,748) (6,174) (5,995)
Total trust funds at the end of the year 190,259 192,604 189,803 192,221
Balance Sheet as at 31 March 2008 in New Zealand Dollars ($000s)
Group Parent
Note 2008 2007 2008 2007
Assets:
Plant and equipment 10 20 30 20 30
Investment property 11 1,680 1,580 – –
Investments in subsidiaries 25 – – 1 1
Other investments 12, 18 189,143 195,426 189,143 195,426
Deferred tax asset 13 8 – – –
Other receivables 14 248 248 248 248
Total non–current assets 191,099 197,284 189,412 195,705
Trade and other receivables 14 14 28 1,056 1,110
Prepayments 4 1 5 –
Cash and cash equivalents 15 2,760 885 2,740 834
Total current assets 2,778 914 3,801 1,944
Total assets 193,877 198,198 193,213 197,649
Trust funds:
Trust capital 16 131,467 131,467 131,467 131,467
Capital maintenance reserve 16 45,883 39,983 45,883 39,983
Uncommitted surplus 16 12,909 21,154 12,453 20,771
Total trust funds 16 190,259 192,604 189,803 192,221
Trade and other payables 17 3,416 5,431 3,410 5,428
Total current liabilities 3,416 5,431 3,410 5,428
Deferred tax liability 13 202 163 – –
Total non–current liabilities 202 163 – –
Total liabilities 3,618 5,594 3,410 5,428
193,877 198,198 193,213 197,649
Approved on behalf of the Ttrustees:
BILL THOMSON. RUSSELL HENDRY.
Chairperson. Trustee.
24 June 2008. 24 June 2008.
Statement of Cashflows for the Year Ended 31 March 2008 in New Zealand Dollars ($000s)
Group Parent
Note 2008 2007 2008 2007
Cashflows from operating activities:
Interest received 95 51 95 50
Other income received 160 72 64 14
Cash paid to suppliers, employees and trustees (1,325) (1,264) (1,312) (1,305)
Net cash outflow from operating activities 23 (1,070) (1,141) (1,153) (1,241)

Cashflows from investment activities:
Receipts from fund managers 11,161 6,956 11,161 6,956
Acquisition of property, plant and equipment – (1) – –
Net cash from/used in investing activities 11,161 6,955 11,161 6,955

Cashflows from financing activities:
Advance from/(to) subsidiary companies – – 114 (1,642)
Donations paid 9 (8,216) (6,550) (8,216) (4,797)
New cash from/used in financing activities (8,216) (6550) (8,102) 192,221

Net (decrease)/increase in cash and cash equivalents 1,875 (736) 1,906 (724)
Cash and cash equivalents at 1 April 885 1,621 834 1,558
Cash and cash equivalents at 31 March 15 2,760 885 2,740 834
Notes to the Financial Statements–Significant Accounting Policies
1. Reporting Entity
The Community Trust of Otago (“the Parent”) is a charitable trust, domiciled in New Zealand, incorporated in accordance with the provisions of the Community Trusts Act 1999.
Separate parent and consolidated financial statements are presented. The consolidated financial statements for the year ended 31 March 2008 comprise the Parent and its subsidiary Fillmor House Limited (together referred to as the “Group”).
2. Basis of Preparation
(a) Statement of Compliance
The financial statements have been prepared in accordance with Generally Accepted Accounting Practice in New Zealand
(NZ GAAP). They comply with New Zealand equivalents to International Financial Reporting Standards, and its interpretations (NZ IFRS) and other applicable Financial Reporting Standards, as appropriate for public benefit entities. Compliance with NZ IFRS ensures that the financial statements are comply with International Financial Reporting (IFRS). These are the Group’s first financial statements that NZ IFRS 1 has been applied to.
An explanation of how the transition to NZ IFRS has affected the reported financial position, financial performance and cash flows of the Group is provided in Note 26.
The accounting policies set out below have been applied consistently to all periods presented in these financial statements and in preparing an opening NZ IFRS balance sheet at 1 April 2006 for the purposes of the transition to NZ IFRS.
The financial statements have been approved by the trustees on 24 June 2008.
(b) Basis of Measurement
The financial statements have been prepared on the historical cost basis except for the following:
? Derivative financial instruments are measured at fair value.
? Financial instruments at fair value through profit or loss are measured at fair value.
? Investment property is measured at fair value.
The methods used to measure fair values are discussed further in Note 4.
(c) Functional and Presentation Currency
These financial statements are presented in thousands of New Zealand dollars ($000s), which is the Parent’s functional currency. All financial information presented in New Zealand dollars has been rounded to the nearest thousand.
(d) Use of Estimates and Judgements
The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.
In particular, information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amount recognised in the financial statements are relate to the valuation of investments are discussed further in Note 4.
3. Significant Accounting Policies
(a) Basis of Consolidation
(i) Subsidiaries
Subsidiaries are entities controlled by the Group. Control exists when the Group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.
(ii) Transactions eliminated on consolidation
Intra–group balances, and any unrealised income and expenses arising from intra–group transactions, are eliminated in preparing the consolidated financial statements.
(b) Foreign Currency
(i) Foreign currency transactions
Transactions in foreign currencies are translated to New Zealand dollars (the “functional currency”) at the dates
of transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date.
