The Community Trust of Mid and South Canterbury Inc. Trustee Banks Restructuring Act 1988 Annual Report and Consolidated Financial Statements for the Year Ended 31 March 1999 Trust Particulars The Community Trust of Mid and South Canterbury Inc. 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. Trustees Mr R. J. Underdown (Chairman), Mrs C. E. Brand, Ms R. A. Carruthers, Mr L. K. Cooney, Mr A. R. McKay, Mr P. F. McIlraith, Mrs J. J. Rayne, Mrs M. B. Ross, Mr D. B. Timpany and Mrs H. Weeks. Bankers Westpac Trust, 243 Stafford Street, Timaru. Auditors Martin Wakefield, Chartered Accountants, 26 Canon Street, Timaru. Executive Director B. E. C. Strathern, P.O. Box 983, 8290 Sophia Street, Timaru. Chairman's Report for the Year Ended 31 March 1999 I am pleased to present my report for the year ended 31 March 1999. The net realised profit for the year was $2,129,547 and after making provision for transfers into general reserves, an amount of $1,597,161 was available for distribution to the Mid and South Canterbury areas. During the year the trust reconsidered its investment strategy, and with guidance from financial advisers, forumulated a new active investment policy. Guardian Trust New Zealand was commissioned to act as investment manager to manage the trust's capital base in accordance with the new policy. The trustees are very conscious of its responsibilities to the community, and they strive to invest capital prudently to generate a financial return for use in the wider community. The Community House project was successfully launched, and so far 12 community-based organisations are leasing the excellent office accommodation provided, and taking advantage of the central location and other facilities provided in the house. The trust's official office is also based in Community House, making it more accessible to the community and enabling a more efficient service to be provided. The terms of office for trustees, Hon. Jim Sutton, M.P., Mr Peter McIlraith and Mr Eddie Thompson (Chairman), expired on 31 May 1998. The Minister of Finance advised the trust that Mr McIlraith had been re-appointed for a futher term of office expiring on 31 May 2002, and that Mr Sutton and Mr Thompson had been replaced by Mrs Carole Brand and Mrs Huriata Weeks. The trust acknowledges the outstanding contribution made by Hon. Jim Sutton and Mr Eddie Thompson to the affairs of the trust, and welcomes the two new trustees to our team. With the departure of Mr Thompson, I was appointed chairperson of the trust, with Mr Peter McIlraith as deputy chairperson. Mr Ken Churcher, secretary of the trust retired on 31 July 1998, and Mr Bruce Strathern was appointed as the trust's executive director from 1 August. The trust is pleased to contribute to the well-being of the district it serves, not only in the provision of tangible assets, but in assisting in the social welfare of the district. I would like to pay tribute to the large number of individuals in the district, who voluntarily work for the well-being of the charitable organisations they serve. R. J. UNDERDOWN, Chairperson. Consolidated Statement of Financial Performance for the Year Ended 31 March 1999 Note 1999$ 1998$ Income Interest 2,022,865 2,241,326 Dividends 326,579 258,202 Gain on redemption of Government stock 13,045 0 Total income 2,362,489 2,499,528 Less expenditure Advertising 9,673 26,076 Auditor's fees 6,412 1,875 Interest 0 365 Investment administration 35,895 30,508 Legal fees 3,148 4,172 Postage, tolls and fax 3,810 1,769 Printing and stationery 20,640 3,243 Secretarial and accountancy fees 70,920 44,527 Special reports 14,270 5,693 Sundry administration expenses 11,064 5,870 Trustees fees and travel 44,395 34,905 Loss on redemption of Government stock 3,513 29,041 Loss on sale of investments 9,202 0 Total expenditure 232,942 188,044 Net income 2,129,547 2,311,484 Unrealised capital gain on investments 64,864 267,313 Surplus transferred to the trust fund $2,194,411 $2,578,797 Consolidated Statement of Movements in Equity for the Year Ended 31 March 1999 1999$ 1998$ Opening equity34,994,644 33,438,962 Net surplus for year2,194,411 2,578,797 Less donations approved(1,398,371) (1,023,115) Closing equity$35,790,684 $34,994,644 Consolidated Statement of Financial Position as at 31 March 1999 Note 1999$ 1998$ Trust capital General fund3 