2 NOVEMBER 2006

NEW ZEALAND GAZETTE, No. 126 3719

Cash flows from investing activities—

Cash was provided from/(applied to):

Cash flows from financing activities—

Cash was provided from/(applied to):

| Net cash flows from financing activities | – | – | – |

| Net increase/(decrease) in cash held | (410,868) | 1,446,637 | (115,687) | 82,691 |
| Cash balances at beginning of the year | 1,604,179 | 3,050,816 | 128,145 | 45,454 |
| Cash balance at end of year | 1,193,311 | 1,604,179 | 12,458 | 128,145 |

Statement of Significant Accounting Policies for the Year Ended 31 March 2006

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 (“the trust”) and Southland Community Trust Charities Limited, making up the parent. The group consists of The Community Trust of Southland (“the trust”), its wholly owned subsidiary company Southland Community Trust Charities Limited and Invest South Limited Group.

The financial statements comply with the Financial Reporting Act 1993, the Community Trusts Act 1999 and the Companies Act 1993. 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, as is the trust’s property at 62 Don Street, Invercargill.

B. Consolidation Method

The financial statements of the trust’s wholly owned company Southland Community Trust Charities Limited are included in the financial statements of the parent. The financial statements of the trust’s wholly owned company, Invest South Limited Group, are included in the financial statements of the group 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 since acquisition on an equity accounted basis.

D. Goodwill Arising on Acquisition of Associates

Goodwill arising on the acquisition of an associate represents the excess of the purchase consideration over the fair value of the identifiable assets acquired. Goodwill is stated at cost and amortised to the statement of financial performance on a straight line basis over the period during which benefits are expected to be derived – a period not exceeding 20 years.

E. Trust Capital

Following the sale of the trust’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 parent and that this value would be maintained. Trustees further agreed that over the long term, the net assets of the parent would not be allowed to reduce to a level below the inflation-adjusted real value of this trust capital.

F. 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.

G. 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.