(c) Financial Instruments
(i) Non–derivative financial instruments
Non–derivative financial instruments comprise investments in equity and debt securities, trade and other receivables, cash and cash equivalents, and trade and other payables.
Non–derivative financial instruments are recognised initially at fair value plus, for instruments not at fair value, derivative financial instruments are measured as described below.
Cash and cash equivalents comprise cash balances and call deposits.
Instruments at fair value through profit or loss
An instrument is classified as at fair value through profit or loss if it held for trading or is designated as such upon initial recognition. Financial instruments are designated at fair value through profit or loss if the Group manages such investments and makes purchase and sale decisions based on their fair value. Upon initial recognition, attributable transactions costs are recognised in profit or loss when incurred. Subsequent to initial recognition, financial instruments at fair value through profit or loss are measured at fair value, and changes therein are recognised in profit or loss.
Investments in subsidiaries
Investments in equity securities of subsidiaries, are measured at cost in the separate financial statements of the Parent.
Trade and other receivables
Trade and other receivables are stated at their cost less impairment losses.
Trade and other payables
Trade and other payables are stated at cost.
(ii) Derivative financial instruments
The Group uses derivative financial instruments to hedge its exposure to foreign exchange and interest rate risks arising from investment activities. In accordance with its treasury policy, the Group does not hold or issue derivative financial instruments for trading purposes. However, derivatives that do not qualify for hedge accounting are accounted for as trading instruments.
Derivative financial instruments are recognised initially at fair value and transaction costs are expensed immediately. Subsequent to initial recognition, derivative financial instruments are stated at fair value. The gain or loss on
re–measurement to fair value is recognised immediately in profit or loss.
(d) Property, Plant and Equipment
(i) Recognition and measurement
Items of property, plant and equipment are measured at cost less accumulated depreciation and impairment losses.
Cost includes expenditures that are directly attributable to the acquisition of the asset.
When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.
(ii) Subsequent costs
The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. The costs of the day–to–day servicing of property, plant and equipment are recognised in profit or loss as incurred.
(iii)Depreciation
Depreciation is recognised in profit or loss on a diminishing value (d.v) basis over the estimated useful lives of each part of an item of plant and equipment.
The depreciation rates for the current and comparative periods are as follows:
Depreciation methods, useful lives and residual values are reassessed at the reporting date.
Office furniture and equipment 12 – 48% d.v.
(e) Investment Property
Investment property is property held either to earn rental income or for capital appreciation or for both. Investment property is measured at fair value with any change therein recognised in profit or loss.
(f) Impairment
The carrying amounts of the Group’s assets are reviewed at each balance date to determine whether there is any indication of impairment
An impairment loss is recognised whenever the carrying amount of an asset exceeds its recoverable amount. Impairment losses directly reduce the carrying amount of assets and are recognised in the income statement.
(i) Impairment of debt instruments and receivables
The recoverable amount of the Group’s receivables carried at amortised cost is calculated as the present value of estimated future cashflows, discounted to the original effective interest rate (i.e. the effective interest rate computed at initial recognition of these financial asses). Receivables with a short duration are not discounted.
(ii) Non–financial assets
The carrying amounts of the Group’s non–financial assets, other than investment property, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated.
An impairment loss is recognised if the carrying amount of an asset or its cash–generating unit exceeds its recoverable amount. A cash–generating unit is the smallest identifiable asset group that generates cash flows that are largely independent from other assets and groups. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of cash–generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis.
The recoverable amount of an asset or cash–generating unit is the greater of its value in use an its fair value less costs to sell. In assessing value in use, the estimated future cashflows are discounted to their present value using a pre–tax discount rate that reflects the current market assessments of the time value of money and the risks specific to the asset.
In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indication that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
(g) Revenue
(i) Investment income
Refer to Note (i) below
(ii) Rental income
Rental income from investment property is recognised in profit or loss on a straight–line basis over the term of the lease. Lease incentives granted are recognised as an integral part of the total rental income, over the term of the lease.
(h) Lease Payments
Payments made under operating leases are recognised in profit or loss on a straight–line basis over the term of the lease. Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease.
Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Contingent lease payments are accounted for by revising the minimum lease payments over the remaining term of the lease when the lease adjustment is confirmed.
(i) Finance Income and Expenses
Finance income comprises interest income on funds invested, dividend income, gains on the disposal of available–for–sale financial assets, changes in the fair value of financial assets at fair value through profit or loss, foreign currency gains, and gains on hedging instruments that are recognised in profit or loss. Interest income is recognised as it accrues, using the effective interest method. Dividend income is recognised on the date that the Group’s right to receive payment is established, which in the case of quoted securities is the ex–dividend date.
Finance expenses comprise interest expense on foreign currency losses, changes in the fair value of financial assets at fair value through profit or loss, impairment losses recognised on financial assets (except for trade receivables), losses on the disposal of available–for–sale financial assets, and losses on hedging instruments that are recognised in profit or loss.
(j) Income Tax Expense
Income tax expense comprises current and deferred tax, income tax expense is recognised in profit or loss except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.
Deferred tax is recognised using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.
A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which temporary difference can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
(k) New Standards Adopted and Interpretations Not Yet Adopted
A number of new interpretations are not yet effective for the year ended 31 March 2008, and have not been applied in preparing these consolidated financial statements:
? NZ IFRS 8 Operating Segments. NZ IFRS 8, which becomes mandatory for the Group’s 2010 financial statements, is not expected to have any impact on the consolidated financial statements.
