The Community Trust Consolidated Financial Statements for the Year Ended 31 March 1999 The Community Trust Trust Directory for the Year Ended the 31st day of March 1999 Trust Particulars: The Community Trust was incorporated as a charitable trust in accordance with the provisions of the Trustee Banks Restructuring Act 1988. The purpose of The 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: I. D. Howell, P. H. Malone, N. A. Allen, J. M. Mckendry, J. C. Bedwell, R. H. Scott, W. Dormer, F. J. Smith, B. P. Duncan, M. W. Wisheart, M. I. Gibb, S. S. J. Wong. Administrator: W. Ward. Accountants: KPMG, P.O. Box 274, Christchurch (M. J. Hadlee). Auditors: PricewaterhouseCoopers, P.O. Box 13-244, Christchurch (J. A. Orr). Fund Managers: Alliance Capital, Lazard Freres, Mercury Asset Management, AMP, Bankers Trust, Towers Perrin. Custodial Trustee: The Chase Manhattan Bank. Bankers: WestpacTrust. Solicitors: Chapman Tripp Sheffield Young, P.O. Box 2510, Christchurch (L. Alexander). The Community Trust Trustees' Report for the Year Ended the 31st day of March 1999 Objectives of the Trust and Charitable Company Subsidiary: To provide charitable, cultural, philanthropic and recreational benefits to the communities of Canterbury, Marlborough and Nelson. Policies and Structure of the Trust and Charitable Company Subsidiary: These organisations are structured to include community representatives from the 3 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 and Nelson. 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 $85,589 (1998: $90,121). Review of Results and Financial Position: The total distribution from the trust and charitable company was $17.5 million (1998: $17.2 million) by way of donations to community groups during the last 12 months. Signed on behalf of the board of trustees: Chairperson: I. D. Howell. Trustee: R. H. Scott. Date: 28 June 1999. The Community Trust Consolidated Statement of Financial Performance for the Year Ended the 31st day of March 1999 Notes 1999$000 1998$000 Revenue2 40,707 46,669 Less investment fees2 1,897 1,182 Less expenses2 1,071 1,362 Net surplus before taxation 37,739 44,125 Less retentions Transfer to capital base reserve 6,766 9,169 Available for distribution 30,973 34,956 Donations to tax appoved entites3 12,939 11,606 Net surplus transferred to trust funds $18,034 $23,350 Transferred to accumulated income reserve4 $18,034 $23,350 The Community Trust Consolidated Statement of Movements in Trust Funds for the Year Ended the 31st day of March 1999 Notes 1999$000 1998$000 Total trust funds at beginning of year 420,015 393,127 Less donations paid from capital3 (4,468) (5,631) 415,547 387,496 Add net surplus for the year 18,034 23,350 Increase in capital base reserve 6,766 9,169 Total trust funds at end of year $440,347 $420,015 Represented by: Core real capital base reserve4 358,000 358,000 Accumulated income reserve4 57,672 44,106 Capital base reserve4 24,675 17,909 $440,347 $420,015 The Community Trust Consolidated Statement of Financial Position as at the 31st day of March 1999 Notes $000 1999$000 1998$000 Trust funds4 440,347 420,015 Represented by: Current assets WestpacTrust operating accounts 21 (58) Bank deposits 663 5,720 Sundry current assets 208 Taxation refund due13 1,455 684 7,325 Investments Property investment7 4,162 3,760 Government securities 304 Managed funds 438,803 411,916 Community loans 148 252 443,113 416,232 Fixed assets8 184 166 Total assets 443,981 423,723 Current liabilities Accounts payable and goods and services tax 113 135 Committed donations and special projects 3,521 3,573 Total liabilities 3,634 3,708 Net assets $440,347 $420,015 The Community Trust Consolidated Statement of Cash Flows for the Year Ended the 31st day of March 1999 Notes 1999$000 1998$000 Cash was provided by (used for): 5 Operations Income from investments 46,039 16,211 Income from interest and dividends 267 11,933 Payments to beneficiaries (3,643) (3,274) Payments to suppliers and employees (2,732) (2,328) Payments to trustees (86) (90) Payments of taxation 1,455 3,279 Payments of goods and services tax 5 40 Donations to the community (13,746) (13,861) $27,559 $11,910 Investing Sale of Government and local authorities securities 304 197 Sale of Armstrong Jones Investment 23,380 Managed funds investments (32,366) (391,435) Movement in term deposits 5,057 344,317 Community loans 105 145 Purchase of fixed assets (580) (2,087) ($27,480) ($25,483) Increase in cash 79 (13,573) Cash at beginning of year (58) 13,515 Cash at end of year $21 ($58) Represented by: WestpacTrust operating accounts $21 ($58) The Community Trust Notes to the Financial Statements for the Year Ended the 31st day