13 SEPTEMBER 2007 NEW ZEALAND GAZETTE, No. 100

2719

6. Taxation
   The trust is exempt from tax with effect from 1 April 2004 in accordance with section CB4(1)(m) of the Income Tax Act 1994.

7. Goods and Services Tax
   These financial statements are stated on a GST exclusive basis except for debtors and creditors which are stated on a GST inclusive basis.

8. Capital Commitments
   There were no capital commitments (2006 – $Nil).

9. Contingent Liabilities
   There were no contingent liabilities at 31 March 2007 (2006 – $Nil).

10. Advances
    There were no advances outstanding at balance date.

11. Reserves
    (i) Capital fund – the initial capital fund (being the realised value of trust bank shares) was $32,087,148.

(ii) Inflation reserve – it is intended to increase the inflation reserve each year by applying the consumer price index to the sum of the initial capital fund and opening inflation reserve. This nominal inflation reserve required under this policy at 31 March 2007 is $8,121,257.

(iii) General reserve – the trustees intend to compile a minimum general reserve equivalent to 5% of the initial capital fund and inflation reserve. The general reserve is intended to enable the trustees to continue with distributions should the trust incur a deficit in a particular income year.

12. Financial Instruments

Fair Values
Investments are stated at estimated market value at balance date. Interest accrued, sundry debtors, sundry creditors, term loans and donations approved, not yet paid, are stated at the amounts expected to be received or paid.

Accordingly, the trustees consider that the fair value of each class of financial assets and financial liabilities is the same as the carrying value in the statement of financial position.

Credit Risk
Fifty-three per cent of the assets of the trust are represented by debt investments and current account balances with Westpac Bank and through managed funds. The trustees consider the risk of non-recovery of these investments at balance date to be within satisfactory guidelines.

The maximum exposure to credit risk of other financial instruments are:

Currency Risk
The trust is party, through its managed funds, to financial instruments with off balance sheet risk to reduce exposure to fluctuations in foreign currency exchange rates. Forward exchange contracts are entered into to hedge foreign currency transactions.

The trust is also party, through its managed funds, to financial instruments with off balance sheet risk to reduce exposure to fluctuations in foreign currency interest rates. Futures contracts are entered into to hedge foreign currency fixed interest transactions.

Interest Rate Risk
The following investments of the trust are sensitive to changes in interest rate: Bank call accounts and term deposits, and various managed fund investments.

Audit Report

To the Readers of the Financial Report of The Community Trust of Mid & South Canterbury Incorporated

We have audited the financial report. The financial report provides information about the past financial performance of the trust and its financial position as at 31 March 2007. The information is stated in accordance with the accounting policies set out above.

Committee Responsibilities
The committee is responsible for the preparation of a financial report which gives a true and fair view of the financial position of the trust as at 31 March 2007 and of the results of operations for the 12 months ended 31 March 2007.

Auditors’ Responsibilities
It is our responsibility to express an independent opinion on the financial report presented by the committee 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 report. It also includes assessing: