Nuplex Industries Limited 12 Industry Road Penrose, Auckland New Zealand P O Box 12-841, Penrose Auckland 1061 Telephone +64 9 579 2029 Facsimile +64 9 571 0542 www.nuplex.co.nz

20 September 2011

2011 Annual Report

Nuplex lodges a further copy of its 2011 Annual Report with the Exchange having corrected table headings on page 33. The table headings refer to the vesting scales for EPS and TSR tranches of Nuplex’s LTI Plan.

E James Williams Company Secretary ANNUAL REPORT 2011

organic growth in Asia

operational excellence and growth NUPLEX: in everyday products, everywhere

Our products, which protect and enhance everyday products everywhere, are manufactured across our global footprint and sold in over 80 countries.

Europe COATING RESINS

Wood Marine & Protective Automotive OEM Vehicle Refinish Metal Decorative Powder

Americas COATING RESINS

Vehicle Refinish Metal Wood Marine & Protective Decorative

Nuplex industries limited contents

AGM Notice 2 2011 Highlights 3 Our Three-Year Journey 16 NuLEAP The 2011 Annual General Meeting of 4 Chairman’s Report 17 Asian Market Expansion Nuplex will be held at 10am, Wednesday, 7 Chief Executive Officer’s Report 18 Research & Development 2 November 2011 at the Guineas Room 10 Our Business at a Glance 20 Board of Directors at the Ellerslie Event Centre 80-100, 12 Safety, Health & Environment Report 22 Our Executive Team Ascot Ave., Greenlane, East Auckland. 15 One Global Team 24 Financial Report

Asia COATING RESINS

Automotive OEM Vehicle Refinish Metal Decorative Powder

COMPOSITES

Casting Swimming Pools Marine & Leisure Sheeting

Australasia CONSTRUCTION PRODUCTS PAPER

Flooring Tissue Newspaper Packaging

COMPOSITES

Swimming Pools Marine & Leisure Infrastructure Transport

COATING AND OTHER RESINS

Metal Wood Decorative Adhesives Textiles Ink

SPECIALTIES TRADING AND AGENCY MASTERBATCH

Agriculture Mining, Oil Food & Nutrition Cosmetics & Colour and Gas Personal Care Additives Nuplex manufacturing sites

2011 ANNUAL Report 1 2011 highlights

A solid result as strong performances from our Resins operations in Europe and the Americas, as well as our Specialties segment in Australasia, highlighted the benefit of geographic diversity.

REVENUE (IN $MIL) EBITDA (IN $MIL)

11 1575 11 131 10 1460 10 139 09 1494 09 92 08 1532 08 122 07 1452 07 104

PLAN & INVEST

OPERATING PROFIT (IN $MIL) NPAT (IN $MIL)

11 68 11 67 10 71 10 64 09 24 09 17 08 53 08 48 07 38 07 26

1 3 REGIONAL SALES % REGIONAL EBITDA % 0 2 SE Y LI A F E R

NZ 11% NZ 5%

AMERICAS 9% AMERICAS 11% 2 AUSTRALIA 38% AUSTRALIA 33% 1 T N 0 E 2 M E Y L F P EUROPE EUROPE M I

26% 29%

1 T 1 S 0 E V N 2 I

Y &

F N

A L

P

ASIA 16% ASIA 22%

2 Nuplex industries limited

PLAN & INVEST

FY2010

IMPLEMENT

REA

L ISE OUR THREE‑YEAR JOURNEY underway

Taking Nuplex to its next stage of performance and gro wth

Having completed a detailed strategic review in the first half of the year, our goals, objective and strategy were set for the next three years. E RS OU Our strategy is our roadmap that will help us achieve our C goals of improved margins and sustainable growth. HE T Y E Its initiatives will propel us towards being G EG AS IN AT B T TR E a leading, independent global resins T S H E T manufacturer and the leading S G M IN AR specialty chemicals supplier in R H AM O TE U ER Australia and New Zealand. EC Z AL S OB TH PLAN & INVEST GL P E A W During this, our first year of N LE O O u GR N R the journey, through planning O D S S F & ET ON R K TI for and investing in our future, G VE AR I N I M OS I AT P S we have laid foundations T V NG G ON S O I IN TI E N RG D SI from which we will be able V IN E EA UI N M L CQ I E ET A to continue to build in the IN K C R GI TH A E coming years. W M T O F RA R O T G N S O F I O AT N ID IO L T O A S R N E O ID C S N O C

VATIVE R&D INNO 3 0 1 2 SE Y LI A F E R

2 1 T N 0 E 2 M E Y L F P M I

1 T 1 S 0 E V N 2 I

Y &

F N

A L

P

2011 ANNUAL Report 3

PLAN & INVEST

FY2010

IMPLEMENT

REA

L ISE CHAIRMAN’S REPORT

am pleased to report on Nuplex’s performance for the Dividend year ended 30 June 2011 and our progress on various Reflecting the current business portfolio and cognisant of initiatives designed to generate improved and the substantial investment program ahead in Asia, the Board sustainable returns for shareholders. I has established a policy to maintain a payout ratio in future Delivering a record net profit despite the headwinds of the years of between 55% and 65% of net profit after tax, past 12 months is testament to the hard work and subject to funding requirements for organic growth and commitment from Nuplex’s 1,600 employees. Additionally, acquisition activity. through the implementation of a number of business For the six months ended 30 June 2011, the Board has improvement initiatives, redefining the company’s strategy declared a final dividend of 11 cents per share which will and expanding our production capacity in Asia, significant be paid on 7 October 2011. Taking into account the interim progress was made in laying the foundations for future growth. dividend of 10 cents, the total dividend for the 2011 financial year is 21 cents per share representing a payout of 61% of operating performance net profit after tax. The 2011 financial year operating environment was characterised by challenging market conditions. Globally Balance Sheet and F unding raw material costs rose rapidly whilst Australia and New We remain committed to efficient capital management and Zealand experienced weak economic conditions as well as taking a conservative approach to gearing. The balance natural disasters. sheet remains strong. Current gearing, as measured by the Sales growth of 8% was underpinned by Nuplex’s net debt to net debt plus equity ratio of 12%, provides us geographic diversification and reflected both higher selling with the flexibility to fund our organic growth projects and prices implemented to recover rising raw material prices as undertake strategic, value-creating acquisitions if they arise. well as higher volumes. Subsequent to year end, we completed the renegotiation of Earnings before interest, tax, depreciation and amortisation our bank facilities. The total available facilities were reduced (EBITDA) were $130.9 million. Whilst 6% lower than in the to AUD$200 million from AUD$300 million thereby aligning record 2010 financial year, half of this decline was due to the the available funds with our planned capacity expansion higher New Zealand dollar relative to the Euro and US dollar. projects over the next three years. As they have been In addition, EBITDA was impacted by non-recurring costs negotiated at a lower interest rate, the new facilities will allow associated with a strategy review as well as the $3.6 million annual savings of approximately $4 million pre tax, assuming restructuring charge predominantly taken in relation to the current debt levels. Australasian composites’ business.

We continued our disciplined financial management NZ SECURITIES COMMISSION approach. Pleasingly, working capital as a percentage of On 23 February 2011, it was announced that the Company sales was held constant year on year whilst non‑raw material had reached a settlement with the New Zealand Securities costs per tonne were reduced by 1%. Commission in relation to the proceedings commenced in Net profit after tax was 3.6% higher at $66.5 million, a solid April 2010 and that the Commission had discontinued its result considering the more difficult operating conditions action against the directors and former directors. Early in the experienced this year when compared to the previous year. 2011 financial year, a provision of $1.8 million was taken to cover the costs of the case. However, reflecting a lower than stable returns estimated take up of the settlement compensation, the final cost in this financial year was $229,000. Total costs borne by Earnings per share were 34.2 cents, slightly higher than the the company in relation to this matter amounted to $1.5 million. 33.7 cents delivered in the previous period. Delivering stable returns to shareholders despite the more challenging SAFETY, HEALTH & ENVIRONMENT operating conditions experienced throughout the period, highlights the strength and diversity of Nuplex’s operations. Safety continues to be a key priority across all of Nuplex’s operations and we continued to make progress towards achieving our safety vision of ‘Zero Harm’.

4 Nuplex industries limited CHAIRMAN ROB AIT KEN AT Nuplex PENROSE, neW ZEALAND

Delivering a record net profit despite the headwinds of the past 12 months is testament to the hard work and commitment from Nuplex’s 1,600 employees.

Positively our safety performance this year has again BOARD update improved. Our lost time injury frequency rate (LTIFR) fell to As previously announced Michael Wynter will retire at this 1.25 injuries per million man hours from 2 in the previous year’s Annual Meeting. I would like to thank Michael for his period and our total injury frequency rate (TIFR) fell to 12.8 contribution to Nuplex over the last 13 years. Having been the from 17.6 injuries per million hours worked. Pleasingly, there Chairman of Australian Chemical Holdings, Michael joined the were no lost time injuries at 19 of our 22 manufacturing sites. Board in 1998 following its acquisition by Nuplex. Michael’s legal background and experience has been of great value to PROPOSED AUSTRALIAN CARBON TAX the Board, particularly with our numerous acquisitions and in IMPLICATIONS furthering Nuplex’s successful expansion into Asia.

In July 2011, the Australian Federal Government unveiled In September, Jeremy Maycock was appointed to the Board its plans for a carbon tax. Given our low levels of carbon as an independent, non‑executive Director. Jeremy is currently emissions, we do not expect to be directly taxed. the Chairman of AGL Energy Limited and Port of Brisbane Pty However, it is likely we will be impacted through increased Ltd and has had a distinguished career in the building and energy and transport costs, as our suppliers are directly construction industry, most recently as the CEO and impacted by the proposed changes. Our intention is to Managing Director of CSR Limited. After an extensive career recover both these costs through higher selling prices as in New Zealand, Jeremy has held a number of senior well as minimise their impact through the continuation of management positions with global multi-national corporations those NuLEAP initiatives focused on improving our energy and I welcome him to the Board. The Board is looking forward efficiency and reducing our transport costs. to working with Jeremy as Nuplex continues to grow and further develop as an international company.

2011 ANNUAL Report 5 Jeremy’s international management experience will further earnings per share growth over three years, and total enhance the skill set of the Board which reflects the balance shareholder returns being amongst the top performing of skills, experience and specialist knowledge required for companies listed on the New Zealand Stock Exchange. governance of a company like Nuplex.

The Board is committed to maintaining the highest standards OUR PEOPLE of corporate governance and regularly reviews its own The progress made over the past 12 months has come from performance to ensure it is meeting those standards. Please the dedication and hard work of our 1,600 employees refer to the Corporate Governance Statement on pages worldwide. On behalf of the Board, I would like to 26 to 34 for more details. congratulate and thank them for their effort and focus, in not only embracing the challenges of the difficult market OUR MEDIUM‑TERM PRIORITIES conditions but also embracing the business initiatives and changes that we are undertaking. Nuplex’s growth to date has been characterised by acquisitions – each one a critical step towards building Nuplex’s global footprint and leading market positions. LOOKING AHEAD During the year we reviewed the Company’s strategy and As we head into the 2012 financial year, we are well placed put in place various initiatives to take Nuplex to the next to continue pursuing organic growth through our focus on stage of growth and performance. operational excellence and expanding our operations in Importantly our strategy reflects the Board’s longer term emerging markets. I am confident that we have the right priorities of: strategy and people to deliver improving returns to shareholders and secure Nuplex’s position as one of • our people, their safety and engagement Australasia’s top global manufacturing companies.

• sustainable growth delivered through organic growth Global economic conditions are likely to remain uncertain in emerging markets and strategic acquisitions and volatile, making it more important than ever that our • technology leadership achieved through research and operations are as efficient and effective as they can be. development and To ensure this is the case, NuLEAP and leveraging the benefits of the revised organisational structure remain top • mitigation of key business risks. priorities for Nuplex in the coming year.

Nuplex’s strategy is clear and achievable – to be a leading We will continue to pursue sustainable growth opportunities. global resins manufacturer in selected market segments and In addition to our organic growth projects such as capacity also a specialty chemical supplier in Australasia through our expansion in emerging markets and innovative R&D, we will core competencies of innovative research and development, consider potential strategic acquisitions. Any such acquisition customer service culture and delivery of high quality would have to provide Nuplex with a significant growth profile products. This is further elaborated in the CEO’s Report. either through strengthening our market positions or providing a new technology to our portfolio. REMUNERATION

As part of its remuneration strategy, the Board continues to balance the interests of shareholders with the need to motivate and reward good performance. Executive remuneration is made up of a base salary plus the potential to earn additional payments through ‘at risk’ Rob Aitken remuneration dependent on both the short‑term and Chairman long‑term profitability of the Company. Each year, the short‑term incentives (STIs) are aligned to Nuplex’s current year safety and financial performance as well as execution of strategy. Importantly, achieving the long‑term incentives (LTIs) is based on the delivery of compound

6 Nuplex industries limited CHief executive officer’S REPORT

y first full year in the role of your Chief Executive Officer (CEO) has been a very busy and extremely rewarding period. I am Mpleased to report that by having focused on the outcomes we can influence, we have finished the year in a stronger position than where we began.

We achieved a solid financial result despite the challenging market conditions and were able to deliver stable returns to shareholders. Additionally, we also invested in and progressed a number of initiatives aimed at strengthening Nuplex including the confirmation of our strategy, improving our safety performance, implementing NuLEAP, and commencing our capacity expansion projects in Asia.

OPERATIONAL HIGHLIGHTS

RESINS

The geographic diversity of our global Resins business underpinned a solid operating performance over the past 12 months. Sales revenue was $1,273 million, up 9% on the CEO Emery Severin, prior period and driven by a combination of visiting Nuplex higher selling prices and higher volumes. bergen op zoom , EBITDA was $107 million, down 10% on the prior period. the netherlands A higher New Zealand dollar and lower volumes from our Coating resins Resins composites’ business accounted for the majority Earnings from our global coating resins of this earnings decline. operations, the largest business in our Resins segment, were steady as volume Raw materials growth was offset by the raw material cost The 2011 financial year was a period of unprecedented raw lag. In Europe, volumes returned to material cost increases in the resins industry. Pleasingly, over pre‑GFC levels, whilst the Americas 90% of these higher input cost increases were recovered experienced steady growth. Capacity-constrained Asia through higher selling prices and work continues to recover delivered steady volumes, whilst coating resins volumes in the remaining cost lag in the current financial year. Australasia were slightly positive. This cost lag is a typical occurrence in the resins industry Non‑coating resins where there is often a lag between movements in raw The decline in our Resins segment EBITDA was material costs and product selling prices. It occurs when predominantly driven by lower volumes in the Australian and either raw material costs are falling and we benefit from the New Zealand non‑coating resins operations and particularly lag of passing on the lower costs as we did last year or, in the composites business. Weak consumer demand, wet like this year, they are increasing and we incur the lag of weather, reduced infrastructure build and increased recovering those higher costs. competition from imports due to higher local currencies reduced demand for composites, paper and ink resins.

2011 ANNUAL Report 7 Whilst it is likely that market conditions will remain somewhat volatile and uncertain over the coming year, given the diversification of our products and geographies – we are in a strong position to meet these challenges.

Nuplex has long been a leading manufacturer and supplier Our action plans over the next three years will be focused of composite resins in Australia and New Zealand. on delivering: To maintain this position, a restructure of operations was • Operational excellence through: undertaken towards the end of the 2011 financial year. Our three composite brands, FGI, Nupol and NSR were – Working towards our safety vision of ‘Zero Harm’ aggregated into one strengthened group, now branded – Developing and engaging our people and Nuplex Composites. Importantly, the restructure provided the opportunity to increase our efforts to grow our existing – Improving margins through NuLEAP – our step composites presence in Vietnam and Indonesia. change program focused on improving the way we work. We also established a joint venture with a leading infrastructure contractor to acquire the Fibrelogic pipe • Profitable growth through: business – a manufacturing operation of wide diameter – Innovative products through targeted R&D fibreglass pipes used in the water and mining infrastructure sector. Nuplex will supply composite resins to the joint – Organic growth projects such as capacity expansion venture company. in Asia and other emerging markets and

SPECIALTIES – Strategic, value‑creating acquisitions to strengthen our existing operations. Selling to over 25 different industries within the Australian and New Zealand economies gives our Specialties business maKing progress a broad exposure to both economies. Sales were up 4% to $302 million and EBITDA was up 20% to $23 million. In this, the first year of our three‑year journey, we made The Specialties segment was boosted by strong sales to the investments in a number of initiatives and projects focused Food & Nutrition industry as a result of the Med‑Chem on securing the performance of our existing operations and acquisition made in the 2010 financial year. laying the foundations for future growth.

Securing our existing operations STRATEGY Safety – ‘Zero Harm’ In the first half of the year we conducted a detailed review As mentioned in the Chairman’s report, fewer people have of our strategy, from which we set our goals, objectives and been injured at work as reflected by the improvement in our action plans for the next three years. safety metrics. During the year our new global Safety, Health Our goals are to improve margins and deliver sustainable & Environment (SH&E) Policy was launched and supported growth to shareholders. by the commitment of Nuplex’s top 50 leaders. Across all our regions, we continue to focus on embedding behaviour Our objectives are to be a leading independent global based safety programs, and in Australia, New Zealand and resins manufacturer and the leading specialty chemicals Asia, additional dedicated SH&E resources were recruited. supplier in Australasia. People – One Global Team Our strategy is the road map that will get us there. We will: As part of bringing together our employees located in four • improve safety, global teamwork and employee regions, across 10 countries, over 22 manufacturing sites engagement to work as One Global Team, we implemented a number of initiatives. During the year we held our first global • improve our operational performance management conference in Shanghai, China, conducted an • pursue leading niche positions in four global product employee survey and launched an internal communications segments in performance and water borne coatings as program across the group. well as composite and powder resins Additionally, we reinforced the One Global Team approach • invest and grow organically in emerging markets and in our Executive Team by flattening structure and including a representative from each of our four regions on the team. • consider value-creating bolt-on and strategic acquisitions.

8 Nuplex industries limited 2 0 1 2 Y F R&D

Organic growth

NuLEAP

One Global Team

1 Focused on what we can control 1 Safety 0 2 Y F

Further, we aligned our structure to better support each PRIORITIES for the coming year region, and develop and deliver on our four global product Our priorities remain the implementation of those segments of water borne, performance, powder coatings performance improvement initiatives and growth projects and composites resins, as well as technology, procurement commenced in the 2011 financial year. and global key account management. FY2010 We will continue improving the performance of our existing NuLEAP – our step change program operations through our ongoing commitment to safety, the NuLEAP is focused on improving the way we work, ensuring implementation of NuLEAP initiatives and the development we are as effective and efficient as we can be. We started of our people. Additionally, we will continue to maintain the diagnostic phase in August 2010, through which 250 financial discipline through cost control, and working capital ideas were developed by employees. Those ideas identified and margin management. as ‘Quick Wins’ were implemented in early 2011, and after accounting for the identification, implementation and With our focus on the growth that we can control, we will consulting costs associated with the program, the ‘Quick continue to develop innovative products through R&D. Our Wins’ delivered over $3 million in benefits in the 2011 R&D team remains committed to the development of innovative financial year. solutions to meet our customers’ challenges and needs.

Since then we have moved onto the development and In addition to progressing our current capacity expansion implementation of longer term NuLEAP initiatives. They are projects in Vietnam and China, we will also assess additional progressing well and are expected to deliver approximately capacity expansion opportunities in faster growing, emerging $10 million in incremental benefits in the 2012 financial year. markets. As well as seeking out a new, fourth site in China, we will also consider capacity expansion opportunities in Russia Laying the foundations and India, both being countries to which we currently export. Organic growth – Asian expansion Whilst it is likely that market conditions will remain somewhat In a major milestone for Nuplex, during the year we volatile and uncertain over the coming year, given the commenced our capacity expansion projects in China and diversification of our products and geographies – we are in Vietnam. In combination, these two projects are expected to a strong position to meet these challenges. This position, double our Asian capacity within the next three years to enable combined with our commitment to delivering on our priorities us to meet the demands of these growing coatings markets. will continue to drive Nuplex towards being one of the In Vietnam, we are increasing our water borne capacity at leading independent global resins manufacturers and the our existing Ho Chi Minh site. Construction is progressing leading specialty chemicals supplier in Australasia. on time and on budget, with first production expected in the second half of the 2012 financial year.