? NZ IFRS 1 Presentation of financial Statements (revised). NZ IFRS 1 will become mandatory for the Group’s 2010 financial statements. The Group has not yet determined the potential effect of the interpretation.
? NZ IFRS 4 Insurance Contracts – Amendments. NZ IFRS 4, which becomes mandatory for the Group’s 2010 financial statements, is not expected to have any impact on the consolidated financial statements.
? NZ IAS 23 Borrowing Costs. NZ IAS 23 will become mandatory for the Group’s 2010 financial statements, and is not expected to have any impact on the consolidated financial statements.
? NZ IFRIC 12 Service Concession Arrangements. NZ IFRIC 12 will become mandatory for the Group’s 2009 financial statements, and is not expected to have any impact on the consolidated financial statements.
? NZ IFRIC 13 Customer Loyalty programmes. NZ IFRIC 13 will become mandatory for the Group’s 2009 financial statements, and is not expected to have any impact on the consolidated financial statements.
? NZ IFRIC 14 The Limit on a defined benefit Asset. Minimum funding requirements and their interaction. NZ IFRIC 14 will become mandatory for the Group’s 2009 financial statements, and is not expected to have any impact on the consolidated financial statements.
4. Determination of Fair Values
A number of the Group’s accounting policies and disclosures require the determination of fair value, for both financial and non–financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods. Where applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.
(a) Investment Property
An external, independent valuation company, having appropriate recognised professional qualifications and recent experience in the location and category of property being valued, values the Group’s investment property on an annual basis. The fair values are based on market values, being the estimated amount for which a property could be exchanged on the date of the valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion. The discounted cashflow technique is also applied as a cross–check of the valuation.
(b) Investments in Equity and Debt Securities
For investments that are actively traded in organised financial markets, fair value is determined by reference to exchange quoted market bid prices at the close of business on the statement of financial position date.
Investments in pooled funds are valued at the unit exit price determined by the fund manager at the close of business on the statement of position date.
(c) Trade and other receivables
The fair value of trade and other receivables is estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date.
(d) Derivatives
The fair value of forward exchange contracts is based on their listed market price, if available. If a listed market price is not available, then fair value is estimated by discounting the difference between the contractual forward price and the current forward price for the residual maturity of the contract using a risk–free interest rate (based on government bonds).
The fair value of interest rate swaps is based on broker quotes. Those quotes are tested for reasonableness by discounting estimated future cash flows based on the terms and maturity of each contract and using market interest rates for a similar instrument at the measurement date.
Notes to the Financial Statements in New Zealand Dollars ($000’s)
5. Revenue Group Parent
2008 2007 2008 2007
Rents received 113 116 – –
Managed Fund income:
– Interest 7,138 6,163 7,209 6,227
– Investment income (2,165) 5,831 (2,165) 5,831
Other 49 – 58 13
Total revenue 5,135 12,110 5,102 12,071

6. Other Income Group Parent
2008 2007 2008 2007
Change in fair value of investment property 100 60 – –
Net gain on sale of property, plant and equipment – – – –
100 60 – –
7. Investment Group Parent
2008 2007 2008 2007
Fund manager fees 459 426 459 426
Investment advisory fees 125 113 125 113
584 539 584 539
8. Other Expenses Group Parent
2008 2007 2008 2007
Public and statutory reporting 21 19 21 19
Auditors remuneration (analysis below) 13 15 13 15
Promotion 39 36 39 36
Depreciation 10 15 10 15
Professional fees (analysis below) 47 55 42 55
Property costs 82 62 64 66
Salaries 287 283 287 286
Other operating 103 97 97 83
Net finance costs – – – 77
Trustee remuneration 160 142 160 142
Trustee expenses 29 17 29 17
Total other expenses 791 741 762 811
Auditor’s remuneration to Polson Higgs:
– audit of financial statements 11 9 11 9
– HR consulting 2 6 2 6
Total auditor’s remuneration 13 15 13 15
Professional fees: 2008 Group 2007 2008 Parent 2007
– accounting and other support 13 14 13 14
– computer support 2 4 2 4
– legal advice 9 4 4 4
– tax advice – 16 – 16
– other professional advice 23 17 23 17
Total professional fees 47 55 42 55
9. Donations Group Parent
2008 2007 2008 2007
Donations paid for the year 8,216 6,550 8,216 6,550
Less recovered from subsidiary companies:
– Community Trust District Improvement Co Limited – – – (1,161)
– Community Trust Amateur Sports Co Limited – – – (592)
– – – (1,753)
Balance paid 8,216 6,550 8,216 4,797
Comprising:
– Tax exempt donees 7,821 6,386 7,821 4,633
– Non tax exempt donees 395 164 395 164
8,216 6,550 8,216 4,797
Movement in donations payable for the year (2,042) 1,198 (2,042) 1,198
6,174 7,748 6,174 5,995
Available for non–taxable distribution to donees 2008 2007
Opening balance 163,080 163,244
Deduct donations paid to non tax exempt donees (395) (164)
Closing balance 162,685 163,080
Available for taxable distribution to donees
Opening balance 29,141 24,251
Current year surplus 3,756 10,720
Deduct donations approved during the year (6,174) (7,748)
26,723 27,224
Add donations paid during the year 8,216 6,550
Deduct donations paid to tax exempt donees (7,821) (4,633)
Closing balance 27,118 29,141
Total trust capital 189,803 192,221
10. Plant and Equipment – Group and Parent
Office Furniture& Equipment Total
Cost or deemed cost:
Balance at 1 April 2006 201 201
Additions 1 1
Disposals
Balance as at 31 March 2007 202 202
Balance at 1 April 2007: 202 202
Other additions
Disposals
Balance as at 31 March 2008 202 202
Depreciation and impairment losses:
Balance at 1 April 2006 157 157
Depreciation for the year 15 15
Impairment loss – –
Disposals – –
Balance as at 31 March 2007 172 172
Balance at 1 April 2007: 172 172
Depreciation for the year 10 10
Disposals – –
Balance as at 31 March 2008 182 182
Carrying amounts
At 1 April 2006 38 38
At 31 March 2007 30 30
At 1 April 2007 30 30
At 31 March 2008 20 20
11.Investment Property Group Parent
2008 2007 2008 2007
Balance at 1 April 1,580 1,520 – –
Acquisitions – – – –
Change in fair value 100 60 – –
Total fair value balance at 31 March 1,680 1,580 – –
Investment property comprises the property at 229 Moray Place, Dunedin. The property was valued by Macpherson Valuation on 9 May 2008.
