3726 NEW ZEALAND GAZETTE, No. 126 2 NOVEMBER 2006

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.

19. Group Investments

20. International Financial Reporting Standards

In December 2002, the New Zealand Accounting Standards Review Board announced that the New Zealand International Financial Reporting Standards (NZ IFRS) will apply to all New Zealand reporting entities for the periods commencing on or after 1 January 2007. Entities have the option to adopt NZ IFRS for periods beginning on or after 1 January 2005. The trust has not yet made a decision with respect to an adoption date.

The Community Trust of Southland has not yet started a project to assess the key differences in accounting policies between NZ IFRS and current New Zealand generally accepted accounting principles (GAAP) with a view to determining the impacts on the financial statements that are expected to arise on transition. As The Community Trust of Southland has not yet completed an analysis of the differences between existing NZ GAAP and NZ IFRS, we are unable to reliably estimate the key differences in accounting policies or quantify the impacts to the financial statements that are expected to arise on transition to NZ IFRS.

The Community Trust of Southland intends to provide further information including quantification of the impacts of transitioning to NZ IFRS, in the financial statements for the year ending 31 March 2007.

21. Segmental Information

The trust’s specified area includes all of the areas of Invercargill City Council, Southland District Council, and Gore District Council, the Heriot and Tapanui areas of Clutha District Council, and the Wakatipu Basin area of Queenstown Lakes District Council. The trust’s principal activities are to invest the trust capital, both within the specified area and outside of the region, and to distribute grants for charitable, cultural, philanthropic, recreational and other purposes being purposes beneficial to the community principally within the trust’s specified area.

22. Financial Instruments

General

The group states its investments in managed funds 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 instruments. 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 advisors 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.

23. Related Parties

There were no related party transactions during the year (2005: nil).

24. Subsequent Events

Subsequent to 31 March 2006, there were no significant events of which readers of the financial statements need to be aware.

(2005: Subsequent to balance date, Invest South Asset Management Limited received the initial deposit for the sale of the Kingston Flyer to a third party. The agreement for sale of the train was signed prior to 31 March 2005. The final balance completing the sale was received on 14 July 2005.)

Audit Report

To the Trustees 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 2006. 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 fairly reflect the financial position of the trust and group as at 31 March 2006 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.