Annual Report for the Year Ended 31 March 1994 Trust Particulars The Trust Bank Otago Community Trust Inc. was incorporated as a charitable trust in accordance with the provisions of the Trustee Banks Restructuring Act 1988. The purpose of the trust is to provide charitable, cultural, philanthropic and recreational benefits to the community. Trustees Trustees are appointed by the Minister of Finance. While the initial term of appointment varies, replacement appointments are for a standard term of 4 years. The present trustees are: Mrs C. A. Melville, Chairperson, Mr R. R. Allan, Mr G. R. Bell, Mr J. Edgecombe, Mr P. C. L. Gibson, Mr R. M. Gray, Mrs N. S. Jones, Mr R. S. McKnight, Mr C. D. Matthewson, Dr J. Ng, Mr D. Pasley, Mr J. D. Polson, Ms H. A. Russell and Mr R. F. Walls. Secretary: Mr K. G. Ellwood, 6066 Tennyson Street, P.O. Box 5751, Dunedin. Bankers: Trust Bank Otago Limited. Solicitors: Anderson Lloyd. Auditors: Taylor McLachlan & Partners. Trust Bank Otago Community Trust Inc. Trustees Report for the Year Ended 31 March 1994 The trustees have pleasure in presenting the sixth annual report of the trust. The trustees' duties, which have not changed since last year, include managing the assets of the trust and applying funds for charitable, cutural, philanthropic, recreational and other purposes, being purposes beneficial to the community generally, within the Otago provincial district. Donations 1994$ 1993$ Donations approved during the year997,614 1,344,918 Less unpaid at balance date140,000 730,000 857,614 614,918 Add prior year donations paid this year615,000 304,000 Donations paid as per income and expenditure account$1,472,614 $918,918 The reason for some donations being unpaid at balance date is either, because certain conditions upon which the donation becomes payable are not yet fulfilled by the donee, or payment is to be spread over future years. By entering into arrangements to pay some donees over a period of years, the trust has been able to assist some larger projects in a more practical way. While payment of future years donation instalments is not legally binding upon the trust, undertakings of this nature are closely monitored by the trustees relative to the trust's projected income. A full list of donations made during the year can be obtained from the secretary. National Disaster Relief Fund Our trust operates in conjunction with all other trust bank community trusts towards the maintenance of a national disaster relief fund. During the year a donation was made towards the Kaikoura Relief Fund of which our trust's share was $1,350. Review of Financial Results (i) Shares in Trust Bank New Zealand Limited The financial year has been dominated by the decision of trustees to sell part of the trust's shareholding in Trust Bank New Zealand Limited. Whereas the trust formerly owned 13.5 percent of the issued capital of the bank, that has now reduced to 5.4 percent. For some years trustees have considered that it has not been prudent to continue to effectively have all of the trust's assets in a single investment. Opportunities for diversification have been limited, however the decision taken last year to increase the bank's capital base opened the door for community trusts, as part of that exercise, to sell some of their shares. As a consequence, the trust in March 1994 realised $62 million from the sale of 30 million shares in the bank which, at balance date was on short term deposit. Trustees have retained professional advisers, with whom they are currently working in order to determine how these funds should be re-invested in the longer term to the best advantage of the trust and its beneficiaries. The shares retained by the trust, together with those shares retained by other community trusts, except South Canterbury, have been dealt with in accordance with the terms of a deed of trust entered into in December 1993. That deed provides for the collective shareholding of the community trusts, except South Canterbury, to be substantially held by Community Trust Nominees Limited and managed by Community Trusts Investments Limited as agents. This deed and the articles of association of Community Trusts Investments Limited provide a detailed code governing share transactions by community trusts. The procedures are intended to ensure that the strategic value of the