12. Other Investments Parent Group
2008 2007 2008 2007
Non–current investments
Financial assets designated at fair value through profit or loss 189,143 195,427 189,143 195,427
189,143 195,427 189,143 195,427
13. Taxation
The Community Trust of Otago has been exempt from income tax pursuant to section CW44 of the Income Tax Act 2004. This means that Fillmor House Limited is the only taxable entity in the Group.
Group Parent
2008 2007 2008 2007
Current tax:
Profit before tax 3,860 10,890 3,756 10,721
Surplus attributable to tax exempt parent (3,756) (10,721) (3,756) (10,721)
Surplus attributable to tax exempt subsidiaries – (76) – –
104 93 – –
Change in fair value of investment property (100) (60) – –
Tax depreciation (30) (33) – –
Tax surplus/(loss) (26) – – –
Current tax using company tax rate of 33% – – – –
Deferred tax:
Tax loss (8) – – –
Change in fair value of investment property 39 28 – –
Applying tax rate of 30% 31 28 – –
Tax expense per income statement 31 28 – –
The effective tax rate is 0.8% (2007 – 0.3%)
Group
Deferred tax assets and liabilities are attributable to the following:
In thousand of New Zealand dollars Assets Liabilities Net
2008 2007 2008 2007 2008 2007
Investment property – 202 163 202 163
Tax losses (8) – (8) –
Net tax (assets)/liabilities (8) – 202 163 194 163
Movement in temporary differences during the year
In thousant of New Zealand dollars Balance1 Apr 06 Recognisedin profitor loss Balance31 Mar 07 Recognisedin profitor loss Balance31 Mar 08
Investment property 135 28 163 39 202
Tax losses – – – (8) (8)
135 28 163 31 194
14. Trade and Other Receivables Group Parent
2008 2007 2008 2007
Advance due from subsidiary company – – 1,041 1,083
Goods and Services tax 14 28 15 27
Advance to Dunedin Community House Trust 248 248 248 248
262 276 1,304 1,358
Classified as:
Current assets 14 28 1,056 1,110
Non current assets 248 248 248 248
262 276 1,304 1,358
15. Net Cash and Cash Equivalents Group Parent
2008 2007 2008 2007
Bank balances 691 52 671 1
Call deposits 2,069 833 2,069 833
Cash and cash equivalents 2,760 885 2,740 834
Cash and cash equivalents in the statement of cash flows 2,760 885 2,740 834
The effective interest rate on call deposits in 2008 was 7.75% (2007 – 6.75%). All deposits were at call.
16. Trust funds Note Trust Capital Capital Maintenance Reserve Uncommitted Surplus Total
Balance at 1 April 2006 131,467 35,773 22,250 189,490
Reserves transfers – 4,210 (4,210) –
Donations paid from trust equity – – (7,748) (7,748)
Total recognised income and expense – – 10,862 10,862
131,467 39,983 21,154 192,604
Balance at 1 April 2007 131,467 39,983 21,154 192,604
Total recognised income and expense – – 3,829 3,829
Reserves transfers – 5,900 (5,900) –
Donations paid from trust equity – – (6,174) (6,174)
Balance at 31 March 2008 131,467 45,883 12,909 190,529
Trust Capital
Trust capital represents the realised value of its original asset, being shares in Trust Bank?.
Capital Maintenance Reserve
The capital maintenance reserve represents the additional amount necessary to preserve the real value of the capital allowing for inflation as measured by the Consumers’ Price Index (CPI).
Uncommitted Surplus
Uncommitted surplus represents funds not allocated to the capital maintenance reserve and as such form part of the trust fund. Like the capital maintenance reserve, balances in uncommitted surplus are used to provide a stable flow of grants to the community during times of adverse investment earnings.
Capital Management
The trust’s policy is to maintain a strong capital base so as to sustain future development of the trust.
The trust is not subject to any externally imposed capital requirements.
The trust’s policies in respect of capital management and allocation are reviewed regularly by the trustees.
There have been no material changes in the trust’s management of capital during the period.
