2 0 0 7 A N N U A L R E P O R T

H I G H L I G H T S F R O M T H E 2 0 0 7 F I N A N C I A L Y E A R

JULY 2006 Blessing of the Fleet at Wakefi eld Quay marking the centennial of the Cut,

1906-2006.

Marine Operations Manager Roy Skucek joined our staff, completing the

new line up of executives.

OCTOBER 2006 Cruise ship The World makes a port call - selecting Nelson as ‘clean, friendly

and a little bit different’.

NOVEMBER 2006 Paving of Brunt Quay completed.

The One Gate in Carkeek Street became fully operational, centralising

services and enhancing security.

Capital structure of the company reviewed, resulting in a share buy back,

delivering $25 million to the two shareholders, Nelson City and Tasman

District Councils.

DECEMBER 2006 Port Nelson Santa Parade marks the beginning of the festive season in

Nelson city.

FEBRUARY 2007 Open Day drew crowds to the port for displays and tours of the

operational area.

MARCH 2007 Port call from HMNZS Te Kaha.

Nelson Yacht Club celebrates 150 year anniversary.

Achieved ACC tertiary accreditation.

APRIL 2007 Tanker Taiko makes her last visit to Nelson before being withdrawn from

service.

Delivery of new Hyster hi-stacker, capable of lifting two empties at once.

Lifting record set by Liebherr cranes with 5749 moves for the month.

Paving laid in former TNL log yard near the port company offi ce.

MAY 2007 Port Nelson Blokes’ Day Out triathlon raced in wet conditions with

high number of entries.

JUNE 2007 The derelict fishing vessel SZAP 5 left port to be scuttled in Cook Strait.

Record container numbers and cargo tonnes handled for a full

fi nancial year.

JULY 2006

Marine Operations Manager Roy Skucek joined our staff, completing the

OCTOBER 200

NOVEMBER

The One Gate in Carkeek Street became fully operational, centralising

Capital structure of the company reviewed, resulting in a share buy back,

DECEMBER

FEBRUARY

MARCH

Nelson Yacht Club celebrates 150 year anniversary.

Achieved ACC tertiary accreditation.

APRIL

Delivery of new Hyster hi-stacker, capable of lifting two empties at once.

Paving laid in former TNL log yard near the port company offi ce.

MAY

JUNE

Record container numbers and cargo tonnes handled for a full

2

“During the Noise Variation process we have appreciated the support of many

parties who understand and acknowledge the importance of the port to the

wider community. It is pleasing to note this has come both from the business

community and many private householders, including a large number of

port hills residents themselves.”

Martin Byrne, Chief Executive , Port Nelson Limited.

Directors’ Report ..............................................................................................................................................................................4

Chief Executive’s Report ...............................................................................................................................................................6

Port Nelson in the Community ..................................................................................................................................................8

Environmental Matters ............................................................................................................................................................... 10

Port People ..................................................................................................................................................................................... 14

Governance .................................................................................................................................................................................... 15

Directors .......................................................................................................................................................................................... 16

Financial & Trade Highlights ..................................................................................................................................................... 17

Auditor’s Report ............................................................................................................................................................................ 18

Statutory Information ................................................................................................................................................................. 19

Statement of Corporate Intent ................................................................................................................................................ 21

Statement of Financial Performance and

Statement of Movements in Equity ....................................................................................................................................... 22

Statement of Financial Position .............................................................................................................................................. 23

Statement of Cashflows ............................................................................................................................................................. 24

Statement of Accounting Policies .......................................................................................................................................... 26

Notes to Accounts ........................................................................................................................................................................ 28

Directory .......................................................................................................................................................................................... 35

R E P O R T C O N T E N T S

3

D I R E C T O R S ’ R E P O R T

As Chairman of Port Nelson Limited I am

pleased to report another encouraging

result for the company during this past

financial year.

The net surplus after taxation and including

unrealised investment property gains

was $6.7 million, based around revenues

that were some $2.4 million ahead of budget, with the associated

operational expenses some $1.5 million higher than budget.

The main factors behind the increased revenue were:

• Higher than anticipated cargo volumes, particularly in the areas of

logs, vehicles, dairy products and wine

• A continued move towards further containerisation of cargo

previously carried in break bulk form, such as sawn timber

• A continued increase in property values, which then flowed through

into higher rental income.

The main areas of increase in operating expenses related to:

• Plant hire and wages – offset by increased activity

• Electricity charges – also offset by increased activity

• Maintenance costs associated with the replacement of a crane winch

gearbox on one of the Liebherr mobile cranes.

C A R G O A N D S H I P P I N G

Cargo volumes were the highest in the history of the company,

the final figure of 2.644 million tonnes being some 89,000 tonnes

ahead of budget. Log, vehicle, dairy and wine volumes were strong,

although once again slightly offset by lower than anticipated exports

of processed wood products and fruit.

The strong dairy and wine volumes, coupled with the movement of

greater amounts of sawn timber into containerised form, meant the

number of containers handled through the port exceeded 70,000 TEU

(Twenty Foot Equivalent Units) for the first time. The final figure of

71,815 is more than 10,000 TEU ahead of the previous twelve month

period.

O P E R A T I O N A L M A T T E R S A N D P O R T

D E V E L O P M E N T

Unlike recent years with significant investment in wharf upgrades and

the purchase of a new pilot boat, 2006/07 was very much focussed on

limited capital expenditure, mainly around pavement areas required

for container operations. The areas adjacent to Brunt Quay and on the

former SSL Receiving and Delivery site required significant pavement

improvements to deal with the increase in volumes being handled.

This reflects the bigger picture that many of the paved areas within the

port were not designed to handle the number of containers and heavy

operating machinery that we now deal with.

Aside from this work, the main investment was around the ‘One Gate’

project which saw us bring staff from three separate operational sites

into the new facility based at the Carkeek St entrance.

That this project was completed on time and under budget, was a

credit to all concerned. We have also continued to invest in new plant

with the purchase of a Hyster ECH forklift; and have continued to

upgrade our IT systems, flowing on from other projects in this area in

recent years.

The other major area of capital expenditure in the year related to

the buy back of buildings and operational land which had been

leased or owned by third parties. This was required to meet both

current operational requirements and to ensure we have suitable

developmental options open to us in the future.

4

F I N A N C I A L O U T T U R N A N D D I V I D E N D

The net surplus after taxation, including unrealised investment

property gains, resulted in a return on average shareholders funds

of approximately 5.6%. Dividends declared for the year will be

$3.9 million.

As was reported in late October of 2006, the Board of Port Nelson

Limited recommended proceeding with a share buy back which saw

a payment of $25 million being split between the two shareholders,

Nelson City Council and Tasman District Council.

This came as a result of a detailed review of the capital structure of

the company, with the focus being to achieve a structure more in line

with the port sector in general and to establish a level of shareholders’

funds that was more appropriate to the nature of the risks associated

with the port’s business.

As was mentioned in the 2006 Annual Report, the continued

rationalisation within the shipping industry remains a challenge for us,

as it is for many New Zealand ports. This was highlighted in the second

half of the financial year with the withdrawal of the Maersk Asian (NZ1)

service from Port Nelson.

We continue to make all efforts to ensure Nelson remains an attractive

port of call for overseas shipping lines but are also realistic, that as vessels

get larger there are likely to be further changes to existing services,

particularly for the smaller regional operations such as ourselves.

I would like to thank the senior management and all staff for the

excellent efforts over the last 12 months.

Our Finance Manager Murray Win retired after a number of years with

Port Nelson and there were also changes in directors’ positions during

the year.

Murray Sturgeon and Bob Dickinson, both long serving directors,

resigned during the latter half of 2006 and we thank them for the huge

contribution they have made to Port Nelson Limited over many years.

They have been replaced by Bronwyn Monopoli and Tim King and we

look forward to their contributions to the growth of the business in

coming years.

To the shareholders and fellow directors I thank you for your support

and commitment over the past year.

Nick Patterson

Chairman , Port Nelson Limited. 5

2007 2006 2005 2004 2003Operations Trade (Millions of Cargo Tonnes) 2.644 2.522 2.623 2.564 2.458Container Throughput (TEU’s)* 71,815 61,455 57,144 51,128 44,632Vessel Arrivals (Over 100GT) 997 1,012 1,178 1,267 1,470Total Vessel GT Calling (Millions) 9.0 8.6 8.4 9.2 9.7Employees (FTE’s) 132 141 143 125 121

Financial ($ Millions) Revenue** $33.0 $29.6 $27.7 $27.6 $25.4EBITDA *** $15.8 $15.3 $12.2 $13.8 $12.5Earnings Before Interest and Taxation (EBIT) $12.2 $11.6 $9.0 $10.6 $9.6Net Interest Expense $2.5 $1.5 $1.3 $1.0 $1.3Taxation $3.0 $3.1 $2.5 $2.9 $2.7Net Surplus After Taxation**** $6.7 $6.9 $5.2 $6.6 $5.6

2007 2006 2005 2004 2003

Financial ($ Millions) ...continued

Dividends Declared (Millions) $3.9 $5.3 $3.3 $9.2 $3.1

Capital Expenditure $4.0 $2.9 $7.3 $3.2 $2.9

Net Interest Bearing Debt $42.0 $16.5 $19.0 $16.5 $15.0

Total Tangible Assets $152.3 $149.6 $117.2 $114.2 $113.7

Shareholder Return Metrics

Earnings per Share (cents) 26.5 22.1 17.0 21.3 18.0

Dividend per Share(cents) 15.3 17.1 11.0 30.0 10.3

Net Assets per Share $4.31 $4.14 $3.15 $3.12 $3.18

Equity (%) 67.9% 82.1% 80.6% 81.2% 82.0%

Return on Average Equity (%) 5.6% 6.1% 5.4% 6.6% 6.0%

Return on Average Assets (%) 7.7% 8.3% 7.5% 8.9% 8.4%

P E R F O R M A N C E R E V I E W - P O R T N E L S O N L T D G R O U P

C H I E F E X E C U T I V E ’ S R E P O R T

C A R G O

Volumes through Port Nelson for the year

were the highest on record with logs,

motor vehicles, wine and dairy products

being particularly strong performers.

Total throughput for the 12 month period

was 2,644,000 tonnes, some 89,000

tonnes ahead of budget and around 122,000 tonnes up on the

previous year.

Log exports for the year were 22,000 tonnes ahead of budget at

636,000 tonnes and reflected the strong overseas demand for wood

throughout the majority of the financial year. Imported motor

vehicles (new and used) totalled 167,000 revenue tonnes as against

a budget of 136,000 tonnes and dairy (21,000 tonnes) and wine

(30,000 tonnes) also showed healthy increases on the figures twelve

months earlier.

Processed forestry exports were some 60,000 tonnes below budget,

with fruit exports and fertiliser and cement imports also being slightly

lower than had been anticipated.

Container numbers significantly increased once again with 71,815

TEU handled during that period as against 61,455 TEU twelve

months earlier.

This increase was on the back of a number of factors including the

following:

• Greater volumes of sawn timber being shipped in containers rather

than in break bulk form, particularly to the Asian region

• Increased wine and dairy exports through the port

• A further increase in LVL and MDF products being loaded into

containers.

S H I P P I N G

Vessel arrivals were marginally lower with 1,001 vessels calling during

the year as against 1,012 the previous year.

In late December the fortnightly Tasman Orient Line (TOL) service

ceased calling on the back of the traditional cargo base for this

service moving principally to containers and around the same time

the monthly Indotrans break bulk service to the US also ceased. In

mid June the regular Maersk relay service to Asia also ceased as part

of a nationwide review of their feedering service where they chose

to commence utilising transhipment operations with existing coastal

operators.

S T O R A G E / R E C E I V A L A N D D E L I V E R Y /

Q U A Y P A C K

The purchase of land previously leased by a third party on the western

side of Hay St in the second half of 2006 enabled us to secure extra

land for the storage of containers, which was urgently needed given

the significant growth in container traffic. Space was particularly

at a premium during the 2007 fruit export season and the efficient

operation of the Container Yard and Receiving and Delivery (R & D)

systems was a credit to all the staff involved in the cargo logistics

division of the business.

Our Quaypack division continues to go from strength to strength with

its packing and unpacking operations. The growth of wood products

moving into containers has certainly seen added demand for their

services.

In late 2006 our Cargo Team moved into the ‘One Gate’ facility on

Carkeek Street. The completion of this project on time and under

budget was a credit to all involved. The benefits of having all cargo

staff in one area have been everything we had hoped for and have

certainly assisted us during the busy peaks we experience from March

through to June.

S T E V E D O R I N G

In late 2006 a review was undertaken of our Stevedoring division,

Tasman Bay Stevedoring (TBS) to ascertain how we could improve the

performance of what has been for some time a marginal business. It is

fair to say that all stevedoring companies in Nelson have a reputation

for high levels of service and efficiency of operation but historically this

service has not attracted the returns available for similar operations in

other New Zealand ports. TBS has since worked through various issues

to achieve mutual benefits, where our major customers know they

have longevity of service and at the same time TBS is assured of the

return that makes it worthwhile staying in this line of work. A huge

amount of credit must go to Chris Shand, Digby Kynaston and the TBS

team who have worked so hard in meeting the targets laid down for

them, and I also express my sincere thanks for the efforts of our Chief

Commercial Officer, Parke Pittar, in driving this review process.