In China, a new, third site was secured west of Shanghai, in Changshu. The appropriate permissions have been granted and planning for construction is underway. Construction is expected to begin in 2012, with commissioning in 2013. Emery Severin Chief Executive Officer Innovative R&D We have built our R&D program around renewing our product offering on a continuous basis. To ensure we are constantly coming up with innovative solutions for our customers, we have set ourselves the target of renewing 25% of our product portfolio through new and improved products every five years on a rolling basis.

Each of these above initiatives and projects is discussed in further detail in the following pages.

2011 ANNUAL Report 9 OUR BUSINESS at a glance

Resins

Our global resins segment % generates 80 of earnings

AUSTRALASIA ASIA EUROPE

2011 UP UP UP Financial Year 0.9% 12.3% 14.9% Sales $462.3M $256.3M $411.2M

EBITDA (Earnings before interest, DOWN DOWN UP tax, DEPReciation 31.6% 15.2% 10.2% and amortisation) $ 26.0M $28.4M $38.7M

Operational Coating resins: • Demand impacted • Underlying economic • Indonesia • Largely exposed to by weaker fundamentals remain – new management Northern European insights • Volume growth consumer, higher robust team in place economies lower than local currencies and refocusing expected due to and natural • Region largely operations • Volumes back to weaker economic disasters capacity constrained pre‑GFC levels activity and natural • Vietnam disasters • Restructure of • China – capacity constraint • Strong growth from composites – continues to benefit limited volume Northern European • Customers seeking underway from exposure to growth customers and lower cost products domestic industrial German automotive • Integrating three production makers Composites: brands of FGI, • Malaysia • Bergen op Zoom • Volumes were Nupol and NSR into Nuplex Composites – production for increased capacity significantly down domestic through NuLEAP ideas on prior year • Increased focus on manufacturing focused on production growth opportunities as well as export efficiencies and in SE Asia to India de‑bottlenecking – production steady

Products Coating and Paper Coating resins Composites Coating resins Main markets other resins Newsprint, tissue, Decorative, automotive Marine & leisure, Automotive OEM, Decorative, wood, packaging and fine OEM, wood, metal, sheeting, sanitary vehicle refinish, metal, adhesives, paper vehicle refinish ware, swimming decorative, metal, textiles, inks pools and powder Construction specialised casting Composites products Marine & leisure, Residential infrastructure, construction, transport, commercial fit-out construction, and industrial sanitary ware, swimming pools

10 Nuplex industries limited Specialties Group

Our specialties segment serves a broad range of industries in Australia and New Zealand

AMERICAS TOTAL AUSTRALASIA AUSTRALASIA TOTAL TOTAL RESINS & VIETNAM SPECIALTIES GROUP

UP UP UP UP 13.9% 8.8% 4.1% 7.9% $143M $1,272.8M $302.2M $1,575.0M

UP DOWN UP DOWN 7.7% 10.4% 20.2% 6.1% $14.4M $107.5M $23.4M $130.9M

• Steady volume growth • Sales to over 25 • Net profit after different industries tax attributable • Growth particularly in Australia and to shareholders from vehicle refinish New Zealand +3.6% to market, and high end $66.5m metal coatings, used • Greatest sales growth in in products such as – Food & Nutrition, • Sales growth agricultural and reflecting the full due to construction year impact of – increased equipment Med‑Chem selling prices acquisition in 2010 to recover – Agriculture higher raw material costs • Continued focus on – higher growing sales into volumes – Agriculture – Food & Nutrition • Earnings were – Mining, oil, and gas impacted by – Plastics and a stronger New packaging Zealand dollar

Coating resins Agency & Masterbatch Metal, vehicle Distribution Concentrated colour additives. refinishing, marine 28 product groups. and protective, Plastics decorative, wood Top 10 areas: Food & Nutrition, Surface Coatings, Cleaning Products, Pharmaceutical, Plastics, Cosmetic & Personal Care, Agriculture, Construction & Building, Rubber, Adhesives

2011 ANNUAL Report 11 SAFETY, health & environment

This year we continued to progress towards our safety vision of ‘Zero Harm’ to our employees, communities and the environment in which we operate.

Lost Time Injuries (LTI) Lost Time Injury Frequency Rate (LTIFR) A lost time injury is a work related injury that results in an This is the number of lost time injuries per million hours worked. employee being unable to work for at least one shift. 11 11 10 10 09 09 08 08 07 07 06 06 05 05 04 04 03 03

| 0 | 5 | 10 | 15 | 20 | 25 | 30 | 35 | 40 | 0 | 2 | 4 | 6 | 8 | 10 | 12

Injury Severity Rate (ISR) Total Reportable injury Rate (TRIR) This is the number of days lost due to LTIs per million hours worked This is the sum of LTIs, medical treatment injuries and restricted and gives the measure of the seriousness of work injuries and the work cases per million man hours worked. impact of the ‘return-to-work’ program. 11 11 10 10 09 09 08 08 07 07 06 06 05 05 04 04 03 03

| 0 | 5 | 10 | 15 | 20 | 25 | 30 | 0 | 50 | 100 | 150 | 200

Energy Consumption Rate (GJ/t) Water Consumption Rate (m3/t) This is the total consumption of energy from natural gas, petroleum This is the total water used in the process which is not harvested fuel oils and electrical power supply per tonne of product produced. and/or recycled per tonne of product produced. 11 11 10 10 09 09 08 08 07 07 06 06 05 05 04 04 03 03

| 0 | 0.5 | 1.0 | 1.5 | 2.0 | 2.5 | 3.0 | 3.5 | 0 | 0.5 | 1.0 | 1.5 | 2.0

Greenhouse Gas Emission RateS Waste Generation Rate (kg/t) (tonnes of CO2e/production tonne) This is the total waste arising from the operations and which leaves the This is the total emissions mass produced by the operations, sites for further treatment and disposal, per tonne of product produced expressed in CO2 equivalents, per tonne of product produced. 11 11 10 10 09 09 08 08 07 07 06 06 05 05

| 0 | 3 | 6 | 9 | 12 |15 | 0 | 0.05 | 0.10 | 0.15 | 0.20 | 0.25 | 0.30 | 0.35

12 Nuplex industries limited new Safety, Health & Environment • Total Injury Frequency Rate (TIFR) improved by 27% to 12.8 Policy per million hours worked from 17.6 in the previous period.

As part of confirming Nuplex’s commitment to • 19 of our 22 manufacturing sites were lost time injury (LTI) making safety a priority and delivering free with no LTI’s in our sites in Asia, Europe and America. improvements in this area, early in the 2011 financial year, A During the year under review, we had no significant process the Board Safety, Health & Environment (SHE) Committee safety incidents. This was a very pleasing result after released a new Nuplex SHE Policy. With endorsement of a number of these incidents in recent years. the Board and Nuplex Executive Team the new policy was launched at the Senior Management Conference in December ENVIRONMENT 2010. At the conference, over 50 of Nuplex’s leaders from around the world committed to embedding the importance Positively, we are able to report that in the past 12 months of safety within our business as well as implementing the there were no significant spills or releases on any of our principles of safe workplace behaviour. 22 manufacturing sites. We continue to put in place measures to reduce our Building a safe w orkplace culture environmental impact including:

The way our leaders and employees behave, think, manage • In Foshan, China we upgraded air emission control themselves and see the world, are all critical factors equipment. We also converted the hot oil system to influencing safety. Hence our approach to embedding safe natural gas from diesel thereby significantly reducing work practices at Nuplex is centred on instilling a culture carbon dioxide emissions. of safety into our operations. Aligned to this, safety is the first of the six behaviours we value at Nuplex. • In Malacca, Malaysia, our new Waste Water Treatment Plant was certified and approved by the Malaysian In starting to embed safety into the Nuplex culture, we have Department of the Environment. focused on instilling the DuPont® concept of ‘felt’ leadership – where concern for safety is genuine and meaningful in our • In Bergen op Zoom, the Netherlands, we carried out senior leaders. In the USA we also launched the DuPont sewer repairs and commenced upgrading the site People Based Safety® program, an innovative approach to containment systems. safety that strives to go beyond behaviour-based safety and • Across a number of our sites in Australia, we upgraded focuses on using human thoughts and attitudes to promote the site containment systems and improved waste safe behaviour. management and segregation practices.

Also, in Australia, New Zealand and Asia, additional • At both our US sites, a water audit identified some professional SHE resources were recruited to help managers hidden leaks which were repaired and significantly improve safety in their areas. reduced water consumption.

Carbon emissions continue to be a high focus area. Given Safety measures moving to wards our our low level of emissions, we do not expect to be directly goal of ‘Z ero Harm’ taxed under the Australian Government’s proposed carbon The above actions and the commitment of all our employees tax scheme. However, given our electricity usage, this year, to safety has resulted in record performance of our key our Australian operations were registered under the safety performance measures. In particular our: Australian National Greenhouse and Energy Reporting scheme. • Lost time injury frequency rate (LTIFR) improved by 38% over last year, falling to 1.25 injuries per million hours worked from 2 in the previous period.

2011 ANNUAL Report 13 Our lost time injury frequency rate is at a new record low

Site Contaminations Asia

During the 2011 financial year, Nuplex fully remediated one of In Foshan, China, we obtained a full Environmental Permit its Australasian sites and continued activities to clean up the from the Shunde Environmental Bureau after upgrading remaining four legacy contaminated sites. emission control equipment.

Pleasingly, the Australian site at North Clayton, in Victoria, was In Suzhou, China we continue to operate under a temporary fully remediated in accordance with Victoria Environmental Land Use Certificate pending final agreement on Protection Agency (EPA) regulations and the site returned to requirements to convert this to a permanent certificate. the owner. Groundwater monitoring will continue at the site but Our Surabaya plant in Indonesia implemented procedures to no further remedial activity is expected. fully comply with recently introduced waste storage and At Nuplex’s largest Australian production site in Botany, New disposal laws. South Wales, a remediation system to manage groundwater was installed as agreed with the NSW Department of EMEA Environment, Climate Change and Water. In the Netherlands, our Bergen op Zoom site successfully Seven Hills is a dormant Australian site in Western Sydney. The passed inspections by the Fire Department, Local Provincial majority of remediation work has been completed and provision Authority, and the Labour Inspectorate relating to has been made to allow the completion of these works that will implementation of SEVESO2 Directive relating to the control ultimately lead to the divestment of the land holding. of major accident hazards involving dangerous substances.

Remediation plans are being developed for the dormant Additionally, inspections of the plant fire protection systems Avondale site in New Zealand as well as the Cheltenham site by the authorities found some non-compliances associated in Australia. Work with remediation consultants is ongoing with system testing procedures. These have been rectified. and plans for dealing with both of these sites are expected to In the United Kingdom at our Silvertown site, we continued be formulated over the next 12 months. the ongoing trials of new wastewater discharge processes.

COMPLIANCE Americas

Nuplex continuously cooperates with regulatory authorities to During the year we conducted an extensive stormwater ensure we can remain in full compliance with local regulatory management and sampling program to demonstrate to the requirements and licensing conditions. All sites maintained local Metropolitan Sewer District (MSD) that our stormwater their operational certifications in 2010/11 and we gained the discharges meet the legislative requirements and we also required new operational licences for our new Culamix started work to upgrade our site containment systems. Masterbatch site in Long Thanh, Vietnam. The Louisville Metropolitan Air Pollution Control District Australasia issued the Louisville site with the required ‘Title V’ air discharge permit. During the year the Springvale site in Victoria was issued with a Pollution Abatement Notice (PAN) from the EPA to improve site containment. A third party assessment was conducted and remediation works are well underway. As a result the PAN has been withdrawn.

In New Zealand at our Penrose and Onehunga sites we continue to work through the regulatory processes to renew the required Air Discharge Consents from the Auckland City Council.

14 Nuplex industries limited one global team ‘chemistry behind everyday products everywhere’

OUR GLOBAL AUTOMOTIVE TEAM, WITH MEMBERS FROM ALL FOUR REGIONS

ne of Nuplex’s greatest strengths has always We manufacture and create the chemistry by: been its people. Known for their commitment • Putting safety first to finding innovative solutions to their customer’s challenges and for manufacturing high quality • Working together as One Global Team products,O each region has built this reputation using their • Valuing our customers and finding innovative products local and regional knowledge. to solve their challenges Now as a global organisation with operations spread across • Embracing diversity, integrity and entrepreneurship. Australia and New Zealand, Asia, Europe and America – we have an opportunity to combine our collective skills, leverage our regional efforts and work together as One Global Team.

A number of initiatives were undertaken to help build and foster our One Global Team approach.

One Global Team with one common purpose

Importantly we articulated and began the journey of embedding a common purpose and culture throughout the group.

As a global team, regardless of our location or activity, we One Global Team June 2011 approach reflected in are all working towards creating and delivering the ‘chemistry new Executive Team behind everyday products everywhere.’ structure

We are the chemistry because: 1 1 First edition of NuNEWS, 0 • We use scientific chemistry to formulate and manufacture our global employee newsletter our products that protect and enhance everyday 2 Y products everywhere and F

First global management • Every day we create human ‘chemistry’ across our global conference team whether it is within our teams or with our customers. Employee engagement survey June 2010

2011 ANNUAL Report 15

FY2010 NuLEAP delivering benefits 1 3 NuLEAP, our structured operational 0 improvement and excellence program, 2 gained momentum in FY2011. Y F

Our step change program Targets

• Intended to deliver a step change improvement • FY2011: $3 million of net benefits

in the way we work through from Quick Win initiatives

– increasing our efficiency • FY2012: $10 million of – improving our effectiveness incremental benefits 2 • Focused on improving sales, operations, 1 • FY2013: Over $30 million logistics and warehousing, procurement, 0 in total benefits, approximately network efficiencies and capacity 2 equivalent to 10% of FY2010 across all regions Y controllable costs F • Initiatives must not compromise safety or the environment.

Objectives

• Improve EBITDA to sales Longer term initiatives margin towards our aspirational target • Larger initiatives, requiring planning and investment ANZ initiatives of 12% • Benefits must exceed any required investment implemented within two years • Set the foundation

for structured, • Examples include: 1 ANZ initiatives continuous Procurement Forming a Chinese trading desk to 1 developed improvement 0 combine regional orders, have them purchased and culture. 2 delivered locally then shipped globally Y Sourcing in Australia and New Zealand F Increasing resources to ensure maximising cost Asia, Europe & Americas efficiency for low volume raw materials initiatives implemented Production in USA Focusing Louisville on large

commodity volume production, centralise smaller volume production in East St Louis. Asia, Europe & Americas initiatives developed

Implemented Quick Wins Quick Win initiatives

• Initiatives that could deliver benefits within months Developed Quick Wins of implementation

• Delivered over $3 million in benefits after accounting 0 for costs associated with embedding the continuous Started diagnostic phase 1 improvement approach across the Group 0 • Examples include: 2 Bergen op Zoom, the Netherlands Simplified Y reactor cleaning processes F Botany, Australia Separating waste streams

Foshan, China Converting heater from diesel to gas Suzhou, China De-bottlenecked acrylic production East St Louis and Louisville, USA Waste reduction projects.

16 Nuplex industries limited ASIAN MARKET EXPANSION 1 3 0 A key element of our strategy is to invest 2 and grow organically in the faster Y growing emerging markets. F

ver the past 12 months, we made significant Vietnam progress towards delivering future growth In February 2011, work began on doubling the water borne through investing in capacity expansion projects capacity at our existing Ho Chi Minh City site. Expected to in Asia, where the medium‑term economic cost USD7.5 million, construction should take about Ogrowth outlook remains attractive. 12 months, with first production expected the second half 2 With our sites in Ho Chi Minh City in Vietnam, and Suzhou in of the 2012 financial year. 1 China, running at capacity, two projects were commenced. Nuplex is the leading producer of decorative paint resins in 0 Combined, they will approximately double our Asian capacity Vietnam. The additional capacity will be used to strengthen 2 within the next three years. Given the attractive outlook for this position as well as produce resins for metal coatings. Y these growing coatings markets, capacity is expected to F be filled within three to five years. China In addition to these two projects, work continues to find another new site in Southern China. In China, a new and third site has been secured in

Changshu, west of Shanghai. Expected to cost USD35 million in total, the permitting and design phase for

the new site is well underway. Construction is expected to commence in 2012 with first production to occur approximately 12 months later. ANZ initiatives implemented This site will be our first Chinese site to have the capability to produce water borne resins. This capability will open up new 1 ANZ initiatives coatings and non‑coatings markets in automotive, metal, 1 developed wood, textiles, inks and construction applications. 0 2 Y F Asia, Europe & Americas

initiatives implemented

Asia, Europe & Americas initiatives developed

Implemented Quick Wins

Developed Quick Wins

0 1 Started diagnostic phase

0

2

Y TOP: CONSTRUCTION CONTINUES F AT OUR HO CHI MINH CITY SITE;

LEFT: 3D VISUALISATION OF OUR

Changshu PLANT

2011 ANNUAL Report 17 RESEARCH & DEVELOPMENT

Providing our customers with innovative products, that meet their challenges and needs, is central to our value proposition.

o be able to provide innovative products to our PURSUING TARGETED INNOVATION customers and thus maintain our market‑leading It is critical that our R&D activities are deliberately selected in positions, we remain committed to investing in areas which will continue to strengthen our existing product research and development (R&D). T portfolio. OUR APPROACH The four product segments in which we will pursue leading niche positions have been selected because we already have Each year we invest approximately $30 million in R&D. This strong market positions on which we can build and are also equates to between 2% and 3% of our Resins segment sales growth markets. They are: revenue and is inline with what our peers within the coatings industry spend. Our R&D activities enable us to offer our customers higher value products that improve their products’ • Performance coatings such as performance, speed up their productivity and help them meet Automotive OEM, vehicle refinish, tightening environmental legislation. protective and high end metal coatings OUR GLOBAL R&D TEAM

Around 10% of Nuplex’s workforce is employed in our R&D activities worldwide. At the heart of our global R&D network is our innovation centre in Wageningen in the • Water borne coatings such as Netherlands. Attached to the University of Wageningen, decorative, wood, metal, here we carry out long-term research in colloid science, adhesives, textile and paper paper technology and bio-based chemistries. coatings

New product development predominantly occurs at our four development centres located in Bergen op Zoom in the Netherlands, Louisville in the United States, Sydney, Australia and Auckland, New Zealand. We also have technical facilities • Composite resins for use in in Indonesia, Malaysia, Vietnam and China. boating and leisure products, In addition to developing innovative products, our R&D pipes, tanks and wind turbines network enables the provision of application support to our customers, long after they have taken delivery of our products. Through our development centres and technical facilities, this ongoing support is an important element of our competitive advantage in servicing our customers. • Powder coatings such as metal coatings 10% of Nuplex’s workforce is engaged in R&D

18 Nuplex industries limited CASE STUDY

Increasing ‘open time’ Setaqua 6250TM is a newly developed resin for increasing the open time of brush and roller applied decorative, joinery and exterior / interior wood coatings.

Open time refers to the length of time that paint can be retouched after initial application and not show evidence CASE STUDY of the touch up. Usually, water borne paints only have a short ‘open time’ in which they can be retouched without A ‘Strong’ SCA leaving brush marks. ‘Strong’ SCAs (Sag Control Agents) are resin additives Together, the R&D teams in Bergen op Zoom and the that enable the coating to evenly cover sharp metal rims Innovation Centre developed the leading and edges. edge technology used in Setaqua 6250TM Sharp rims and edges are notorious spots on articles for – which increases the length of the paint application. The wet paint tends to avoid these sharp ‘open time’ while still maintaining its edges resulting in thinner coverage of the area and then quick dry time. Being able to retouch as it leaves the edge, any excess paint can cause sagging the paint for a longer period of time on more vertical surfaces. Additionally, having a thin layer means it is easier to use and improves of coating reduces the corrosion protection provided by its final appearance.  the coating.

To help paint makers and applicators address these issues, Nuplex developed a new SCA. Nuplex is a global leader in SCAs, which, when used in a coating, allow it to be applied on vertical surfaces without it sagging as it is cured. Strong SCAs enable the coating to evenly cover sharp edges, improving their appearance and reducing the risk of corrosion on those edges. 

