16 JUNE 2005

NEW ZEALAND GAZETTE, No. 91

2159

14. Financial Instruments

Financial instruments include short-term deposits, New Zealand bonds, international bonds, derivatives and investments in managed funds both within New Zealand and overseas.

14.1 Credit Risk

The trustees regularly review their investment strategy. The investment strategy ensures an appropriate diversification of investments so that the trust has no significant concentration of counterparty or credit risk.

14.2 Fair Values

The trust has recorded its financial assets and liabilities at current market values, which represent estimated fair values and credit risk exposure.

14.3 Currency Risk

The trust has exposure to currency risk through its investments in offshore equities managed funds. The current investment policy requires full hedging of currency risk for overseas bonds when held and 50% hedging of currency risk for overseas equities. Since October 2004, all hedging on overseas equities was removed after a resolution to this effect was passed by the board. Currency risk is managed by fund managers with a range of tolerance.

Offshore investments are denominated into the following foreign currency groupings:

14.4 Credit Facilities

The trust has no credit facilities.

14.5 Interest Rate Risk

The trust investments in fixed rate securities are subject to interest rate risk.

15. Net Current Assets

Cash, bank deposits and accrued income are expected to be realised within 12 months. All liabilities are due within 12 months.

Audit Report

To the Trustees of Eastern & Central Community Trust Incorporated

We have audited the financial statements. The consolidated financial statements provide information about the past financial performance of the Eastern & Central Community Trust (Inc) and its financial position as at 31 March 2005. This information is stated in accordance with the accounting policies set out in note 1 to the consolidated financial statements.

The Trustees’ Responsibilities

The trustees are responsible for the preparation of financial statements that give a true and fair view of the financial position of the trust and the results of its operations and cash flows for the year ended 31 March 2005.

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; and
• whether the accounting policies are appropriate to the trust’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 give 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.

Other than our capacity as auditors, we have no relationship with or interest 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 statements:
  • comply with New Zealand generally accepted accounting practice; and
  • give a true and fair view of the financial position of the trust as at 31 March 2005 and the results of its operations and cash flows for the year ended on that date.

Our audit was completed on 26 May 2005 and our unqualified opinion is expressed as at that date.

PALAIRET PEARSON, Chartered Accountants, Napier.