E N V I R O N M E N T A L I S S U E S

The Noise variation to the Nelson City Council Resource Management

Plan was notified in early June this year and we expect to commence

noise mitigation work on the affected properties in the coming

months. While no solution will ever meet with universal support we 6

believe the variation in its current form offers a solution that all parties

should be able to live with, and we remain committed to ensuring we

do everything possible on an ongoing basis to keep noise created

from port operations to an absolute minimum. During this process we

have appreciated the support of many parties who understand and

acknowledge the importance of the port to the wider community.

It is pleasing to note this has come both from the business community

and many private householders, including a large number of port hills

residents themselves.

The Environment Committee has continued to meet regularly over

the last 12 months. Following on from the recommendations of the

committee and our own board and management, the company

was recently successful in gaining ISO 14001 certification for our

environmental practices - the first major port in New Zealand to

attain this standard. Special note should be made of the efforts of our

Environmental Officer, Frances Woodhead, in driving this project to a

successful conclusion.

P L A N N I N G F O R T H E F U T U R E

The withdrawal of one of the Maersk services in mid June highlighted

the continued change apparent within the shipping industry in

New Zealand and overseas. If there is one thing that is sure, it is that

change will carry on for the foreseeable future. In 2001 P & O Nedlloyd

announced the introduction of the 4100 TEU container vessels to NZ

and Australia and now some lines are looking at bringing 6000 TEU

vessels to this part of the world, which will in all likelihood result in

fewer port calls and greater use of feedering services.

At this stage we believe the short to medium term future for regional

ports such as ours is one where there are a mix of direct callers and

lines choosing to utilise feeder operations. The challenge for us is to

ensure we have the facilities to handle those vessels, without over

investing in infrastructure that will struggle to generate a reasonable

return.

A C K N O W L E D G E M E N T S

I would like to once again express on behalf of myself and our

Executive Team our thanks to the Board of Port Nelson Limited for their

support and advice over the last twelve months and to thank our staff

who have all contributed to another solid performance.

As I have stated in previous years, I would also like to express our

appreciation to the importers and exporters of the region for their

support, and to the many shipping lines that PNL services. Your

support is vital to our continued success.

Martin Byrne

Chief Executive, Port Nelson Ltd.

7

“We work in a hectic environment in the peak fruit season and can’t always stick

to our plans. PNL staff understand our needs and allow for flexibility in working

hours and cargo volumes. I really value the personal relationships we have built

up over many years.”

Hans Krabo, Logistics Manager, ENZA International.

P O R T N E L S O N I N T H E C O M M U N I T Y

Export is the lifeblood of Nelson-Tasman and at Port Nelson we are

aware of the vital role we play as the ‘region’s gateway to the world’.

From forestry, seafood, fruit, wine and imports, the wellbeing of the

region as a whole is intrinsically linked to Port Nelson in some way.

The community ownership of Port Nelson Limited is reflected in the

strong role the company plays in the region in sports, arts, community

and business.

We are one of the region’s largest sponsors putting over $150,000 a

year into support for a number of events, groups and projects. This

year we continued to develop partnerships themed around the youth

in the community and saw excellent results - our funding of a coach for

the Nelson Rowing Club has seen the squad win gold at the Mardi Cup

and selected rowers competing for New Zealand in Beijing.

We continued to build on the success of the entry level multisport

event, the Port Nelson Blokes’ Day Out, with increased entries and

a large contingent from our own staff; we are in our third year of

sponsorship with the Tasman Makos as a First XV supporter of the

combined Nelson Marlborough side.

The third Nelson Port and Transport Industry Charity Golf Tournament

was held in November, attracting a capacity field, and providing an

opportunity for the industry to get together and raise money for the

very worthwhile cause of sending the Nelson Special Olympic Squad

to Beijing.

Out in the streets of the city we maintain a high profile with support

for the Port Nelson Santa Parade and the Port Nelson Masked Parade,

which opens the Nelson Arts Festival every year. Drawing crowds in

excess of 10,000 these are Nelson’s biggest participation events.

The Port Nelson Trust helps a wide range of community groups.

Over the past year funds were distributed by the trust to a range of

sports, community and arts projects.

In the business community our support for the Nelson economy

continues as a key stakeholder in the Nelson Regional Economic

Development Agency, a cornerstone sponsor of the Nelson-Tasman

Chamber of Commerce and supporter of the Nelson Bays Educational

Business partnership, with Infrastructure Manager Dick Carter chairing

the Nelson Engineering Group.

The amenities berth on Wakefield Quay is now home to the Nelson

Coast Guard, provided free of charge by Port Nelson to support this

vital service to the community, and we continue to allow public access

for fishing in this area.

8 Port Open Day, February 07.

9

Port Nelson’s support of the Nelson Marlborough Rescue Helicopter Trust ensures

that our volunteers receive vital training in water rescue and winch operation.

Our family of sponsors and the support of the community help provide a free

dedicated air rescue service, on call 24 hours a day, seven days a week.

Paula Muddle , Marketing and Communications Manager, Nelson Marlborough Rescue Helicopter.

P O R T N E L S O N S P O N S O R S H I P S

Community

Outward Bound youth programme

Port Nelson Santa Parade

Richmond Santa Parade

Motueka Hospital Trust

Port Nelson Masked Parade

Nelson-Tasman Rescue Helicopter

Blessing of the Fleet

Nelson Bays Youth Team Racing

School of Music Winter Festival

Mouteka Yacht & Cruising Club

Brightwater Food & Wine Festival

Port Nelson Trust

Business

Latitude Nelson

Chamber of Commerce

Fishing Association

Nelson Bays Education Business Partnership

Sealord Rescue Centre

Marine Farming Conference

Golfing Tournaments

Wood Processing Association

Nelson Engineering Cluster

Sports

Tasman Bay Rugby

Nelson Rowing

Port Nelson Big Bay Bike Ride

Beach Volleyball

Port Nelson Blokes Day Out

Tasman Sports Awards

Nelson Motor Cycle Racing

Portions of the Port Nelson information panels at Wakefield Quay.

E N V I R O N M E N T A L M A T T E R S

This year saw a significant progress in our environmental efforts at the

port, as we worked towards ISO 14001 Environmental Management

accreditation. The international standard is considered to be the most

stringent of all the accreditation systems available in New Zealand

for environmental management, and Port Nelson is the first major

New Zealand port to make the commitment to externally audited

continuous improvement in environmental management. Our first full

audit was held at the end of the financial year and the final certification

was issued some weeks later.

Reaching this point has meant having a long hard look at our existing

environmental management plan against the framework prescribed

by the standard. The Environmental Consultative Committee has

guided the process, advising on priority of environmental impacts and

contributing several of the new quantitative performance indicators.

As in previous years we extend a grateful thanks to this dedicated and

knowledgeable team of volunteers.

Auditors will continue to visit us on a regular basis to ensure we are

gathering information related to the meeting of our targets and

checking that procedures are working as described by the system.

I S O A C T I V I T I E S T H R O U G H T H E Y E A R

Environmental Policy Statement updated . . . . . . . . . . . . . . . . . . July 2006

Environmental Aspects Register and

scoring developed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .August 2006

Internal environmental team convened. . . . . . . . . . . . . .September 2006

Staff training in auditing environmental

management systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .October 2006

Initial audit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . November 2006

Baselines and performance targets reviewed . . . . . . . . . . February 2007

Plastics, paper and cardboard recycling introduced . . . . . .March 2007

Review of documents and record keeping . . . . . . . . . . . . . . . . April 2007

First full audit, update of Environmental Management Plan . . June 2007

I N D I C A T O R S O F P R O G R E S S

Our performance indicators are provided in both actual units and

in TEU (twenty foot container equivalent) to provide a measure of

efficiency improvements.

1 0

E N V I R O N M E N T A L M A N A G E M E N T P E R F O R M A N C E I N D I C A T O R S

Aspect Indicator Baseline Baseline 2005/6 2006/7

Environmental Policy Percentage of new permanent employees receiving environmental induction 0 23%

Fuel Fuel use (litres) per teu* of cargo handled. 8.34 (537,926 ) 8.08 (580,905)

Power Electricity use (kw hours)/per teu of cargo handled 65.7 (4,234,445) 63.89 (4,591,509)

Waste Waste generated per FTE **employee (m3) 2.8 (397.5) 2.75 (363)

Methyl Bromide Number of readings higher than the current OSH workplace standard

(19/mg/m3) in areas not cordoned off during fumigation or venting. 0 0

Quantity of Methyl Bromide used at Port Nelson (tonnes) 2.491 2.286

Noise Number of noise complaints 33 32

Oil Spills Number of oil spills when bunkering 1 3

Dust Number of dust complaints 8 9

Codes of Practice Number of audit reports completed 7 13

Number of non-conformances identified 6 7

Number of non conformances resolved 5 6

Continuous Improvement Number of targets reported on 4 15

Number of new initiatives Not recorded 19

Water Water use (m3)per teu (site use excl ships) 0.61 (39,478) 0.64*** (46,437)

* Twenty foot equivalent unit for 2005/6 = 64,455 for 2007/7 = 71,865** Full time equivalent employees 2006/7 132*** Increase due to water leak.

S Z A P 5 D I S P O S A L

The most unusual environmental project for the year was the sinking

of the SZAP 5, an abandoned but fully equipped 60 metre fishing

vessel - an undertaking that gave a whole new meaning to the concept

of ‘waste management’.

Following a long history of trying to get the owners to take responsibility

for the vessel and eventually securing the legal right to dispose of her,

our attempts to sell the vessel or get her broken up for scrap failed.

We had a liability on our hands, in a deteriorating condition, and in

December 2006 filed an application to Maritime New Zealand for a

permit for disposal at sea. Conditions of the permit included removing

all floatable items and contaminants - no small task on a fully equipped

32 berth fishing vessel.

The long process began with securing loose asbestos, pumping off

refrigerant used in the fish processing plant, removing diesel oil (for

recycling) from 13 fuel tanks and bilges and disposing of part-filled

drums of lube and other contaminants. In February, everything that

could float was removed from the ship. Serviceable items were resold,

unusual artifacts ended up on Trade Me and Nelsonians picked up

quirky Russian bargains at a garage sale. Stainless steel, metal and

even the bronze alloy propeller, were removed for recycling.

Preparations for towing included fitting bilge pump sensors and self-

powered navigation lights. There was a long wait for suitable weather

for the tow to the approved dumping ground beyond Cape Palliser in

Cook Strait, a 2000 metre trench used as a munitions dump. Disposal

of redundant vessels is becoming an increasing problem around the

world. The development of facilities to recycle ships and consideration

of their end of life during construction is required. The SZAP 5 was built

in Klaypeda, Russia in 1978.

E N V I R O N M E N T A L I S S U E S R E G I S T E R 2 0 0 6 / 7

A total of 61 incidents were recorded. The increase is due to improved

reporting following a review of the Issues Register code of practice,

and the introduction of the land-based spill trailer.

1 1

“Watching the SZAP 5 descend beneath the waves accompanied by a

tremendous crashing was a strangely beautiful experience. Thanks to our efforts,

no debris accompanied her sea burial. We can take some pride that in doing a job

we did not ask for, we managed to make the best of it.”

Frances Woodhead, Environmental Officer, Port Nelson Limited.

The new land-based spill trailer.

E N V I R O N M E N T A L M A T T E R S

N O I S E M A N A G E M E N T

Despite handling more containers we have had fewer noise complaints,

which is encouraging. However, clangs caused by empty containers are

still the biggest source of complaints, followed by ships’ generators.

Vigilance in stevedoring practices and training is ongoing. This year

several complaints related to a particularly large vessel, the Cosco

Melbourne; managing this ship will be easier when wharf repairs have

improved the workability of Main Wharf South. Another notable

noisy incident was an oil tanker inadvertently setting off her fire alarm

system in the very early morning.

Discussions continued with Nelson City Council on solutions to protect

residents from noise. Further information was provided by Port Nelson

Ltd and the proposed variation to the Nelson Resource Management

Plan has now been finalised for a public submission process.

F U M I G A T I O N

Numbers of shed fumigations remained the same, with a total of 12

over the 2006 summer season, when fumigation of export timber

to Australia is required. Additional health and safety monitoring

was done, to help identify changes that may be needed to current

operating practices.

The Nelson Air Quality Plan suggestion that fumigation at Port

Nelson be subject to resource consent remains under review. Some

progress was made through mediation between the operator and

the submitters, but no compromise was reached and a decision by an

Environment Court judge is awaited.

D R E D G I N G C O N S E N T R E N E W A L

Work has been underway to prepare an application to renew the port’s

maintenance dredging consent. Over 277,204 m3 of sediment are

1 2

carried down the region’s rivers and into Tasman Bay each year. Some

of this ends up in the channels and berth pockets making dredging an

essential annual task.

