Consolidated Statement of Financial Performance for the Year Ended 31 March 2003
2003 2002
Note $ $
Total investment income 1 (11,392,083) 1,845,912
Total expenditure 2 1,303,143 1,302,801
Net surplus before taxation (12,695,226) 543,111
Taxation 17 - -
Net surplus after taxation (12,695,226) 543,111
Share of income/(deficit) of Invest South Limited 8 211,824 (72,326)
Net surplus/(deficit) for the year before distribution (12,483,402) 470,785
Transfer to capital maintenance reserve (4,369,401) (4,412,418)
(16,852,803) (3,941,633)
Donations to tax approved entities (1,183,800) (4,718,060)
Net deficit transferred from grants maintenance reserve (18,036,603) (8,659,693)
Consolidated Statement of Movements in Trust Funds for the Year Ended 31 March 2003
2003 2002
Note $ $
Trust capital at beginning of year 170,424,737 180,182,430
Less grants paid from capital 4 (7,305,691) (5,510,418)
Net deficit for the year transferred from grants maintenance reserve 3 (18,036,603) (8,659,693)
Increase in capital maintenance reserve 3 4,369,401 4,412,418
Trust capital at end of year 149,451,844 170,424,737
Consolidated Statement of Financial Position as at 31 March 2003
2003 2002
Note $ $
Funds employed:
Trust capital 4 158,460,000 158,460,000
Reserves 3 (9,008,156) 11,964,737
Total capital and reserves 149,451,844 170,424,737
Liabilities-
Current liabilities:
Accounts payable 118,045 133,968
Grants committed but not paid 5,819,620 6,737,647
Total liabilities 5,937,665 6,871,615
Total capital and liabilities 155,389,509 177,296,352
Assets-
Current assets:
WestpacTrust cheque account 25,466 (15,282)
Accounts receivable and interest accrued 10,836 77,303
Total current assets 36,302 62,021
Non current assets:
Fixed assets 10 1,061,791 1,095,448
Investment assets:
WestpacTrust call account - 4
Trading bank deposits 211,000 745,000
Managed funds:
- ING (NZ) Ltd 11 20,749,630 23,797,583
- Tower Asset Management 11 46,749,547 46,211,894
- AMP Asset Management 11 37,941,250 38,619,139
- State Street Global Advisors 11 45,058,741 62,565,123
Loans 12 938,055 1,768,771
Invest South Limited 8 2,643,193 2,431,369
Total non current assets 155,353,207 177,234,331
Total assets 155,389,509 177,296,352
Consolidated Statement of Cash Flows as at 31 March 2003
2003 2002
Note $ $
Cash flows from operating activities-
Cash was provided from/(applied to):
Interest and dividends 7,308,978 5,439,695
Revaluation of investments (18,631,581) (3,635,361)
Administration expenses (1,242,266) (1,261,979)
Grants to the community (8,367,518) (11,284,459)
Net cash inflow/(outflow) from operating activities 13 (20,932,387) (10,742,104)
Cash flows from investing activities-
Cash was provided from/(applied to):
Investments 21,228,575 11,840,372
Fixed assets (46,156) (61,890)
Loans (209,284) (1,055,263)
Net cash inflow/(outflow) from investing activities 20,973,135 10,723,219
Net increase/(decrease) in cash held 40,748 (18,885)
Add cash at beginning of the year (15,282) 3,603
Total cash balance at end of year 25,466 (15,282)
Statement of Significant Accounting Policies for the Year Ended 31 March 2003
A. Basis of Preparation
The Community Trust of Southland was formed under the Trustee Banks Restructuring Act 1988 and is incorporated under the Charitable Trusts Act 1957. The financial statements presented are those for The Community Trust of Southland Group
("the group"). The group consists of The Community Trust of Southland ("the trust"), its wholly owned subsidiary company Southland Community Trust Charities Limited and the trust's interests in associates.
The financial statements comply with the Financial Reporting Act 1993 and the Community Trusts Act 1999. They comprise statements of the following: significant accounting policies, financial performance, movements in trust funds, financial position, cash flows, as well as notes to these statements.
The financial statements are prepared on the basis of historical cost except that investment assets are stated at valuation.