2011 ANNUAL Report 19 BOARD OF DIRECTORS

Left to right: DAVID JAC KSON, BARBARA GIBSON, ROB AIT KEN, Peter Springford, Emery Severin and MICHAEL W YNTER at nuplex penrose , new zealand

ROB AITKEN Emery severin Chairman and Independent Director, based in Sydney, Managing Director and Chief Executive Officer, Australia based in Sydney, Australia Joined the Board in July 2006, and became Chairman in Joined the Board as Managing Director and Chief Executive November 2008. Rob has over 25 years’ experience in in April 2010. Between 1977 and 1986 Emery was an officer senior management roles with manufacturing, industrial in the Australian Regular Army and during this period marketing and distribution businesses in Australia, Asia, completed a BSc. (Hons) in Chemistry and was also North America and Europe. Most recently this has been as awarded a Rhodes Scholarship achieving a D. Phil in Executive General Manager Southcorp Water Heaters and physical chemistry at Oxford University. Emery joined BHP Southcorp Appliances and prior to that as President Formica Steel in 1986 holding a range of line management positions Corporation. He is a non-executive Director of Rubicor in Australia and SE Asia. In 1996 he joined Boral Limited. Group Limited and Alesco Corporation Limited. Rob is an From 1999 to 2004 he was Executive General Manager of ex officio member of the Audit, Remuneration, SHE and Boral’s Australian Construction Materials division, and in Nomination Committee. 2004 was appointed as President, Boral Industries Inc. USA, based in Atlanta, Georgia focusing on building Boral’s USA operations through green field developments and acquisitions. In 2007, Emery completed the Advanced Management Program at the Harvard Business School. Emery returned to Australia in 2010 to take up his new role at Nuplex.

20 Nuplex industries limited BARBARA GIBSON MICHAEL W YNTER Independent Director, based in Melbourne, Australia Independent Director, based in Sydney, Australia Joined the Board in September 2008. Barbara is a former Joined the Board in April 1998. Michael is a consultant for senior executive with Orica Limited (previously ICI Australia). the Australian legal partnership of McCullough Robertson. Her last position was as Group General Manager, Chemicals He has broad experience in Australia, Japan and South East Group. She has extensive experience in the development of Asia and was involved in negotiations for the establishment technology‑based businesses in Australia and overseas. of our Vietnam plant. He was a Director of Australian Barbara is a non-executive director of Graincorp Limited, Chemical Holdings from 1993 and Chairman from 1995 until and Chairman of Warakirri Asset Management Pty Ltd. In its acquisition by Nuplex in 1998. He is one of the trustees of 2003 Barbara received the Centenary Medal for services to the Mitsui Education Foundation in Australia. Michael is a Australian Society in Medical Technology. She is a member member of the Remuneration Committee. of the Australian Academy of Technological Sciences and Engineering. Barbara is the Chairman of the Remuneration Committee and a member of the SHE Committee. Jeremy Maycock Independent Director, based in Brisbane, Australia Joined the Board in September 2011, Jeremy holds a Bachelor DAVID JACKSON of Engineering in Mechanical Engineering and has over Independent Director, based in Auckland, New Zealand 30 years’ experience in senior management roles with Joined the Board in November 2006. David is a former responsibility for Southern ASEAN, Australian and Pacific Chairman and Audit Partner of Ernst & Young. He is an Companies. Most recently he was Managing Director and Independent Director of Pumpkin Patch Limited and Fonterra Chief Executive Officer of CSR Limited. He is currently Cooperative Group Limited, and Chairman of The New Zealand Chairman of AGL Energy Limited and Port of Brisbane Pty Ltd. Refining Company Limited. He is Chairman of the Dame Jeremy is a Fellow of the Institute of Professional Engineers Malvina Major Foundation, and a trustee of the New Zealand in New Zealand and a Fellow of the Australian Institute of National Maritime Museum. In 1994 David was awarded a Company Directors. He is also on the Advisory Council Fellowship of the New Zealand Institute of Chartered of the Australian School of Business at the University of Accountants. David is Chairman of the Audit Committee. New South Wales.

Peter Springford Independent Director, based in Auckland, New Zealand Joined the Board in September 2009. Peter spent 30 years in the forest and building products industries. He is currently an independent director of The New Zealand Refining Company Ltd, Creating Tracks NZ Limited, NZ Wood Products Ltd and NZ Frost Fans Ltd, and a director of other industrial companies based in New Zealand. He is a trustee of the Graeme Dingle Foundation. Peter is the Chairman of the SHE Committee and a member of the Audit Committee.

2011 ANNUAL Report 21 Our executive team

Emery severin CLIVE DEeTLEFS Managing Director and Chief Executive Officer, Group General Manager Operations, based in Sydney, based in Sydney, Australia Australia Please see details on page 20 Clive joined Nuplex in 2010. Clive is a Chartered Professional Chemical Engineer and also has a Bachelor’s Degree in Ian Davis Accounting / Business Economics. In addition he is a Certified Chief Financial Officer, based in Sydney, Australia Six Sigma Master Black Belt. He has 23 years’ experience Ian joined Nuplex in 2009 as Chief Financial Officer. in senior manufacturing roles including process and project A Chartered Accountant, Ian has over 30 years’ experience engineering, multi-plant operational management, and regional in public accounting and senior financial roles in commerce. supply chain operations. He has global experience, having The commercial roles have predominantly been in worked in South Africa, the UK, the Netherlands, the United manufacturing and include experience in Australia, New States, Asia, as well as Australia. Prior to joining Nuplex, Clive Zealand, China and the United States. Prior to joining Nuplex, was the Global Six Sigma and Lean Manufacturing Lead for Ian was CFO of Tenix Pty Ltd and before that, General Monsanto based in the United States. Manager Finance of Rheem Australia Pty Ltd. PAUL DAVEY James Williams Vice President, Human Resources, based in Sydney, Vice President, General Counsel & Company Australia Secretary, based in Sydney, Australia Paul joined Nuplex in 2010 as Vice President Human James joined Nuplex in 2009 in the role of General Counsel Resources. Previously Paul has held HR leadership positions & Company Secretary. James has over 25 years’ experience in multinationals such as Nestlé, Glaxo Wellcome and senior in commercial law and corporate administration, and has consulting roles within Ernst & Young and Mercer. These worked as legal counsel and company secretary in a number roles have all had regional accountability – based in Australia, of large publicly listed companies and major corporates. Switzerland, the UK and South Africa. Paul has a BA James was previously a partner in a medium-sized law firm and Post Graduate honours in Business Administration. in Sydney before leaving private practice to work in-house. James holds degrees in Commerce and Law and is a Fellow Paul Kieffer of the Institute of Chartered Secretaries in Australia. James Regional President – Europe, Middle East and Africa brings to the role at Nuplex a focus on legal and regulatory (EMEA), based in Bergen op Zoom, the Netherlands affairs, corporate governance and administration, and Paul joined Nuplex through the acquisition of Akzo Nobel regulatory risk management and compliance. Coating Resins in 2005. Paul joined Akzo Nobel in 1987 and was appointed General Manager of the European Resins Sam Bastounas operations in 2002, and held this role until his appointment Regional President – Australasia, based in Melbourne, to Regional President in 2011. Throughout his career he has Australia held a number of roles in production, sales and marketing Prior to being appointed Regional President, Australia and as well as senior management. Paul completed his studies in New Zealand in 2011, Sam had been Chief Operating Officer Mineral Processing & Metallurgy at the Technical University, for the Australasian based Functional Materials and Delft in the Netherlands. Specialties operations. He has held a number of roles with Orica and ICI in the past and spent two years in Asia HASAN SHAFI as CFO of a joint venture in the late 1990s. Sam holds a Vice President, Corporate Development and Planning, BSc (Hons) in Chemistry and an MBA, both from Monash based in Sydney, Australia University in Melbourne. In 2007 he completed the AMP Hasan joined Nuplex in 2010, in the role of Vice President at the Wharton School in the United States and in 2009 Corporate Development and Planning. Hasan has broad completed his graduate diploma at The Australian Institute experience in management consulting, R&D, engineering of Company Directors. and academia. Prior to joining Nuplex, Hasan was a Principal with A.T. Kearney, a global management consulting firm, in its Sydney office. For over ten years, Hasan consulted to clients in Australia, New Zealand, SE Asia, China and the

22 Nuplex industries limited Left to right: Clive Deetlefs, Mike kelly, Paul Davey, Ruben Mannien, Ian Davis, Paul Kieffer, Emery Severin, Sam Bastounas, Hasan Shafi, James Williams and William Weaver at NUPLEX BOTANY, AUSTRALIA

United States. Hasan has a PhD in Mechanical Engineering marketing and joined Akzo Nobel in 1996 as Director of Sales from the University of Newcastle, a BSc in Aeronautical and Marketing for North America. Mike holds a Bachelors Engineering from the Middle East Technical University in in Business Administration from the University of Illinois, Turkey and an MBAE from the Ross School of Business, and graduate MBA studies from Northwestern University. University of Michigan. William Weaver Ruben Mannien Vice President, Technology, based in Bergen op Zoom, Regional President – Asia, based in Shanghai, China the Netherlands Having joined Akzo Nobel as a member of their graduate William has been overseeing Nuplex’s global R&D activities recruitment program in 1997, Ruben joined Nuplex following since 2008, having previously been Nuplex Resins’ European the acquisition of their coating resins operations in 2005. R&D manager. He holds a BSc (Hons) Chemistry from the Prior to being appointed Regional President for Asia in 2011, University of Lancaster and a MSc in Polymer Science and Ruben was General Manager for China for three years, and Technology from the London School of Polymer Technology. before that, Director General in Vietnam for three years. Prior During his career, William’s areas of focus have spanned to moving into senior management roles in Asia, Ruben held several of Nuplex’s key product areas including powder a number of global raw material procurement roles. Ruben coatings, automotive in-mould and industrial coatings, as well has a Master of Science in Industrial Engineering and as composite resins. William joined Nuplex following its Management Science from the Eindhoven University of acquisition of Akzo Nobel’s Coating Resins operations in Technology, in the Netherlands. 2005, having joined Akzo Nobel in 1994.

Mike Kelly Regional President – Americas, based in Louisville, USA Before being appointed to Regional President, Americas in 2011, Mike had been running Nuplex’s North and South American resins operations since 2002. Mike joined Nuplex through the acquisition of Akzo Nobel’s Coating Resins operation in 2005 and has over 30 years’ experience in the coatings industry. Mike has held a variety of roles in sales and

2011 ANNUAL Report 23 FI NANCIAL Report

Contents

26 Corporate Governance 35 Auditor’s Report 36 Statements of Comprehensive Income 37 Statements of Change in Equity 38 Statements of Financial Position 39 Cash Flow Statement 40 Notes to the Financial Statements 87 Five-year Statistical Summary 88 Shareholder Information 90 Statutory Information IBC Corporate Directory

The Directors are pleased to present the Financial Statements of the Nuplex Group for the year ended 30 June 2011

Rob Aitken David Jackson Chairman Director

22 August 2011 22 August 2011

24 Nuplex industries limited FINANCIAL Report

organic growth in Asia

operational excellence and growth

2011 ANNUAL Report 25 Coo rp rate Governance

1. u Introd ction During the year under review, the Board Charter was reviewed and amended to reflect initiatives introduced by the ASX in connection Nuplex Industries Limited (Nuplex) is listed on the New with gender diversity. Zealand Stock Exchange (NZX) and the Australian Securities Exchange (ASX). 3. Role and Function of Senior Management Nuplex has adopted the following governance principles as The Board has delegated to the Managing Director, responsibility the benchmark against which it will implement its governance for the conduct of the affairs and day to day management of the principles and practices: Company. Delegation is subject to matters reserved for Board • The NZX Corporate Governance Best Practice Code approval as detailed in the Board of Directors’ Charter.

• The New Zealand Financial Markets Authority’s Governance In addition, there are 10 senior executives reporting to the Principles and Guidelines and Managing Director who have been delegated the responsibility for managing key areas of the business including: operations and • The ASX Corporate Governance Principles and production facilities, raw material purchasing, sales, marketing, Recommendations (2nd Edition). distribution, technology, research & development, financial and This report contains details of Nuplex’s corporate governance treasury management, strategic planning, human resources, legal practices. and compliance, regulatory affairs and corporate governance. The performance of the Managing Director and senior executives 2. Role and Function of Board of Directors is reviewed periodically by the Board, and by the Managing The Board of Directors (the Board) of Nuplex is elected by Director in respect of executives against appropriate measures shareholders to direct and supervise the management of the set by the Board, the Managing Director and the Remuneration Company. Committee relative to the executive’s role. The Remuneration Committee has oversight in relation to the setting of goals to be The Board establishes the strategic direction and objectives achieved by senior executives in connection with both short-term of the Company and sets the policy framework within which and long-term incentive schemes and monitors the performance the Company will operate. The Board appoints the Managing of senior executives in relation to the achievement of those goals. Director, delegates appropriate authority for the management In accordance with this process, a performance evaluation for of the Company, and monitors management’s performance senior executives has taken place during the reporting period. on a regular basis. In May, the Company announced the following management Nuplex has formally established the functions reserved to the restructure aligning the Executive Team with regional and Board. These are contained in the Board of Directors’ Charter functional accountability. The restructure became effective which is available in the Investor Relations section of the 1 July 2011. Company’s website (www.nuplex.co.nz).

Emery Severin – Managing Director & Chief Executive Officer

Regional Presidents Group Heads Sam Bastounas – Australasia Ian Davis Also responsible for Chief Financial Officer –– Global composites development Paul Davey –– Global Technology Council Chairman Vice President, Human Resources Mike Kelly – Americas Clive Deetlefs Also responsible for Group General Manager, Operations –– Global performance coatings development –G– lobal Key Accounts Hasan Shafi Vice President, Corporate Development and Planning Paul Kieffer – Europe, the Middle East & Africa Also responsible for William Weaver –– Global powder coatings development Vice President, Technology –– Global Procurement Council Chairman James Williams Ruben Mannien – Asia Vice President, General Counsel & Company Secretary Also responsible for –– Global water borne products development

26 Nuplex industries limited 4.or B a d Structure 5.or B a d Committees The Board is comprised of a majority of five non-executive The Board has the following standing committees. The Chairman, Directors, all of whom are independent Directors. The Managing Rob Aitken, is an ex officio member of all Board committees. Director, Emery Severin is the only executive Director. Non- executive Directors are selected to ensure that a broad range of Nomination Committee skills and experience is available. Mr Rob Aitken is the current The Board’s practice has been that the full Board constitutes the Chairman. Nuplex has appointed an additional independent Nomination Committee. From time to time the Board establishes Director, Mr Jeremy Maycock, whose appointment takes effect on a sub-committee to carry out the responsibilities of the 1 September 2011, to replace Mr Michael Wynter who will retire at Nomination Committee. the 2011 Annual Meeting. The responsibilities of the Nomination Committee include the The Board meets in accordance with a schedule prepared well identification and nomination of suitable candidates to fill board in advance of the start of each calendar year; rotating between vacancies as they arise. The policy and selection process for the Auckland office and other overseas facilities. This enables the appointment of Directors include an evaluation of the skills, Directors to become familiar with the Group’s market environment knowledge and experience of current Directors, an evaluation and manufacturing operations and to meet employees. Board of the competencies required of prospective Directors and the meetings follow procedures that ensure that all Directors have the evaluation of prospective candidates against these requirements. necessary information to participate in an informed discussion In determining the mix of skills, the Nomination Committee and on all agenda items. Senior managers make direct presentations the Board will have regard to the objectives sought to be achieved to the Board on a rotational basis to give the Directors a broad in accordance with the Company’s Diversity Policy. exposure to management philosophies, capabilities and the key A description of the procedure for the selection and appointment issues facing the business and actions taken to address them. of new Directors, including the policy for the nomination and Any Director is entitled to obtain professional advice relating to the appointment of Directors, is set out in the Nomination Committee affairs of the Company or to his or her other responsibilities as a Charter which is available in the Investor Relations section of the Director. The full provisions in this regard are set out in the Board Company’s website (www.nuplex.co.nz). During the year, the of Directors’ Charter and other Board Committee Charters. Nomination Committee Charter was reviewed and amended to reflect initiatives introduced by the ASX in connection with The Board has established that all non-executive Directors are gender diversity. independent after taking into consideration their associations as shareholders of the Company and Directors or officers of other During the year under review, a Nomination Committee consisting organisations. Details of the Directors’ skills and experience, of the Chairman, Rob Aitken, and Directors Barbara Gibson and period of appointment and their interests are disclosed on page David Jackson, was constituted in connection with the recruitment 91 of this report. and appointment of a new Director. The Committee met on three occasions with all committee members in attendance on each The Board has instituted a system to review annually the occasion. performance of the Board, its Committees and individual Directors. During the period under review, the Board engaged Audit Committee an independent third party to conduct a review of Board and The Audit Committee is comprised of three independent, Committee performance and corporate governance processes. non‑executive Directors, of whom one is the Company Chairman, That review concluded that the Board has made significant steps ex officio. The Managing Director, the Chief Financial Officer, in moving the business forward and setting in place the enhanced the internal auditor and the external auditors attend meetings governance processes, management resources and strategic by invitation. focus needed by virtue of the Company’s status as a public listed company with global reach. In addition, the Board’s review The composition of the Audit Committee during the last financial process also involves peer review and one-on-one consultation year was David Jackson (Committee Chair), Rob Aitken and between the Chairman and individual Directors. Peter Springford. The qualifications of the members of the Audit Committee are disclosed on pages 20 and 21 of this report. The Board has held 14 meetings during the year ending 30 June 2011 with attendances recorded as follows: The Audit Committee met on six occasions during the year ending 30 June 2011 with attendances recorded as follows: Name of Director: No. of Meetings attended Name of Director: No. of Meetings attended R Aitken 14/14 R Aitken 6/6 B Gibson 14/14 D Jackson 6/6 D Jackson 14/14 P Springford 6/6 E Severin 14/14

P Springford 14/14 The Committee has direct communication with and unrestricted M Wynter 13/14 access to the Group’s external auditors, the internal auditor and internal accounting staff.

2011 ANNUAL Report 27 Coo rp rate Governance Statement continued

The Committee’s responsibilities include: steps to ensure that its approach to the appointment and use of remuneration advisers accords with new legislative requirements • reviewing the half yearly and annual financial statements and in Australia. reports and advising all Directors whether they comply with the relevant and appropriate laws, regulations and recognised The composition of the Remuneration Committee during the last accounting policies financial year was Barbara Gibson (Committee Chair), Rob Aitken, and Michael Wynter. • obtaining formal sign-off from the Managing Director and the Chief Financial Officer that the Company’s financial reports The Committee has met on three occasions during the year present a true and fair view, in all material respects and are ending 30 June 2011 with attendances recorded as follows: in accordance with applicable accounting standards Name of Director: No. of Meetings attended • oversight of compliance with statutory responsibilities relating to financial and stock exchange regulations and guidelines R Aitken 3/3 B Gibson 3/3 • approval of other advisory services from the external auditor M Wynter 2/3 • monitoring of corporate financial risk The Charter of the Remuneration Committee is available • reviewing the Company’s accounting policies and reporting in the Investor Relations section of the Company’s website requirements to ensure accuracy and timeliness and the (www.nuplex.co.nz). inclusion of appropriate disclosures Safety Health & Environment Sub‑Committee • to review the scope and outcome of the external audit. In May 2010 the Board established a Safety Health & Environment The Committee reports the proceedings of each meeting to (SHE) Board Sub-Committee comprised of three independent, the Board. non-executive Directors of whom one is the Company Chairman, The Audit Committee has the responsibility for making ex officio. recommendations in connection with the appointment of the The purpose of the Committee is to assist the Board in external auditor. The Audit Committee Charter requires the Audit discharging its responsibilities by assessing the effectiveness Committee to ensure that the external audit lead partner’s term is of the Company’s safety, health and environment programs, limited to five years. The Audit Committee will monitor to ensure initiatives and policies with a view to ensuring compliance with all that the rotation of the external engagement partner occurs in legislative and regulatory requirements. accordance with this requirement. The composition of the SHE Committee during the last year The Audit Committee has a formal charter which is available was Peter Springford (Committee Chair), Rob Aitken and in the Investor Relations section of the Company’s website Barbara Gibson. (www.nuplex.co.nz). The Committee has met on three occasions during the year During the year under review, the Committee has overseen the ended 30 June 2011 with attendances recorded as follows: conduct of a tender for the provision of audit services to the Company and its subsidiaries. The result of the tender process is Name of Director: No. of Meetings attended that in due course, it is proposed that PricewaterhouseCoopers R Aitken 3/3 be appointed as the Company’s external auditor subject to compliance with regulatory requirements in connection with the B Gibson 3/3 appointment. P Springford 3/3

Remuneration Committee The Charter of the SHE Committee is available in the Investor The Remuneration Committee is comprised of three independent, Relations section of the Company’s website (www.nuplex.co.nz). non-executive Directors, of whom one is the Company Chairman, NZ Securities Commission Board Sub-Committee ex officio. The Managing Director is not a member of the Committee. In order to deal with litigation involving the Company and the New Zealand Securities Commission, the Board formed The Remuneration Committee meets as required to review the a sub‑committee comprised of Director, Peter Springford remuneration of the Directors, the Managing Director and the (Committee Chair) and the Managing Director. Neither of these senior executives reporting directly to the Managing Director, Directors held office during the period to which the litigation before making recommendations to the Board. related and neither was a party to the proceedings personally.