Dredging has been done since the early 1960s and careful study

of the impacts of the activity are part of the stringent monitoring

requirements of the existing resource consent, granted for 15 years in

1993. The results show no negative effects at the dumping ground and

have given us the confidence to apply for a 35 year consent, again with

careful monitoring conditions and a review period.

H A Z A R D O U S W A S T E S

Certification to comply with the new requirements under the

Hazardous Substances and New Organisms regulations was confirmed

in August 2006.

L O O K I N G A H E A D

Investing in ISO 14001 certification has improved the frameworks we

have in place. Over the coming year the focus will move from systems

to action, as we make progress in the targets set for noise, waste

minimisation, energy consumption and oil spill prevention.

In the key area of noise we intend to make offers of insulation to the

first 11 houses in the affected noise zone, by July 2008. Under the terms

of the Noise Variation we will also establish a noise liaison committee;

and budget provision has been made for reduction of noise at source.

The new code of practice for fumigation will help to ensure that we

continue to lead in minimising the risks associated with this aspect of

cargo handling, as exporters address quarantine regulations imposed

by overseas countries.1 3

“When the topic of Environmental Management systems came up at the

environment committee meetings we were able to indicate the benefits of

having an externally audited system and to share our experience, as Nelson Pine

Industries and TNL were both already ISO 14001 certified.”

Philip Wilson, Environmental Engineer, Nelson Pine Industries.

Port Nelson Environmental Committee.

Everyone’s contribution is vital to waste reduction initiatives.

P O R T P E O P L E

Port Nelson has a proud track record of a stable and skilled workforce,

with staff numbers steady over the past year with 93 permanent, fixed

term and part-time staff. Casual staff boosted the total hours worked to

the equivalent of 132 full-time equivalents. This year three staff members

reached the milestone of 25 years service bringing the total number of

‘silver servers’ to nine, one of whom has clocked up 44 years service.

H E A L T H A N D S A F E T Y

Port Nelson values its reputation for speed and efficiency in vessel

turnaround, but never at the expense of compromising the safety

of staff and on-site contractors. The Health and Safety Committee’s

‘bottom up’ approach encourages input and suggestions from all

staff members and ensures buy-in to safe working practices. The

committee has been operating now for over 17 years and represents

employees from all worksites within the port, as well as the CEO and

three members of the Executive Team.

L I F E S T Y L E P R O G R A M M E S

A range of health checks are offered to staff. All permanent staff and

some casuals have their hearing and vision checked annually by an

occupational health provider. Identified employees in certain work

areas are given lung function tests and some employees have regular

blood tests to detect substances such as heavy metals or fumigants. A

new initiative this year was ergonomic assessments for all the forklift

drivers in the Cargo Logistics division.

In 2006 we trialled a ‘Health and Wellbeing’ programme, where all

permanent staff and qualifying casuals could claim $500 to improve

their physical health, educational and personal development or

emotional wellbeing. There has been an excellent uptake with staff

applying to spend their wellness dollars on such items as gym

memberships, computer equipment, tramping gear, massage therapy,

life coaching, night school fees and bicycles.

For several years we have undertaken pre-employment drug tests for

permanent and casual staff; as well as ‘incident and reasonable cause’

drug and alcohol testing, to further enhance workplace safety standards.

In early autumn each year we offer free ‘flu injections’ to all permanent

staff, and in late spring staff are offered a melanoma skin check at an

on-site GP clinic. Other Sun Smart measures are the provision of hats

and sunscreen to outdoor workers.

Our Employee Assistance Programme continues to support staff with

counselling services for work or other matters. This service is offered

to employees at no cost by a contracted professional organisation.

We have a subsidized medical insurance scheme in place, we continue to

offer a number of retirement seminars each year and we offer company-

subsidised superannuation schemes for all permanent waged staff.

L O S T T I M E I N J U R I E S ( L T I ’ S )

We are pleased to report a small decrease in LTI’s over the past year,

down from twelve to nine. Our target LTI frequency rate of 1.5% was

not met, with an end of year result of 3.27%. A port is a workplace with

inherent dangers and the potential for ‘human error’. Any accidents

are thoroughly investigated and new safety measures are added to our

prevention programme where necessary. We remain committed to our

long-term company goal of ‘Together towards Zero’ (LTI’s).

A C C I D E N T C O M P E N S A T I O N

Port Nelson Ltd is an Accredited Employer in the Work Safety and

Management Practices Programme, and successfully met the tertiary

level for the first time when we were audited in early 2007 - an

achievement that gives us a great sense of pride and accomplishment.

We continue to be a ‘reimbursing employer’ and we value the ability to

have employees remain on the payroll system with all wage and salary

deductions continuing without interruption.

S U P P O R T I N G S T A F F E N D E A V O U R S

The number of sports events that we compete in as a company is

growing. In May a large staff team competed in the third Port Nelson

Blokes’ Day Out, with a social event to follow; and we supported

female staff to enter the Taylors’ Women’s Triathlon. Staff were helped

to attend out of town representative sports events and to support

local sports clubs and teams. Staff were also given support to attend

professional and personal development courses.

C O M M U N I C A T I O N

All staff receive the company magazine RePort Nelson, which includes

the ‘Safe Harbour’ feature, with a focus on health and safety matters.

Safe Harbour includes the results of a scheme that rewards staff

who report ‘near misses’ by putting them in a draw for a night

out at the movies complete with a café voucher. This year we

introduced an internal newsletter with input from all departments.

This has been well received and covers a wider range of subjects

- from new machinery to the results of sports’ sweepstakes.

Summaries of monthly incident reporting are regularly posted on staff

noticeboards along with safety messages. We have had good feedback

on the noticeboard at the port gate, which records the number of days

since the last lost time injury.

1 4

T R A I N I N G

We undertook organisation-wide training with a management

consultant at the end of 2006, with the aim of improving our internal

communications and enhancing our workplace culture. The staff

newsletter was one result and we also went through a ‘starfish’

exercise, where staff were challenged to come up with a six week

project that would make a positive difference in their work area. There

have been ongoing updates for forklift drivers, first aid certification

refresher training, seasonal induction for casual staff, and staff have

also attended business, administration, supervisory, legal compliance

and administration courses throughout the year. Marine staff have

been to Launceston in Australia for port simulator training, senior staff

have been supported in tertiary study in commerce and engineering,

and we have continued to send two staff members per year to the

Outward Bound eight day ‘Navigator’ course.

G O V E R N A N C E

The Finance and Risk Committee and Remuneration Committees met

as required by their respective Terms of Reference and have been

effective in terms of dealing with matters that may not warrant full

Board attention. Both committees report to the Board.

D I R E C T O R C H A N G E S

During the year two well known directors retired, Messrs Dickinson and

Sturgeon. Mr Dickinson had served on the Port Nelson Board for 12 years

and Mr Sturgeon 16 years. In September 2006 Mr Sturgeon was replaced

by Bronwyn Monopoli and in December Mr Dickinson was replaced by

Tim King. Ms Monopoli is a Nelson based Chartered Accountant and Mr

King Deputy Mayor of Tasman District Council. Both new Directors bring

considerable complementary experience to the Board.

B O A R D A N D S U B C O M M I T T E E C O M P O S I T I O N

A S A T 3 0 J U N E 2 0 0 7

Board

Nick Patterson (Chair)

Phil Lough (Deputy Chair)

Tim King (Deputy Mayor Tasman District Council)

Paul Matheson (Mayor Nelson City Council)

Peter Schuyt (CFO NZ Post Group)

Bronwyn Monopoli (Principal – Bronwyn Monopoli Chartered

Accountants)

Finance and Risk Committee

Peter Schuyt (Chair)

Bronwyn Monopoli (Director)

Martin Byrne (Chief Executive Officer)

Parke Pittar (Chief Commercial Officer, Company Secretary)

Remuneration Committee

Nick Patterson (Chair)

Phil Lough (Director)

Meeting attendance

Meeting type Board Finance and Risk Remuneration

Meetings held. . . . . . . . . . . 11 . . . . . . . . . . . . . . 3 . . . . . . . . . . . . . . . . . .1

B Dickinson* . . . . . . . . . . . . 5 . . . . . . . . . . . . . . . 2 . . . . . . . . . . . . . . . . . .

T King*. . . . . . . . . . . . . . . . . . 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

P Lough. . . . . . . . . . . . . . . . . 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1

P Matheson* . . . . . . . . . . . .10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

B Monopoli . . . . . . . . . . . . . 7 . . . . . . . . . . . . . . . 1 . . . . . . . . . . . . . . . . . .

N Patterson . . . . . . . . . . . . . 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1

P Schuyt . . . . . . . . . . . . . . . . 11 . . . . . . . . . . . . . . 3 . . . . . . . . . . . . . . . . . .

M Sturgeon . . . . . . . . . . . . . 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1

* Attendance includes any meeting attended by alternates.

F U R T H E R G O V E R N A N C E P R O G R E S S

During the year a Delegated Authorities Policy was developed. The

policy’s aim is to ensure there is appropriate control over expenditure

limits and provide for delegation when key Authorised Signatories

may be absent. The policy brought together some existing policy

directives in addition to allowing for a review of best practice as it

related to Port Nelson Ltd.

Additionally, in September 2006 the Risk Framework was finalised

providing management and the Board with an up to date risk profile

related to Port Nelson’s specific risks.

At the end of the Financial Year the final stages were being completed

on an updated Fraud Policy, thus ensuring that an appropriate

framework is in place to manage any suspected fraudulent events

should they occur.

Port Nelson’s Governance Framework continues to be reviewed and

enhanced where appropriate on an annual basis.

1 5

“I’m proud to work for a company that takes good care of its people and provides

an all-round engaging, stimulating, positive work environment.

There are challenges, but our people are the heart of the company - we’ve got

strong social networks and we have fun!”

Karen Barnett, HR & Quality Manager, Port Nelson Limited (left)

with team members Jim Lane and Suzanne Thompson.

D I R E C T O R S

N I C K P A T T E R S O NNick is the Managing Director of Wai-West Horticulture Ltd, which has extensive

horticultural plantings and post harvest facilities. Wai-West manages Fruit Logistics

(Nelson) Ltd, providing coolstorage and associated services for around 25% of the

Nelson pipfruit industry.

P A U L M A T H E S O NPaul is the Mayor of Nelson City and an experienced business manager.

His ex officio positions include directorships of Nelson Airport Ltd and Trustee of

Cawthron Institute. He chairs the nationwide Mayors’ Taskforce for Jobs and is actively

involved in many wider community organisations.

P H I L L O U G HPhil is currently Chair of NZ Trade & Enterprise and a range of other NZ companies.

He was previously CEO of the Sealord Group and is based in Nelson.

T I M K I N GTim is Deputy Mayor of the Tasman District Council and chairs their Corporate

Services committee. He farms on the Waimea Plains and has governance roles on a

range of community organisations including chairing the Waimea Rural Fire

Authority and the Wakefield & Community Health Centre Trust.

P E T E R S C H U Y TPeter is Chief Financial Officer for the New Zealand Post Group. He is also a director of a

number of companies in that group. Prior to his current role, Peter was CFO of the New

Zealand Dairy Board.

B R O N W Y N M O N O P O L IBronwyn is a chartered accountant, with her Richmond based practice

providing specialist accounting and financial advice to mainly rural businesses.

She is also a director of a number of Crown and other companies, and a trustee of

various arts-related organisations.

1 6

1 7

F I N A N C I A L R E P O R T 2 0 0 7

FINANCIAL HIGHLIGHTS

2007 2006 $Millions $Millions

Revenue $33.0 $29.6

Net Surplus After Taxation* $6.7 $7.6

Dividend $3.9 $5.3

Basic Earnings per Ordinary Share 26.5¢ 22.1¢

Return on Average Shareholders’ Funds 5.6% 6.1%

Net Asset Backing per Share $4.31 $4.14¢

Dividend - Recommended per Share 15.3¢ 17.1¢

Return on Average Total Assets** 7.7% 8.3%

Ratio of Shareholders’ Funds to

Total Assets 67.9% 82.1%

TR ADE HIGHLIGHTS

2007 2006

Cargo Tonnes 2.64M 2.52M

Vessel Arrivals 997 1,012

Container Throughput (TEU’s) 71,815 61,455

* Including Investment Property Revaluation

** Based on EBIT

1 8

AUDIT REPORT

TO THE READERS OF PORT NELSON LIMITED’S FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

The Auditor-General is the auditor of Port Nelson Limited (the company). The Auditor-General has appointed me, Scott Tobin, using

the staff and resources of Audit New Zealand, to carry out the audit of the financial statements of the company, on his behalf, for the

year ended 30 June 2007.

Unqualified opinion

In our opinion:

• The financial statements of the company on pages 22 to 42:

- comply with generally accepted accounting practice in New Zealand; and

- give a true and fair view of:

• the company’s financial position as at 30 June 2007; and

• the results of its operations and cash flows for the year ended on that date.

• Based on our examination the company kept proper accounting records.

The audit was completed on 10 September 2007, and is the date at which our opinion is expressed.