B. Consolidation Method
The financial statements of the trust's wholly owned company Southland Community Trust Charities Limited are included in the financial statements using the purchase method of consolidation.
C. Associates
Associates are entities in which the group has significant influence, but not control over the operating and financial policies. The financial statements include the group's share of the net surplus of associates on an equity accounted basis.
D. Trust Capital
Following the sale of the group's shares in Trust Bank New Zealand Limited in April 1996 for $158,460,000, the trustees agreed that the value of the trust at that time should be maintained for the benefit of current and future generations living in the region. For this purpose, the trustees agreed that $158,460,000 would be considered as the "trust capital" value of the group and that this value would be maintained.
E. Capital Maintenance Reserve
The capital maintenance reserve represents the additional amount necessary to preserve the real value of the trust capital allowing for inflation as measured by the Consumers Price Index (all groups) and payments of grants out of capital.
F. Grants Maintenance Reserve
While the trustees have adopted a long-term investment strategy, they accept that annual returns from investments are likely to fluctuate from year to year. In recognition of this, a grants maintenance reserve is maintained. In years when net income from investments is higher than the grant levels, surplus income will be transferred to this reserve. In years when there is insufficient income to sustain the level of grants, an appropriate amount will be transferred from the grants maintenance reserve to income.
G. Basis of Recognising Components of the Financial Statements
The following general accounting policies are adopted:
Assets
A transaction results in an asset being recognised in the statement of financial position when it will probably give rise to ongoing benefits for the group and those benefits can be measured with reliability.
Liabilities
A transaction results in a liability being recognised in the statement of financial position when it will probably give rise to the need for the group to sacrifice assets in the future and those sacrifices can be measured with reliability.
Revenue
Revenue is recognised in the statement of financial performance when a transaction gives rise to an increase in the value of the group's net assets, and that increase can be measured with reliability.
Expenses
An expense is recognised in the statement of financial performance when a transaction results in a decrease in the value of the group's net assets, and that decrease can be measured with reliability.
Classification of Assets and Liabilities Between Current and Non-current
An amount is classified as current when it is expected to be settled or extinguished within one year of the date of the financial statements. All other amounts are classified as non-current.
H. Fixed Assets
Fixed assets are initially stated at cost and then depreciated on a straight line basis. The estimated useful lives of fixed assets are as follows:
Land Indefinite
Buildings 30-40 years
Furniture and fittings 3-15 years
Office equipment 3-8 years
Motor vehicles 5-8 years
I. Investments
Investments are stated at market value and report realised and unrealised gains or losses on holding these investments in the statement of financial performance. These gains or losses are shown in the statement of financial performance as income from revaluation of investments.
J. Accounts Receivable
Accounts receivable are stated at expected realisable value.
K. Grants
Grants are recognised when they are approved by the trustees. Unpaid grants are recorded as a liability.
L. Goods and Services Tax
The group is not registered for goods and services tax. The financial statements are prepared using G.S.T. inclusive accounting.
M. Income Taxation
The group provides for income tax on its net income after adjusting for tax accounting differences and any beneficiaries' income determinations made pursuant to section OB1 (226) of the Income Tax Act 1994.
N. Statement of Cash Flows
Operating cash flows includes interest and dividends paid or credited to investment funds under management and any upward or downward revaluation of funds during the period. Cash movements in funds invested are recognised in investing activities.
O. Changes in Accounting Policies
The accounting policies have been consistently applied by the group and are consistent with those of the previous year.