Remuneration packages are reviewed annually with the benefit The Committee met on nine occasions during the year ended of independent external advice to ensure that remuneration is 30 June 2011 with both committee members in attendance on competitive with like organisations within the jurisdiction in which each occasion. an employee resides. The Remuneration Committee has taken

28 Nuplex industries limited 6. Code of Conduct Nuplex’s Diversity Policy refers to measurable objectives for achieving gender diversity. Gender diversity targets are The Board has established a policy (Code of Conduct and Ethics established and reviewed annually in accordance with the policy Policy) to give guidance to its employees and Directors on how it and with reference to peer industry practice. Data will be gathered expects them to conduct themselves when undertaking business across the Group to monitor progress in connection with the on behalf of the Company. achievement of targets.

The Board has a ‘Whistleblower’ Policy to provide guidance The Board of Nuplex will assess the objectives of the policy on an and assistance to employees who may wish to disclose annual basis with a view to reporting on the relative proportion of information that relates to wrongdoing in the workplace and women employed at all levels of the Company. related work environment. The measurable objectives for achieving gender diversity which The Code of Conduct and Ethics Policy is available in have been set by the Board in accordance with the policy are: the Investors Relations section of the Company’s website (www.nuplex.co.nz). • The establishment of a reporting framework to record and monitor gender diversity by country and employment category 7.e Div rsity Policy within the Group on a twice-yearly basis. During the year under review, the Board has focused on the area • Nuplex will actively seek out quality female applicants (internal of diversity, reflecting the initiatives in this area put forward as and external) for job opportunities that arise within the part of a number of changes to the ASX Corporate Governance organisation. Employee recruitment consultants will be directed Principles which were introduced with effect from 1 January 2011. to provide female candidates for review. In early 2011, after considering the matter at meetings of the Board across the second half of 2010, the Board adopted a formal • Nuplex will ensure that quality female employees are Diversity Policy. included in projects which provide leadership and development opportunities. In accordance with ASX recommendations, Nuplex’s Diversity Policy is aimed at developing and promoting a commitment • Nuplex will nurture existing and emerging female managers and across the Nuplex Group to the implementation of a corporate team leaders by ensuring that development plans are in place culture which embraces diversity in the composition of the general and reviewed by senior managers and executives. workforce, management, senior management and the Board. • Nuplex will ensure that every female in a senior management In this regard, Nuplex recognises that diversity is represented in role and any female employee determined as ‘high potential’ a range of forms including gender, age, ethnic origin, race, cultural on the Nuplex talent matrix will have undertaken an appropriate heritage, language and physical ability. To this end, diversity leadership‑style diagnostic. has also been established as one of Nuplex’s Core Values, to be acknowledged and embraced across the Nuplex Group. The following table sets out the proportion of women employees across the organisation, (information is reported on a full-time Nuplex’s Diversity Policy acknowledges that achieving diversity basis by category/seniority) including: across the Group, and at Board level, maximises the talent potential available to the Group leading to the appointment of well‑qualified • the proportion of women employees in the whole organisation employees, senior management and Board candidates. Nuplex • the proportion of women in executive and senior acknowledges that this will yield significant benefits particularly management positions in relation to the achievement of Nuplex’s corporate goals. • the proportion of women on the Board As an organisation which has operations in ten countries around the world and sales to more than 80 countries, Nuplex has a rich diversity of race and culture in many parts of its business.

Senior Total Board (%) Executive (%) Management (%) Workforce (%) Total Females Total Employees Global 16.7% 0% 16.5% 20% 316 1,589

Summary i. Nuplex has established a policy concerning diversity and a summary of the policy is disclosed on the Company’s website www.nuplex.co.nz ii. The policy includes objectives to measure the achievement of gender diversity. iii. Nuplex has disclosed in this Corporate Governance Report the measurable objectives to achieving gender diversity in accordance with the Diversity Policy.

2011 ANNUAL Report 29 Coo rp rate Governance Statement continued

8. Trading in the Company’s Shares Nuplex’s Risk Management Framework incorporates key principles covering Risk Governance, Risk Infrastructure and The Board has established a policy and procedure for the Oversight, and Risk Ownership to provide a structured and guidance and direction of Directors, senior managers and transparent approach to managing risk across the business. employees on the laws governing share trading (Securities Trading Policy and Guidelines). Through the development and implementation of this framework, the Board ensures that there are appropriate risk management Under the policy, Directors, senior managers and employees and internal control systems which manage Nuplex’s material are advised that it is illegal to buy or sell ordinary shares, capital business risks. notes or other listed securities if they have material information that is not generally available to the market and if it were Throughout all of its business operations, the Company has generally available to the market, a reasonable person would in place, policies, processes and systems which are designed expect it to have a material effect on the price of the Company’s to identify, assess, monitor and manage material business risk. listed securities. Accordingly, the Company’s policies are aimed at managing risk The policy also covers the notification procedures that must be in the following ways: adopted by Directors and senior managers before they buy or sell • The Board of Directors has oversight of risk management the Company’s listed securities. initiatives, policies and practices and is assisted in this regard The Securities Trading Policy and Guidelines has been by the Audit Committee in identifying risks which may have lodged with the ASX in accordance with the ASX Listing Rule a material impact on the Company’s business. requirements, and a copy is available in the Investor Relations • The Managing Director and Senior Executives of the section of the Company’s website (www.nuplex.co.nz). Company are responsible for designing and implementing The Company recently amended the Share Trading Policy and risk management and internal control systems which identify Guidelines to comply with changes to the ASX Listing Rules, in material risks that the Company faces as well as managing particular, to provide for the ‘closed periods’ during which trading risk across the Group, and are required to report to the Board in securities may not take place. through the Managing Director. This includes formulation of policies and procedures which cover the identification, 9.mn Com u ications and Disclosure assessment, reduction, management and monitoring of risk, Nuplex has established a Communications and Disclosure as well as identifying any material changes to the Group’s Policy to ensure compliance with NZX and ASX disclosure risk profile. These are required to be reported to the Board requirements and to ensure accountability for compliance at regular intervals. at a senior executive level. • There is regular assessment by the Board and Senior The Communications and Disclosure Policy is available in Executives of strategic risks affecting the Company’s the Investor Relations section of the Company’s website operations and the establishment of controls to reduce their (www.nuplex.co.nz). impact. This includes policies and procedures directed at maintaining all relevant registrations and approvals in relation Nuplex has established a separate Shareholder Communications to operating plant, processes, handling of materials that Policy designed to promote effective communication with are hazardous or require traceability. On a regular basis the shareholders, and to encourage shareholder participation at Board also reviews the Company’s internal controls and risk the annual general meeting. Nuplex ensures that its Auditor management practices to ensure that they are adequate and attends the annual general meeting and is in a position to answer reflect the Company’s risk profile. questions about the audit of Nuplex’s financial information. • Nuplex’s risk management policies require that risk The Shareholder Communications Policy is available in assessments are conducted for all major work initiatives, where the Investor Relations section of the Company’s website new projects are undertaken and for new product introductions. (www.nuplex.co.nz). • Nuplex’s risk management policies require that there is 10. Risk Management periodic verification of risk controls at various levels across the Nuplex recognises that in order to achieve its business plans Company’s operations. and strategic goals, there must be a thorough understanding • The Company has established a range of policies and across the Company of the risks that may affect the ability of the procedures aimed at assisting in the management of risk Company to achieve those plans and goals. across the Company’s operations.

At the direction of the Board, Nuplex’s management has • The Board satisfies itself that adequate external insurance cover developed an enterprise risk management framework for the is in place appropriate for the Company’s size and risk profile. oversight and management of material business risks which has been implemented and is being continually embedded across the Group.

30 Nuplex industries limited • The Board satisfies itself that adequate Safety, Health & 12. Remuneration Environmental Protection Policies and hazard assessments 12.1 Senior Executive Remuneration are in place and monitor performance. To assist in this process the Board established a SHE Board Sub-Committee The policy of the Company is to reward the Managing Director and in May 2010. senior executives and managers with competitive remuneration packages that are aligned with the objectives of the Company and • The Managing Director and Chief Financial Officer also provide its shareholders and comprise: a declaration that the financial statements of the Group present a true and fair view, in all material respects of the Group’s • A Total Employment Cost (TEC) element as defined below. financial position and operating results. The Managing Director • A Short‑Term Incentive (STI) payment dependent on and Chief Financial Officer are able to make this declaration achievement of annual financial performance hurdles and having regard to the Company’s sound system of risk specific operational objectives. management and control. • A Medium‑Term Incentive (MTI) payment which is applicable • The Company has established an internal audit function within to senior managers dependent on achievement of financial the Group to assist the Company in carrying out the analysis performance hurdles and specific operational objectives which and independent appraisal of the adequacy and effectiveness may be required to be achieved over a period in excess of of the Group’s financial risk management and internal control 12 months. systems. The internal audit function is independent of the external auditor. • A Long‑Term Incentive (LTI) payment in the form of cash or ordinary shares in the Company applicable to senior executives The Board requires management to report to it on whether risks based on achievement of performance criteria aligned to the are being managed effectively, and management has reported objectives of shareholders including growth in Total Shareholder to the Board periodically during the financial year under review Return and Earnings Per Share. At the 2010 annual meeting as to the effectiveness of the management of material business shareholders approved the Company’s Performance Rights risks in accordance with the risk management framework. Plan and the grant of up to 1,800,000 performance rights to the Managing Director under the terms of that plan, such grant to 11. Internal Financial Control and be made over a three‑year period. Risk Management The Board, advised by the Audit Committee, monitors and Executive Salaries approves the Company’s system of internal financial control which The remuneration of the Senior Executives of the Company for includes clearly defined policies controlling treasury operations, year ended 30 June 2011 was as follows: capital expenditure authorisation and risk management. Total Employment Cost (TEC) includes the following components: The Board participates in the development of strategic plans, approves budgets and monitors performance monthly. 1. Cash salary

The Chief Financial Officer is responsible to the Managing 2. The cost of the provision of a motor vehicle to a standard Director for ensuring that all operations within the Company nominated by the executive and approved by the Board adhere to the Board-approved financial control policies. 3. Superannuation including compulsory and voluntary The Managing Director and Chief Financial Officer have signed contributions a declaration stating: 4. Other non-cash benefits nominated by the executive and 1. That Financial Statements for year ended 30 June 2011 approved by the Board present a true and fair view, in all material respects, of the 5. Fringe benefits tax payable in respect to any component Group’s financial condition and operational results and are of TEC. in accordance with NZIFRS. Executive and management salaries were reviewed with effect 2. That the statement referred to in the preceding paragraph 1 from 1 July 2010. In most cases, increases were in line with cost is founded on a sound system of risk management and of living increases, except in cases of promotion or similar special control which implements policies adopted by the Board of circumstances. Directors and

3. That the Group’s risk management and internal compliance Managing Director’s Remuneration and control system is operating efficiently and effectively in all The Managing Director’s remuneration consists of salary and material respects. other benefits referred to below as ‘Total Employment Cost’, plus the short‑term and long‑term incentives referred to below.

2011 ANNUAL Report 31 Coo rp rate Governance Statement continued

Paid Provisioned – to be paid only on meeting performance targets

STI Name Title TEC and other Cash LTI 1 Other 1 Share LTI 4 Total E Severin Chief Executive Officer 1,000,000 491,548 75,000 355,208 1,921,756 R Harmsen Chief Operating Officer 463,320 – 33,027 1,192,470 2,3 98,745 1,787,562 S Bastounas Chief Operating Officer Functional 463,320 73,390 31,855 115,830 3 98,745 783,140 Materials and Specialties I Davis Chief Financial Officer 428,480 107,20 6 57,938 – 91,320 684,943 C Deetlefs Group General Manager, Operations 346,800 84,689 – – 73,912 505,401 J Williams General Counsel and Company Secretary 232,120 86,273 13,523 – 69,270 492,186 P Davey Vice President, Human Resources 307,000 131,9003 – – 69,266 508,166 H Shafi Vice President, Planning and Strategy 297,917 83,850 – – 69,266 451,032 7,134,187 (All figures in AUD) 1 Amounts provisioned for payment subject to future performance hurdles. 2 Provision for separation payment in accordance with Dutch employment law. 3 Includes retention and sign-on payments. 4 Amounts provisioned for payment subject to future performance hurdles as approved by shareholders at the 2010 AGM.

Total Employment Cost (TEC) period. In 2010, 526,316 performance rights were granted For the year under review, the Managing Director’s TEC was to the Managing Director under the terms of the Performance AUD$1,000,000 per annum with an annual review. TEC includes Rights Plan. salary and superannuation and may also include non-cash Vesting of performance rights under the Performance Rights Plan components such as a motor vehicle and costs associated with is subject to performance hurdles based on Earnings per Share that vehicle. (EPS) and Nuplex’s Total Shareholder Return (TSR) performance Incentives relative to companies within the NZX50 Index over a measurement period of three to four years. Under the terms of the employment agreement with the Managing Director, he is entitled to receive incentive awards as set out below 2009 LTI Plan calculated by reference to his TEC. During the year ended 30 June 2010, the Company offered 1. Short Term Incentive (STI) a cash-based LTI incentive to senior managers. The LTI Plan was designed to drive behaviour that grows business value over the The amount of the STI payment in any year will be determined by longer term and to complement the shorter term focus of the the Board by assessment of the Managing Director’s performance STI Plan. against financial and non-financial targets set by the Board at the start of each financial year. For performance outcomes at The 2009 LTI Plan, effective from 1 July 2009, is subject to target level, the Managing Director would receive 50% of his TEC performance hurdles based on Earnings Per Share (EPS) and and for performance outcomes at stretch level, he would receive relative Total Shareholder Return over a measurement period a maximum of 100% of his TEC. of three to four years (FY2013).

2. Long Term Incentive (LTI) Under the terms of the Plan, Nuplex’s Total Shareholder Return The LTI plan is designed to drive behaviour that grows business (TSR) performance will be measured relative to companies within value over the longer term and to complement the shorter term the NZX50 Index. TSR is defined in the plan rules as share price focus of the STI Plan. growth and dividends paid and reinvested (adjusted for rights, bonus issues and any capital reconstructions) measured over the The Managing Director is entitled to an annual LTI grant up to an measurement period. amount of 100% of TEC subject to achievement of performance hurdles. The initial grant was in the form of $900,000 cash The EPS hurdle is triggered by a percentage growth in Nuplex’s pro‑rated for the period from commencement of employment until compound annual growth rate in earnings per share over the 30 June 2010. measurement period. Target growth in EPS is 10% per annum from a starting base of EPS for the year ended 30 June 2009 At the 2010 annual meeting shareholders approved the of NZ19.18 cents. Company’s Performance Rights Plan and the grant of up to 1,800,000 performance rights to the Managing Director under In respect of the LTI grant, 50% of the grant is based on EPS and the terms of that plan, such grant to be made over a three‑year 50% on TSR.

32 Nuplex industries limited 2010 Performance Rights Plan For the performance rights to be issued during the 2011-12 In 2010, performance rights were issued to senior executives financial year (2011 Performance Rights) the TSR and EPS Growth in accordance with the terms of the plan as follows: hurdles have been set as follows: The vesting scale for the TSR Tranche (50%) is as follows and Participant: Performance Rights Issue* is measured against the performance of companies in the Emery Severin 526,316 NZX50 Index. Ian Davis 135,309 Relative TSR Rob Harmsen 146,312 Performance Level Percentile (P) Ranking Vesting% Sam Bastounas 146,312 Target & P50 &

Total 1,371,065 The vesting scale for the EPS Tranche (50%) is as follows

(* to be pro-rated to 11/12ths for one month delayed entry to plan) Compound Annual Growth Rate (CAGR) in EPS Vesting of performance rights under the 2010 Performance Rights Performance Level Growth Vesting% Plan is subject to the following performance hurdles: Threshold & 6% & <10% Pro‑rata is measured against the performance of companies in the NZX50 Index. Target 10% 50% >Target & 10% & <14% Pro‑rata Relative TSR Performance Level Percentile (P) Ranking Vesting% Stretch ≥14% 100% Threshold & P40 & Target & P50 & Threshold & 6% & <10% Pro‑rata Board resolved that with effect from 1 July 2010, the fee payable Target 10% 50% to the Board Chairman be increased to $220,000 per annum, >Target & 10% & <16% Pro‑rata inclusive of attendance at Board Sub-Committee meetings. The Board also resolved that with effect from 1 July 2010, all Stretch ≥16% 100% Directors’ fees be paid in Australian Dollars or its equivalent New Zealand dollar rate.

Remuneration paid to Directors during the year ended 30 June 2011 is disclosed in the Statutory Information section of this report on page 90 of this report.

2011 ANNUAL Report 33 Coo rp rate Governance Statement continued

Retirement Allowances 2. With regard to Nuplex’s dividend reinvestment plan, on The Board has resolved that payments under clause 12.4 of the 8 February 2011 Nuplex was granted a waiver from Rule Constitution will be crystallised at the average of the last three 7.11.1 with respect to shares allotted under the DRP on the years’ total remuneration up to 30 June 2004 plus an allowance following conditions: for cost of living (CPI) adjustments. Retiring allowances will a. That Nuplex will allot shares pursuant to the DRP on the be paid to the non-executive Directors serving at that time on same day that cash dividends are paid to shareholders who retirement in full provided they have served at least six years as do not elect to participate, or fully participate, in the DRP; and a Director and on a pro-rata basis for service less than six years. b. That, if the DRP does not proceed to allotment, and money Directors appointed to the Board after 30 June 2004 are not is returned to subscribers, Nuplex will refund any such eligible to a retirement allowance. monies to those who have elected to participate in the DRP at the same time as cash dividends are paid to shareholders 13.mar Sum y of Waivers granted by NZX who do not elect to participate in the DRP. For the purposes of NZX Listing Rule 10.5.5(f), Nuplex discloses 14. Governance Practices that the following waivers were granted under the Listing Rules of The Board has reviewed its governance practices against the ASX the NZX in the 12‑month period preceding the date two months Corporate Governance Principles (2nd Edition), NZX Corporate before the date of publication of this Annual Report: Governance Best Practice Code and the NZ Financial Markets Authority’s Principles and Guidelines of Corporate Governance 1. With regard to Nuplex’s Performance Rights Plan, on and is of the view that Nuplex is compliant with these codes. 17 September 2010 Nuplex was granted a waiver from Rules 7.3.1(a), 7.3.2(a) and 7.6.6(a) so that Nuplex could issue shares and provide participants with financial assistance pursuant to the terms of the plan, beyond 36 months after obtaining shareholder approval. Nuplex was also granted a waiver from Rule 6.2.1(h) so that Nuplex is not required to include the amounts of financial assistance that may be given by Nuplex to participants pursuant to the terms of the plan.

34 Nuplex industries limited Audos it r’ Report

T o the Shareholders of Nuplex Industries Limited Report on the Company and Group Financial Statements We have audited the accompanying financial statements of Nuplex Industries Limited (“the company”) and the group, comprising the company and its subsidiaries, on pages 40 to 86. The financial statements comprise the statements of financial position as at 30 June 2011, the statements of comprehensive income, changes in equity and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information, for both the company and the group. Directors’ Responsibility for the Company and Group Financial Statements The directors are responsible for the preparation of company and group financial statements in accordance with generally accepted accounting practice in New Zealand and International Financial Reporting Standards that give a true and fair view of the matters to which they relate, and for such internal control as the directors determine is necessary to enable the preparation of company and group financial statements that are free from material misstatement whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express an opinion on these company and group financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing (New Zealand). Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the company and group financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the company and group financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the company and group’s preparation of the financial statements that give a true and fair view of the matters to which they relate in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company and group’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates, as well as evaluating the presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Our firm has also provided other services to the company and group in relation to taxation and general accounting services. Partners and employees of our firm may also deal with the company and group on normal terms within the ordinary course of trading activities of the business of the company and group. These matters have not impaired our independence as auditors of the company and group. The firm has no other relationship with, or interest in, the company and group. Opinion In our opinion the financial statements on pages 40 to 86: • Comply with generally accepted accounting practice in New Zealand; • Comply with International Financial Reporting Standards; • G ive a true and fair view of the financial position of the company and the group as at 30 June, 2011 and of the financial performance and cash flows of the company and the group for the year then ended. Report on Other Legal and Regulatory Requirements In accordance with the requirements of sections 16(1)(d) and 16(1)(e) of the Financial Reporting Act 1993, we report that: • We have obtained all the information and explanations that we have required; and • In our opinion, proper accounting records have been kept by Nuplex Industries Limited as far as appears from our examination of those records.