of March 1999 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 Community Trust was incorporated as a charitable trust in accordance with the provisions of the Trustee Banks Restructuring Act 1988. These financial statements have been prepared in accordance with applicable financial reporting standards. (ii) Community Trust Charities Limited is a charitable company incorporated under the Companies Act 1993 as amended and is a reporting entity for the purposes of the Financial Reporting Act 1993. The financial reports of Community Trust Charities Limited have been prepared in accordance with the Financial Reporting Act 1993. (iii) Canterbury Trust House Limited was incorporated on 18 December 1995 under the Companies Act 1993. Canterbury Trust House Limited is a reporting entity for the purposes of the Financial Reporting Act 1993. The financial statements of Canterbury Trust House Limited have been prepared in accordance with the Financial Reporting Act 1993. (iv) 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. (v) The matching of revenue earned and expenses incurred using accrual accounting concepts. 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. Fixed Assets and Investment Property: Fixed assets investment property are recorded at cost less accumulated depreciation. Investments: Investments are shown at market value. Net income including realised and unrealised gains or losses from holding or trading these investments are recorded in the statement of financial performance. Donations, Special Projects and Community Loans: Donations, special projects and community loans are accounted for on an accruals basis. Dividend Income: Dividend income is included in the statement of financial performance when it is received. Income Tax: 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 Community Trust Charities Limited, Canterbury Trust House Limited, is registered for G.S.T. Accordingly its financial performance and financial position have been consolidated within the accounts on a G.S.T. exclusive basis. Subject to the above, the trust is not registered for G.S.T. purposes and therefore the financial statements have been prepared on a G.S.T. 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 transactions 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 WestpacTrust balances only. Cash excludes bank deposits not used as part of the trust's day-to-day cash management. Basis of Consolidation: The Community Trust, Community Trust Charities Limited and its subsidiary, Canterbury Trust House 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 1999$000 1998$000 Revenue: Rents received146 2 Interest received267 11,933 Investment income40,294 34,734 $40,707 $46,669 Investment fees: Fund managers fees1,453 950 Custodial fees274 52 Advisory fees170 180 $1,897 $1,182 Expenses: Advertising, public relations, distribution and travelling costs280 374 Computer and system review costs36 157 Depreciation and loss on sale166 107 Professional fees170 164 Property costs67 31 Salaries and staff recruiting fees262 432 Trustees fees86 90 Change on value of Government securities investment4 7 $1,071 $1,362 3. Donations The names of organisations to whom distributions have been made by the trust under section 21 of the Trustee Banks Restucturing Act 1988 during the financial year and the amounts distributed are shown in the annual report. 1999$000 1998$000 Donations paid from income12,939 11,606 Special projects paid from income4,467 5,631 $17,406 $17,237 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. 4. Trust Funds 1999$000 1998$000 Core real capital base reserve: Balance brought forward358,000 358,000 Transfer from accumulated income reserve4,468 5,631 Donations paid from capital(4,468) (5,631) $358,000 $358,000 Accumulated income reserve: Balance brought forward44,106 26,387 Transfer to core real capital base reserve(4,468) (5,631) Net surplus for year18,034 23,350 $57,672 $44,106 Capital base reserve: Balance brought forward17,909 8,740 Retention as per statement of financial performance6,766 9,169 $24,675 $17,909 The capital base reserve is an allowance for the erosion of the value of the core real capital base reserve, due to inflation. For 1999 this was calculated based on inflation at 1.8 percent on a core real capital base reserve of $375,908,120 for 12 months. 