Notes to the Financial Statements for the Year Ended 31 March 2003
1. Investment Income
2003 2002
Note $ $
Dividends and distributions 4,452,442 359,710
Interest 2,787,056 5,121,563
Change in value of investments (18,631,581) (3,635,361)
(11,392,083) 1,845,912
2. Expenditure
2003 2002
$ $
Audit fees 6 12,921 14,104
Communications 18,623 21,830
Conference costs 7,462 13,522
Depreciation 74,153 83,496
Loss/(gain) on disposal of fixed assets 5,660 (5,725)
Fund manager fees 445,915 386,632
General expenses 36,735 41,300
Insurance 12,263 12,131
Occupancy costs 17,089 17,205
Office expenses 20,403 24,139
Professional fees 5 160,709 210,158
Promotion, reporting and compliance expenses 52,919 65,334
Salaries and staff costs 254,862 250,273
Trustees' fees 7 167,433 150,697
Vehicle expenses 15,996 17,705
1,303,143 1,302,801
3. Reserves
(a) Capital Maintenance Reserve
2003 2002
$ $
Opening balance of capital maintenance reserve 10,039,680 11,137,680
Transfer from statement of financial performance 4,369,401 4,412,418
Transfer to capital reserve (7,305,691) (5,510,418)
7,103,390 10,039,680
(b) Grants Maintenance Reserve
2003 2002
$ $
Opening balance of grants maintenance reserve 1,925,057 10,584,750
Transfer from statement of financial performance (18,036,603) (8,659,693)
(16,111,546) 1,925,057
Total reserves (9,008,156) 11,964,737
4. Trust Capital
2003 2002
$ $
Opening balance of trust capital 158,460,000 158,460,000
Transfer from capital maintenance reserve 7,305,691 5,510,418
Less grants paid from capital (7,305,691) (5,510,418)
158,460,000 158,460,000
5. Professional Fees
2003 2002
$ $
Financial/taxation advisory 140,064 165,959
Legal 5,091 18,297
Other 15,554 25,902
160,709 210,158
6. Auditor's Remuneration
During the year, the following amounts were paid to Ward Wilson, the group's auditors:
2003 2002
$ $
For audit work 12.921 14,104
For other services - -
7. Trustees' Fees
Meeting fees and honorariums were paid to trustees as follows:
Meetings Fees Fees
attended 2003 2002
$ $
T. W. Harpur 59 39,257 27,547
C. S. Ballantyne 23 12,258 19,677
A. R. Macdonald 13 11,546 11,213
F. G. Cardno 22 13,222 10,600
S. G. Palmer 33 16,872 14,240
J. D. Frampton 21 13,082 11,650
A. A. Broad 31 17,342 11,120
N. J. Wyeth 29 16,092 15,490
P. Redpath (appointed June 2001) 31 14,698 12,900
D. Williams (appointed June 2001) 26 13,064 11,450
W. A. Cambridge (retired June 2001) - - 2,500
P. Duffy (retired June 2001) - - 2,310
167,433 150,697
Trustee fees and honorariums are set by the Minister of Finance. During the year, the Minister undertook a review of community trust remuneration levels and increased fee levels by approximately 13%. This was the first remuneration change since 1997.
8. Investments in Associates
Invest South Limited is a joint venture company, owned 50% each by the group and SBS. Invest South Limited is in the business of investing, principally by way of equity investment, in businesses in the Southland region. Invest South Limited's balance date is 31 March.
The group's investment in Invest South Limited comprises:
2003 2002
$ $
Opening value of investment 2,431,369 2,503,695
Share of operating surplus/(deficit) 211,824 (72,326)
Equity accounted value of investment 2,643,193 2,431,369
The trustees resolved prior to balance date to purchase from SBS their shareholding in Invest South Limited for the sum of $2,625,000, and this transaction was completed in May 2003. Following the purchase, the group owns 100% of Invest South Limited's 10 million shares.
9. Grants Approved
2003 2002
$ $
Grants approved this year 9,207,483 10,675,693
Less prior year's grants cancelled (717,992) (447,215)
Net grants approved 8,489,491 10,228,478
10. Fixed Assets
Cost Accum depn 2003 value 2002 value
$ $ $ $
Land 457,419 - 457,419 457,419
Buildings 523,063 107,396 415,667 437,525
Office equipment 181,123 120,669 60,454 50,667
Furniture and fittings 151,357 93,653 57,704 74,692
Motor vehicles 119,298 48,751 70,547 75,145
Totals 1,432,260 370,469 1,061,791 1,095,448
11. Investments Managed by Fund Managers
The group has funds with five investment managers (fund managers), being AMP Asset Management, ING (NZ) Ltd, State Street Global Advisors, Tower Asset Management and Invest South Limited. Market values and asset allocations of these investments as at balance date were as follows:
AMP (NZ$m) ING(NZ)Ltd(NZ$m) State Street Global Advisors (NZ$m) TowerAsset Management (NZ$m) InvestSouthLtd(NZ$m) Total2003value (NZ$m) Total2002value (NZ$m)
NZ equities 14.01 2.64 16.65 18.39
Overseas equities 45.06 45.06 62.57
NZ fixed interest 34.20 34.20 36.85
Overseas fixed interest 46.75 46.75 46.21
Cash 3.74 6.74 10.48 9.67
Totals 37.94 20.75 45.06 46.75 2.66 153.14 173.69
Exposure to currency, interest rate and credit risk arises in the normal course of the fund managers' management of the group's investments. A range of hedging policies are in place whereby the fund managers use derivative financial instruments as a means of managing exposure to fluctuations in foreign exchange rates and interest rates. While these financial instruments are subject to the risk of market rates changing subsequent to acquisition, such changes would generally be offset by opposite effects on the items being hedged.