collective shareholding of the community trusts is preserved and that material transactions in parcels of shares either between community trusts, or with third parties are conducted in an orderly manner. The deed also prescribes procedures designed to ensure that community trusts have influence in relation to the appointment of directors to the board of Trust Bank New Zealand Limited. The intent is to ensure that there continues to be an appropriate level of experience, skills and other attributes present on the board of Trust Bank New Zealand Limited. (ii) Financial Performance The income of the trust rose significantly during the year, both as a result of increased dividends from the bank as well as increased interest income arising from the proceeds from the sale of shares. The work required as part of the process involved in selling off part of the trust's shareholding in the bank has led to increases in administration costs and professional fees. Overall the achievements made during the year have been extremely pleasing and trustees consider the affairs of the trust to be in an excellent position. Acknowledgments During the year, the trust lost the services of one of its trustees, Mr Stephen Alexander of Dunedin. His contribution was extremely valuable and sincerely appreciated by all trustees. Mr Richard McKnight was appointed as trustee by the Associate Minister of Finance in May 1993. The financial statements of the trust follow this report. For and on behalf of the trustees: C. A. MELVILLE, Trustee. R. S. McKNIGHT, Trustee. Dated the 24th day of May 1994. A full list of donations is available from the secretary, P.O. Box 5751, Dunedin. Publication of these took place in the 7th day of August 1993 edition of the Otago Daily Times. Trust Bank Otago Community Trust Inc. Income and Expenditure Account for the Year Ended 31 March 1994 $ 1994$ 1993$ Income Interest received191,911 89,225 Dividends received (note 2)1,946,295 1,264,815 Total income 2,138,206 1,354,040 Less expenses ACC levy6 316 Advertising4,441 15,228 Audit fees1,000 800 General expenses850 1,816 Professional fees9,026 5,843 Secretarial fees and expenses65,995 41,035 Travelling expenses9,646 8,987 Trustees fees31,896 32,101 Total expenses 122,860 106,126 Net income before extraordinary item 2,015,346 1,247,914 Extraordinary item Profit on sale of shares in Trust Bank New Zealand Limited 50,451,783 0 Net income before donations 52,467,129 1,247,914 Less donations paid 1,472,614 918,918 Undistributed income $50,994,515 $328,996 These accounts are to be read in conjunction with the notes set out below. Trust Bank Otago Community Trust Inc. Balance Sheet at 31 March 1994 $ 1994$ 1993$ Accumulated funds Balance at 31 March 1993 22,759,455 22,430,459 Add undistributed income from this year 50,994,515 328,996 Total accumulated funds 73,753,970 22,759,455 Represented by current assets Trust Bank Otago current accounts331,253 999,118 Trust Bank Otago short term deposit62,230,867 0 Trust Bank Otago term deposits1,679,440 550,000 National Disaster Relief Fund at call15,267 15,716 Interest accrued101,751 11,460 Total current assets 64,358,578 1,576,294 Deduct current liabilities Sundry creditors12,742 4,056 Undistributed grant provision NDRF15,135 15,135 Total current liabilities 27,877 19,191 Working capital 64,330,701 1,557,103 Add investment (note 3) 24 000 000 shares in Trust Bank New Zealand Limited (at cost) 9,423,269 21,202,352 Net assets as per accumulated funds $73,753,970 $22,759,455 Signed on behalf of the board of trustees: C. A. MELVILLE, Chairperson. R. S. McKNIGHT, Trustee. Dated the 24th day of May 1994. These accounts are to be read in conjunction with the notes set out below. Trust Bank Otago Community Trust Inc. Statement of Cash Flows for the Year Ended 31 March 1994 1994$ 1993$ Cash flows from operating activities Cash was provided from: Dividend from Trust Bank New Zealand Limited1,946,295 1,264,815 Interest on investments100,719 88,842 2,047,014 1,353,657 Cash was disbursed to: Suppliers of goods and services84,994 71,070 Fees to trustees29,181 32,100 Donations to the community1,471,264 918,918 1,585,439 1,022,088 Net cash flows from operating activities461,575 331,569 Cash flows from investing activities Cash was provided from: Maturing fixed interest investments0 450,000 Sale of shares in Trust Bank New