17 Trade and other payables Group Parent
2008 2007 2008 2007
Donations payable 3,294 5,336 3,294 5,336
Other trade payables 122 95 116 92
3,416 5,431 3,410 5,428
18. Financial Instruments
The trust has the following financial assets and liabilities:
Summary Financial Assets and Liabilities
Financial Assets Managed by 2008 2008
Self Managed Funds:
Cash at bank and on deposit with Westpac 2,760 885
Investments Held by Fund Managers:
NZ Cash AMP Capital NZ 10,786 10,215
NZ Fixed Interest AMP Capital NZ 41,094 39,546
NZ Equities Tower Asset Management NZ 8,789 10,484
Global Fixed Interest Tower Asset Management NZ 67,633 62,777
Global Equities Russell Investments Australia 44,708 53,502
Collateralised Commodities Futures State Street USA 6,005 8,675
Fund of Hedge Funds Russell Investment Ireland (part)Warakirri Asset Management Aust (part) 10,128 10,227
189,143 195,426
Total financial assets 191,903 196,311
Donations payable 3,294 5,336
Trade payables 122 95
Total financial liabilities 3,416 5,431
Risks arising from the financial assets and liabilities are inherent in the nature of the trust’s activities and are managed by means of an ongoing process of identification, measurement and monitoring. The trust is exposed to credit risk, liquidity risk, and market risk. Market risk includes risks around foreign currency, interest rates and pricing.
The trust generally manages these risks in accordance with its statement of investment performance objectives (SIPO). The principle investment objectives are:
? to maximise the total amount of donations which can be financed by the investment of the fund over the long term;
? to preserve the real capital of the Fund;
? to maintain equity between present and future generations with respect to the amounts available for donations;
? to maintain the highest degree of stability of investment earnings that is possible consistent with the preceding objectives;
Trustees regard risk as the likelihood that the trust fails to achieve these objectives and have adopted a series of strategies to mitigate all risks. The principle strategies include:
? ensuring the fund is well diversified;
? maintaining an appropriate level of liquidity;
? avoiding purely speculative investments;
? retaining an investment consultant for investment advice;
? using only fund managers which are researched and recommended by the investment consultant;
? maintaining adequate reserves;
? regularly reviewing investment performance.
1. Credit Risk
Credit risk represents the risk that a counter-party to a financial asset fails to discharge an obligation which will cause the trust to incur a financial loss. The current exposure at balance date is the fair value of these assets as disclosed in the statement of financial position. Concentrations of risk arise when a number of financial instruments or contracts are entered into with the same counterparty or where a number of counterparties are engaged in similar business activities, geographic regions or similar economic features that would influence their ability to meet their contractual obligations by reason of changes in economic, political or other considerations.
The trust manages credit concentration risks through:
? a diversified and non-correlated basket of investments across traditional and alternative asset classes
? ensuring compliance with the mandate requirements of each fund manager
The credit quality of the trust’s New Zealand and global fixed interest portfolios is managed using the Standard and Poors rating categories. In addition, exposure to global bonds is fully hedged against foreign currency movements. The following is an analysis of the trust’s fixed interest portfolios, based on information supplied by the fixed interest managers.
Analysis of Fixed Interest Portfolios
2008 2008 2007 2007
Global NZ Global NZ
Credit Rating:
AAA 35,845 25,910 46,524 25,286
AA 19,634 10,253 14,552 9,566
A 5,965 4,931 2,072 4,694
BBB 5,491 – – –
Other 698 – (371) –
Totals 67,633 41,094 62,777 39,546

Sector Rating
Government 31,328 21,274 36,047 20,386
Corporates 17,503 13,060 1,588 15,818
Mortgages 17,050 – 12,668 –
Swaps (3,179) – 11,287 (376)
Other 4,931 6,760 1,187 3,718
Totals 67,633 41,094 62,777 39,546
Duration
0–3 years 35,433 11,210 62,740 13,979
3–5 years 15,271 17,095 (540) 13,525
5–7 years 12,844 3,275 1,073 2,922
7–9 years 1,082 2,996 (3,321) 902
9–11 years (4,991) 6,518 220 8,218
11+ years 7,994 – 2,605 –
Totals 67,633 41,094 62,777 39,546
2. Liquidity Risk
Liquidity risk is the risk that the trust will encounter difficulties in meeting the obligations associated with its financial liabilities. This risk is managed through the trust’s investment in a diversified portfolio of financial assets. This portfolio consists of marketable securities which, under normal conditions are readily convertible to cash. In addition, the trust maintains sufficient cash and cash equivalents to meet normal operating requirements.
The trust’s financial liabilities comprise trade and other payables and committed but unpaid donations.
At balance date, the ratio of financial assets to financial liabilities was 56:1 (2007 – 36:1).
3. Market Risk
Market risk is the risk that the fair value of future cash flows from financial assets will fluctuate due to changes in market variables such as interest rates, foreign exchange rates and market prices. Market risk is managed and monitored using sensitivity analysis and minimised by ensuring that all investment activities are undertaken in accordance with established mandate limits and the investment strategies set out in the trust’s statement of investment performance objectives.
3.1 Interest Rate Risk
Interest rate risk arises from the possibility that changes in interest rates will affect future cash flows or the fair value of financial assets. The trust’s investment in global bonds is held in a pooled fund. Movements in interest rates will be reflected in each pooled fund’s fair value asset pricing. NZ Bonds are held in segregated accounts. The exposure to movement in the fair value of the trust’s bond portfolios is discussed in the commentary on price risk.