12. Loans
Loan balances outstanding as at 31 March were as follows:
2003 2002
$ $
Troopers Memorial Corner Charitable Trust 195,000 195,000
Topoclimate South Trust 98,493 146,525
Southland Museum & Art Gallery 34,190 41,746
Ringa Ringa Heights Golf Club 39,000 39,000
Nga Hau Wha Society 34,872 -
Croydon Aviation Museum 280,000 -
Southland Outdoor Stadium Trust - 1,000,000
Tuatapere Hump Ridge Track 160,000 200,000
Invercargill Artificial Sport Surface Trust 96,500 96,500
Ice Sports Southland - 50,000
938,055 1,768,771
Each loan is repayable upon demand. All loans are interest free, with the exception of the loan to Topoclimate South Trust, which attracts interest at the 90 day bank bill rate plus a margin of 2%, and the loan to Nga Hau Wha Society, which attracts interest of 7%.
13. Reconciliation with Operating Surplus
2003 2002
$ $
Net surplus before distribution (12,483,402) 470,785
Less grants (8,489,491) (10,228,478)
(20,972,893) (9,757,693)
Add/(less) movement in working capital:
Increase/(decrease) in liabilities (933,950) (1,114,078)
(Increase)/decrease in accounts receivable 66,467 (20,430)
867,483 (1,134,508)
Add/(less) movement in non-cash items:
Revaluation of investments 828,176 72,326
Depreciation 74,153 83,496
Loss/(gain) on sale of fixed assets 5,660 (5,725)
907,989 150,097
Net cash provided by operating activities (20,932,387) (10,742,104)
14. Financial Instruments
General
The group states its investments at balance date at estimated market value. The trustees consider that the fair value of the financial assets is identical to the value in the statement of financial position.
Concentration of Credit Risk
The group, from time to time, has significant funds in trading bank deposits. The group limits risk by spreading the deposits over several trading banks. The group has not required collateral or other security to support its financial statements.
The group further limits risk through its policy of placing investment funds with five separate fund managers, with each fund manager having an investment mandate which requires that they diversify their investments on the group's behalf. The group has sought and obtained the advice of professional financial advisers prior to making its investment allocation and placement decisions.
Interest Rate Risk
The bank deposits are sensitive to changes in interest rates, as are a proportion of the funds managed by the fund managers, and the loans to Topoclimate South Trust and Nga Hau Wha Society.
15. Capital Commitments
Commitments of $4,202,448 exist for grants which will be distributed from either capital or future income sources in future years. These grants have not been recorded in either the statements of financial performance or financial position. Specific commitments are as follows:
2003 2002
$ $
Southern Institute of Technology 839,128 1,678,259
Southland Outdoor Stadium Trust - 1,000,000
Gore Multi Sport Complex - 1,065,465
Eastern Southland Art Gallery - 400,000
Southland Hospice - 375,000
Tuatapere Hump Ridge Track 160,000 200,000
Fiordland Community Events Centre - 400,000
Fiordland Medical Trust - 325,000
Venture Southland - Broadband 423,320 -
Invercargill City Council - Civic Theatre 2,500,000 -
Croydon Aviation Museum 280,000 -
4,202,448 5,443,724
The years in which these commitments fall due are as follows:
Year ending 31 March 2003 - 5,283,724
Year ending 31 March 2004 1,359,128 40,000
Year ending 31 March 2005 1,263,320 40,000
Year ending 31 March 2006 1,040,000 40,000
Year ending 31 March 2007 540,000 40,000
4,202,448 5,443,724
Commitments of up to $473,850 exist for loans which trustees have approved, but which had not been drawn down as at balance date. The approved loans are as follows:
Borland Lodge 293,850 -
Northern Southland Medical Trust 50,000 -
Wyndham & Districts Community Rest Home 80,000 -
Southland Heritage Building Preservation Trust 50,000 -
473,850 -
16. Related Party Transactions
There were no related party transactions during the year.