Zealand Limited62,230,868 0 62,230,868 450,000 Cash was applied to: Fixed interest investments63,360,308 550,000 Net cash flows from investing activities1,129,440 100,000 Net increase in cash held667,865 231,569 Add cash held at 31 March 1993999,118 767,549 Cash held at 31 March 1994$331,253 $999,118 These accounts are to be read in conjunction with the notes set out below. Trust Bank Otago Community Trust Inc. Notes to and Forming Part of the Financial Statements for the Year Ended 31 March 1994 1. Statement of Accounting Policies General Accounting Policies The general accounting policies adopted in the preparation of these financial statements are: the measurement base adopted is the historical cost basis. reliance has been placed on the fact that the trust is a going concern. revenues earned and expenses incurred are matched using accrual accounting, except that dividends received are accounted for on a receipts basis. Particular Accounting Policies The following are the particular accounting policies which have a material effect on the measurement of results and the financial position: (a) Dividend income from Trust Bank New Zealand Limited is included in the income and expenditure account when it is received. (b) Donations made are included in the income and expenditure account when paid. (c) Investments, which comprise shares held in Trust Bank New Zealand Limited are stated at cost. 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. 2. Dividends Fully imputed dividends received from Trust Bank New Zealand Limited comprised: (a) 1993 final dividend of $1,136,295 plus imputation credits received 2 July 1993. (b) 1994 interim dividend of $810,000 plus imputation credits received 3 December 1993. 3. Investment in Trust Bank New Zealand Limited During the year the trust sold 55 percent of its shareholding in Trust Bank New Zealand Limited. This was achieved in conjunction with a public offering of shares by Trust Bank New Zealand Limited to raise additional equity capital. Changes in the trust's shareholding of Trust Bank New Zealand Limited during the year are summarised as follows: Number of fully paid $1 shares at 1 July 199313 500 000 1:1 bonus issue in February 199413 500 000 27 000 000 Share split in February 1994 ($1 to 50 cents)27 000 000 Total number of 50 cent shares held prior to sale54 000 000 Less sold in March 199430 000 000 Balance of 50 cent shares held at 31 March 199424 000 000 Owned and held directly2 000 Owned and held through Community Trusts Nominees Limited23 998 000 24 000 000 The shares listed on the New Zealand Stock Exchange on 30 March 1994. Market value of the shareholding at 31 March 1994 is estimated to be $55,200,000 based upon Stock Exchange sales of $2.30 per share at close of trading on 31 March 1994. 4. Taxation For taxation purposes, the trust is deemed to be a charitable organisation. Its income is not subject to taxation. The trust is not registered for Goods and Services Tax purposes. Accordingly, these financial statements are stated on a G.S.T. inclusive basis. The trust has been registered as exempt from interest and dividend PAYE and holds a current certificate of exemption. 5. Contingent Liabilities There are no contingent liabilities at 31 March 1994 (1993: $0). 6. Reconciliation of Undistributed Income With Cash Inflow From Operating Activities 1994$ 1993$ Undistributed income50,994,515 328,996 Deduct item classified as investing activity Profit on sales of shares in Trust Bank New Zealand Limited50,451,783 0 542,732 328,996 Adjust for movements in working capital Increase in sundry creditors8,684 2,956 Decrease (increase) in funds held in the National Disaster Relief Fund450 (1,018) (Increase) decrease in interest accrued(90,291) 635 Net cash flow from operating activities$461,575 $331,569 Auditor's Report, Trust Bank Otago Community Trust Inc. We have examined the accompanying balance sheet, income and expenditure account and statement of cash flows and have obtained all the information and explanations we have required. In our opinion, the balance sheet and accounts respectively give a true and fair view of the financial position of the trust as at 31 March 1994 and of the results and the cash flows for the year ended on that date. Dated at Dunedin this 24th day of May 1994. TAYLOR McLACHLAN & PARTNERS, Chartered Accountants.