The basis of our opinion is explained below. In addition, we outline the responsibilities of the Board of Directors and the Auditor, and

explain our independence.

Basis of opinion

We carried out the audit in accordance with the Auditor-General’s Auditing Standards, which incorporate the New Zealand Auditing

Standards.

We planned and performed the audit to obtain all the information and explanations we considered necessary in order to obtain reasonable

assurance that the financial statements did not have material misstatements, whether caused by fraud or error.

Material misstatements are differences or omissions of amounts and disclosures that would affect a reader’s overall understanding of the

financial statements. If we had found material misstatements that were not corrected, we would have referred to them in our opinion.

The audit involved performing procedures to test the information presented in the financial statements. We assessed the results of

those procedures in forming our opinion.

Audit procedures generally include:

• determining whether significant financial and management controls are working and can be relied on to produce complete and

accurate data;

• verifying samples of transactions and account balances;

• performing analyses to identify anomalies in the reported data;

• reviewing significant estimates and judgements made by the Board of Directors;

• confirming year-end balances;

• determining whether accounting policies are appropriate and consistently applied; and

• determining whether all financial statement disclosures are adequate.

We did not examine every transaction, nor do we guarantee complete accuracy of the financial statements.

We evaluated the overall adequacy of the presentation of information in the financial statements. We obtained all the information and

explanations we required to support our opinion above.

Responsibilities of the Board of Directors and the Auditor

The Board of Directors is responsible for preparing financial statements in accordance with generally accepted accounting practice

in New Zealand. Those financial statements must give a true and fair view of the financial position of the company as at 30 June 2007.

They must also give a true and fair view of the results of its operations and cash flows for the year ended on that date. The Board of

Directors’ responsibilities arise from the Port Companies Act 1988 and the Financial Reporting Act 1993.

We are responsible for expressing an independent opinion on the financial statements and reporting that opinion to you. This

responsibility arises from section 15 of the Public Audit Act 2001 and section 19 of the Port Companies Act 1988.

Independence

When carrying out the audit we followed the independence requirements of the Auditor-General, which incorporate the

independence requirements of the Institute of Chartered Accountants of New Zealand.

Other than the audit, we have no relationship with or interests in the company.

S M Tobin

Audit New Zealand

On behalf of the Auditor-General

Christchurch, New Zealand

1 9

S T A T U T O R Y I N F O R M A T I O NT o s h a r e h o l d e r s , o n t h e a f f a i r s o f P o r t N e l s o n L i m i t e d

f o r t h e Y e a r E n d e d 3 0 J u n e 2 0 0 7

P R I N C I P A L A C T I V I T I E S

Port Nelson Limited (“the Company” or “Port Nelson”) is primarily engaged in the commercial operation of the Port of Nelson. There has been

no significant change in the nature of the Company’s business during the year.

R E V I E W O F A C T I V I T I E S

A review of the year’s operations is contained in the Chairman’s Report and the Chief Executive Officer’s Review.

R E V I E W O F O P E R A T I O N S

The surplus for the Company for the year was $6.725 million. (2006 $7.587 million)

D I V I D E N D S

Dividends of $6,600,000 were paid or provided for during the year. ($2,700,000 final dividend for 2006 financial year, $1,000,000 interim dividend

for 2007 financial year, and a provision for $2,900,000 final for 2007 financial year)

D I R E C T O R S

In accordance with the Company’s constitution Messrs P K Matheson and T B King will retire by rotation.

R E M U N E R A T I O N O F D I R E C T O R S

Fees paid to Directors during the year were as follows:

A O Patterson $43,045

R G Dickinson $11,423

T B King $11,500

P V Lough $23,395

P K Matheson $21,925

B A Monopoli $17,880

M G Sturgeon $5,725

P M Schuyt $23,868

TOTAL $158,761

M G Sturgeon resigned in September 2006.

B A Monopoli was appointed in September 2006.

R G Dickinson resigned in December 2006.

T B King was appointed in December 2006.

D I R E C T O R S ’ I N S U R A N C E

The Company has arranged policies of Directors’ Liability Insurance to ensure that as far as possible Directors will not personally incur any

monetary loss as a result of actions undertaken by them as Directors. Certain actions are specifically excluded, for example the incurring of

penalties and fines that may be imposed in respect of breaches of the law.

D I R E C T O R S ’ I N T E R E S T

The following notices have been received from Directors disclosing their interests in other companies with whom the group may have

transactions. All transactions with these companies are conducted on normal commercial terms.

• Mr T B King is Deputy Mayor of Tasman District Council, which is a shareholder of the Company.

• Mr P K Matheson is Mayor of Nelson City, which is a shareholder of the Company.

• Ms B A Monopoli is a Director of the Cawthron Institute that sell services to the Company.

• Mr A O Patterson is a Director of Cold Storage Nelson Ltd that leases land and purchases services from the Company.

• Mr P M Schuyt is a Director of ECN Ltd and Express Couriers Ltd that sell services to the Company.

D I R E C T O R S ’ L O A N S

There were no loans by the Company to Directors.

The Statement of Accounting Policies and Notes to the Accounts on pages 26 to 42 form part of these Financial Statements.

2 0

S T A T U T O R Y I N F O R M A T I O NT o s h a r e h o l d e r s , o n t h e a f f a i r s o f P o r t N e l s o n L i m i t e d

f o r t h e Y e a r E n d e d 3 0 J u n e 2 0 0 7

S H A R E H O L D I N G B Y D I R E C T O R S

No Directors hold shares in the Company.

U S E O F C O M P A N Y I N F O R M A T I O N

During the year the Board received no notices from Directors requesting to use Company information received in their capacity as Directors that

would not otherwise have been available to them.

C O M M I T T E E S O F T H E B O A R D

The Board has established a Finance and Risk Committee to assist the Board in carrying out its responsibilities under the Companies Act 1993 and

the Financial Reporting Act 1993, and a Remuneration Committee.

A U D I T O R S

Under section 15 of the Public Audit Act 2001 and section 19 of the Port Companies Act 1988, the Auditor General is the Auditor of the Company.

The Auditor General has appointed Audit New Zealand to undertake the audit on its behalf. Fees paid to the Auditors are disclosed in the

Financial Statements.

P E R F O R M A N C E I N D I C A T O R S

As required under Section 16 of the Port Companies Act 1988, performance indicators in the Statement of Corporate Intent are given on

page 21.

D O N A T I O N S

Donations made during the year are disclosed in the Financial Statements.

E M P L O Y E E R E M U N E R A T I O N

The Company has remuneration agreements including benefits with employees in excess of $100,000 per annum in the following bands:

Remuneration Number of Employees

2007 2006

$100,000 to $110,000 3 3

$110,000 to $120,000 - 1

$120,000 to $130,000 3 2

$130,000 to $140,000 1 -

$150,000 to $160,000 - 1

$160,000 to $170,000 1 -

$190,000 to $200,000 - 1*

$210,000 to $220,000 1* -

$240,000 to $250,000 1 1

* Employee retired during year

C H A N G E S I N A C C O U N T I N G P O L I C I E S

There have been no changes in accounting policies during the financial year.

Chairman of Directors Director

For and on behalf of the Board

Date: 7 September 2007

The Statement of Accounting Policies and Notes to the Accounts on pages 26 to 42 form part of these Financial Statements.

2 1

S T A T E M E N T O F C O R P O R A T E I N T E N T

M I S S I O N S T A T E M E N T

• To operate the Company as a successful business providing cost efficient, effective and competitive services and facilities for port users and

shippers.

• To provide for the present and future needs of the Company in ways that are sensitive to people, use resources wisely, and are in harmony with

the environment of an export port.

O B J E C T I V E S

1. To operate as a successful business.

2. To be a good employer.

3. The debt equity ratio not to exceed 66.67% (40/60).

4. To aim to grow the business through stimulation of throughput, added value services and related business activities, so leading to increased

revenue.

5. To achieve a commercially acceptable rate of return on shareholders’ funds in accordance with meeting the objectives herein.

6. To ensure that Port development takes place which meets the needs of the region.

7. To ensure that adequate environmental standards are maintained.

8. To strive for continuous improvement in everything that we do.

M E A S U R E O F P E R F O R M A N C E A G A I N S T O B J E C T I V E S

The 2005 figures are not comparable with 2006 and 2007 as the 2006 and 2007 financial information was prepared in accordance with NZ IFRS.

Target 2007 2006 2005 Target Met?

Lost Time Injury Frequency Rate * <1.5 3.3 4.1 1.7 No

Net Debt / Equity Ratio <66.67% 36.3% 12.9% 19.4% Yes

Dividends Declared $3.9m $3.9m $5.3m $3.4m Yes

Cargo Throughput (Cargo Tonnes) 2.55m 2.64m 2.52m 2.62m Yes

Shipping Tonnes (Gross Tonnes) 9.9m 9.0m 8.6m 8.4m No

Ships Visits 1005 997 1012 1178 No

Revenue $29.9m $33.02m $29.6m $27.7m Yes

Return on Average Shareholders Funds 9.0% 5.6% 6.1% 5.4% No

Return on Funds Employed 7.0% 8.3% 8.8% 7.9% Yes

Capital Expenditure <$7.0m $4.0m $2.9m $7.3m Yes

Incidents Leading to Pollution of Harbour Nil 3 Nil Nil No

Compliance with all Resource Consent Conditions Full Full Full Full Yes

Compliance with NZ Maritime Safety Standards Full Full Full Yes

* Lost Time Injury Frequency Rate = Lost Time Injuries

Hours Worked in Period x 100,000

The Statement of Accounting Policies and Notes to the Accounts on pages 26 to 42 form part of these Financial Statements.

2 2

I N C O M E S T A T E M E N Tf o r t h e Y e a r E n d e d 3 0 J u n e 2 0 0 7

The Statement of Accounting Policies and Notes to the Accounts on pages 26 to 42 form part of these Financial Statements.

Notes 2007 2006 $000 $000

R E V E N U E

Operations 27,864 25,364

Property 5,159 4,902

TOTAL REVENUE 1 33,023 30,266

E X P E N S E S

Operations and Property 20,767 18,673

Financing 2,513 1,564

TOTAL EXPENSES 2 23,280 20,237

O P E R A T I N G S U R P L U S 9,743 10,029

Reversal of Prior Year Building Asset Write Down Impairment - 699

NET SURPLUS BEFORE TAXATION 9,743 10,728

Less Taxation Expense 3 3,018 3,141

N E T S U R P L U S 6,725 7,587

S T A T E M E N T O F M O V E M E N T S I N E Q U I T Yf o r t h e Y e a r E n d e d 3 0 J u n e 2 0 0 7

2007 2006 $000 $000

Opening Equity 128,405 128,380

Movements in Hedging Reserve 6h 812 139

Revaluations 6f 2,563 -

Net Surplus 6,725 7,587

Total Recognised Revenues and Expenses for the Period 10,100 7,726

Distribution to Owners 6b (3,900) (7,700)

Share Repurchase 6a (25,000) -

C L O S I N G E Q U I T Y 109,605 128,405

2 3

S T A T E M E N T O F F I N A N C I A L P O S I T I O Nf o r t h e Y e a r E n d e d 3 0 J u n e 2 0 0 7

The Statement of Accounting Policies and Notes to the Accounts on pages 26 to 42 form part of these Financial Statements.

Notes 2007 2006 $000 $000

C U R R E N T A S S E T S

Cash and Cash Equivalents 7 2,170 2,484

Trade and Other Receivables 8 3,518 3,011

Inventories 9 394 363

Prepayments and Accruals 361 343

Tax Refund Due - 32

Properties Intended for Sale 5 394 -

Hedging Asset 13 1,290 78

8,127 6,311

L E S S C U R R E N T L I A B I L I T I E S

Trade and Other Payables 10 1,721 1,452

Employee Benefit Liabilities 17 1,103 1,050

Tax Payable 69 -

Dividend Payable 6b 2,900 2,700

5,793 5,203

W O R K I N G C A P I T A L 2,334 1,108

N O N - C U R R E N T A S S E T S

Property, Plant and Equipment 11 137,960 135,627

Intangible Assets 12 742 709

Investment Properties 5 14,311 13,983

153,013 150,319

N O N - C U R R E N T L I A B I L I T I E S

Employee Benefit Liabilities 17 190 202

Deferred Tax liability 4 3,552 3,820

Term Loan 13, 14 42,000 19,000

45,742 23,022

T O T A L N E T A S S E T S 109,605 128,405

S H A R E H O L D E R S F U N D S

Issued Capital 6a 6,046 31,046

Retained Earnings 6b 31,860 29,035

Asset Revaluation Reserves 6f 70,835 68,272

Hedging Reserve 6h 864 52

T O T A L S H A R E H O L D E R S ’ F U N D S 109,605 128,405

Chairman of Directors Director

For and on behalf of the Board

Date: 7 September 2007

2 4

S T A T E M E N T O F C A S H F L O W Sf o r t h e Y e a r E n d e d 3 0 J u n e 2 0 0 7

The Statement of Accounting Policies and Notes to the Accounts on pages 26 to 42 form part of these Financial Statements.