33,526,105 32,993,718 Donations reserve4 1,878,064 1,733,613 Unrealised revenue reserve5 386,515 267,313 $35,790,684 $34,994,644 Represented by: Current assets Provision for tax6 66,708 27,367 Westpac Trust Subsidiary company account 9,205 1,365 Current account 232,933 77,495 Prime call account 66,206 63,062 Term deposits 6,784,512 7,086,707 National Bank of New Zealand term deposits 5,477,579 5,356,950 ANZ Banking Group term deposits 2,857,365 2,664,150 Sundry debtors 0 32,547 Prepayments 0 13,770 Advvances 200,000 0 Interest accrued 345,490 368,540 Short term debt investments2 1,632,845 2,400,000 17,672,843 18,091,953 Less current liabilities Sundry creditors 8,550 16,652 Donations approved not yet paid8 286,560 69,630 Total current liabilities 295,110 86,282 Working capital 17,377,733 18,005,671 Add non current assets Investments Debt2 10,996,815 9,146,548 Equity 7,416,136 7,842,425 Net assets $35,790,684 $34,994,644 Signed on behalf of the board of trustees: R. J. UNDERDOWN, Chairperson. C. BRAND, Trustee. Dated this 8th day of July 1999. Consolidated Statement of Cash Flows for the Year Ended 31 March 1999 1999$ 1998$ Cash flows from operating activities Cash was provided from: Interest on deposits2,045,304 1,939,082 Dividends287,238 230,989 Debtors32,547 0 2,365,089 2,170,071 Cash was applied to: Suppliers of goods and services(213,948) (216,478) Donations paid(1,181,441) (1,704,981) Advances made(200,000) 0 (1,595,389) (1,921,459) Net cash flows from operating activities769,700 248,612 Cash flows from investing activities Cash was provided from: Redemption of Government stock2,400,000 1,000,000 Sale of equity investments210,954 0 2,610,954 1,000,000 Cash was applied to: Purchase of local body stock0 (1,500,000) Purchase of Australian shares(83,963) (663,283) Purchase of New Zealand Goverment stock (5,754,048) Purchase of New Zealand shares(50,000) (2,497,290) Purchase of New Zealand property shares(154,592) (846,534) Purchase of Australian property shares(38,359) (674,723) Purchase of other debt investments(2,875,669) (1,261,568) Net cash flows from investing activities(3,202,583) (13,197,445) (591,629) (12,197,445) Increase/(decrease) in cash held178,071 (11,948,833) Add opening cash 1 April 199815,249,729 27,198,562 Cash as at 31 March 1999$15,427,800 $15,249,729 Comprised of: Westpac Trust: Subsidiary company account9,205 1,365 Current account232,933 77,495 Prime call account66,206 63,062 Term account6,784,512 7,086,707 National Bank5,477,579 5,356,950 ANZ Banking Group2,857,365 2,664,150 $15,427,800 $15,249,729 Reconciliation of Net Surplus and Net Cash Flows From Operating Activities 1999$ 1998$ Net surplus transferred to equity2,129,547 2,534,440 Add Decrease in debtors32,547 Decrease in prepayments13,770 Decrease in accrued interest23,050 Loss on sale of investments9,203 29,041 2,208,117 2,563,481 Deduct Unrealised capital gain on equity investments0 222,956 Donations paid1,181,441 1,704,981 Advances made200,000 Movements in working capital Decrease in creditors8,102 18,287 Increase in tax refund due39,341 27,367 Increase in accrued interest 302,090 Increase in prepayments 12,514 Increase in debtors 26,674 Net gain on redemption of Government stock9,533 1,438,417 2,314,869 Net cash flow from operating activities$769,700 $248,612 Cash at 31 March 1999 comprises the subsidiary company account, current account, the prime call account and the money market deposit account at Westpac Trust and deposits at National Bank of New Zealand and ANZ Banking Group. Notes to the Consolidated Financial Statements for the Year Ended 31 March 1999 1. Statement of Accounting Policies Reporting Entity The Community Trust of Mid and South Canterbury Inc. is a charitable trust incorporated under the Trustee Banks Restructuring Act 1988. The financial statements have been prepared in accordance with the Financial Reporting Act 1993 and generally accepting accounting policies. General Accounting Policies The general accounting policies adopted in the preparation of these financial statements are: 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. The matching of revenues earned and expenses incurred using accrual accounting. Particular Accounting Policies The following are the particular accounting policies which have a material effect on the measurement of results and financial