5. Reconciliation of Net Surplus to Net Operating Cash Flow 1999$000 1998$000 Net surplus from statement of financial performance18,034 23,350 Adjustments for non cash items in net depreciation160 107 Revaluation of Government securities investment 7 Managed funds income unrealised5,479 (20,489) 23,673 2,975 Adjustments for changes in working capital: Decrease/(increase) in accounts receivable1 (1) Decrease/(increase) in accrued interest119 1,966 Decrease/(increase) in prepayments18 (3) Increase/(decrease) in accounts payable(28) 14 Increase/(decrease) in donations payable(52) 171 Increase/(decrease) in taxation payable1,455 3,279 Increase/(decrease) in goods and services tax5 40 Increase/(decrease) in donations paid in advance70 (69) 25,261 8,372 Add capital base reserve transfer6,766 9,169 Deduct donations paid from capital(4,468) (5,631) Cash flow from operations$27,559 $11,910 6. Capital Commitments There are no capital commitments at balance date (1998: nil). 7. Investment Property The investment property of the trust is valued at cost. Payments made on the investment property as at 31 March 1999 consist of the purchase of the land at 262 Oxford Terrace and adjoining property, architectual and legal fees, stamp duty, building consent permits and building costs to date. 8. Fixed Assets Cost$000 AccumulatedDepreciation$000 1999BookValue$000 1998BookValue$000 Plant and equipment45 24 21 25 Computer120 35 85 27 Motor vehicles44 29 15 34 Furniture and fittings90 27 63 80 $299 $115 $184 $166 9. Contingent Liabilities There are no contingent liabilities at balance date (1998: nil) apart from donation commitments as per note 3. 10. Segmental Reporting The trust operates as a charitable trust in the Canterbury, Marlborough and Nelson areas. 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 estimated market value at balance date. Accrued interest, accounts payable, community loans, 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 statement of financial position. Concentration of Investments Ninety-nine percent (99%) of the assets of the trust are represented by investments held with a range of financial institutions. However the trustees consider the risk of non-recovery of these investments to be minimal. Currency Risk The trust incurs currency risk as a result of investment transactions entered into by fund managers. Interest Rate Risk The following investments of the trust are sensitive to changes in interest rates: Bank call accounts and deposits, governments and local authority and securities held by fund managers. Loans and advances with related parties do not carry interest and therefore do not hold any interest rate risk. 13. Taxation 1999$000 1998$000 Net income before taxation as per statement of financial performance37,739 44,125 Add: non deductible expenditure325 357 Imputation credits received425 402 Withholding taxes on investments214 Canterbury Trust House Limited loss15 Less: revaluation of equities(3,088) (13,775) Allocated as beneficiaries income(21,754) (17,767) Donations to tax approved entities(12,939) (11,606) Assessable income for tax purposes937 1,736 Less: loss carry forward entitlement0 (170) Taxable income937 1,566 Taxation 33 percent309 517 Less: imputation credits received(425) (402) Tax credits on overseas dividends(214) (115) Add: excess imputation credits330 Resident withholding tax 1,455 Taxation payable (refund) as per the statement of financial position ($1,455) Auditors' Report to the Trustees of The 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 1999 and their financial position as at that date. This information is stated in accordance with the accounting policies set out therein. Trustees' Responsibilities The trustees are responsible for the preparation and presentation of the consolidated financial statements which give a true and fair view of the financial position of the trust and subsidiaries as at 31 March 1999 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 financial statements. It also includes assessing: (a) the significant estimates and judgments made by the trustees in the preparation of the financial statements; and (b) whether the accounting policies used and described therein 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 consolidated 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: (a) proper accounting records have been kept by the trust as far as appears from our examination of those records; and (b) the consolidated financial statements: (i) comply with generally accepted accounting practice; and (ii) give a true and fair view of the financial position of the trust and subsidiaries as at 31 March 1999 and their financial performance and cash flows for the year ended on that date. Our audit was completed on 24 May 1999 and our unqualified opinion is expressed as at that date. PricewaterhouseCoopers, Chartered Accountants, Christchurch. PricewaterhouseCoopers, 119 Armagh Street (PO Box 13-244), Christchurch, New Zealand. Telephone: (643) 374 3000. Facsimile: (643) 374 3001.