2007 2006 $000 $000

C A S H F L O W S F R O M O P E R A T I N G A C T I V I T I E S

Cash was provided from:

Receipts from Customers 27,241 25,851

Rent Received 4,447 4,187

Interest Received 107 67

31,795 30,105

Cash was applied to:

Payments to Suppliers and Employees (16,693) (15,020)

Interest Paid (2,604) (1,540)

Taxes Paid (3,176) (3,310)

Net GST Paid (70) 115

(22,543) (19,755)

Net Cash In Flows from Operating Activities 9,252 10,350

C A S H F L O W S F R O M I N V E S T I N G A C T I V I T I E S

Cash was provided from:

Property Plant and Equipment Sold 170 42

Cash was applied to:

Purchase of Property Plant Equipment and Intangibles (4,036) (2,891)

Net Cash Out Flows from Investing Activities (3,866) (2,849)

C A S H F L O W S F R O M F I N A N C I N G A C T I V I T I E S

Cash was provided from:

Loans Raised 25,000 -

Cash was applied to:

Loans Paid (2,000) -

Shares Purchased and Cancelled (25,000) -

Dividend Paid (3,700) (5,000)

Net Cash Out Flows from Financing Activities (5,700) (5,000)

Net Increase/(Decrease) in Cash Held (314) 2,501

Cash at 1 July 2,484 (17)

C A S H A T 3 0 J U N E 2,170 2,484

Represented by:

Cash at Bank 269 585

Deposits 1,901 1,899

C A S H A T 3 0 J U N E 2,170 2,484

2 5

S T A T E M E N T O F C A S H F L O W Sf o r t h e Y e a r E n d e d 3 0 J u n e 2 0 0 7

The Statement of Accounting Policies and Notes to the Accounts on pages 26 to 42 form part of these Financial Statements.

2007 2006 $000 $000

R E C O N C I L I A T I O N W I T H N E T S U R P L U S

Net Surplus 6,725 7,587

Add Non Cash Items:

Depreciation and Amortisation 3,636 3,736

Impairment - 194

Increase (Decrease) in Deferred Tax (268) (143)

Deferred Tax Movement Taken Direct to Equity 9 -

Less:

Reversal of Prior Year Building Asset Write Down Impairment - (699)

Unrealised Gains (722) (712)

2,655 2,376

Add (Less) Movements in Other Working Capital Items:

(Increase)/Decrease in Accounts Receivable (451) 583

Increase/(Decrease) in Accounts Payable (excluding Assets Payable) 372 (144)

Increase/(Decrease) in Current and Non Current Employee Benefit Liabilities (12) (87)

Increase/(Decrease) in Tax Payable 101 (26)

(Increase)/Decrease in Inventory (31) 73

(Increase)/Decrease in Net GST (70) 115

(Increase)/Decrease in Prepayments and Accruals (18) (99)

(109) 415

Add (Less) Items Classified as Investing Activities:

(Profit) Loss on Sale of Assets (19) (28)

N E T C A S H I N F L O W F R O M O P E R A T I N G A C T I V I T I E S 9,252 10,350

2 6

S T A T E M E N T O F A C C O U N T I N G P O L I C I E S

R E P O R T I N G E N T I T Y

Port Nelson Limited is a public company registered under the Companies Act 1993 and created pursuant to the Port Companies Act 1988.

Port Nelson is a reporting entity in terms of the Financial Reporting Act 1993. The financial statements of Port Nelson have been prepared in

accordance with the Financial Reporting Act 1993.

B A S I S O F P R E P A R A T I O N

The financial statements have been prepared in accordance with Generally Accepted Accounting Practice in New Zealand (‘NZ GAAP’). They

comply with New Zealand equivalents to International Financial Reporting Standards (‘NZ IFRS’) and other applicable reporting standards as

appropriate for profit orientated entities.

The financial statements are presented in New Zealand dollars and the functional currency of Port Nelson is New Zealand dollars.

The financial statements were authorised for issue by the Directors on the 7 September 2007.

S T A N D A R D S A N D I N T E R P R E T A T I O N S I S S U E D A N D N O T Y E T A D O P T E D

There are no standards, interpretations and amendments that have been issued, but are not yet effective other than NZ IFRS 7 and 8, that Port

Nelson has not yet applied. When effective these standards will require additional disclosures in the financial statements.

A C C O U N T I N G P O L I C I E S

Unless otherwise stated, all accounting policies applied are consistent with those of the prior year. Where appropriate, comparative figures have

been amended to accord with the current year’s presentation and disclosure.

M E A S U R E M E N T S Y S T E M

Those accounting principles considered appropriate by the New Zealand Institute of Chartered Accountants for the measurement and reporting

of results and financial position under the historical cost method, modified by the revaluation of land, buildings, wharves, and investment

property, have been followed.

R O U N D I N G O F A M O U N T S

Amounts in this report have, unless otherwise indicated, been rounded to the nearest one thousand dollars.

S P E C I F I C A C C O U N T I N G P O L I C I E S

The accounting policies adopted in the financial statements, which have a significant effect on the result and the financial position disclosed are

set out below:

1.1 Revenue Recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to Port Nelson and that revenue can be

reliably measured as follows:

Cargo and Marine revenue – is recognised based on departure of the vessel.

Stevedoring – is recognised based on partial completion of the vessel at balance date.

Property lease revenue – is recognised on an accrual basis at balance date. Rentals are payable in advance.

Interest revenue – is recognised on a time proportion basis using the effective interest method.

1.2 Provisions

Provisions are recognised when a present obligation exists as a result of a past event, the future sacrifice of economic benefits is probable,

and the amount of the provision can be measured reliably. The amount recognised as a provision is the best estimate of the consideration

required to settle the present obligation at reporting date, taking into account the risks and uncertainties surrounding the obligation.

1.3 Property, Plant and Equipment and Depreciation

Property, Plant and Equipment, except land, buildings, and wharves, are stated at valuation taken over from the Nelson Harbour Board

on 1 October 1988 and subsequent additions at cost. Depreciation is written off depreciable assets on a straight line basis over the

estimated economic lives of the assets, ranging as follows:

Years Years

Wharves, Quays and Berths 20-65 Buildings 50-100

Vessels 20 Cranes 15-20

Forklifts 15-25 Tractors and Vehicles 10

Sundry Plant and Equipment 5-20 Navigation and Pilot Equipment 10-40

Office Equipment 5-15 Hard Standing 50

Software 5

Capital dredging is not amortised. The cost of maintaining the dredged depth is expensed. Land is valued at least every three years.

2 7

S T A T E M E N T O F A C C O U N T I N G P O L I C I E S

Land is included at the valuation as at 1 July 2005 except for, (a) reclaimed land for which title has recently been received and has been

revalued as at 30 June 2007, and, (b) investment property which is included at fair value being the market value of the lessor’s interests

as at 30 June 2007, and is valued annually. Land owned and leased to third parties (other than investment property) is valued at the

market value of the lessor’s interests. Non leased land is recorded at market value. Additions between valuations are recorded at cost.

The land valuation was completed by Ian McKeage, Registered Valuer, FNZIV, FPINZ of TelferYoung.

Buildings are stated at fair value. Fair value was determined as at 1 July 2005 using either a market based approach (where evidence

can be reliably analysed) or optimised depreciated replacement cost. Additions between valuations are recorded at cost. Buildings are

valued at least every five years. The buildings valuation was completed by Ian McKeage, Registered Valuer, FNZIV, FPINZ of TelferYoung.

Wharves are stated at fair value as determined by a Chartered Professional Engineer employed by Port Nelson and reviewed by Ian

McKeage, Registered Valuer, FNZIV, FPINZ of TelferYoung. Fair value was determined as at 1 July 2005 using optimised depreciated

replacement cost. Wharves are valued at least every five years. Additions between valuations are recorded at cost.

The asset classes that are subject to revaluation are assessed at each balance date to ensure that the values are not materially different

from fair value. Where the carrying value is materially different from fair value a revaluation is undertaken.

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount of the asset. Gains and losses are

included in the Income Statement. When revalued assets are sold, the amounts included in asset revaluation reserves in respect of

those assets are transferred to retained earnings.

Cost incurred subsequent to initial acquisition are capitalised only when it is probable that future economic benefits or service

potential associated with the item will flow to Port Nelson and the cost of the item can be reliably measured.

1.4 Investment Properties

Investment Property which is property held to earn rentals and/or capital appreciation is measured at its fair value at the reporting

date. Gains or losses from changes in the fair value of Investment Property are included in the profit or loss in the period in which they

arise. Investment Properties are not depreciated.

1.5 Cash and Cash Equivalents

Cash and Cash Equivalents comprise cash on hand, cash in banks and investments in money market instruments, net of outstanding

bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the balance sheet.

1.6 Trade and Other Receivables

Trade and Other Receivables are valued at fair value and subsequently measured at amortised cost using the effective interest method,

less any provision for impairment.

A provision for the impairment of receivables is established when there is objective evidence that all amounts due will not be able to

be collected as per the original terms of the receivables. The amount of the provision is the difference between the assets carrying

amount and the present value of estimated future cash flows, discounted using the effective interest method.

1.7 Inventories

Inventory is valued at the lower of cost using the weighted average method and net realisable value. Full provision has been made for

obsolescence where applicable. Stock is held for internal maintenance and construction work only.

1.8 Intangible Assets

Intangible Assets are limited to computer software. On acquisition they are capitalised at cost which equates to fair value. The

computer software will have a finite life. Amortisation is to be charged to the Income Statement based on the finite life of the asset.

Software is amortised on a straight line basis over five years.

Intangible Assets will be tested for impairment where an indicator of impairment exists and useful lives will be assessed on an annual

basis.

1.9 Impairment of Assets

At each reporting date, Port Nelson reviews the carrying amount of its Tangible and Intangible Assets to determine whether there is

any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is

estimated in order to determine the extent of the impairment loss (if any).

Where the carrying amount of the asset exceeds its recoverable amount the asset is considered impaired and is written down to its

recoverable amount. For revalued assets the impairment loss is recognised against the Revaluation Reserve for that class of asset.

Where that results in a debit balance in the Revaluation Reserve, the balance is recognised in the Income Statement. For assets not

carried at a revalued amount the impairment loss is recognised in the Income Statement.

The reversal of an impairment loss on a revalued asset is credited to the Revaluation Reserve. However, to the extent that an impairment

loss for that class of asset was previously recognised in the Income Statement, a reversal of the impairment loss is also recognised in the

Income Statement.

For assets not carried at a revalued amount, the total impairment loss is recognised in the Income Statement.

2 8

S T A T E M E N T A C C O U N T I N G P O L I C I E S

1.10 Goods and Services Tax

All items in the financial statements are exclusive of Goods and Services Tax (GST) with the exception of receivables and payables

which are stated with the GST included. Where GST is not recoverable as an input tax then it is recognised as part of the related asset

or expense.

The net amount of GST recoverable from, or payable to, the Inland Revenue Department (IRD) is included as part of receivables or

payables in the Balance Sheet.

The net GST paid to or received from the IRD, including the GST relating to investing and financing activities, is classified as an operating

cash flow in the Statement of Cash Flows.

Commitments and Contingencies are disclosed exclusive of GST.

1.11 Income Tax

The income tax expense for the period is the tax payable on the current period’s taxable income based on the income tax rate and

adjusted by changes in Deferred Tax Assets and Liabilities attributable to temporary differences between the tax bases of assets and

liabilities and their carrying amounts in the financial statements and for unused tax losses (if any).

Deferred Tax Assets and Liabilities are recognised for temporary differences at the rate expected to apply when the assets are recovered

or liabilities are settled. The tax rate is applied to the cumulative amounts of deductible and taxable temporary differences to measure

the Deferred Tax Asset or Liability.

Deferred Tax Assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable

amounts will be available to utilise those temporary differences and losses.

Deferred tax is charged or credited to the Income Statement, except where it relates to items charged or credited directly to equity, in

which case the tax is dealt within equity.

1.12 Borrowings

Borrowings are initially recognised at their fair value. After initial recognition, all borrowings are measured at amortised cost using the

effective interest method where this differs from face value.

1.13 Derivative Financial Instruments

Port Nelson uses derivative financial instruments such as interest rate swaps to hedge against interest rate fluctuations. Port Nelson

does not hold or issue derivative financial instruments for trading purposes. Such derivative financial instruments are stated at fair

value. The fair value of interest rate swaps is determined by reference to market values. The effective portion of changes in the fair

value of the derivative financial instruments that are designated and qualify as cash flow hedges are deferred in equity.

If a hedging instrument is sold, terminated, revoked or no longer meets the criteria for hedge accounting, the cumulative gain or loss

that remains recognised directly in equity from the period when the hedge was effective will be recognised in the Income Statement.

1.14 Financing Costs

Finance costs are recognised as an expense when incurred. Financing costs directly attributable to buildings under construction are

capitalised as part of the cost of those assets.

1.15 Employee Entitlements

Provision is made in respect of the company’s liability for annual leave, long service leave and retirement gratuities. Annual leave and

long service leave has been calculated on an actual entitlement basis at current rates of pay and retirement gratuities calculated at

current rates of pay assuming the payment will be made upon retirement.

