Kevin Prime: Cutting back now to promote growth in better times

Opinion

The global financial crisis is having an impact close to home, including a reduction in the value of ASB Community Trust's investments.

Recently, the media focus has been on how much the dollar value of the trust's asset value has reduced, but looking instead at the percentages helps to keep things in perspective.

The value of ASB Community Trust's assets is down by 16.1 per cent. Those assets are invested nationally and internationally in a conservative and diversified investment portfolio which has weathered the storm reasonably well.

The trust's core assets are intact and are still worth more than $800 million. We will use income from these assets to rebuild the fund and then continue granting money for community projects and organisations throughout Auckland and Northland.

It is important to remember that the Trust has lived through market falls before, the most recent being the prolonged 2000-02 downturn following the dot-com bubble. There have also been years when the annual return has been 15 per cent or more. This all helps put a 16 per cent reduction into perspective.

Our trustees have decided that it is their fiduciary duty to protect the fund as a long-term community asset. Putting grants on hold until September 2009 will give our investments time to recover and, hopefully, generate enough income to create a modest grants budget.

The trust is set up in perpetuity, so we have focused on the long term. Trustees have inflation-proofed the core assets so the real value is not eroded over time. Currently we are $5 million below that inflation-proof value. Our assets must recover that ground and create a surplus before grants can resume.

It is our trustees' duty to act in the best long-term interest of our trust and prepare for better times ahead. By ensuring that our core assets are maintained, we will be able to continue supporting our communities into the future.

Grants are made from any income generated above the rate of inflation and have averaged $40 million a year in recent times. However, we must await market stabilisation before the 2009 grants budget can be calculated.

Despite the downturn, our doors have not closed and we continue to work with not-for-profit organisations across the spectrum. We are still accepting grant applications, although a decision on those grants will have to wait until the second half of the year.

We believe that this is the best way to support our community through the coming months of uncertainty.

With the creation of the community trust network in 1989, New Zealand gained 12 trusts with a combined value of more than $2 billion. This money came from the sale of the trust bank network, including ASB Community Trust's sale of the ASB bank. These trusts remain community assets, together making grants worth around $100 million a year.

Since 1989, successive trustees have carefully built up the value of those assets. They have walked a careful path, enriching their communities while at the same time growing the reserves so that we, in our turn, could become guardians of these precious community assets today.

This is the time to review our priorities, to be clear about what we want to achieve and to ensure that future trustees can enjoy the privilege of supporting their communities in the same way we do today.

I would like to finish with a Maori proverb: "Ahakoa whati te manga, e takoto ana ano te kohiwi" (Although the branch is broken off, the trunk remains).

We in the community trusts can apply this proverb to the way we have been hurt by the unprecedented financial storm which has swept the world, stripping away many assets. However, that hurt is not fatal and the core of our putea, our treasure, remains. We may be scarred, and the damage will take time to heal, but we will endure and flourish again.

* Kevin Prime is chairman of the ASB Community Trust.