position: (a) Dividend Income Dividend income is included in the consolidated statement of financial performance when it is received. (b) Donations Donations, special projects and community loans are accounted for on an accruals basis. (c) Investments Investments held as managed funds are shown at market value. Net income including unrealised gains or losses from holding such investments are recorded in the consolidated statement of financial performance. (d) Fixed Assets Fixed assets are recorded at cost less accumulated depreciation. (e) Basis of Consolidation The Community Trust of Mid and South Canterbury Inc. and its subsidiary the Trust Bank South Canterbury Community Trust Charities Limited have been consolidated using the purchase method of consolidation. Changes in Accounting Policies The policy with respect to investments has changed during the year from taking unrealised gains/losses on debt investments directly to the revaluation reserve to taking these gains/losses through the statement of financial performance on an annual basis. Net unrealised gains/losses on all investments are now recorded in the statement of financial performance to provide consistency in the recognition of movements in the value of all investments This change has resulted in an increased operating surplus by $597,910. In addition we have split the general fund into general fund and donations reserve to provide more detailed analysis of trust equity. 1998 comparative figures have been restated in order to reflect the change in accounting policy regarding presentation of equity components. All other accounting policies remain unchanged from the previous year. 2. Investments 1999$ 1998$ New Zealand Government stock 6,824,353 8,835,342 New Zealand local authority stock 1,589,243 1,490,240 New Zealand debentures 1,088,392 1,010,580 New Zealand capital notes and bonds 3,127,672 210,386 New Zealand shares 3,877,112 4,526,660 Australian shares 1,115,500 795,000 New Zealand property shares 1,150,815 1,204,110 Australian property shares 1,272,709 1,316,655 20,045,796 19,388,973 Less New Zealand Government stock short term (1,632,845) (2,400,000) $18,412,951 16,988,973 3. General Fund Balance at beginning of the year 32,993,718 33,438,962 Plus: transfer from statement of financial performance 532,387 577,871 Balance at end of the year33,526,105 34,016,833 Less: donations paid0 (953,485) Donations approved but not paid0 (69,630) Balance at end of the year$33,526,105 $32,993,718 4. Donations Reserve Balance at beginning of the year1,733,613 0 Plus: transfer from statement of financial performance1,597,160 1,733,613 3,330,773 1,733,613 Less: donations approved(1,398,371) 0 Transfer to unrealised revenue reserve(54,338) 0 Balance at end of the year$1,878,064 $1,733,613 5. Unrealised Revenue Reserve Balance at beginning of the year 267,313 0 Transfer from statement of financial performance64,864 267,313 Transfer from donations reserve54,338 0 Balance at end of the year$386,515 $267,313 6. Taxation Net income before donations2,129,547 2,311,484 Add: imputation credits 70,319 65,727 Non deductible expenditure 14,270 34,274 2,214,136 2,411,485 Deduct: distributed as beneficiaries income to Trust Bank South Canterbury Community Trust Charities Limited2,001,048 2,212,313 Taxable income 213,088 199,172 Tax @ 33 percent 70,319 65,727 Less: tax credits 109,660 93,094 39,341 27,367 Prior year refund due 27,367 0 Tax refund due $66,708 $27,367 7. Goods and Services Tax The trust is not registered for goods and services tax purposes. Accordingly these financial statements are stated on a G.S.T. inclusive basis. 8. Donations Approved Not Yet Paid Approved donations not yet paid out include: 1999$ 1998$ S.C. Dare Association 2,000 - Otipua Wetland Charitable Trust - 25,000 S.C. Museum Development Trust 250,000 - Mensline S.C. 1,000 - Task Force Green Community Employment Initiative 5,060 6,380 Temuka/Geraldine A & P Assn 2,000 - Ashburton Domain Oval Pavilion 10,000 - St Andrews Presbyterian Church (Ashburton) 1,000 1,000 Timaru Squash Club - 10,000 Ashburton Youth Steering Committee 5,000 - Barnabas Christian Trust - 13,750 Waikakahi Centennial - 3,000 Sound Shell Roof Cover project 10,000 10,000 South Rangitata Reserve 500 500 $286,560 $69,630 9. Capital Commitments There were no capital commitments (1998 Nil). 