1.16 Foreign Exchange Transactions

Transactions in foreign currencies are converted at the New Zealand rate of exchange ruling at the date of the transaction. Capital items

are converted at the exchange rate ruling at balance date or the forward exchange contract rate where applicable.

1.17 Leases

Leases of plant and equipment are classified as operating leases. Operating lease payments are charged as an expense in the period

in which they are incurred, as this represents the pattern of benefits derived from the leased assets.

1.18 Dividends

Provision is made for the amount of any dividend declared on or before the end of the financial year but not distributed at balance

date.

1.19 Critical Judgements

Management have not had to exercise any critical judgements in the period ending 30 June 2007.

C H A N G E S I N A C C O U N T I N G P O L I C I E S

There have been no changes in accounting policies during the financial year.

2 9

N O T E S T O T H E A C C O U N T S

N O T E 1 : R E V E N U E

2007 2006Includes the following revenue: $000 $000

P O R T O P E R A T I O N S

Port Operations 27,702 25,269

Interest 107 67

Gain on Sale of Assets 55 28

Total Port Operations 27,864 25,364

P R O P E R T Y

Non Investment Property 3,542 3,399

Investment Property 895 791

Fair Value Adjustment to Investment Property 722 712

Total Property 5,159 4,902

T O T A L R E V E N U E 33,023 30,266

All revenue relates to continuing operations.

N O T E 2 : N E T S U R P L U S B E F O R E T A X A T I O N

2007 2006Includes the following expense: $000 $000

Administration Related 2,439 2,100

Audit Fees – IFRS Restatement 21 -

Audit Fees – Non IFRS 54 51

Bad Debts Written Off 112 2

Depreciation and Amortisation 3,636 3,736

Directors Fees 159 136

Donations/Corporate Sponsorship 195 159

Employee Wages and Related Expenses 7,703 6,926

Interest 2,513 1,564

Impairment - 194

Investment Property Expenses 12 12

Loss on Sale of Assets 36 -

Operating Leases 20 19

Other Operating Expenses 6,380 5,338

T O T A L E X P E N S E 23,280 20,237

All expenses relate to continuing operations.

N O T E 3 : P R O V I S I O N F O R T A X A T I O N 2007 2006 $000 $000

Current Tax 3,277 3,284

Deferred Tax (143) (143)

Deferred Tax Relating to Changes in Tax Rates (116) -

T A X E X P E N S E 3,018 3,141

Profit from Continuing Operations 9,743 10,728

Tax at 33% 3,215 3,540

Non Deductible Expenses 57 67

Non Taxable Income (238) (466)

Adjustments to Prior Year Estimates 100 -

Deferred Tax Relating to Changes in Tax Rates (116) -

T A X E X P E N S E 3,018 3,141

3 0

N O T E S T O T H E A C C O U N T S

N O T E 4 : D E F E R R E D T A X ( A S S E T S ) A N D L I A B I L I T I E S

Employee Intangible PP&E Derivatives Entitlements Assets Total $000 $000 $000 $000 $000

Opening Balance 4,065 26 (339) 68 3,820

Charged to Profit and Loss (200) - 36 21 (143)

Charged to Equity (189) 400 - - 211

B A L A N C E A T 3 3 % 3,676 426 (303) 89 3,888

Tax rate Adjustment

Charged to Profit and Loss (114) - 6 (8) (116)

Charged to Equity (220) - - - (220)

C L O S I N G B A L A N C E 3,342 426 (297) 81 3,552

N O T E 5 : I N V E S T M E N T P R O P E R T Y

2007 2006 $000 $000

Opening Balance 13,983 13,271

Revaluations 722 712

Properties Intended for Sale (394) -

C L O S I N G B A L A N C E 14,311 13,983

Properties Intended for Sale

An Investment Property has been presented as Properties Intended for Sale following the Company entering into a Sale Agreement, on 7 June

2007, with settlement after Balance Date.

Basis of Valuation

Investment Property is stated at fair value. Fair value was determined as at 30 June 2007 being the market value of the lessor’s interests as at 30

June 2007, and is valued annually. Valuation was completed by Ian McKeage, independent Registered Valuer, FNZIV, FPINZ of TelferYoung.

N O T E 6 : E Q U I T Y

(a) Share Capital 2007 2006 $000 $000

Opening Balance 31,046 31,046

Redeemed During the Year (25,000) -

B A L A N C E A T 3 0 J U N E 6,046 31,046

At 30 June 2007 the company has 25,415,404 ordinary shares. (2006 31,046,035). During the 2007 financial year the company purchased and

cancelled 5,630,631 shares. All shares are fully paid and have no par value. All shares carry equal voting rights and the right to share in any surplus

on winding up of the company. None of the shares carry fixed dividend rights.

(b) Retained Earnings 2007 2006 $000 $000

Retained Earnings 29,035 26,749

Net Surplus 6,725 7,587

Dividends Paid (1,000) (2,600)

Transfer to Dividend Payable (2,900) (2,700)

R E T A I N E D E A R N I N G S A T 3 0 J U N E 31,860 29,035

3 1

N O T E S T O T H E A C C O U N T S

(c) Asset Revaluation Reserve (Land) 2007 2006 $000 $000

Opening Balance 61,853 61,853

Revaluation Movement 2,638 -

C L O S I N G B A L A N C E 64,491 61,853

(d) Asset Revaluation Reserve (Wharves)

Opening Balance 4,495 4,495

Deferred Tax Movement 184 -

C L O S I N G B A L A N C E 4,679 4,495

(e) Asset Revaluation Reserve (Buildings)

Opening Balance 1,924 1,924

Deferred Tax Movement 225 -

Revaluation Movement (484) -

C L O S I N G B A L A N C E 1,665 1,924

(f) Asset Revaluation Summary

Opening Balance 68,272 68,272

Deferred Tax Movement 409 -

Revaluation Movement 2,154 -

C L O S I N G B A L A N C E 70,835 68,272

(g) Proposed Dividend Reserve

Opening Balance - 2,400

Dividend Paid - (2,400)

C L O S I N G B A L A N C E - -

(h) Hedging Reserve

Opening Balance 52 (87)

Fair Value Movement 1,212 165

Deferred Tax Movement (400) (26)

C L O S I N G B A L A N C E 864 52

Revaluation Reserves

The Revaluation Reserves relate to the revaluation of land, wharves, buildings and investment properties.

Hedging Reserve

The Hedging Reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments related to

hedged transactions that have not yet occurred.

N O T E 7 : C A S H A N D D E P O S I T S 2007 2006 $000 $000

General Account 269 585

Call Account 1,901 1,899

T O T A L 2,170 2,484

N O T E 8 : A C C O U N T S R E C E I V A B L E 2007 2006 $000 $000

Trade Receivables 3,508 3,010

Related Party Receivables 10 1

T O T A L 3,518 3,011

Movements in the provision for impairment of receivables are as follows:

Opening Balance - -

Additional Provisions made during the Year 72 -

Receivables Written Off during Period - -

A T 3 0 J U N E 72 -

N O T E 9 : I N V E N T O R I E S 2007 2006 $000 $000

Opening balance 363 436

Purchases 365 57

Expensed (334) (130)

C L O S I N G B A L A N C E 394 363

No inventories are pledged as security for liabilities nor are any inventories subject to retention of title clauses.

N O T E 1 0 : T R A D E A N D O T H E R P A Y A B L E S 2007 2006 $000 $000

Accruals 561 498

GST Payable 181 241

Trade Payables 874 706

Related Party Payables 105 8

C L O S I N G B A L A N C E 1,721 1,453

N O T E 1 1 : P R O P E R T Y P L A N T A N D E Q U I P M E N T

Accumulated Accumulated Depreciation Current Depreciation and Current Current Year and Cost/ Impairment Carrying Year Current Year Depre- Cost/ Impairment Carrying Revaluation Charges Amount Additions/ Year Impairment ciation Revaluation Revaluation Charges Amount 30/06/06 30/06/06 30/06/06 Transfers Disposals Charges Charges Surplus 30/06/07 30/06/07 30/06/072 0 0 7 $000 $000 $000 $000 $000 $000 $000 $000 $000 $000 $000

Mobile Plant 17,405 (8,692) 8,713 678 (139) - (950) - 17,304 (9,002) 8,302

Floating Plant 5,338 (3,037) 2,301 0 - - (303) - 5,338 (3,340) 1,998

Wharves & Berths 18,620 (887) 17,733 0 (502) - (889) - 18,103 (1,761) 16,342

Wharves Leased 2,633 (167) 2,466 0 - - (167) - 2,633 (334) 2,299

Plant, Furniture & Fittings 8,044 (4,049) 3,995 1,111 (12) - (602) - 9,113 (4,621) 4,492

IT Equipment 1,492 (1,133) 359 51 - - (134) - 1,543 (1,267) 276

Hardstanding & Roadways 4,970 (755) 4,215 765 - - (118) - 5,736 (874) 4,862

Dredging 2,089 - 2,089 0 - - - - 2,089 - 2,089

Buildings 8,486 (240) 8,246 272 - - (166) (484) 8,273 (405) 7,868

Buildings Leased 2,625 (91) 2,534 419 - - (84) - 3,045 (176) 2,869

Land Reclamation 1,443 - 1,443 (1,443) - - - - - - -

Land 43,913 - 43,913 917 - - - 1,068 45,898 - 45,898

Land Leased 36,946 - 36,946 1,074 - - - 1,570 39,590 - 39,590

Work in Progress 674 - 674 401 - - - - 1,075 - 1,075

154,678 (19,051) 135,627 4,245 (653) - (3,413) 2,154 159,740 (21,780) 137,960

During the year the Company received title to the reclaimed land and revalued it in accordance with the Company’s Accounting Policies 2006.

3 2

N O T E S T O T H E A C C O U N T S

3 3

N O T E S T O T H E A C C O U N T S

Accumulated Accumulated Depreciation Current Depreciation and Current Current Year and Cost/ Impairment Carrying Year Current Year Depre- Cost/ Impairment Carrying Revaluation Charges Amount Additions/ Year Impairment ciation Revaluation Revaluation Charges Amount 30/06/05 30/06/05 30/06/05 Transfers Disposals Charges Charges Surplus 30/06/06 30/06/06 30/06/062 0 0 6 $000 $000 $000 $000 $000 $000 $000 $000 $000 $000 $000

Mobile Plant 17,605 (7,770) 9,835 70 (6) (194) (992) - 17,405 (8,692) 8,713

Floating Plant 4,978 (2,795) 2,183 417 (8) - (291) - 5,338 (3,037) 2,301

Wharves & Berths 15,849 - 15,849 2,765 - - (881) - 18,620 (887) 17,733

Wharves Leased 2,591 - 2,591 42 - - (167) - 2,633 (167) 2,466

Plant, Furniture & Fittings 7,806 (3,509) 4,297 275 - - (577) - 8,044 (4,049) 3,995

IT Equipment 1,356 (970) 386 136 - - (163) - 1,492 (1,133) 359

Hardstanding & Roadways 4,847 (648) 4,199 123 - - (107) - 4,970 (755) 4,215

Dredging 2,092 - 2,092 (3) - - - - 2,089 - 2,089

Buildings 7,218 - 7,218 1,238 - - (210) - 8,486 (240) 8,246

Buildings Leased 2,285 - 2,285 341 - - (92) - 2,625 (91) 2,534

Land Reclamation 1,443 - 1,443 - - - - - 1,443 - 1,443

Land 43,881 - 43,881 32 - - - - 43,913 - 43,913

Land Leased 36,439 - 36,439 507 - - - - 36,946 - 36,946

Work in Progress 2,340 - 2,340 (1,666) - - - - 674 - 674

150,730 (15,692) 135,038 4,277 (14) (194) (3,480) - 154,678 (19,051) 135,627

Note: All assets are held primarily for the operating of port facilities.

Wharves and Buildings were valued as at 1 July 2005. The financial effect of the revaluations was that depreciation charges for the financial year

were increased by $416,449.

N O T E 1 2 : I N T A N G I B L E A S S E T S

2 0 0 7 Accumulated Accumulated Amortisation Current Amortisation and Current Current Year and Impairment Carrying Year Current Year Amort- Impairment Carrying Cost Charges Amount Additions/ Year Impairment isation Cost Charges Amount 30/06/06 30/06/06 30/06/06 Transfers Disposals Charges Charges 30/06/07 30/06/07 30/06/07 $000 $000 $000 $000 $000 $000 $000 $000 $000 $000

Software 1,951 (1,242) 709 258 - - (225) 2,209 (1,467) 742

1,951 (1,242) 709 258 - - (225) 2,209 (1,467) 742

2 0 0 6 Accumulated Accumulated Amortisation Current Amortisation and Current Current Year and Impairment Carrying Year Current Year Amort- Impairment Carrying Cost Charges Amount Additions/ Year Impairment isation Cost Charges Amount 30/06/05 30/06/05 30/06/05 Transfers Disposals Charges Charges 30/06/06 30/06/06 30/06/06 $000 $000 $000 $000 $000 $000 $000 $000 $000 $000

Software 1,681 (986) 695 270 - - (256) 1,951 (1,242) 709

1,681 (986) 695 270 - - (256) 1,951 (1,242) 709

All Intangible Assets are externally generated.