22 August, 2011 KPMG Sydney

KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative.

2011 ANNUAL Report 35 Se tat ments of Comprehensive Income For the year ended 30 June 2011

Group Company (NZD in thousands) Note 2011 2010 2011 2010

Sales revenue 1,575,014 1,459,933 91,838 89,766 Cost of sales (1,235,589) (1,111,071) (68,710) (65,073) Gross profit 339,425 348,862 23,128 24,693 Other operating income 3 2,766 2,532 20,744 59,434 Distribution expenses (76,953) (70,732) (4,569) (4,403) Marketing expenses (85,058) (85,864) (9,180) (8,114) Administration expenses (64,415) (65,858) (7,910) (9,998) Other operating expenses 4 (8,885) (22,905) (1,671) (2,746) Operating profit before financing costs 106,880 106,035 20,542 58,866 Financial income 1,797 1,420 10,444 3,349 Financial expenses (18,374) (22,126) (7,068) (8,555) Net financing costs 7 (16,577) (20,706) 3,376 (5,206) Share of profits/(losses) of associates 12 1,907 2,131 – – Profit before tax 92,210 87,460 23,918 53,660 Income tax (expense)/benefit 8 (22,939) (20,478) (1,263) 959 Profit for the year 69,271 66,982 22,655 54,619 Other comprehensive income Foreign currency translation differences for foreign operations (8,338) (39,483) – – Net gain/(loss) on hedge of net investment in foreign operation 1,701 1,821 – – Effective portion of changes in fair value of cash flow hedges (268) 6,999 (356) 911 Income tax on other comprehensive income (423) (2,632) 107 (273) Other comprehensive income for the period, net of income tax (7,328) (33,295) (249) 638 Total comprehensive income for the year 61,943 33,687 22,406 55,257 Profit attributable to: Equity holders of the parent 66,543 64,210 22,655 54,619 Non-controlling interests 2,728 2,772 – – 69,271 66,982 22,655 54,619 Total comprehensive income attributable to: Equity holders of the parent 60,069 31,262 22,406 55,257 Non-controlling interests 1,874 2,425 – – 61,943 33,687 22,406 55,257 Basic earnings per share 9 0.34 0.34 Diluted earnings per share 9 0.33 0.32

To be read in conjunction with the notes to the Financial Statements on pages 40 to 86.

36 Nuplex industries limited Se tat ments of Changes in Equity For the year ended 30 June 2011

Statements of Changes in Equity (for the year ended 30 June 2011) Group Company Attributable to equity holders of the parent Share- Share- based Non- based Share payments Translation Retained Hedging controlling Total Share payments Retained Hedging (NZD in thousands) Note capital reserve reserve earnings reserve Total interest equity capital reserve earnings reserve Total

Balance as at 1 July 2010 349,664 – (8,932) 175,345 (536) 515,541 7,789 523,330 349,664 – 100,540 (181) 450,023 Other Comprehensive Income Foreign currency translation differences –– (7,484) –– (7,484) (854) (8,338) ––––– Net gain/(loss) on hedge of net investment in foreign operation, net of tax –– 1,191 –– 1,191 – 1,191 ––––– Effective portion of changes in fair value of cash flow hedges, net of tax –––– (181) (181) – (181) ––– (249) (249) Total other comprehensive income –– (6,293) – (181) (6,474) (854) (7,328) ––– (249) (249) Profit for the year ––– 66,543 – 66,543 2,728 69,271 –– 22,655 – 22,655 Total comprehensive income for the year –– (6,293) 66,543 (181) 60,069 1,874 61,943 –– 22,655 (249) 22,406 Contributions by and distributions to owners Dividend reinvestment plan 20 14,580 –––– 14,580 – 14,580 14,580 ––– 14,580 Performance Rights Plan 18 – 1,200 ––– 1,200 – 1,200 – 1,200 –– 1,200 Dividends paid 20 ––– (40,652) – (40,652) (2,781) (43,433) –– (40,652) – (40,652) Non-controlling interest on acquisition 26 –––––– 3,112 3,112 ––––– Balance as at 30 June 2011 364,244 1,200 (15,225) 201,236 (717) 550,738 9,994 560,732 364,244 1,200 82,543 (430) 447,557

Statements of Changes in Equity (for the year ended 30 June 2010) Group Company Attributable to equity holders of the parent Share- Share- based Non- based Share payments Translation Retained Hedging controlling Total Share payments Retained Hedging (NZD in thousands) Note capital reserve reserve earnings reserve Total interest equity capital reserve earnings reserve Total

Balance as at 1 July 2009 341,944 – 28,929 146,248 (5,449) 511,672 9,950 521,622 341,944 – 81,034 (819) 422,159 Other Comprehensive Income Foreign currency translation differences –– (39,136) –– (39,136) (347) (39,483) ––––– Net gain/(loss) on hedge of net investment in foreign operation, net of tax –– 1,275 –– 1,275 – 1,275 ––––– Effective portion of changes in fair value of cash flow hedges, net of tax –––– 4,913 4,913 – 4,913 ––– 638 638 Total other comprehensive income –– (37,861) – 4,913 (32,948) (347) (33,295) ––– 638 638 Profit for the year ––– 64,210 – 64,210 2,772 66,982 –– 54,619 – 54,619 Total comprehensive income for the year –– (37,861) 64,210 4,913 31,262 2,425 33,687 –– 54,619 638 55,257 Contributions by and distributions to owners Shares issued 20 7,720 –––– 7,720 – 7,720 7,720 ––– 7,720 Dividends paid 20 ––– (35,113) – (35,113) (4,586) (39,699) –– (35,113) – (35,113) Balance as at 30 June 2010 349,664 – (8,932) 175,345 (536) 515,541 7,789 523,330 349,664 – 100,540 (181) 450,023

To be read in conjunction with the notes to the Financial Statements on pages 40 to 86.

2011 ANNUAL Report 37 ste at ments of financial position As at 30 June 2011

Group Company (NZD in thousands) Note 2011 2010 2011 2010

Equity attributable to members of the parent company 20 Share capital 364,244 349,664 364,244 349,664 Share‑based payments reserve 1,200 – 1,200 – Translation reserve (15,225) (8,932) – – Retained earnings 201,236 175,345 82,543 100,540 Hedging reserve (717) (536) (430) (181) Non-controlling interests 20 9,994 7,789 – – Total Equity 560,732 523,330 447,557 450,023 Property, plant and equipment 14 282,919 272,163 18,960 19,683 Intangible assets 15 152,391 146,334 2,154 2,155 Investments in associates 12 4,946 4,371 – – Investments in subsidiaries – – 177,725 177,725 Trade and other receivables 11 – – 287,179 274,405 Deferred tax asset 13 8,292 9,393 199 86 Non-current Assets 448,548 432,261 486,217 474,054 Inventories 10 196,508 192,780 15,598 15,467 Trade and other receivables 11 310,713 287,113 17,485 16,617 Income tax receivable 9,434 10,077 – 3,434 Cash and cash equivalents 66,850 82,063 4,275 12,424 Current Assets 583,505 572,033 37,358 47,942 Total Assets 1,032,053 1,004,294 523,575 521,996 Borrowings 17 53,077 154,067 52,649 52,659 Employee provisions 18 20,887 23,413 543 617 Deferred tax liability 13 14,017 13,953 – – Non-current Liabilities 87,981 191,433 53,192 53,276 Borrowings 17 87,695 356 77 74 Trade and other payables 16 246,052 238,735 18,690 15,317 Employee provisions 18 23,936 23,585 1,744 1,251 Provisions 19 10,855 10,637 1,820 2,055 Income tax payable 14,803 16,218 495 – Current Liabilities 383,341 289,531 22,826 18,697 Total Liabilities 471,322 480,964 76,018 71,973 Total Net Assets 560,732 523,330 447,557 450,023

To be read in conjunction with the notes to the Financial Statements on pages 40 to 86.

38 Nuplex industries limited C ash Flow Statements For the year ended 30 June 2011

Group Company (NZD in thousands) Note 2011 2010 2011 2010

Receipts from customers 1,652,319 1,518,671 102,531 92,295 Interest received 1,797 1,046 6,761 3,349 Payments to suppliers and employees (1,553,464) (1,385,908) (98,037) (90,264) Interest paid (18,437) (20,357) (6,778) (6,891) Dividends received 1,334 844 – – Income taxes (paid)/received (23,413) (9,590) 292 – Net cash from/(used in) operating activities 28 60,136 104,706 4,769 (1,511) Disposal of property, plant and equipment 41 7 – – Acquisition of property, plant, equipment and intangibles (17,193) (9,860) (546) (728) Loans to subsidiaries – – 13,700 28,866 Increase in investment in subsidiaries less cash acquired (12,706) – – – Purchases of businesses, net of cash acquired – (5,317) – – Net cash from/(used in) investing activities (29,858) (15,170) 13,154 28,138 Proceeds from borrowings 24,725 – – – Repayment of borrowings (40,552) (88,533) – – Dividends paid to shareholders (28,853) (31,979) (26,072) (27,393) Net cash from/(used in) financing activities (44,680) (120,512) (26,072) (27,393)

Increase/(decrease) in cash and cash equivalents (14,402) (30,976) (8,149) (766) Cash and cash equivalents at 1 July 82,063 119,499 12,424 13,190 Effect of exchange rate fluctuation (811) (6,460) – – Cash and cash equivalents at 30 June 66,850 82,063 4,275 12,424

Comprising: Cash balances 48,947 61,308 4,275 7,424 Cash on call deposit 17,903 20,755 – 5,000 66,850 82,063 4,275 12,424

To be read in conjunction with the notes to the Financial Statements on pages 40 to 86.

2011 ANNUAL Report 39 N otes to the Financial Statements For the year ended 30 June 2011

1.e Stat ment of significant accounting policies Nuplex Industries Limited (the ‘Company’) is a Company registered and domiciled in New Zealand. The consolidated financial statements of the Company comprise the Company and its subsidiaries (the ‘Group’) and the Group’s interest in associated entities. (a) Statement of compliance The financial statements have been prepared in accordance with New Zealand Generally Accepted Accounting Practice (NZ GAAP). They comply with New Zealand equivalents to International Financial Reporting Standards (NZIFRS), and other applicable Financial Reporting Standards, as appropriate for profit-orientated entities. The financial statements also comply with International Financial Reporting Standards (IFRS).

The accounting policies set out below have been applied consistently to all periods in these financial statements, there have been no changes in the accounting policies during the year.

The International Accounting Standards Board has issued a number of other standards, amendments and interpretations which are not yet effective, detailed below. The Group has not yet applied these in preparing these financial statements and will apply each in the period in which it becomes mandatory.

Mandatory for the Standard Description year ending

NZ IFRS 9 Financial Instruments June 30, 2014 NZ IAS 24 Related Party Disclosures (revised 2009) June 30, 2012 NZ IFRIC 14 Amendments to The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction June 30, 2012 NZ IFRS 7 Disclosures–Transfers of Financial Assets June 30, 2012 NZ IFRS 1 Amendments–Severe Hyperinflation and Removal of Fixed Dates for first-time adopters June 30, 2012 FRS-44 New Zealand Additional Disclosures June 30, 2012 NZ IAS 12 Amendments–Deferred tax: recovery of underlying assets June 30, 2013 NZ IAS 1 Amendments–Presentation of items of Other Comprehensive Income June 30, 2013 NZ IFRS 10 Consolidated Financial Statements June 30, 2014 NZ IFRS 11 Joint Arrangements June 30, 2014 NZ IFRS 12 Disclosure of interests in other entities June 30, 2014 NZ IFRS 13 Fair Value Measurement June 30, 2014 NZ IAS 19 Employee Benefits (amended 2011) June 30, 2014 NZ IAS 27 Separate Financial Statements (2011) June 30, 2014 NZ IAS 28 Investments in Associates and Joint Ventures (2011) June 30, 2014

The above standards and interpretations are not considered likely to have a material impact for the Group. (b) Basis of preparation The financial statements of the Group and Company comply with the Financial Reporting Act 1993 and the Companies Act 1993. These financial statements are presented in New Zealand dollars, which is the Company’s functional currency, except where stated otherwise, rounded to the nearest thousands.

They are prepared on the historical cost basis except for previously revalued property, plant and equipment carrying values which on transition to NZIFRS have been deemed as cost, and the following assets and liabilities are stated at their fair values: derivative financial instruments and deferred acquisition settlements payable.

The consolidated financial statements have been approved by the Board of Directors on 22 August 2011.

The preparation of financial statements in conformity with NZIFRSs requires management to make judgements, estimates and assumptions that effect the application of policies and reported amounts of assets, liabilities, income and expenses.

The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgements about carrying values of some assets and liabilities. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing

40 Nuplex industries limited basis. Revisions to accounting estimates are recognised in the (v) Provisions and contingencies period in which the estimate is revised if the revision affects only Identification, recognition and valuation of provisions requires that period, or in the period of revision and future periods if the management to make judgements about the likelihood of revision affects both current and future periods. an amount becoming payable or an economic benefit being Information about the significant areas of judgement exercised foregone, estimation of the value of the potential obligations or estimation in applying accounting policies that have had based on available information and estimating when such a significant impact on the amounts recognised in the financial obligations are likely to be settled. statements are described below. Where a range of possible outcomes exist, management must apply judgement in assessing the probability that any given (i) Classification of investments outcome may occur. Note 19 to these financial statements Classifying investments as either subsidiaries, associates or gives further information on the value of provisions recognised. joint ventures requires that management assesses the degree As new contingencies can arise unexpectedly or existing items of influence which the Group holds over the investee. In arriving be resolved at short notice, it is impracticable to predict how at a conclusion, management takes into account the constitutional the carrying value may be impacted over the next financial structure of the investee, governance arrangements, current and period but changes could result in a material adjustment to the future representation on the Board of Directors, and all other carrying amount. arrangements which might allow influence over the operating and financial policies of the investee. (vi) Employee provisions The Group is exposed to defined benefit obligations and long (ii) Valuation of goodwill and other intangibles service leave obligations that require significant judgements to The carrying value of goodwill is assessed at least annually be made in the calculation of the Group’s expected future liability to ensure that it is not impaired. This assessment requires and its present value. Significant assumptions made include management to estimate future cash flows to be generated by the expected asset growth rates, social security rates, pension cash‑generating units to which goodwill has been allocated. and salary growth rates and the discount rates to be applied in Estimating future cash flows entails making judgements including calculating present values. For each significant defined benefit the expected rate of growth of revenues and expenses, margins scheme a qualified external actuary is engaged to provide and market shares to be achieved, and the appropriate discount a valuation based, where possible, on externally verifiable rate to apply when discounting future cash flows. Note 15 of assumptions. As the outcomes in the next financial period may be these financial statements provides more information on the different to the assumptions made, it is impractical to predict the assumptions management has made in this area and the carrying impact that could result in a material adjustment to the carrying values of goodwill. As the outcomes in the next financial period amount. may be different to the assumptions made, it is impracticable to predict the impact that could result in a material adjustment to the (vii) Property plant and equipment and finite-life carrying amount. intangible assets (iii) Recognition of deferred tax assets In accounting for property plant and equipment and finite-life intangible assets management is required to make judgements The value of deferred tax assets recognised in the financial on the expected life of the asset, the likelihood of the asset’s statements involves a significant degree of judgement around the obsolescence and the likelihood that the asset will continue to be future profitability, ownership and legislative outcomes impacting utilised. Management reassesses useful lives at least annually on the Group entity to which the assets or potential assets and considers whether indicators of impairment have occurred relate. In making the required judgements, management takes that might necessitate impairment testing. Assessing impairment account of all circumstances of which they are aware and current where required may involve estimation and valuation of future economic forecasts which might have bearing on the tax situation cash flows that an asset is expected to generate and making of the entity concerned. Note 13 to these financial statements assumptions thereon. As the outcomes in the next financial contains further information on tax losses the Group has incurred period may differ from the assumptions made, it is impractical to but not recognised as a deferred tax asset. predict the impact that could result in a material adjustment to the (iv) Doubtful debt provisions carrying amount. Provisioning for doubtful debts takes into account known factors (c) Basis of consolidation impacting specific debtors, as well as the overall profile of each Group company’s debtors’ portfolio. Accounting for business combinations Prior to 1 July 2009 all business combinations were dealt with Factors such as the age of receivable balances, past collection using the purchase method. All business combinations occurring history, the level of activity in customer accounts are taken into on or after 1 July 2009 are accounted for by applying the account. Further information on the doubtful debt provision is acquisition method. The change in accounting policy was due contained in Note 21 to these financial statements. to the adoption of NZ IFRS 3 Business Combinations in the year ended 30 June 2010. The change in accounting policy had no impact on assets, profit or earnings per share in the year ended 30 June 2010.

2011 ANNUAL Report 41 N otes to the Financial Statements For the year ended 30 June 2011 continued

1.e Stat ment of significant accounting In the Company’s financial statements, investments in subsidiaries policies CONTINUED are carried at the lower of cost or recoverable amount. Control is the power to govern the financial and operating policies Associates of an entity so as to obtain benefits from its activities. In assessing Associates are those entities in which the Group has significant control the Group takes into consideration potential voting rights influence, but not control, over the financial and operating policies. that are currently exercisable. Acquisition date is the date on which control is transferred to the acquirer. Judgement is applied Investments in associates are accounted for using the equity in determining the acquisition date and determining whether method and are initially measured at cost. The consolidated control is transferred from one party to another. financial statements include the Group’s share of the total recognised income, expense and equity movements of The Group measures goodwill as the fair value of the associates on an equity‑accounted basis, net of any impairment consideration transferred including the recognised amount of any losses, from the date that significant influence commences until non-controlling interest in the acquiree, less the net recognised the date that significant influence ceases. When the Group’s amount (generally fair value) of the identifiable assets acquired share of losses exceeds its interest in the associate, the Group’s and liabilities assumed, all measured as at the acquisition date. carrying amount is reduced to nil and recognition of further losses Consideration transferred includes the fair value of the assets is discontinued except to the extent that the Group has incurred transferred, liabilities incurred by the Group to the previous legal or constructive obligations or made payments on behalf owners of the acquiree, and equity interests issued by the Group. of the associate. Consideration transferred also includes the fair value of any Transfer of entities or assets under Group control contingent consideration and share-based payment awards Business combinations arising from the transfer of assets or of the acquiree that are replaced mandatorily in the business interests from one Group entity to another Group entity are combination. If a business combination results in the termination accounted for at the carrying amounts recognised previously of pre-existing relationships between the Group and the in the Group’s controlling shareholders’ consolidated acquiree, then the lower of the termination amount, as contained financial statements. in the agreement, and the value of the off-market element is deducted from the consideration transferred and recognised Transactions eliminated on consolidation in other expenses. IntraGroup balances and any unrealised gains or losses or income Transaction costs that the Group incurs in connection with and expenses arising from intraGroup transactions are eliminated a business combination, such as finders fees, legal fees, due in preparing the consolidated financial statements. Unrealised diligence fees, and other professional and consulting fees are gains arising from transactions with associates are eliminated to expensed as incurred in the Group financial statements. the extent of the Group’s interest in the entity. Unrealised losses are eliminated in the same way as unrealised gains, but only to the A contingent liability of the acquiree is assumed in a business extent that there is no evidence of impairment. combination only if such a liability represents a present obligation and arises from a past event, and its fair value can (d) Foreign currency be measured reliably. Foreign currency transactions When share-based payment awards (replacement awards) Transactions in foreign currencies are translated at the foreign are exchanged for awards held by the acquiree’s employees exchange rate ruling at the date of the transaction. Monetary (acquiree’s awards) and relate to past services, then a part of the assets and liabilities denominated in foreign currencies at the market-based measure of the replacement awards is included balance sheet date are translated to the functional currency at in the consideration transferred. If future services are required, the foreign exchange rate ruling at that date. Foreign exchange then the difference between the amount included in consideration differences arising on translation are recognised in the income transferred and the market-based measure of the replacement statement. Non-monetary assets and liabilities denominated in awards is treated as post combination compensation cost. foreign currencies that are stated at fair value are translated to the functional currency at foreign exchange rates ruling at the dates Accounting for acquisitions of non-controlling interests the fair values were determined. Acquisitions of non-controlling interests are accounted for as transactions with equity holders in their capacity as equity Financial statements of foreign operations holders and therefore no goodwill is recognised as a result The assets and liabilities of foreign operations, including of such transactions. goodwill and fair value adjustments arising on consolidation, are translated to New Zealand dollars at foreign exchange rates Subsidiaries ruling at the balance sheet date. The revenues and expenses of Subsidiaries are entities controlled by the Group. Control exists foreign operations are translated to New Zealand dollars at rates when the Group has the power, directly or indirectly, to govern approximating to the foreign exchange rates ruling at the dates the financial and operating policies of an entity so as to obtain of the transactions. benefits from its activities. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