10. Contingent Liabilities The trust is committed to providing $750,000 over 3 years to the Ashburton Acquatic Park Trust contingent upon certain conditions being met. 11. Advances The trust made an advance to the Aorangi Park Trust. The balance outstanding at balance date was $200,000. 12. Financial Instruments Fair Values Investments are stated at estimated market value at balance date. Interest accrued, sundry debtors, sundry creditors, term loans and donations approved, not yet paid, are stated at the amounts expected to be received or paid. Accordingly, the trustees consider that the fair value of each class of financial assets and financial liabilities is the same as the carrying value in the statement of financial position. Credit Risk Seventy six percent of the assets of the trust are represented by debt investments and current account balance with Westpac trust, National Bank of New Zealand and ANZ Banking Group. The trustees consider the risk of non-recovery of these investments at balance date to be within satisfactory guidelines. The maximum exposure to credit risk of other financial instruments are: 1999$ 1998$ Sundry debtors0 32,547 Advances 200,000 0 Interest accrued 345,490 368,540 New Zealand shares 3,877,112 4,526,660 New Zealand property shares 1,150,815 1,204,110 Australian property shares 1,272,709 1,316,655 Australian shares 1,115,500 795,000 $7,761,626 $8,243,512 Currency Risk The Trust incurs currency risk as a result of investment in Australian property shares and Australian shares - i.e. gives rise to currency risk in Australian dollars. Interest Rate Risk The following investments of the trust are sensitive to changes in interest rate: bank call accounts and term deposits, government and local authority securities, Telenotes, Fletcher Challenge Capital Notes, Housing Corporation, Transpower Bonds and various convertible notes. Audit Report to the Readers of the Consolidated Financial Statements of the Community Trust of Mid and South Canterbury Inc. We have audited the financial report on pages 5 to 13 and 15 to 25. The financial report provides information about the past financial performance of the trust and its financial position as at 31 March 1999. The information is stated in accordance with the accounting policies set out on page 10. Trustees Responsibilities The trustees are responsible for the preparation of a financial report which gives a true and fair view of the financial position of the trust as at 31 March 1999 and of the results of operations for the year ended 31 March 1999. Auditor's Responsibilities It is our responsibility to express an independent opinion on the financial report presented by the trustees and report 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 report. It also includes assessing: the significant estimates and judgments made by the trustees in the preparation of the financial report, and whether the accounting policies are appropriate to the trust circumstances, 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 in order to provide us with sufficient evidence to give reasonable assurance that the financial report is free from material misstatements, whether caused by fraud or error. In forming our opinion we also evaluated to overall adequacy of the presentation of information in the financial report. Other than in the normal course of business and in our capacity as auditors we have no relationship with or interests in the trust. 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 as far as appears from our examination of those records; and the financial report on pages 5 to 13 and 15 to 25: complies with generally accepted accounting practice; gives a true and fair view of the financial position of trust as at 31 March 1999 and the results of it's operations for the year ended on that date. Our audit was completed on 8 July 1999 and our unqualified opinion is expressed as at that date. MARTIN WAKEFIELD, Auditors. Timaru. The Hon. Minister of Finance has directed that the Community Trust of Mid and South Canterbury Inc. need not publish the full list of its donations, but a copy of the list is available to anyone upon request to the chairperson, the Community Trust of Mid and South Canterbury Inc., P.O. Box 983, Timaru, or from the offices of the executive director, Community House, 8290 Sophia Street, Timaru.