3 4

N O T E S T O T H E A C C O U N T S

N O T E 1 3 : F I N A N C I A L I N S T R U M E N T S

Financial Risk Management Objectives

Port Nelson does not enter into or trade financial instruments, including derivative financial instruments for speculative purposes. Treasury

functions are governed by a Treasury Policy approved by the Board of Directors. Approved instruments include:

• Forward rate agreements • Interest rate swaps

• Options on a swap • Interest rate options

• Interest rate collars • Spot and forward foreign exchange

Fixed rate hedging parameters are as follows:

Term Minimum Fixed Rate Amount Maximum Fixed Rate Amount

Less than 1 year 0% 100%

1 year to 4 years 30% 70%

5 years to 10 years 0% 50%

Maximum Credit Risk Exposure

Port Nelson is exposed to credit risk from the possibility of counter parties failing to perform their obligations.

Credit risk exposure on financial assets other than cash at bank and at call has been recognised in the balance sheet net of any provision for

doubtful debts. Principally any risk is in respect of cash and bank, and accounts receivable.

The major components of debtor exposure are to shipping companies and forestry exporters. Terms of trade are either payment on the 20th of

the month following or 7 working days. The majority of debtors are major international companies with extensive histories of payment. There

are no major concentrations of credit risk with respect to accounts receivable and any single debtor.

Maximum exposures to credit risk at balance date are: 2007 2006 $000 $000

Bank 269 585

Short Term Deposits @ 7.25% 1,901 1,899

Receivables 3,518 3,011

The above maximum exposures are net of any recognised provision for losses on these financial instruments. No collateral is held on the above accounts.

The Directors do not consider there is any significant exposure to interest rate risk on its investments.

Interest Rate Risk

Under interest rate swap contracts, Port Nelson agrees to exchange the difference between fixed and floating rate interest amounts calculated

on agreed, notional principal amounts thus allowing Port Nelson to mitigate the risk of changing interest rates on debt held.

Swaps expiring within 12 months are treated as core debt and will be replaced with another approved instrument.

The following table details the notional principle amounts and remaining terms of interest rate swap contracts outstanding as at reporting date.

Notional Amount Fair Value Interest 0 to 1 1 to 2 2 to 3 3 to 4 9 to 10

($000’s) gain/(loss) rate %* year years years years years

2 0 0 7 ( A T B A L A N C E D A T E )

$12,000 Swap 96 7.49 12,000 - - - -

$3,000 Swap 70 6.98 - 3,000 - - -

$4,000 Swap 178 6.75 - - - 4,000 -

$5,000 Swap 256 6.55 - - - 5,000 -

$3,000 Swap 367 6.49 - - - - 3,000

$27,000 967 - 12,000 3,000 - 9,000 3,000

2 0 0 7 ( P O S T B A L A N C E D A T E )

$7,000 Swap 17 7.91 - 7,000 - - -

$9,000 Swap 306 6.19 - - - - 9,000

$16,000 323 - - 7,000 - - 9,000

2 0 0 7 T O T A L 1,290 - 12,000 10,000 - 9,000 12,000

2 0 0 6 T O T A L 78 - 6,000 - - 4,000 5,000

*Interest rate is exclusive of margin and line of credit fee.

3 5

N O T E S T O T H E A C C O U N T S

All interest rate options and interest swap options are on 90 day roll-over terms.

The following table summarises the Port Nelson exposure to interest rate risk as at 30 June 2007.

2 0 0 7 (000’s) Weighted Fixed Maturity Dates Average NonFinancial Effective Floating 0 to 1 1 to 2 3 to 4 9 to 10 Interest Instruments Interest Rate Interest Year Years Years Years Bearing Total

A S S E T S

Cash 7.94 % 2,170 - - - - - 2,170

Receivables - - - - - - 3,518 3,518

T O T A L - 2,170 - - - - 3,518 5,688

L I A B I L I T I E S

Borrowings 7.87 % 15,000 12,000 3,000 9,000 3,000 - 42,000

Payables - - - - - - 1,721 1,721

T O T A L - 15,000 12,000 3,000 9,000 3,000 1,721 43,721

2 0 0 6 (000’s) Weighted Fixed Maturity Dates Average NonFinancial Effective Floating 0 to 1 1 to 2 3 to 4 9 to 10 Interest Instruments Interest Rate Interest Year Years Years Years Bearing Total

A S S E T S

Cash 7.0 % 2,484 - - - - - 2,484

Receivables - - - - - - 3,011 3,011

T O T A L - 2,484 - - - - 3,011 5,495

L I A B I L I T I E S

Borrowings 7.37 % 4,000 6,000 - - 4,000 5,000 - 19,000

Payables - - - - - - 1,453 1,453

T O T A L - 4,000 6,000 - - 4,000 5,000 1,453 20,453

Fair Values

Cash at bank and at call are valued as the amount of the deposit or the purchase of the underlying security.

Receivables are carried at the nominal amount due, less any provision for doubtful debts which represents the assessed credit risk.

Liability to trade creditors is recognised on receipt of goods and services at nominal value. Payment would normally occur within 30 days.

The following table details the fair value comparison of the long term borrowings as at 30 June 2007.

Carrying Value Fair Value 2007 2006 2007 2006 $000 $000 $000 $000F I N A N C I A L L I A B I L I T I E S

Term Debt 42,000 19,000 42,000 19,000

Fair Value Movement (1,290) (129)

T O T A L F I N A N C I A L L I A B I L I T I E S 42,000 19,000 40,710 18,871

Currency Risk

Port Nelson has no currency risk. (2006 Port Nelson had no currency risk).

N O T E 1 4 : T E R M L O A N

The Company has financing arrangements with Westpac Banking Corporation. The total facility is $57,000,000 for a term of 5 years. (2006:

$31,000,000 for a term of 5 years)

Security for the multi option credit facility is by a first and exclusive debenture charge over the assets and undertakings of the Company.

3 6

N O T E S T O T H E A C C O U N T S

N O T E 1 4 : T E R M L O A N ( . . . c o n t i n u e d )

Interest Rate Contracts:

The notional principal amounts of interest rate contracts outstanding at 30 June are as follows:

1. $12,000,000 for 1 year @ 7.49% p.a. terminating 30 May 2008.

2. $3,000,000 for 2 years @ 6.98% p.a. terminating 29 May 2009.

3. $4,000,000 for 4 years @ 6.75% p.a. terminating 31 May 2011.

4. $5,000,000 for 4 years @ 6.55% p.a. terminating 31 May 2011.

5. $3,000,000 for 9 years @ 6.49% p.a. terminating 30 November 2016.

6. $15,000,000 at floating interest rate.

Swaps expiring within 12 months are treated as core debt and will be replaced with another approved instrument.

N O T E 1 5 : C O M M I T M E N T S

The following expenditure was contracted for at balance date but not provided for:

2007 2006 $000 $000

Capital Development 197 238

N O T E 1 6 : O P E R A T I N G L E A S E S

Non-cancellable operating leases as lessee

2007 2006 $000 $000

Not later than one year 3 -

Later than one year and not later than five years 46 49

T O T A L N O N - C A N C E L L A B L E O P E R A T I N G L E A S E S 49 49

N O T E 1 7 : E M P L O Y E E B E N E F I T L I A B I L I T I E S

2007 2006 $000 $000

Accrued Pay 282 421

Annual Leave 593 581

Long Service Leave 88 89

Retirement Gratuities 125 113

Other Benefits 205 48

T O T A L E M P L O Y E E B E N E F I T L I A B I L I T I E S 1,293 1,252

Comprising:

Current 1,103 1,050

Non-current 190 202

T O T A L E M P L O Y E E B E N E F I T L I A B I L I T I E S 1,293 1,252

N O T E 1 8 : C O N T I N G E N T A S S E T S & L I A B I L I T I E S

2007

The Noise Variation has been notified by the Nelson City Council with effect. Over the next 6 months it is expected that remedial noise mitigation

work will be required.

2006

There may be a potential liability in the future with respect to noise mitigation costs of residential housing to comply with the proposed noise

variation (yet to be notified) to the Nelson City Council Resource Management Plan. Given the status of current hearings it is not possible to

reliably estimate the liability.

3 7

N O T E S T O T H E A C C O U N T S

N O T E 1 9 : R E L A T E D P A R T Y D I S C L O S U R E 2007 2006 $000 $000Nelson City Council

Services Provided by Port Nelson 41 13

Services Provided to Port Nelson 485 266

Accounts Payable by Port Nelson 104 1

Accounts Receivable by Port Nelson 10 1

*Dividends Paid by Port Nelson 1,850 2,500

Share Buy Back by Port Nelson 12,500 -

Tasman District Council

*Dividends paid by Port Nelson 1,850 2,500

Share buy back by Port Nelson 12,500 -

Nelmac

Services Provided to Port Nelson 21 18

Accounts Payable by Port Nelson 1 -

* Net of imputation credits

Nelmac

Nelmac is 100% owned by Nelson City Council and is therefore a related party.

All Related Parties

There were no nil or nominal value transactions between the Company and related parties (2006 nil).

No inter entity debt has been forgiven or written off (2006 nil).

Directors

Mr A O Patterson is a Director of Cold Storage Nelson Ltd that leases land from the Company. The amount received from Cold Storage Nelson Ltd

was $408,745 for the year, and $NIL was receivable at year end (2006 $315,304). The amount paid to Cold Storage Nelson Ltd was $1,871 for the

year, and $NIL was payable at year end (2006 $99).

Mr P M Schuyt is a Director of ECN Ltd from which the Company purchased EDI services. Payments for the year to 30 June totalled $5,067.

(2006 $4,458) The Company owed $400 as at 30 June (2006 $210). Mr P M Schuyt is a Director of Express Couriers Ltd from which the Company

purchased courier services. Payments for the year to 30 June totalled $1,503 (2006 $1,738). The Company owed $71 as at 30 June (2006 $127).

Mr P M Schuyt is also an employee of New Zealand Post Ltd. The amount paid to New Zealand Post Ltd was $6,722 for the year, and $425 was

payable at year end.

Key Management Personnel

Details of compensation paid to key management personnel during the financial year:

2007 2006 $000 $000

Total remuneration to Key Management Personnel 1,136 1,283

Termination Benefits - 61

T O T A L 1,136 1,344

N O T E 2 0 : F I N A N C I A L R E P O R T I N G B Y S E G M E N T S

Port Nelson operates in one industry and one geographical segment providing and managing port facilities, marine services, cargo handling

operations, and investment properties at the port of Nelson.

3 8

N O T E S T O T H E A C C O U N T S

N O T E 2 1 : I M P U T A T I O N C R E D I T S

Imputation Credits Available to Shareholders: 2007 2006 $000 $000

Opening Balance 9,338 8,491

Tax Paid 3,176 3,310

Credits Attached to Dividends Paid (1,822) (2,463)

C L O S I N G B A L A N C E 10,692 9,338

N O T E 2 2 : E V E N T S O C C U R R I N G A F T E R B A L A N C E D A T E

Subsequent to balance date Port Nelson entered into an agreement to purchase a number of properties and divest a number of other properties

with a single counterparty. This transaction resulted in the company obtaining freehold title to a number of strategic properties while divesting

a number of non strategic properties. Settlement was 31 July 2007.

The net effect of this transaction was that Port Nelson acquired an additional $2,887,000 of non current assets.

N O T E 2 3 : R E C O N C I L I A T I O N B E T W E E N N Z I F R S A N D N Z G A A P A S A T 3 0 J U N E 2 0 0 6

Effect of Previous transition to NZGAAP NZIFRS NZIFRS Notes $000 $000 $000

C U R R E N T A S S E T S

Cash and Cash Equivalents 2,484 - 2,484

Receivables 3,011 - 3,011

Inventory 363 - 363

Prepayments 343 - 343

Tax Refund 32 - 32

Hedging Assets a - 78 78

6,233 78 6,311

L E S S C U R R E N T L I A B I L I T I E S

Bank

Accounts Payable 1,453 - 1,453

Employee Entitlements 1,050 - 1,050

Provision for Dividend 2,700 - 2,700

Hedging Liability - - -

5,203 - 5,203

W O R K I N G C A P I T A L 1,030 78 1,108

N O N C U R R E N T A S S E T S

Property, Plant and Equipment b 136,336 (709) 135,627

Investment Property 13,983 - 13,983

Intangible Assets b - 709 709

150,319 - 150,319N O N C U R R E N T L I A B I L I T I E S

Employee Entitlements 202 - 202

Deferred Tax Liability c 3,663 157 3,820

Term Loan 19,000 - 19,000

22,865 157 23,022

T O T A L N E T A S S E T S 128,484 (79) 128,405

E Q U I T Y

Issued Capital 31,046 - 31,046

Retained Earnings d 18,469 10,566 29,035

Proposed Dividend Reserve - - -

Asset Revaluation Reserve e 78,969 (10,697) 68,272

Hedging Reserve a - 52 52

T O T A L E Q U I T Y 128,484 (79) 128,405

3 9

N O T E S T O T H E A C C O U N T S

N o t e s t o t h e R e c o n c i l i a t i o n s 3 0 J u n e 2 0 0 6

(a) Hedging Liability

Port Nelson qualifies for treatment of its financial derivatives as Cash Flow Hedges per NZ IAS 39. At 30 June 2006 Port Nelson had a $78,000

Hedging Asset.