42 Nuplex industries limited This would normally be the average foreign exchange rate for Current tax is the expected tax payable on the taxable income the reporting period, or such shorter period for an entity or for the period, using tax rates enacted or substantially enacted business acquired or disposed of during the period. Exchange at the balance sheet date, and any adjustments to tax payable differences arising on these retranslations are recognised in other in prior years. comprehensive income and presented in the translation reserve. Deferred tax is recognised in respect of temporary differences Net investment in foreign operations between the carrying amounts of assets and liabilities for Exchange differences arising from the translation of the net accounting purposes and the amounts used for taxation investment in foreign operations, and the related hedges and purposes. The following temporary differences are not provided deferred tax impact are recognised in other comprehensive for: goodwill not deductible for taxation purposes, the initial income to the extent that the hedge is effective and are presented recognition of assets and liabilities that affect neither accounting, within equity in the translation reserve. nor taxable profit, and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the If ineffective, it is recognised in profit or loss. Amounts recognised foreseeable future. The amount of deferred tax provided is based in equity are released to profit or loss upon disposal. on the expected realisation or settlement of the carrying amount (e) Revenue and other operating income of assets and liabilities, using tax rates at balance date, or if known, tax rates at the expected time of realisation or settlement. Sale of goods Tax losses and other deferred tax assets are recognised only to Revenue from the sale of goods is measured at the fair value the extent that it is probable that future tax profits will be available of the consideration received or receivable, net of returns and against which the asset can be utilised. Deferred tax assets are allowances, trade discounts and volume rebates. Revenue is reduced to the extent that it is no longer probable that the related recognised when the significant risks and rewards of ownership tax benefit will be realised. have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods Additional income taxes that arise from the distribution of can be estimated reliably, and there is no continuing management dividends are recognised at the same time as the liability to pay involvement with the goods. If it is probable that discounts will the related dividend. be granted and the amount can be measured reliably, then the discount is recognised as a reduction in revenue as the sales (h) Earnings per share are recognised. The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the Dividend income profit or loss attributable to ordinary shareholders of the Company Dividend income is recognised in profit and loss on the date the by weighted average number of ordinary shares outstanding entity’s right to receive payment is established, which is when the during the period. Diluted EPS is determined by adjusting the dividend is declared. profit or loss attributable to ordinary shareholders and the Dividend income from associates reduces the investment balance weighted average number of ordinary shares outstanding for the shown in the consolidated statement of financial position. effects of all dilutive potential ordinary shares, which comprise convertible notes and share options granted to employees. (f) Expenses (i) Property, plant and equipment Operating lease payments Owned assets Payments made under operating leases are recognised in profit and loss on a straight-line basis over the term of the lease. Items of property, plant and equipment are stated at cost or deemed cost, less accumulated depreciation and Net financing costs impairment losses. Net financing costs comprise interest payable on borrowings Cost includes expenditure that is directly attributable to the calculated using the effective interest rate method, foreign acquisition of the asset. The cost of self-constructed assets exchange gains and losses, and gains and losses on hedging includes the cost of materials and direct labour, any other costs instruments that are recognised in profit and loss. The interest directly attributable to bringing the asset to a working condition for expense component of finance lease payments is recognised its intended use, the costs of dismantling and removing the items in profit and loss using the effective interest rate method. Interest and restoring the site on which they are located and capitalised income is recognised in profit and loss as it accrues, using the borrowing costs. effective interest rate method. The cost of replacing part of an item of property, plant and (g) Income tax equipment is recognised in the carrying amount of the item if it is Income tax on the profit or loss for the year comprises current probable that the future economic benefits embodied within the and deferred tax. Income tax is recognised in profit and loss part will flow to the Group and its cost can be measured reliably. except if it relates to items recognised directly in equity or The carrying value of the replaced part is derecognised. The other comprehensive income, in which case the income tax costs of the day-to-day servicing of property, plant and equipment is recognised therein. are recognised in profit or loss as incurred.

2011 ANNUAL Report 43 N otes to the Financial Statements For the year ended 30 June 2011 continued

1.e Stat ment of significant accounting Purchased agency portfolio policies CONTINUED Agency agreements acquired are capitalised as intangible assets Gains and losses on disposal of an item of property, plant at a value based on a discounted cash flow analysis of their and equipment are determined by comparing the proceeds expected net worth at acquisition. from disposal with the carrying amount of property, plant and The portfolio of agreements is not considered to have a finite equipment and are recognised within ‘other income’ in profit life, as agreements can be rolled over at the option of the Group, or loss. and it is reasonably expected that this will occur, and as such the portfolio is not amortised. The portfolio is tested for impairment Leased assets each reporting period and any impairment is recognised in profit Leases in terms of which the Group assumes substantially all the and loss. risks and rewards of ownership of the leased asset are classified as finance leases. Other intangible assets Other intangible assets that are acquired by the Group are stated Depreciation at cost less accumulated amortisation and impairment losses. Depreciation is charged to profit and loss on a straight-line basis over the estimated useful lives of each part of an item of property, Subsequent expenditure plant and equipment. Subsequent expenditure is capitalised only when it increases Depreciation is classified as Distribution, Marketing, the future economic benefits embodied in the asset to which it Administration or other, based on the function of the underlying relates. All other expenditure, including expenditure on internally asset to which the charge relates. The land component of land generated goodwill and brands, is recognised in profit or loss and buildings is not depreciated. The estimated useful lives for the as incurred. current and comparative year are as follows: Amortisation Amortisation is charged to profit and loss on a straight-line basis Land and buildings 20–50 years over the estimated useful lives of the finite‑life intangible assets. Plant and equipment 3–20 years Goodwill and intangible assets with an indefinite useful life are not Motor vehicles 5 years amortised but tested for impairment at each annual balance sheet date. Other intangible assets are amortised from the date they are (j) Intangible assets available for use. The estimated useful lives for the current and Goodwill comparative years are as follows: All business combinations are accounted for by applying the acquisition method. Goodwill represents amounts arising on Intellectual property up to 15 years acquisition of subsidiaries and associates, and represents the Other up to 5 years difference between the cost of the acquisition and the fair value of the net identifiable assets acquired. Goodwill is stated at cost (k) Trade and other receivables less any accumulated impairment losses. Goodwill is allocated Trade and other receivables are initially stated at fair value and to cash-generating units and is tested annually for impairment. are categorised as loans and receivables which are subsequently In respect of associates, the carrying amount of goodwill is measured at amortised cost less impairment. included in the carrying amount of the investment in the associate. Negative goodwill arising on an acquisition is recognised directly (l) Inventories in profit and loss. Inventories are stated at lower of cost and net realisable value with Intellectual property due allowance for rework and/or obsolescence. Raw materials, packaging and inventories purchased for resale are valued Expenditure on research activities, undertaken with the prospect on a weighted average cost basis. Manufactured inventories of gaining new scientific or technical knowledge, is recognised in and work in progress are valued at the cost of materials plus profit and loss as an expense as incurred. Expenditure on product direct labour and factory overheads based on normal operating or process development activities, whereby research findings capacity, including all costs of bringing items to their present are applied to the development of new or substantially improved location and condition. products and processes, is capitalised if the product or process is technically and commercially feasible with the probability of (m) Cash and cash equivalents future economic benefits and the Group has sufficient resources Cash and cash equivalents comprise cash balances and to complete development. The expenditure capitalised includes call deposits maturing in less than three months and readily the cost of materials, direct labour and an appropriate proportion convertible to cash. Bank overdrafts that are repayable on of overheads. demand and form part of the Group’s cash management are Capitalised development expenditure is stated at cost less included for the purposes of the cash flow statements. accumulated amortisation and impairment losses. Other development expenditure is recognised in profit and loss as an expense as incurred.

44 Nuplex industries limited (n) Impairment The discount rate is the yield at the balance sheet date on The carrying amounts of the Group’s assets, other than government bonds that have maturity dates approximating inventories and deferred tax assets, are reviewed at each balance to the terms of the Group’s obligations. sheet date to determine whether there is any indication of The calculation is performed by a qualified actuary using the impairment. If any such indication exists, the asset’s recoverable projected unit credit method. When the benefits of a plan are amount is estimated. For intangible assets that have an indefinite improved, the portion of the increased benefit relating to past useful life and intangible assets that are not yet available for service by employees is recognised immediately as an expense use, the recoverable amount is estimated at each balance sheet in the income statement. date. An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its In respect of actuarial gains and losses that arise subsequent recoverable amount. Impairment losses are recognised in the to transition in calculating the Group’s obligation in respect of income statement. Impairment losses recognised in respect of a plan, to the extent that any cumulative unrecognised actuarial cash-generating units are allocated first to reduce the carrying gain or loss exceeds 10% of the greater of the present value of the amount of any goodwill allocated to cash-generating units and defined benefit obligation and the fair value of plan assets, that then to reduce the carrying amount of other assets in the unit portion is recognised in profit and loss over the expected average on a pro‑rata basis. The recoverable amount of other assets remaining working lives of the employees participating in the plan. is the greater of their net selling price and value in use. Otherwise, the actuarial gain or loss is not recognised. (o) Equity Long-term service benefits The Group’s obligation in respect of long-term service benefits, Share capital is recognised at the fair value of the consideration other than pension plans, is the amount of the future benefit, received by the Company. Transaction costs attributable to including on-costs, and discounted to present value at discount the issue of ordinary shares are recognised directly in equity rates appropriate to the local jurisdiction in which the liability as a reduction of the share proceeds received. Dividends are arises, that employees have earned in return for their service recognised as a liability in the period in which they are declared. in the current and prior periods. (p) Interest-bearing borrowings Termination benefits Interest-bearing borrowings are recognised initially at fair value Termination benefits are recognised as an expense when the less attributed transaction costs, and the attributed transaction Group is demonstrably committed, without realistic possibility costs are amortised over the period of the borrowings on an of withdrawal, to a formal detailed plan to terminate employment effective interest basis. before the normal retirement date. If benefits are payable more Subsequent to initial recognition, borrowings are measured at than 12 months after the end of the reporting period then they amortised cost using the effective interest rate method, less any are discounted to their present value. impairment losses. Other (q) Employee benefits Vested sick leave, annual leave and bonuses are measured at Share-based transactions their nominal amounts, based on remuneration rates which are expected to be paid when the liability is settled. These amounts Performance share rights are granted to senior management. are disclosed in current employee benefits. The fair value of the rights is recognised as an employee expense with a corresponding increase in equity. The fair value of rights (r) Provisions are measured at the grant date and spread over the vesting A provision is recognised in the statement of financial position period, taking into account the terms and conditions upon which when the Group has a present legal or constructive obligation the rights were granted. The amount recognised as an expense as a result of a past event, and it is probable that an outflow is adjusted to reflect the number of rights for which the service of economic benefits will be required to settle the obligation. and non-market vesting conditions are expected to be met at the vesting date. The rights are equity settled. (s) Payables Defined contribution plans Liabilities for trade payables and other amounts are carried at cost which is the fair value of the consideration to be paid in the future Obligations for contributions to defined contribution pension for goods or services received, whether or not billed. plans are recognised as an expense in profit or loss in the periods during which services are rendered by employees.

Defined benefit plans The Group’s net obligation in respect of defined benefit pension and medical plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned or might receive in return for their service in the current and prior periods. That benefit is discounted to determine its present value and the fair value of any plan assets is deducted.

2011 ANNUAL Report 45 N otes to the Financial Statements For the year ended 30 June 2011 continued

1.e Stat ment of significant accounting (v) Hedging policies CONTINUED Cash flow hedges (t) Segment reporting Where a derivative financial instrument is designated as a hedge The Group determines and presents operating segments based of the variability in cash flows of a recognised asset or liability, on the information that is internally provided to the CEO, who or a highly probable forecasted transaction, the effective is the Group’s chief operating decision maker. part of any gain or loss on the derivative financial instrument is recognised directly in equity. For cash flow hedges, the An operating segment is a component of the Group that engages associated cumulative gain or loss is removed from equity and in business activities from which it may earn revenues and recognised in profit and loss in the same period or periods during incur expenses, including revenues and expenses that relate which the underlying exposure impacts profit and loss. When the to transactions with any of the Group’s other components. hedged item is a non‑financial asset, the amount recognised in An operating segment’s operating results are reviewed regularly other comprehensive income is transferred to the carrying amount by the CEO to make decisions about resources to be allocated of the asset when the asset is recognised. The ineffective part to the segment and to assess its performance, and for which of any gain or loss is recognised immediately in profit and loss. discrete financial information is available. Hedges of net investments in foreign operations Segment capital expenditure is the total cost incurred during the The portion of the gain or loss on an instrument used to hedge period to acquire property, plant and equipment, and intangible a net investment in a foreign operation that is determined to be an assets other than goodwill. effective hedge is recognised in other comprehensive income and (u) Financial instruments presented in the hedging reserve in equity. Any ineffective portion is recognised immediately in profit and loss. Non-derivative financial instruments Non-derivative financial instruments comprise trade and other (w) Assets held for sale and discontinued operations receivables, cash and cash equivalents, loans and borrowings Immediately before classification as held for sale, the and trade and other payables. measurement of the assets (and all assets and liabilities in Non-derivative financial instruments are recognised initially at fair a disposal Group) is brought up to date in accordance with value plus, for instruments not at fair value through profit or loss, applicable accounting standards. Then, on initial classification any directly attributable transaction costs. Subsequent to initial as held for sale, non-current assets and disposal Groups are recognition non‑derivative financial instruments are measured recognised at the lower of carrying amount and fair value less at amortised cost using the effective interest rate method, less costs to sell. any impairment losses. Impairment losses on initial classification as held for sale are A financial instrument is recognised if the Group becomes included in profit or loss, even when there is a revaluation. The a party to the contractual provisions of the instrument. Financial same applies to gains and losses on subsequent remeasurement. instruments are derecognised if the Group’s obligations specified A discontinued operation is a component of the consolidated in the contract expire or are discharged or cancelled. entity’s business that represents a separate major line of business Derivative financial instruments or geographical area of operations that has been disposed of or is held for sale, or is a subsidiary acquired exclusively with a view The Group uses derivative financial instruments to hedge its to resale. exposure to foreign exchange and interest rate risks arising from operational, financing and investment activities. In accordance Classification as a discontinued operation occurs upon disposal with its treasury policy, the Group does not hold or issue derivative or when the operation meets the criteria to be classified as held financial instruments for trading purposes. However, derivatives for sale, if earlier. that do not qualify for hedge accounting are accounted for as trading instruments. Derivative financial instruments are (x) Determination of fair values recognised initially at fair value (transaction price). Subsequent A number of the Group’s accounting policies and disclosures to initial recognition, derivative financial instruments are stated require the determination of fair value, for both financial and at fair value. The gain or loss on remeasurement to fair value non‑financial assets and liabilities. The following summarises is recognised immediately in profit and loss except where the major methods and assumptions used in estimating those the derivatives qualify for hedge accounting, as described fair values. Where applicable, further information about the in policy (v). assumptions made in determining fair values is disclosed in the notes specific to that asset or liability. The fair value of interest rate swaps is the estimated amount that the Group would receive or pay to terminate the swap at the balance sheet date, taking into account current interest rates and the current creditworthiness of the swap counterparties. The fair value of forward exchange contracts is their quoted market price at the balance sheet date.

46 Nuplex industries limited Trade receivables and payables 2.m Seg ent analysis Fair value is estimated as the present value of future cash flows The Group has two reportable segments, as described below. discounted at market rates of interest where settlement is not The reportable segments offer products and services with expected within 12 months. markedly different production processes and are managed Secured bank loans separately. For each of the reporting segments the CEO reviews internal management reports monthly. The following Fair value is taken to be the carrying value of these assets and summary describes the operations in each of the Group’s liabilities due to their short‑term repricing. reportable segments:

Derivatives Inter-segment pricing is determined on an arm’s length basis. For forward exchange contracts and interest rate swaps, independent third party valuations are used. Global manufacture of synthetic resins for regional markets. Distribution of complementary Capital notes Resins functional materials. Fair value is calculated based on discounted expected future principal and interest cash flows. Manufacture and distribution of a range Specialties of functional materials for regional markets. Finance lease liabilities The fair value is estimated as the present value of future Geographical segments cash flows, discounted at current market interest rates for In presenting information on the basis of geographical segments, homogeneous lease agreements. segment sales are based on the ultimate country of destination of the product, if known. Segment assets are based on the The estimated fair values reflect changes in interest rates. geographical location of the assets.

2011 ANNUAL Report 47 N otes to the Financial Statements For the year ended 30 June 2011 continued

2.M SEG Ent ANALYSIS CONTINUED

Information about reportable segments 2011 2010 (NZD in thousands) Resins Specialties Total Group Resins Specialties Total Group

Sales to outside customers 1,272,848 302,166 1,575,014 1,169,766 290,167 1,459,933 Inter-segment sales 370 5,787 447 7,311 Segment sales 1,273,218 307,953 1,170,213 297,478

EBITDA 107,464 23,441 130,905 119,935 19,501 139,436 Depreciation and amortisation (21,094) (1,271) (22,365) (21,245) (1,604) (22,849) Segment result 86,370 22,170 108,540 98,690 17,897 116,587 Net financing costs (16,577) (20,706) Share of profits of associates 1,907 2,131 Non-controlling interest (2,728) (2,772) Tax on operating profits (23,174) (23,796) Operating profit after tax 67,968 71,444 Avondale and Seven Hills Remediation provisions – (991) Earn-out provision on Med-Chem acquisition (739) – Nuplex US waste water discharge costs and legal costs provision (692) (1,787) NZ Securities Commission proceedings costs (229) (1,300) Other non-operating items – 184 Income tax benefit on non-operating items 235 3,318 Reversal of writedown of Brazilian operation – 687 Impairments and reversal thereof – – (7,345) (7,345) Net profit attributable to equity holders of the parent 66,543 64,210 Net profit attributable to non‑controlling interests 2,728 2,772 Profit for the period 69,271 66,982

Assets 772,723 174,755 947,478 741,780 160,981 902,761 Unallocated assets 84,576 101,533 1,032,053 1,004,294

Liabilities 260,372 41,358 301,730 240,888 55,482 296,370 Unallocated liabilities 169,592 184,594 471,322 480,964

Other segment information Equity ‑accounted investments Included in segment assets 2,442 2,504 4,946 2,032 2,339 4,371 Capital and acquisition expenditure 28,622 1,235 29,858 9,185 5,992 15,177

48 Nuplex industries limited Sales by destination Non-current assets Geographic segments 2011 2010 2011 2010

New Zealand 159,071 145,770 47,197 48,625 Australia 581,819 568,707 217,630 182,991 Asia 284,320 278,314 47,970 53,473 Europe 393,853 331,341 116,127 122,218 Americas 155,951 135,801 19,625 24,954 Total Group 1,575,014 1,459,933 448,549 432,261

Revenues in the resins segment from one group of customers under common control amount to 13.4% of the Group’s total revenues.

3. Other income Group Company (NZD in thousands) 2011 2010 2011 2010

Gain on disposal of property, plant and equipment – 16 – 5 Dividends received from subsidiaries – – 20,744 59,327 Commissions and fees received 1,210 829 – – Rental income received 686 604 – 50 Income received from subsidiaries – – – 52 Reversal of writedown of Brazilian operation – 687 – – Other 870 396 – – 2,766 2,532 20,744 59,434

Dividends received from subsidiaries Dividends recognised in Company other income represent the value of dividends declared by Nuplex Operations (Aust) Pty Limited and applied to inter‑company loan accounts during the year.

4. Other operating expenses Group Company (NZD in thousands) Note 2011 2010 2011 2010

Loss on sale of property, plant and equipment – 798 – – Impairment recognised on property, plant and equipment 14 – 7,345 – – Non-recurring legal costs and settlements 1,087 3,087 1,305 – Site remediation costs provided 520 3,058 – 569 Amortisation of intellectual property 2,381 2,611 – – Restructuring and retirement 3,930 5,991 251 586 Earn-out provision on Med-Chem acquisition 739 – – – Other 228 15 115 1,591 8,885 22,905 1,671 2,746

2011 ANNUAL Report 49 N otes to the Financial Statements For the year ended 30 June 2011 continued

5. Personnel expenses Included in cost of sales, distribution, marketing, administration and other expenses are the following personnel expenses:

Group Company (NZD in thousands) Note 2011 2010 2011 2010

Wages and salaries 136,235 136,729 12,772 12,873 Social security contributions 8,176 8,291 563 724 Contributions to defined contribution plans 10,642 10,316 – – Expenses related to defined benefit plans 18 473 1,031 – – Increase/(decrease) in liability for leave 1,323 808 (10) (182) Share‑based incentive scheme 1,200 – 210 – Restructuring and retirement 3,930 5,991 251 586 Other benefits 2,206 2,345 – – 164,185 165,510 13,786 14,001

6.o Audit r’s remuneration Group Company (NZD in thousands) 2011 2010 2011 2010

Audit services Auditors of the Company KPMG Sydney: Audit and review of financial reports 641 727 298 360 Overseas KPMG Firms: Audit and review of financial reports 731 794 77 77 1,372 1,521 375 437 Other auditors Audit and review of financial reports 8 9 – – 1,380 1,530 375 437

Other services Auditors of the Company KPMG Sydney: Taxation services 204 90 – – Other services 108 – – – Overseas KPMG Firms: Taxation services 560 932 182 555 Other services – 34 – – 872 1,056 182 555

The lead auditors of the Group are KPMG Sydney.

50 Nuplex industries limited 7.ial Financ Income and Expense Recognised in profit and loss Group Company (NZD in thousands) 2011 2010 2011 2010

Interest income from outside the Group 977 1,046 135 240 Interest income from subsidiaries – – 6,626 3,109 Foreign exchange gain 820 374 3,683 – Financial income 1,797 1,420 10,444 3,349 Interest expense 16,268 20,357 6,632 6,829 Interest paid to subsidiaries – – 81 69 Foreign exchange loss 2,106 1,769 355 1,657 Financial expenses 18,374 22,126 7,068 8,555 Net financing costs 16,577 20,706 (3,376) 5,206

8. Income tax expense Recognised in profit and loss Group Company (NZD in thousands) 2011 2010 2011 2010

Current tax expense Current year 22,589 25,998 1,269 (1,745) Adjustments for prior years (683) (926) – 82 21,906 25,072 1,269 (1,663)

Deferred tax expense Temporary differences 1,033 (4,594) (6) 704 1,033 (4,594) (6) 704 Total income tax expense/(benefit) in profit and loss 22,939 20,478 1,263 (959)

2011 ANNUAL Report 51 N otes to the Financial Statements For the year ended 30 June 2011 continued

8. INCOME TAX EXPENSE CONTINUED

Reconciliation between tax expense and pre-tax net profit Group Company (NZD in thousands) 2011 2010 2011 2010

Profit before tax 92,210 87,460 23,918 53,660 Income tax using the New Zealand corporate tax rate of 30% (2010: 30%) 27,663 26,238 7,175 16,098 Increase in income tax expense due to: –– Non-deductible expenses 809 248 311 88 –C– hange in tax cost base of New Zealand buildings – 571 – 571 –T– ax losses not recognised 32 180 – – Decrease in income tax expense due to: –– Dividends from subsidiaries – – (6,223) (17,798) –– Utilisation of previously unrecognised tax losses (1,059) (2,369) – – –E– ffect of tax rate in foreign jurisdictions (2,915) (2,352) – – –– Equity earnings of associates (572) (640) – – –T– ax incentives (337) (472) – – Under / (over) provided in prior years (683) (926) – 82 Income tax expense/(benefit) on pre-tax net profit 22,939 20,478 1,263 (959)

Losses generated in the Company during the prior year have been recognised as they are expected to be utilised against profits in other New Zealand domiciled entities in either the current or following year. Deferred tax recognised directly in equity Group Company (NZD in thousands) 2011 2010 2011 2010

Fair valuation of hedge‑accounted derivatives (423) (2,632) 107 (273) (423) (2,632) 107 (273)

9. Earnings per share Group The calculation of basic earnings per share is based on: 2011 2010

Net surplus attributable to ordinary shareholders 66,543 64,210 Weighted average number of ordinary shares (in thousands of shares): Ordinary shares on issue at 1 July 192,233 189,798 Dividend reinvestment plan shares issued 1 April 2010 – 602 Dividend reinvestment plan shares issued 8 October 2010 2,059 – Dividend reinvestment plan shares issued 1 April 2011 417 – 194,709 190,400 Basic earnings per share 0.34 0.34

52 Nuplex industries limited Group The calculation of diluted earnings per share is based on: 2011 2010

Net surplus attributable to ordinary shareholders 66,543 64,210 Interest expense on convertible notes, net of tax 3,422 3,422 Net surplus attributable to ordinary shareholders (diluted) 69,965 67,632 Basic weighted average number of ordinary shares (in thousands of shares) 194,709 190,400 Effect of Performance Rights Plan 634 – Effect of conversion of convertible notes 17,221 17,772 Diluted weighted average number of ordinary shares 212,564 208,172 Diluted earnings per share 0.33 0.32

10. Inventories Group Company (NZD in thousands) 2011 2010 2011 2010

Raw materials and consumables 54,863 49,883 4,906 4,270 Finished goods 149,073 150,618 11,253 11,784 Provision for stock obsolescence (7,428) (7,721) (561) (587) 196,508 192,780 15,598 15,467

Separately identifiable unmodified purchased inventory included in this Note may be subject to a retention of title clause in the normal course of business.

11. Trade and other receivables Group Company (NZD in thousands) 2011 2010 2011 2010

Current Trade receivables 288,089 264,696 15,544 14,632 Other receivables and prepayments 22,236 20,987 915 1,081 Receivables due from controlled entities – – 1,026 904 Fair value derivatives 126 444 – – Prepaid loan restructure fees 262 986 – – 310,713 287,113 17,485 16,617 Non-current Loans to controlled entities – – 287,179 274,405 – – 287,179 274,405

The Company’s loans to controlled entities are repayable on demand and bear market interest rates with the exception of a NZD147,854,000 (2010: NZD163,417,000) loan to Nuplex Finance Holdings Limited which is non-interest bearing.

2011 ANNUAL Report 53 N otes to the Financial Statements For the year ended 30 June 2011 continued

12. Investments accounted for using the equity method Investments in associates The Group has the following investments in associates:

Reporting Ownership 30 June Principal activities Country date 2011 2010 2009

Quaker Chemical (Australia) Pty Limited Distributor of specialty products Australia 31-Dec 49% 49% 49% Innospec Valvemaster Limited Distributor of specialty products UK 31-Dec 50% 50% 50% Manufacture and distribution Synthese (Thailand) Co Limited of synthetic resins Thailand 31-Dec 47.5% 47.5% 47.5%

Share of Net assets associates as reported net profit/ Total Total by Share of Revenues Profit/(loss) (loss) assets liabilities associates associate’s (NZD in thousands) (100%) (100%) recognised (100%) (100%) (100%) net assets

2011 Quaker Chemical (Australia) Pty Limited 17,143 2,864 1,403 8,566 3,547 5,019 2,459 Innospec Valvemaster Limited 1,091 (46) (23) 623 539 84 42 Synthese (Thailand) Co Limited 34,096 1,110 527 20,118 14,916 5,202 2,445 52,330 3,928 1,907 29,307 19,002 10,305 4,946

2010 Quaker Chemical (Australia) Pty Limited 15,332 2,392 1,172 7,742 3,146 4,597 2,252 Innospec Valvemaster Limited 984 (20) (10) 546 420 126 63 Synthese (Thailand) Co Limited 30,596 2,040 969 21,230 16,491 4,739 2,056 46,912 4,412 2,131 29,518 20,057 9,462 4,371

Results of associates Group (NZD in thousands) 2011 2010

Share of associate profit before income tax 2,724 3,044 Share of income tax expense (817) (913) Share of associates net profit as disclosed by associates 1,907 2,131 Share of associates net profit accounted for using the equity method 1,907 2,131

Reconciliation of investment balance Group (NZD in thousands) 2011 2010

Balance as at 1 July 4,371 3,092 Share of associates net profit/(loss) 1,907 2,131 Dividends received (1,334) (844) Exchange translation difference 2 (8) Balance as at 30 June 4,946 4,371

54 Nuplex industries limited 13.r Defer ed tax assets and liabilities Recognised deferred tax assets and liabilities Deferred tax assets and liabilities are attributable to the following:

Group Assets Liabilities (NZD in thousands) 2011 2010 2011 2010

Property, plant and equipment 206 163 19,958 20,446 Intangible assets 135 196 3,502 3,813 Receivables 944 1,312 17 264 Inventories 1,197 647 683 25 Employee benefits 10,169 6,113 – – Payables 1,925 2,549 – – Provisions 2,021 5,818 – – Fair value derivatives 366 226 – – Other items 2,164 3,121 693 157 Tax assets / liabilities 19,128 20,145 24,853 24,705 Set off of tax (10,836) (10,752) (10,836) (10,752) Net tax assets / liabilities 8,292 9,393 14,017 13,953

Company Assets Liabilities (NZD in thousands) 2011 2010 2011 2010

Property, plant and equipment – – 1,280 1,423 Intangible assets – 66 – – Receivables 119 63 – – Inventories 178 176 – – Employee benefits 641 558 – – Payables 126 112 – – Provisions 509 616 – – Fair value derivatives 76 2 – – Other items – – 170 84 Tax assets / liabilities 1,649 1,593 1,450 1,507 Set off of tax (1,450) (1,507) (1,450) (1,507) Net tax assets / liabilities 199 86 – –

Movement in temporary differences during the year Group Company 2011 2010 2011 2010

Balance as at 1 July (4,560) (9,666) 86 1,063 Recognised in profit or loss (1,033) 4,594 6 (704) Recognised in equity (423) (2,632) 107 (273) Exchange adjustment 291 3,144 – – Balance as at 30 June (5,725) (4,560) 199 86

2011 ANNUAL Report 55 N otes to the Financial Statements For the year ended 30 June 2011 continued

13.R DEFER ED TAX ASSETS AND LIABILITIES CONTINUED

Unrecognised deferred tax assets Deferred tax assets have not been recognised in respect of the following items:

Group Company (NZD in thousands) 2011 2010 2011 2010

Gross value of tax losses 28,171 31,467 – –

The tax losses will not expire under local legislation, subject to the local taxpaying entities meeting any conditions relating to continuity of business and ownership.

Deferred tax assets have not been recognised in respect of these losses because it is not probable that taxable profit will be available in the immediate future against which the losses can be applied.

The losses originate in Brazil (NZD8,252,000 (2010: NZD8,614,000)) and the UK (NZD19,919,000 (2010: 22,853,000))

56 Nuplex industries limited 14. Property, plant and equipment Group Land and Plant and Motor Under (NZD in thousands) buildings equipment vehicles construction Total

Cost Balance as at 1 July 2009 198,044 304,476 8,672 1,944 513,136 Additions/transfers 2,511 3,623 423 (343) 6,214 Disposals (573) (38,156) (1,774) – (40,503) Effect of movements in foreign exchange (14,742) (16,176) (865) (207) (31,990) Balance as at 30 June 2010 185,240 253,767 6,456 1,394 446,857

Balance as at 1 July 2010 185,240 253,767 6,456 1,394 446,857 Acquisitions through business combinations – 20,895 – – 20,895 Additions/transfers 834 7,958 977 1,463 11,232 Disposals (180) (2,902) (1,140) – (4,222) Effect of movements in foreign exchange (1,229) (2,340) (143) (78) (3,790) Balance as at 30 June 2011 184,665 277,377 6,150 2,779 470,972

Depreciation and impairment losses Balance as at 1 July 2009 28,687 159,422 5,828 – 193,937 Depreciation charge for the year 3,732 15,549 747 – 20,028 Impairment charge 7,345 – – – 7,345 Disposals (573) (37,351) (1,774) – (39,698) Effect of movements in foreign exchange (2,605) (3,879) (434) – (6,918) Balance as at 30 June 2010 36,586 133,741 4,367 – 174,694

Balance as at 1 July 2010 36,586 133,741 4,367 – 174,694 Depreciation charge for the year 3,509 15,602 765 – 19,876 Disposals (180) (2,902) (1,140) – (4,222) Effect of movements in foreign exchange (1,200) (1,064) (31) – (2,295) Balance as at 30 June 2011 38,715 145,377 3,961 – 188,053

Carrying amounts At 1 July 2009 169,357 133,835 2,844 1,944 319,199 At 30 June 2010 148,654 120,027 2,089 1,394 272,163 At 1 July 2010 148,654 120,027 2,089 1,394 272,163 At 30 June 2011 145,950 132,001 2,189 2,779 282,919

2011 ANNUAL Report 57 N otes to the Financial Statements For the year ended 30 June 2011 continued

14. PROpeRTY, PLANT AND EQUIPMENT CONTINUED

Company Land and Plant and Motor (NZD in thousands) buildings equipment vehicles Total

Cost Balance as at 1 July 2009 17,0 66 28,224 35 45,325 Additions/transfers 2 731 – 733 Disposals – (6) – (6) Balance as at 30 June 2010 17,0 68 28,949 35 46,052

Balance as at 1 July 2010 17,0 68 28,949 35 46,052 Acquisitions through business combinations – – – – Additions/transfers 10 556 – 566 Disposals – (38) – (38) Balance as at 30 June 2011 17,078 29,467 35 46,580

Depreciation and impairment losses Balance as at 1 July 2009 1,731 23,298 24 25,053 Depreciation charge for the year 317 1,002 3 1,322 Impairment charge – – – – Disposals – (6) – (6) Balance as at 30 June 2010 2,048 24,294 27 26,369

Balance as at 1 July 2010 2,048 24,294 27 26,369 Depreciation charge for the year 316 970 3 1,289 Disposals – (38) – (38) Balance as at 30 June 2011 2,364 25,226 30 27,620

Carrying amounts At 1 July 2009 15,335 4,926 11 20,272 At 30 June 2010 15,020 4,655 8 19,683 At 1 July 2010 15,020 4,655 8 19,683 At 30 June 2011 14,714 4,241 5 18,960

Impairment The Directors impaired the value of land holdings in the specialties segment in the year ended 30 June 2010. The Group had received indicative valuations of certain land holdings. As the valuations were less than the carrying value of the land, the Directors considered these to provide an indicator of impairment and reduced the carrying value to the estimated fair value less costs to sell. Further valuations obtained in the current year suggest there has been no change to the estimated fair value less costs to sell. Leased plant and machinery The Group leases plant and equipment under a number of finance lease agreements. At 30 June 2011, the net carrying amount of leased plant and machinery was NZD955,000 (2010: NZD1,003,000) for the Group and NZD153,000 (2010: NZD135,000) for the Company. The leased equipment secures the underlying lease obligations (see Note 17).

58 Nuplex industries limited Assets pledged as security for loan facility The Group’s loan facility is secured by a charge over the Group’s Netherlands, New Zealand and Australian assets and undertakings. The net book value of the property, plant and equipment covered by that charge at 30 June 2011 was:

Group Company

Land and buildings 127,345 14,714 Plant and equipment 83,133 4,241 Motor vehicles 1,453 5 Total 211,931 18,960

15. Intangible assets Group Intellectual (NZD in thousands) Goodwill Agencies property Other Total

Cost Balance as at 1 July 2009 123,271 28,660 31,238 3,045 186,214 Acquisitions through business combinations 499 3,177 – – 3,676 Other acquisitions – – – 3,646 3,646 Disposals – – – (978) (978) Effect of movements in foreign exchange (8,631) – (5,501) (133) (14,265) Balance as at 30 June 2010 115,139 31,837 25,737 5,580 178,293 Balance as at 1 July 2010 115,139 31,837 25,737 5,580 178,293 Acquisitions through business combinations 715 – – – 715 Other acquisitions – – – 6,030 6,030 Effect of movements in foreign exchange 3,169 – (926) 192 2,435 Balance as at 30 June 2011 119,023 31,837 24,811 11,802 187,473

Amortisation and impairment losses Balance as at 1 July 2009 18,240 – 11,984 2,588 32,812 Amortisation for the year – – 2,611 210 2,821 Disposals – – – (978) (978) Effect of movements in foreign exchange (147) – (2,511) (38) (2,696) Balance as at 30 June 2010 18,093 – 12,084 1,782 31,959 Balance as at 1 July 2010 18,093 – 12,084 1,782 31,959 Amortisation for the year – – 2,381 107 2,488 Effect of movements in foreign exchange 722 – (129) 42 635 Balance as at 30 June 2011 18,815 – 14,336 1,931 35,082

Carrying amounts At 1 July 2009 105,031 28,660 19,254 457 153,402 At 30 June 2010 97,046 31,837 13,653 3,798 146,334 At 1 July 2010 97,046 31,837 13,653 3,798 146,334 At 30 June 2011 100,208 31,837 10,475 9,871 152,391

2011 ANNUAL Report 59 N otes to the Financial Statements For the year ended 30 June 2011 continued

15.T IN ANGIBLE ASSETS CONTINUED

Company (NZD in thousands) Goodwill Other Total

Cost Balance as at 1 July 2009 2,650 208 2,858 Balance as at 30 June 2010 2,650 208 2,858 Balance as at 1 July 2010 2,650 208 2,858 Balance as at 30 June 2011 2,650 208 2,858

Amortisation and impairment losses Balance as at 1 July 2009 500 192 692 Amortisation for the year – 11 11 Balance as at 30 June 2010 500 203 703 Balance as at 1 July 2010 500 203 703 Amortisation for the year – 1 1 Balance as at 30 June 2011 500 204 704

Carrying amounts At 1 July 2009 2,150 16 2,166 At 30 June 2010 2,150 5 2,155 At 1 July 2010 2,150 5 2,155 At 30 June 2011 2,150 4 2,154

Agencies Agencies disclosed above represent the fair value assessed at the time of acquisition of certain agency agreements acquired as part of the PML Holdings Limited group of companies and Med-Chem business. Amortisation charge The amortisation charge is recognised in the following line items in profit and loss:

Group Company (NZD in thousands) 2011 2010 2011 2010

Administration expenses 107 210 1 11 Other operating expenses 2,381 2,611 – – 2,488 2,821 1 11

Impairment tests for cash‑generating units containing goodwill and capitalised agencies The following segments have significant carrying amounts of goodwill and capitalised agencies:

Group Company (NZD in thousands) 2011 2010 2011 2010

Resins goodwill 87,463 84,545 2,150 2,150 Specialties goodwill 12,745 12,501 – – Specialties agencies 31,837 31,837 – – 132,045 128,883 2,150 2,150

60 Nuplex industries limited For the purposes of impairment testing, goodwill and agencies are allocated to the Group’s operating divisions which represent the lowest level within the Group at which goodwill is monitored for internal management purposes.

The recoverable amount of each cash-generating unit (‘CGU’) is based on value‑in‑use calculations. Those calculations use cash flow projections based on actual operating results, budgets and forecasts.

Key budget and forecast assumptions, including market growth rates, wages growth rates and inflation are set based on independent economic forecasts for each relevant jurisdiction and approved at Board level.

Detailed budgets and forecast cash flows are prepared for a two‑year period and are extrapolated using the following growth rates, in accordance with current business plans and forecasts and with reference to long‑term independent economic forecasts.

Growth rate assumptions:

Australian Resins 1.9-3% New Zealand Resins 2% Australia and New Zealand Specialties 0-3% Europe Resins 2% Americas Resins 1% Asia Resins 3%

The period over which cash flows are considered for each region is consistent with the Group’s long‑term commitment and certainty of cash flows in each region. The following pre-tax discount rates have been used in discounting the projected cash flows:

Discount rates used:

New Zealand 16.7% Australia 17.0% Europe 14.8% Americas 15.0% Asia 16.2%

There was a significant amount of headroom between the recoverable amount and the carrying value of goodwill by CGU and no impairment was recognised. Management does acknowledge that the value‑in‑use calculations are sensitive to changes in interest rates, earnings and foreign exchange rates varying from the assumptions and forecast data used in the impairment testing. As such, sensitivity analysis was undertaken to examine the effect of a change in a variable on each CGU. Management believes that any reasonably possible change in the key assumptions on which recoverable amount is based would not create a situation where the carrying value of goodwill allocated to a particular CGU would exceed its recoverable amount other than in respect of the NZ Plaster Systems and ANZ Polychem Multichem CGUs where a 2% increase in discount rate or a 2% decrease in long-term growth rates would result in the carrying value of the CGU equalling its recoverable amount.