The trust’s self managed cash and deposit accounts are interest bearing. Any movement in interest rates on these accounts is minimal and is not considered to be material.
3.2 Currency Risk
Currency risk is the risk that the fair value of, or future cash flows from, financial assets will fluctuate due to changes in foreign currency exchange rates.
At balance date, the trust’s exposure to currency risk was as follows:
2008 2007
Foreign currency denominated financial assets 128,513 134,746
Less foreign currency contracts 115,662 120,034
Total unhedged exposure at 31 March 12,851 14,712
3.3 Pricing Risk
Pricing risk is the risk that the fair value of financial assets will increase or decrease as a result of changes in market prices, whether these changes are caused by factors specific to individual stocks or factors affecting all financial assets in the market. Price risks arise from the Trust’s investment portfolio (the Fund). As reported in the section on Significant Accounting Policies, the financial assets are valued at fair value as determined by reference to their quoted bid price at the reporting date, wherever this information is available.
Sensitivity to fluctuations in income for the trust’s fund arising from market risk are set out in the following tables provided by the trust’s investment consultant, Russell Investment Group Limited.
Sensitivity Analysis for the Trust’s Portfolio 31 March 2008
Asset Class Asset Allocation 31 Mar 2008 Long TermExpected Return p.a. –1 Standard Deviation Return p.a. 1 Standard Deviation Return p.a.
NZ Equities 4.7% 9.2% –7.8% 26.2%
Global Equities 23.8% 8.7% –6.2% 23.6%
NZ Fixed Interest 21.9% 6.3% 3.0% 9.6%
Global Bonds 36.0% 6.3% 3.0% 9.6%
NZ Cash 5.7% 5.7% 4.2% 7.2%
CCFs 2.6% 7.8% –10.2% 25.8%
Hedge Funds 5.4% 8.3% 0.3% 16.3%
Total 100.0% 7.1% 2.2% 12.0%
From this table it can be seen that the long term expected return of the fund is 7.1% per annum and there is approximately a 68% probability that the return in any one year will be within the range of 2.2% to 12.0%. The trust’s actual return for the year was 2.8%. Based on the fund’s value at 31 March 2008 of $189.1 million, it translates that the trust’s income from the fund would lie within the range of $4.1 million to $22.6 million with an expected amount of $13.4 million. The trust’s actual income from the fund was $4.9 million.
The following table sets out the position for the year to 31 March 2007.
Asset Class Asset Allocation 31 Mar 2007 Long TermExpected Return p.a. –1 Standard Deviation Return p.a. 1 Standard Deviation Return p.a.
NZ Equities 5.3% 8.9% –8.1% 25.9%
Global Equities 27.1% 8.4% –6.5% 23.3%
NZ Fixed Interest 20.0% 6.0% 2.7% 9.3%
Global Bonds 31.9% 6.0% 2.7% 9.3%
NZ Cash 5.2% 5.4% 3.9% 6.9%
CCFs 5.1% 7.5% –10.5% 25.5%
Hedge Funds 5.3% 8.0% 0.0% 16.0%
Total 100.0% 7.0% 2.1% 11.9%
For that year, the long term expected return was 7.0% per annum when there was a 68% probability that the return in any one year would be within the range of 2.1% to 11.9%. The actual return was 6.7%. Based on the fund’s value at 31 March 2007 of $195.4 million, it translates that the trust’s income for that year would lie within the range of $4.1 million to $23.5 million with an expected amount of $13.8 million. The trust’s actual income from the fund for that year was $11.9 million.
These sensitivity analyses are based on the volatility of each asset class and the fund as a whole, as measured by plus or minus one standard deviation. The overall effect of the trust’s diversified portfolio is to reduce volatility and stabilise investment returns over time.
19. Asset and Liability Classification and Fair Value
Classification and fair values
Group 2008 Designated at fair value Held-to-maturity Loans and receivables Other amortised cost Total carrying amount Fair value

Assets:
Other receivables 248 248 248
Other investments 189,143 189,143 189,143
Total non-current assets 189,143 248 189,391 189,391
Trade and other receivables 14 14 14
Cash and cash equivalents 2,760 2,760 2,760
Total current assets 2,774 2,774 2,774
Total assets 3,022 192,165 192,165

Liabilities:
Trade and other payables 3,416 3,416 3,416
Total current liabilities 3,416 3,416 3,416
Total liabilities 3,416 3,416 3,416
Group 2007 Designated at fair value Held-to-maturity Loans and receivables Other amortised cost Total carrying amount Fair value
Assets:
Other receivables 248 248 248
Other investments 195,427 195,427 195,427
Total non-current assets 195,427 248 195,675 195,675

Other investments
Trade and other receivables 28 28 28
Cash and cash equivalents 885 885 885
Total current assets 913 913 913
Total assets 195,427 1,161 196,588 196,588

Liabilities

Trade and other payables 5,431 5,431 5,431
Total current liabilities 5,431 5,431 5,431
Total liabilities 5,431 5,431 5,431
20. Operating leases
Leases as lessee
Non-cancellable operating lease rentals are payable as follows:
Group Parent
2008 2007 2008 2007
Less than one year 8 11 8 11
Between one and five years 8 7 8 7
More than five years – – – –
Leases as lessor
The Group leases out its investment property held under operating leases. The future minimum lease payments under
non-cancellable are as follows:
Group Parent
2008 2007 2008 2007
Less than one year 58 95 – –
Between one and five years 106 165 – –
More than five years – – – –
During the year ended 31 March 2008, $113,000 was recognised as being rental income in the income statement
(2007 – $116,000). Repairs and maintenance expense, recognised in occupancy costs, was $16,099 (2007 – $3,042).