Effect of movement: Effect of Previous transition to NZGAAP NZIFRS NZIFRS $000 $000 $000

Hedging Asset - 78 78

Deferred Tax Liability - (26) (26)

Hedging Reserve - 52 52

(b) Intangibles

The effect of the reclassifications as at 30 June 2006 are as below. Effect of transition to Previous NZIFRS NZGAAP Reclassification NZIFRS30 June 2006 $000 $000 $000

I N T A N G I B L E S 709 (709) -

Software (Intangibles) 709 (709) -

Intangibles in the nature of software amounting to $709,000 have been reclassified as Intangibles.

(c) Deferred Tax Liability $000

Opening 3,663

Reversal of existing NZ GAAP (3,663)

3 0 J U N E 2 0 0 6 N Z I F R S L I A B I L I T Y 3,820

Consisting of:

Deferred Tax Asset (805)

Deferred Tax Liability 4,625

3 0 J U N E 2 0 0 6 N Z I F R S L I A B I L I T Y 3,820

At 30 June 2006 a temporary difference of $12,602,000 existed between the total tax base value of depreciable assets and the total carrying value of the same assets. A Deferred Tax Liability of $4,625,000 in relation to the temporary difference between the value of the asset bases was established requiring an increase to the Deferred Tax Liability. Against the increase in Deferred Tax Liability, a Deferred Tax Asset of $466,000 relating to the temporary differences between tax base value of depreciable assets and the carrying value of those assets and $339,000 relating to the Employee was netted. The Deferred Tax asset of $805,000 has been netted against the Deferred Tax Liability as per NZIAS 12 (74).

(d) Retained Earnings

30 June 2006 $000

NZ GAAP 18,469

Investment Property revaluation 1/7/05 5,469

Transfer of balance previously attributable to Investment Property from Revaluation Reserve 5,763

Transfer from Revaluation Reserve of debit balances relating to individual assets previously netted off on a class basis (1,109)

Reversal of existing NZ GAAP Deferred Tax Liability balance at Transition 1,259

Deferred Tax Liability adjustment on differing tax bases as at 1 July 2005 excluding revaluations (1,319)

Reversal of Investment Property revaluation at 30 June 2006 previously transferred to Revaluation Reserve 712

NZ IFRS transition adjusting entry (209)

3 0 J U N E 2 0 0 6 N Z I F R S R E T A I N E D E A R N I N G S 29,035

4 0

N O T E S T O T H E A C C O U N T S

N O T E 2 3 : R E C O N C I L I A T I O N B E T W E E N N Z I F R S A N D N Z G A A P A S A T 3 0 J U N E 2 0 0 6 ( . . . c o n t )

(e) Asset Revaluation Reserve Effect of transition Effect of transition Previous to NZIFRS to NZIFRS NZGAAP Reclassification Adjusting Entry NZIFRS30 June 2006 $000 $000 $000 $000

A S S E T R E V A L U A T I O N R E S E R V E 78,969 (12,015) 1,318 68,272

Consisting of: Buildings 1,144 - 780 1,924

Land 61,853 - - 61,853

Investment Property 11,944 (11,944) - -

Wharves 4,028 (71) 538 4,495

The revaluation components associated with Investment Property are more appropriately allocated to Retained Earnings as per NZIAS 40 (35).

$000

Opening 78,969

Transfer from Retained Earnings of credit balances relating to individual assets previously netted-off on a class basis 1,108

Transfer of accumulated revaluation increments for Investment Property (11,944)

Reversal of existing NZ GAAP Deferred Tax Liability balance at Transition 329

Reversal of existing NZ GAAP Deferred Tax Liability movement in 2006 year 2,217

Deferred Tax Liability adjustment on depreciable revaluations on 1 July 2005 (2,616)

IFRS transition adjusting entry 209

C L O S I N G 68,272

N O T E 2 4 : E X P L A N A T I O N O F T R A N S I T I O N T O N E W Z E A L A N D E Q U I V A L E N T S T O I F R S

A S A T T H E D A T E O F T R A N S I T I O N T O N Z I F R S : 1 J U L Y 2 0 0 5

Previous Effect of transition NZGAAP to NZIFRS NZIFRS Notes $000 $000 $000C U R R E N T A S S E T S

Cash and Cash Equivalents - - -

Trade and Other Receivables 3,666 - 3,666

Inventories 436 - 436

Prepayments 131 - 131

Tax Refund 6 - 6

4,239 - 4,239L E S S C U R R E N T L I A B I L I T I E S

Bank 17 - 17

Trade and Other Payables 1,682 - 1,682

Employee Entitlements 961 - 961

Hedging Liability a 129 129

2,660 129 2,789

W O R K I N G C A P I T A L 1,579 (129) 1,450

N O N C U R R E N T A S S E T S

Property, Plant and Equipment b 117,189 18,958 136,147

Investment Property - 13,271 13,271

Intangible Assets b - 695 695

117,189 32,924 150,113

N O N C U R R E N T L I A B I L I T I E S

Employee Entitlements 289 - 289

Deferred Tax Liability c 1,588 2,306 3,894

Term Loan 19,000 - 19,000

20,877 2,306 23,183

T O T A L N E T A S S E T S 97,891 30,489 128,380

E Q U I T Y

Issued Capital 31,046 - 31,046

Retained Earnings d 16,894 9,855 26,749

Proposed Dividend Reserve 2,400 - 2,400

Asset Revaluation Reserve e 47,551 20,721 68,272

Hedging Reserve a - (87) (87)

T O T A L E Q U I T Y 97,891 30,489 128,380

4 1

N O T E S T O T H E A C C O U N T S

N o t e s t o t h e R e c o n c i l i a t i o n s 1 J u l y 2 0 0 5

(a) Hedging Liability

Port Nelson qualifies for treatment of its financial derivatives as Cash Flow Hedges per NZ IAS 39. On transition Port Nelson had a $129,000

hedging liability.

Effect of movement: Previous Effect of Transition NZGAAP to NZIFRS NZIFRS $000 $000 $000

Deferred Tax (Asset) - (42) (42)

Hedging Liability - 129 129

Hedging Reserve - (87) (87)

(b) Revaluations

On transition, a number of reclassifications where made to Property Plant and Equipment in addition to Port Nelson revaluing its Land, Wharves

and Buildings. Previously Buildings were not revalued. The revaluation of Buildings is a policy change associated with the transition to IFRS.

Effect of Transition Effect of Transition Previous to NZIFRS to NZIFRS NZGAAP Reclassification Revaluation NZIFRS1 July 2005 $000 $000 $000 $000

P R O P E R T Y , P L A N T A N D E Q U I P M E N T 117,189 32,924 150,113

Consisting of:

Mobile Plant 9,835 - - 9,835

Floating Plant 2,183 - - 2,183

Wharves Leased 2,288 - 302 2,591

Wharves 11,467 - 4,712 16,178

Plant, Furniture and Fittings 4,296 - - 4,296

Information Technology 1,080 (695) - 385

Software (Intangibles) - 695 - 695

Hard standing and Roadways 4,198 - - 4,199

Dredging 2,093 - - 2,093

Buildings 6,336 - 1,297 7,632

Buildings Leased 2,240 - 410 2,651

Land at Cost – Reclamation 1,443 - - 1,443

Land (Revalued) 33,532 (298) 10,646 43,881

Land (Revalued) Leased 33,857 (7,504) 10,086 36,439

Investment Property - 7,802 5,469 13,271

Work in Progress 2,341 - - 2,341

Port Nelson has elected to use the revalued amounts at Transition as fair value. Land will continue to be revalued every three years and Wharves

and Buildings at five year intervals or earlier if there has been a material change in value of the assets.

Intangibles in the nature of software amounting to $695,000 at Transition have been identified. Investment Property has been classified and

revalued at Transition. The amount relating to Investment Property under previous NZ GAAP was $7,802,000 recognised on transition and

subsequently revalued.

On Transition a review was undertaken of the categorisation of all Port Nelson assets with reclassification adjustments made where deemed

appropriate between the other categories.

4 2

N O T E S T O T H E A C C O U N T S

N O T E 2 4 : E X P L A N A T I O N O F T R A N S I T I O N T O N E W Z E A L A N D E Q U I V A L E N T S T O I F R S

A S A T T H E D A T E O F T R A N S I T I O N T O N Z I F R S : 1 J U L Y 2 0 0 5 ( . . . c o n t i n u e d )

(c) Deferred Tax Liability $000

Opening 1,558

Reversal of Existing NZ GAAP (1,558)

1 J U L Y 2 0 0 5 N Z I F R S L I A B I L I T Y 3,894

Consisting of:

Deferred Tax Asset (640)

Deferred Tax Liability 4,534

1 J U L Y 2 0 0 5 N Z I F R S L I A B I L I T Y 3,894

At Transition a temporary difference of $12,893,000 existed between the total tax base value of depreciable assets and the total carrying value

of the same assets. A Deferred Tax Liability of $4,534,000 in relation to the temporary difference between the value of the asset bases was

established requiring an increase to the Deferred Tax Liability. Against the increase in Deferred Tax Liability, a Deferred Tax Asset of $279,000

relating to the temporary differences between tax base value of depreciable assets and the carrying value of those assets, $318,000 relating to

the Employee Entitlements and $43,000 relating to the Hedging Liability was netted. The Deferred Tax asset of $640,000 has been netted against

the Deferred Tax Liability as per NZIAS 12 (74).

(d) Retained Earnings $000

Opening 16,894

Investment Property revaluation 1/7/05 5,469

Transfer of balance previously attributable to Investment Property from Revaluation Reserve 5,763

Transfer from Revaluation Reserve of debit balances relating to individual assets previously netted off on a class basis (1,108)

Reversal of existing NZ GAAP Deferred Tax Liability balance at Transition 1,259

Deferred Tax Liability adjustment on differing tax bases as at 1 July 2005 excluding revaluations in (e) (1,319)

IFRS transition adjusting entry (209)

C L O S I N G 26,749

The Deferred Tax Liability balance at Transition ($1,588,000) relating to Retained Earnings amounting to $1,259,000 has been adjusted against

Retained Earnings within the Deferred Tax Liability Adjustment.

(e) Asset Revaluation Reserve $000

Opening 47,551

Revaluation of PPE 27,455

Transfer from Retained earnings of credit balances relating to individual assets previously netted-off on a class basis 1,108

Transfer of accumulated revaluation increments for Investment Property (5,763)

Reversal of existing NZ GAAP Deferred Tax Liability balance at Transition 329

Deferred Tax Liability adjustment on depreciable revaluations on 1 July 2005 (2,616)

IFRS transition adjusting entry 209

C L O S I N G 68,272

The total revaluation increase of $32,924,000 consisted of $28,562,000 relating to PP&E and $5,469,000 relating to Investment Property. The

revaluation increment required an adjustment to reflect the Deferred Tax Liability effect on the depreciable assets revalued at 1 July 2005. The

adjustments resulted in a net $20,721,000 increase to the Revaluation Reserve account.

4 2

Registered Office 10 Low Street, Port Nelson

PO Box 844, Nelson 7040

New Zealand

Tel. (03) 548 2099

Fax. (03) 546 9015

mail@portnelson.co.nz

www.portnelson.co.nz

Auditors Audit New Zealand, on behalf of the

Office of the Auditor General

Solicitors Pitt & Moore

Barristers & Solicitors

PO Box 42

Nelson 7040

J.A. Levenbach

Barrister & Solicitor

PO Box 35

Nelson 7040

Simpson Grierson

Barristers & Solicitors

PO Box 2402

Wellington 6140

Bankers Westpac Banking Corporation

PO Box 643

Nelson 7040

4 3

Board of DirectorsA.O. Patterson Chairman

T.B. King

P.V. Lough Deputy Chairman and

Chairman Remuneration Committee

P.K. Matheson

B. Monopoli

P.M. Schuyt Chairman Finance and Risk Committee

SecretaryP.J. Pittar

Executive OfficersM.J. Byrne Chief Executive Officer

K.M. Barnett Human Resources & Quality Manager

R.J. Carter Infrastructure Manager

P.N. Francois Cargo Operations Manager

P.J. Pittar Chief Commercial Officer

C.J. Shand Tasman Bay Stevedoring Manager

R.J. Skucek Maritime Operations Manager

C.E. Williams Marketing Manager

D I R E C T O R Y

Mission Statement

To operate the Company as a successful business providing cost

efficient, effective and competitive services and facilities for port

users and shippers.

To provide for the present and future needs of the Company in

ways that are sensitive to people, use resources wisely, and are in

harmony with the environment of an export port.