4 SEPTEMBER 2008 NEW ZEALAND GAZETTE, No. 136 3657

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 2008 is $9,475,334.

(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-two 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 2008. The information is stated in accordance with the accounting policies set out above.

Board of Trustee’s Responsibilities

The board of trustees 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 2008 and of the results of operations for the 12 months ended 31 March 2008.

Auditors’ Responsibilities

It is our responsibility to express an independent opinion on the financial report presented by the board of 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 report. It also includes assessing:

• the significant estimates and judgements made by the board of trustees in the preparation of the financial report; and
• whether the accounting policies are appropriate to the trust circumstances, consistently applied and adequately disclosed.

We conducted our audit in accordance with generally accepted auditing standards in 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 report is 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 report.

Other than in 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.