21. Capital Commitments
The trust had no capital commitments as at balance date (2007 – Nil).
22. Contingencies
The trust had no contingent liabilities as at balance date (2007 – Nil).
23. Reconciliation of the Profit for the Period with the Net Cash From Operating Activities
Group Parent
Note 2008 2007 2008 2007
Surplus for the period 3,829 10,862 3,756 10,721
Adjustments for:
Depreciation 10 15 10 15
Change in fair value of investment property (100) (60) – –
Change in fair value of managed funds (4,878) (11,947) (4,878) (11,947)
Income tax expense 31 28 – –
Change in trade and other receivables 15 (28) (60) (28)
Change in prepayments (5) – (5) –
Change in trade and other payables 28 (11) 24 (2)
Net cash from operating activities (1,070) (1,141) (1,153) (1,241)
24. Related Parties
Several of the trustees of the Community Trust of Otago and key management personnel have a relationship with organisations which were recipients of donations during the year. The details are as follows:
Trustee Recipient Organisation Donation Amount$
Mrs Hilary Allison Otago Settlers’ Assn 1,000,000
Anglican Family Care 80,000
Maniototo Golf Club 5,000
Naseby Golf Club 5,000
Mr Duncan Butcher Lake Dunstan Boat Club 5,000
Mrs Louise Croot Southern Heritage Trust 3,640
Mr Russell Hendry Otago Cricket Assn 55,600
Epilepsy Assn of NZ Otago 6,500
Mrs Sally Hope Oamaru North School 1,210
Janet Frame Eden Street Trust 3,000
Totara Estate 3,500
Mrs Barbara Payton Basketball Otago 64,990
Mr Mark Ryan Otago Polytechnic 9,800
Anglican Family Care 80,000
Otago Community Hospice 88,456
Ms Nicola Taylor Anglican Family Care 80,000
Te Runanga O Otakou 5,000
Otago Polytechnic 9,800
Arai Te Uru Kokiri Centre Inc 1,000
Kati Huirapa Runanga Ki Puketeraki 28,640
Mr William Thomson Heartland Otago/Southland Life Education Trust 11,400
St Josephs School Balclutha 7,000
Otago Youth Adventure Trust 4,000
Clutha Community Van 6,000
Enterprise Clutha Trust 10,000
Catlins Historical Society 25,000
Clutha Valley School 30,700
NZ Council of Victim Support Groups 20,000
Mr Stuart Walker WOW Productions 5,000
Key management personnel
Mr Keith Ellwood Waikouaiti Golf Club 10,000
Dunedin Lawn Bowls Stadium 9,500
Mrs Carol Melville North Otago Special Olympics 2,000
Dunedin Civic Orchestra t/a Southern Sinfonia 50,000
NZ Special Olympics South Island 5,000
Otago Embroiders Guild 300
City of Dunedin Choir 7,500
Southern Brass Academy 25,000
Disabled Citizens Society 2,500
In addition, Mr Stuart Walker, a trustee of the Community Trust of Otago, is a consultant with Anderson Lloyd, the law firm engaged by the trust. The value of services obtained from Anderson Lloyd to 31 March 2008 was $3,810 (GST incl).
The above transactions all relate to the parent entity.
25. Group Entities
Significant subsidiaries Country of ownership incorporation Interest (%)
Group
Note 2008 2007
Fillmor House Limited New Zealand 100% 100%
26. Explanation of Transition to NZ IFRS
As stated in Note 2(a), these are the Group’s first financial statements for the year ended 31 March 2008, the comparative information presented in these financial statements for the year ended 31 March 2007 and in the preparation of an opening NZ IFRS balance sheet at 1 April 2006 (the Group’s date of transition).
In preparing its opening NZ IFRS balance sheet, the Group has adjusted amounts reported previously in financial statements prepared in accordance with its old basis of accounting (previously GAAP). An explanation of how the transition from previous GAAP to NZ IFRS has affected the Group’s financial position, financial performance and cash flows is set out in the following tables and the notes that accompany the tables.
Reconciliation of EquitpGroup Note Previous GAAP Effect of transitionto NZ IFRS1 Apr 06 NZ IFRS Previous GAAP Effect oftransition toNZ IFRS31 Mar 07 NZ IFRS
Assets:
Property, plant and equipment (a) 1,107 (1,068) 39 1,066 (1,036) 30
Investment property (a) – 1,520 1,520 – 1,580 1,580
Other investments 190,689 – 190,689 195,676 – 195,676
Total non–current assets 191,796 452 192,247 196,742 544 197,286
Other investments:
Trade and other receivables – – – 27 – 27
Cash and cash equivalents 1,621 – 1,621 885 – 885
Total current assets 1,621 – 1,621 912 – 912
Total assets 193,417 452 193,869 196,754 198,198
Trust funds:
Trust capital 131,467 – 131,467 131,467 – 131,467
Capital maintenance reserve 35,773 – 35,773 39,983 – 39,983
Uncommitted surplus 21,934 316 22,250 20,774 380 21,155
Total trust funds 189,174 316 189,490 192,224 380 192,604
Deferred tax liabilities (b) – 136 136 – 163 163
Total non–current liabilities – 136 136 – 163 163
Trade and other payables 104 – 104 93 – 93
Donations payable 4,139 – 4,243 5,430 – 5,337
Total current liabilities 4,243 – 4,243 5,430 – 5,430
Total liabilities 4,243 136 4,379 5,430 163 5,593
Total equity and liabilities 193,417 452 193,869 197,654 544 198,198
Reconciliation of profit for year ended 31 March 2007Group Note Previous GAAP Effect of transitionto NZ IFRS1 Apr 06 NZ IFRS
Revenue 12,110 – 12,110
Investment fees (539) – (539)
11,571 – 11,571
Other income (a) – 60 60
Other expenses (774) 33 (741)
Surplus before taxation 10,797 93 10,890
Income tax expense (b) – (28) (28)
Surplus for the year 10,797 65 10,862
Explanation of material adjustments to the cash flow statement for 2007
There were no differences between the cash flow statement presented under NZ IFRS and the cash flow statement presented under previous GAAP.
Explanation of transition to NZ IFRS on the Parent’s financial statements
There were no differences between the Parent’s financial statements presented under previous GAAP and the financial statements presented under NZ IFRS.
Notes to the reconciliation of equity and profit
The impact on deferred tax of the adjustments described below is set out in Note (13).
(a) Under previous GAAP, land and buildings owned by Fillmor House Limited were classified as property, plant
& equipment. Under NZ IFRS, this is classified as investment property and is therefore required to be re-valued annually to its fair value.
The effect is to decrease property, plant and equipment by $1,068,000 at 1 April 2006, by $1,036,000 at 31 March 2007 and to increase investment property by $1,520,000 at 1 April 2006, by $1,580,000 at 31 March 2007.
(b) The above changes increase/(decrease) the deferred tax liability as follows:
Group Parent
1 April 2006 31 March 2007 1 April 2006 31 March 2007
Investment property 135 163 – –
Increase in deferred tax liability 135 163 – –
(c) The effect of the above adjustment on retained earnings is as follows:
Group Parent
1 April 2006 31 March 2007 1 April 2006 31 March 2007
Investment property 452 544 – –
Deferred tax (136) (163) – –
Total adjustment to equity 316 381 – –
Statutory Information
1. Trustees remuneration
Rates of trustee remuneration are set by the Minister of Finance. Remuneration includes the honoraria and meeting fees:
in New Zealand Dollars (000s)
Board meetingsheld Board meetings attended Other official meetings attended Honoraria and meeting fees paid
$
Hillary Allison 21 20 10 13,932
Duncan Butcher 21 19 1 10,070
John Farry 4 4 1 3,990
Russell Hendry 21 20 23 16,070
Sally Hope 21 16 11 12,415
Stuart Walker 21 13 11 9,790
Barbara Payton 21 19 11 11,260
Raewynne Pedofski 21 21 18 14,684
Mark Ryan 21 14 3 7,550
David Shepherd 4 4 1 1,842
Nicola Taylor 21 21 8 10,805
Bill Thomson 21 21 24 31,347
Louise Croot 17 11 3 6,093
Louise Rosson 17 14 8 10,153
160,001
2. Entries recorded in the interests register
The following entries were recorded in the interest register of the Parent and its subsidiaries during the year:
(A) Trustees’ interests in transactions
The trust maintains a “register of interests” which is held at its offices and which is available for public inspection.
(B) Trustee liability insurance
The trust has insured its trustees against liability to other parties that may arise from their position as trustees. The insurance does not cover liabilities arising from criminal actions.
3. Employee’s remuneration
During the year, the following number of employees received remuneration of at least $100,000:
Number of Employees
140,000 – 149,999 1
Audit Report
To the Trustees of The Community Trust of Otago
We have audited the financial statements. The financial statements provides information about the past financial performance and financial position of the trust and Group as at 31 March 2008. This information is stated in accordance with the accounting policies.
Trustees’ Responsibilities
The trustees are responsible for the preparation of the financial statements which fairly give a true and fair view of the financial position of the trust and Group as at 31 March 2008, and the results of its operations and cashflows for the year ended on that date.
Auditors’ Responsibilities
It is our responsibility to express 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 judgements made by the trustees in the preparation of the financial statements; and
? whether the accounting policies are appropriate to the trust’s and Group’s circumstances, consistently applied and adequately disclosed.
We have 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 obtain reasonable assurance that the financial re statements port is 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 performed a human resource consulting assignment for the trust during the year. We have no other relationship with, or interest in, the trust or any of its subsidiaries other than in our capacity as auditor.
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;
– comply with International Financial Reporting Standards; and
– give a true and fair view of the financial position of The Community Trust of Otago as at 31 March 2008 and the results of their operations and cash flows for the year ended on that date.
Our audit was completed on 24 June 2008 and our unqualified opinion is expressed as at that date.
POLSON HIGGS, Chartered Accountants, Dunedin.
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(A summary of donations approved during the financial year ended 31 March 2008 is available on request from the office of the trust – Freephone 0800 101 240 or email info@cto.org.nz or by writing to the Trust at PO Box 5751, Dunedin.)