17. Tax Calculation
2003 2002
$ $
Net surplus/(deficit) before taxation as per statement of financial performance (12,695,226) 470,785
Less: Charitable business exemption 2,218,891 1,866,081
Dividend income on black-list country equities - -
Tax refund included in income - -
Realised gains on black-list country equities - -
Unrealised gains on NZ equities - 569,423
Unrealised gain on grey-list equities 5,673,306 -
7,892,197 2,435,504
(20,587,423) (1,964,719)
Add: FIF income - -
Unrealised loss on black-list country equities - -
Unrealised loss on NZ equities 475,160 -
Unrealised loss on grey-list equities - 12,854,750
Reversal of unrealised loss on currency hedging (31/03/00) - -
Non deductible expenditure 453,975 483,082
Imputation credits received 268,869 125,678
Withholding tax 162 -
1,198,166 13,463,510
Total taxable income (19,389,257) 11,498,791
Less: Allocation of beneficiaries' income to the charitable company - (5,800,000)
Allocation of beneficiaries' income to tax exempt entities (1,183,800) (4,718,060)
(1,183,800) (10,518,060)
Total trustees' income/(loss) (20,573,057) 980,731
Less: Tax losses brought forward ($419,216): amount claimed - (980,731)
Assessable income for tax purposes (20,573,057) -
Taxation at 33% - -
Taxation payable/refund due - -
Excess imputation credits converted to loss to carry forward (814,755) (380,841)
Current year loss to carry forward (20,573,057) -
Loss brought forward from 2002 unclaimed (419,216) (38,375)
Total loss to carry forward (21,807,028) (419,216)
Audit Report
To the Readers of the Financial Statements of the Community Trust of Southland
We have audited the financial statements. The financial statements provide information about the past financial performance and financial position of the trust and the group as at 31 March 2003. This information is stated in accordance with the accounting policies set out.
Trustees' Responsibilities
The trustees are responsible for the preparation of financial statements which give a true and fair view of the financial position of the trust and group as 31 March 2003 and the results of their operations and cash flows 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 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 statements.
It also includes assessing:
? the significant estimates and judgements made by the trustees in the preparation of the financial statements;
? whether the accounting policies are appropriate to the trust's and group's circumstances, consistently applied and adequately disclosed.
We conducted our audit in accordance with New Zealand Auditing Standards issued by the Institute of Chartered Accountants of 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 obtain reasonable assurance that the financial statements are free from material misstatements, whether caused by fraud or error. In forming our opinion, we also evaluated the overall adequacy of the presentation of information in the financial statements.
Our firm has also provided other services to the trust and certain of its subsidiaries in relation to grant reviews. Partners and employees of our firm may deal with the trust and group on normal terms within the ordinary course of business with the trust and group. These matters have not impaired our independence as auditors of the trust and group. The firm has no other interest in the trust or any of its subsidiaries.
Unqualified Opinion
We have obtained all the information and explanations we have required.
In our opinion:
? proper accounting records have been kept by the trust as far as appears from our examination of those records;
? the financial statements:
- comply with New Zealand generally accepted accounting practice; and
- give a true and fair view of the financial position of the trust and group as at 31 March 2003 and the results of their operations and cash flows for the year ended on that date.
Our audit was completed on 15 August 2003 and our unqualified opinion is expressed as at that date.
WARD WILSON, Invercargill.
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(A list of all distributions of income and capital approved by The Community Trust of Southland during the year ended
31 March 2003 is available, on request, from the trust's office.)