16. Trade and other payables

Group Company (NZD in thousands) 2011 2010 2011 2010

Trade payables and accrued expenses 244,718 237,503 17,274 12,335 Trade payables and accruals owed to subsidiaries – – 1,162 2,977 Fair value derivatives 1,334 1,232 254 5 246,052 238,735 18,690 15,317

2011 ANNUAL Report 61 N otes to the Financial Statements For the year ended 30 June 2011 continued

17. Interest-bearing loans and borrowings This note provides information about the contractual terms of the Group’s interest-bearing loans and borrowings. For more information about the Group’s exposure to interest rate and foreign currency risk, see Note 21.

Group Company (NZD in thousands) 2011 2010 2011 2010

Current liabilities Current portion of secured bank loans 87,243 – – – Current portion of finance lease liabilities 452 356 77 74 87,695 356 77 74

Non-current liabilities Secured bank loans – 101,340 – – Capital notes 52,568 52,568 52,568 52,568 Finance lease liabilities 509 159 81 91 53,077 154,067 52,649 52,659

Financing facilities Secured bank loans 388,954 369,140 – –

Facilities utilised at reporting date Secured bank loans 87,243 101,340 – –

Facilities not utilised at reporting date Secured bank loans 301,710 267,80 0 – –

Terms and debt repayment schedule The terms and conditions of outstanding loans were as follows:

Nominal interest rate 2011 2010 Carrying Carrying (NZD in thousands) Currency 2011 2010 Maturity Face value amount Face value amount

Capital notes NZD 9.30% 9.30% Sep–12 52,568 52,568 52,568 52,568 Cash advance facility loan USD 1.71% Mar–12 – – 19,543 19,543 Cash advance facility loan USD 1.88% Mar–12 – – 2,012 2,012 Cash advance facility loan AUD 6.42% 6.15% Mar–12 78,439 78,439 68,906 68,906 Cash advance facility loan EUR 3.04% 2.16% Mar–12 8,804 8,804 8,769 8,769 Cash advance facility loan CNY 5.10% Mar–12 – – 2,110 2,110 Total interest‑bearing liabilities 139,811 139,811 153,908 153,908

Financing arrangements Capital notes The capital notes have an election date of 15 September 2012, at which point the Company can redeem for cash or roll over the notes on revised terms. Unless the Company has given notice that it will redeem all capital notes, noteholders must elect to retain some or all of their notes on revised terms or convert some or all notes to shares. Despite a noteholders’ election, the Company can elect to redeem for cash some or all of the notes. The capital notes have an interest rate of 9.3% per annum.

Revolving multi-currency cash advance facilities Bank loans are denominated in Australian Dollars, Euro, US Dollars and Chinese Yuan (refer Note 21). The overall facility limit is denominated in AUD and is AUD300,000,000 (2010: AUD300,000,000).

The bank loans are secured by a charge over the Group’s Netherlands, New Zealand and Australian assets and undertakings.

62 Nuplex industries limited The bank loans are also secured by a negative pledge whereby Nuplex Industries Limited and a guaranteeing group of its subsidiary companies undertake to the lenders that they will not create or allow to continue any security interest over any part of its property other than in limited circumstances. The guaranteeing group comprises all wholly owned subsidiary companies except Nuplex Resins (Foshan) Co Limited, Nuplex Resins (Suzhou) Co Limited, Nuplex Resins (Thailand) Limited, Nuplex Industries (Hong Kong) Limited and Nuplex Producao de Resinas Ltda.

Loans are drawn on a revolving facility and are drawn for periods of 1, 2, 3 or 6 months under the facilities and interest accrues at a rate fixed on the date of drawdown for that period. The facilities have a maturity of March 2012 and as such have been disclosed as current in the statement of financial position.

The Group’s borrowings are subject to various covenants pursuant to the financing arrangements with the Group’s bank lenders.

Renewal of multi-currency cash advance facilities On 19 August 2011 the Group renewed its multi-currency cash advance facility. The facility was extended for a further three‑year period with a reduced facility limit of AUD200,000,000. Under the renewed agreement no assets are pledged as security for the facility. Finance lease liabilities Finance lease liabilities of the Group and Company are payable as follows:

Group Company Minimum Minimum lease lease (NZD in thousands) payments Principal Interest payments Principal Interest

2011 Less than one year 484 452 32 82 77 5 Between one and five years 532 509 22 87 81 6 1,016 961 54 169 158 11

2010 Less than one year 396 356 40 99 91 8 Between one and five years 172 159 13 78 74 4 568 515 53 177 165 12

The Group leases equipment under finance leases expiring from one to five years.

2011 ANNUAL Report 63 N otes to the Financial Statements For the year ended 30 June 2011 continued

18. Employee provisions Group Company (NZD in thousands) 2011 2010 2011 2010

Current Bonus provisions 7,352 9,184 485 366 Liability for annual leave 11,126 9,770 1,259 885 Redundancy 3,436 2,427 – – Other 2,022 2,204 – – 23,936 23,585 1,744 1,251

Non ‑Current Present value of unfunded obligations 10,630 14,054 – – Present value of funded obligations – 2,010 – – Fair value of plan assets – (1,796) – – Present value of net obligations 10,630 14,268 – – Unrecognised actuarial amounts (206) (857) – – Recognised liability for defined benefit obligations (see below) 10,424 13,411 – – Liability for long-service leave 8,424 8,218 314 388 Other 2,039 1,784 229 229 Total non-current employee benefits 20,887 23,413 543 617

The movement in the redundancy provision included utilisations of NZD3,424,000. Liability for defined benefit obligation The Group makes contributions to two defined benefit plans that provide benefits for employees upon retirement. The plans include a retirement scheme in The Netherlands and a United States medical scheme. During the year the Group’s one remaining New Zealand defined benefit retirement scheme was terminated.

Plan assets consist of the following:

Group Company 2011 2010 2011 2010

Equity securities – 916 – – Property – 180 – – Fixed interest – 611 – – Other – 89 – – – 1,796 – –

None of the plans held any investments in Nuplex shares.

Movements in the net liability for defined benefit obligations:

Group Company (NZD in thousands) 2011 2010 2011 2010

Net liability for defined benefit obligations at 1 July 16,064 17,223 – – Benefits and settlements paid (4,485) (1,452) – – Current service costs and interest 541 1,000 – – Actuarial gain/(loss) 118 747 – – Exchange adjustment (1,608) (1,454) – – Net liability for defined benefit obligations at 30 June 10,630 16,064 – –

64 Nuplex industries limited Liability for defined benefit obligation (continued) Movements in plan assets:

Group Company 2011 2010 2011 2010

Fair value of plan assets at 1 July 1,796 1,626 – – Employer contributions paid into the plan 80 88 – – Participant contributions paid into the plan 38 42 – – Benefits and settlements paid by the plan (2,016) – – – Expected return on plan assets 79 84 – – Actuarial gain/(loss) 23 (44) – – – 1,796 – –

Expense recognised in profit and loss:

Group Company 2011 2010 2011 2010

Current service costs (90) (308) – – Interest on obligation (450) (692) – – Expected return on plan assets 79 84 – – Amortisation of actuarial gain/(loss) (12) (115) – – (473) (1,031) – –

The expense is recognised in the following lines in profit and loss:

Group Company 2011 2010 2011 2010

Marketing expenses (76) (81) – – Administration expenses (397) (950) – – (473) (1,031) – –

It is expected that the Group will make contributions to plans of NZD4.3m and pay benefits from the plans of NZD0.3m in the year ended 30 June 2011.

Actuarial Assumptions:

Group Company 2011 2010 2011 2010

Discount rate 4.75 to 5.50% 3.80 to 6.00% – – Return on plan assets 4.75% 5.00% – – Social security increases 2.00% 2.00% – – Pension increases 2.00 to 13.20% 2.00 to 9.20% – – Salary increases 2.50% 0 to 4.00% – –

Trend data 2011 2010 2009 2008 2007

Defined benefit obligation (10,630) (16,064) (17,223) (17,892) (16,563) Assets of the plans – 1,796 1,626 2,205 2,438 Net obligation (10,630) (14,268) (15,597) (15,687) (14,125) Experience adjustments arising on plan assets (23) 44 292 259 (75) Experience adjustments arising on plan liabilities (446) (184) (184) (293) 1,219

2011 ANNUAL Report 65 N otes to the Financial Statements For the year ended 30 June 2011 continued

18. EMPLOyee PROVISIONS CONTINUED

Share ‑based incentive schemes The Company established in the current year a Performance Rights Plan that entitles key management personnel to receive shares in the Company after a three- or four‑year vesting period subject to TSR and EPS performance hurdles. The first tranche of the scheme was approved by shareholders in November 2010 and involved the issue of 1,371,668 rights with a vesting period commencing 1 July 2010 and tested for vesting at 30 June 2013 and 30 June 2014 if not fully vested at the earlier date; rights lapse at 30 June 2014 if unvested. The rights are equally split into those tested against a TSR performance hurdle and those tested against an EPS performance hurdle and rights vest on a sliding scale depending on performance against targets set at grant in each case, subject also to continuing service with the Company.

The grant date fair value of the rights was measured based on Monte Carlo sampling for those subject to a TSR hurdle. Expected volatility is estimated by considering historic average share price volatility. The inputs used in the measurement of those fair values were:

Share price at grant date NZD3.53 Risk‑free rate (based on Govt. bonds) 4.26% Dividend yield 7% Volatility 26%

Group Company (Income)/Expense recognised in the income statement (NZD in thousands) 2011 2010 2011 2010

Performance rights granted in 2011 financial year 1,200 – – – 1,200 – – –

19.v Pro isions Group Company Site Site (NZD in thousands) restoration Other Total restoration Total

Balance as at 1 July 2010 7,956 2,681 10,637 2,055 2,055 Provisions made during the year 520 2,317 2,837 – – Provisions used or reversed during the year (966) (1,923) (2,889) (235) (235) Exchange rate adjustment 270 – 270 – – Balance as at 30 June 2011 7,780 3,075 10,855 1,820 1,820

2011 Current 7,780 3,075 10,855 1,820 1,820 Non-current – – – – – Total 7,780 3,075 10,855 1,820 1,820

2010 Current 7,956 2,681 10,637 2,055 2,055 Non-current – – – – – Total 7,956 2,681 10,637 2,055 2,055

Site restoration Provisions for site restoration are made where the Group has an obligation to remediate a site on which contamination has occurred. Provisions are based upon prior experience and surveyors’ reports. The amounts are expected to be utilised within the year. Other Other provisions include provisions for costs to defend legal claims and earn-outs payable on acquisitions as disclosed in Note 26.

66 Nuplex industries limited 20. Capital and reserves Reconciliation of movement in capital and reserves Group Attributable to equity holders of the parent Share- based Non- Share payments Translation Retained Hedging controlling Total capital reserve reserve earnings reserve Total interest equity

Balance as at 1 July 2009 341,944 – 28,929 146,248 (5,449) 511,672 9,950 521,622 Total comprehensive income for the year – – (37,861) 64,210 4,913 31,262 2,425 33,687 Shares issued 7,720 – – – – 7,720 – 7,720 Dividends paid – – – (35,113) – (35,113) (4,586) (39,699) Balance as at 30 June 2010 349,664 – (8,932) 175,345 (536) 515,541 7,789 523,330 Balance as at 1 July 2010 349,664 – (8,932) 175,345 (536) 515,541 7,789 523,330 Total comprehensive income for the year – – (6,293) 66,543 (181) 60,069 1,874 61,943 Shares issued 14,580 – – – – 14,580 – 14,580 Performance Rights Plan – 1,200 – – – 1,200 – 1,200 Dividends paid – – – (40,652) – (40,652) (2,781) (43,433) Non-controlling interest in acquisition – – – – – – 3,112 3,112 Balance as at 30 June 2011 364,244 1,200 (15,225) 201,236 (717) 550,738 9,994 560,732

Company Share- based Share payments Retained Hedging capital reserve earnings reserve Total

Balance as at 1 July 2009 341,944 – 81,034 (819) 422,159 Total comprehensive income for the year – – 54,619 638 55,257 Shares issued 7,720 – – – 7,720 Dividends paid – – (35,113) – (35,113) Balance as at 30 June 2010 349,664 – 100,540 (181) 450,023 Balance as at 1 July 2010 349,664 – 100,540 (181) 450,023 Total comprehensive income for the year – – 22,655 (249) 22,406 Shares issued 14,580 – – – 14,580 Performance Rights Plan – 1,200 – – 1,200 Dividends paid – – (40,652) – (40,652) Balance as at 30 June 2011 364,244 1,200 82,543 (430) 447,557

2011 ANNUAL Report 67 N otes to the Financial Statements For the year ended 30 June 2011 continued

20. CAPITAL and RESERVES CONTINUED

Share capital Company and Group (In thousands of shares) (NZD in thousands) 2011 2010 2011 2010

Fully paid ordinary shares On issue at 1 July 192,233 189,798 349,664 341,944 Dividend reinvestment plan 4,515 2,435 14,580 7,720 On issue at 30 June 196,748 192,233 364,244 349,664

The holders of ordinary shares are entitled to receive dividends as declared from time to time; are entitled to one vote per share at meetings of the Company and participate equally on winding up of the Company. Share ‑based payments reserve The share‑based payments reserve comprises the equity impact of the Group’s Performance Rights Plan as disclosed in Note 18. Translation reserve The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations where their functional currency is different to the functional currency of the reporting entity, as well as from the translation of liabilities designated as hedges of the Company’s net investment in a foreign subsidiary. Hedging reserve The hedging reserve comprises the effective portion of the cumulative net change in the fair value of effective cash flow hedging instruments related to hedged transactions that have not yet occurred.

Dividends recognised in the current and previous years by the Company are as follows:

2011 2010 Imputation Imputation Cents per Total cents per Date of Cents per Total cents per Date of (NZD in thousands) share amount share payment share amount share payment

Interim current year ordinary 10.0 19,506 Nil Apr-11 10 18,980 Nil Apr-10 Final prior year special – – – – 3.5 6,643 Nil Oct-09 Final prior year ordinary 11.0 21,146 Nil Oct-10 5.0 9,490 Nil Oct-09 Total amount 21.0 40,652 18.5 35,113

Dividends include tax credits from the Company’s Imputation Credit Account as noted above. Dividends also include Australian franking credits at 80% of the maximum rate for the prior year interim dividend, 40% for the prior year final dividend and 50% of the maximum rate for the current year interim dividend.

After the balance sheet date the following dividends were proposed by the Directors. The dividends have not been provided.

Imputation Cents per Total cents per Date of (NZD in thousands) share amount share payment

Final dividend 11.0 21,642 Nil 7 October 2011

Imputation credits Group (NZD in thousands) 2011 2010

Balance as at 1 July 1,915 2,688 Prior year adjustment 175 (151) Tax paid/(refunded) and interest applied (995) (622) Balance as at 30 June 1,095 1,915

68 Nuplex industries limited The Company is part of a New Zealand tax group with the Group’s other New Zealand domiciled entities. The imputation credit balance presented above represents that of the Group.

Australian franking credits Group (AUD in thousands) 2011 2010

Balance as at 1 July 927 19,445 Franking credits attached to dividends received 441 294 Tax paid 8,840 1,872 Franking credits attached to dividends paid (6,857) (20,684) Balance as at 30 June 3,351 927

21. Financial risk management Exposure to credit, liquidity, interest rate and currency risks arises in the normal course of the Group’s business. This note presents information about the Group’s exposure to those risks, the objectives, policies and processes for measuring and managing financial risks, and the Group’s management of capital. Further quantitative disclosures are included throughout these financial statements.

The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework. The Group’s risk management policies are set to identify and analyse the risks faced by the Group, to set appropriate limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities.

The Board oversees how management monitors compliance with the Group’s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to risks faced by the Group. Credit risk Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s receivables from customers.

Trade and other receivables The Group has a credit policy which restricts the exposure to individual trade debtors. Each new customer is analysed for creditworthiness before the Group offers payment and delivery terms. The review includes external ratings where available. Credit limits are established for each customer, representing the maximum open amount without requiring approval from senior management or the Board. The Board of Directors reviews the exposure to trade debtors on a regular basis. 13.4% of the Group’s revenue is attributable to one global group of customers under common control.

Goods are sold subject to retention of title clauses, so that in the event of non-payment the Group may have a secured claim. The Group does not require collateral in respect of trade receivables.

Guarantees The Company has issued a guarantee to HSBC to enable associate company Synthese Thailand Co Limited to borrow up to USD5.6million, as detailed in Note 24.

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was:

Group Company (NZD in thousands) 2011 2010 2011 2010

Trade and other receivables 310,588 286,669 16,459 15,713 Cash and cash equivalents 66,850 82,063 4,275 12,424 Interest rate swaps used for hedging: Assets 50 – – – Forward exchange contracts used for hedging: Assets 76 444 – – 377,564 369,176 20,734 28,137

2011 ANNUAL Report 69 N otes to the Financial Statements For the year ended 30 June 2011 continued

21. FINANCIAL RISK MANAGEMENT CONTINUED

The maximum exposure to credit risk for financial assets at the reporting date by geographic region was:

Group Company (NZD in thousands) 2011 2010 2011 2010

New Zealand 34,451 43,954 17,919 25,023 Australia 114,165 122,286 281 508 Americas 26,899 30,393 – – Europe 118,309 98,397 – 4 Asia 83,740 74,146 2,534 2,602 377,564 369,176 20,734 28,137

The ageing of trade receivables at the reporting date was:

Group Company Gross Impairment Gross Impairment Gross Impairment Gross Impairment (NZD in thousands) 2011 2011 2010 2010 2011 2011 2010 2010 Not past due 251,476 (1,716) 233,392 (2,640) 12,714 – 13,072 – Past due 0-30 days 30,934 – 23,243 – 2,280 – 1,338 – Past due 31-90 days 5,534 (495) 8,523 – 449 – 119 – Past due 91 days or more 3,822 (1,467) 4,186 (2,009) 525 (424) 464 (361) Total 291,766 (3,678) 269,345 (4,649) 15,968 (424) 14,993 (361)

The movement in the allowance for impairment in respect of trade receivables during the year was:

Group Company (NZD in thousands) 2011 2010 2011 2010 Balance as at 1 July 4,649 4,805 361 209 Impairment loss recognised/(reversed) (160) 1,803 153 154 Utilisation of existing provisions (812) (1,743) (90) (2) Exchange adjustment 1 (216) – – Balance as at 30 June 3,678 4,649 424 361

Included in Group trade receivables are amounts totalling NZD474,000 (2010: NZD4,225,000) not past due having been renegotiated.

70 Nuplex industries limited Liquidity risk Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group ensures as far as possible that it maintains sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.

In addition to the Group debt facility, companies in the Group maintain operating credit facilities for day‑to‑day operational purposes.

The following are the contractual maturities of financial liabilities, including interest payments and excluding the impact of netting arrangements:

Group Carrying Contractual 6 months or (NZD in thousands) amount cash flows less 6-12 months 1-2 years 2-5 years

2011 Non-derivative financial liabilities Secured bank loans 87,243 91,739 2,997 88,742 – – Capital notes 52,568 58,475 2,444 2,444 53,587 – Finance lease liabilities 961 1,016 242 242 330 201 Trade and other payables 244,718 244,718 244,718 – – –

Derivative financial liabilities Interest rate swaps – – – – – –

Forward exchange contracts –– Outflow 1,334 42,782 41,920 862 – – –– Inflow (76) (41,441) (40,602) (839) – – 386,748 397,289 251,719 91,451 53,917 201

Group Carrying Contractual 6 months or (NZD in thousands) amount cash flows less 6-12 months 1-2 years 2-5 years

2010 Non-derivative financial liabilities Secured bank loans 101,340 112,239 3,114 3,114 106,011 – Capital notes 52,568 63,364 2,444 2,444 4,889 53,587 Finance lease liabilities 515 568 198 198 135 37 Trade and other payables 237,503 237,503 237,503 – – –

Derivative financial liabilities Interest rate swaps 1,136 1,076 970 155 (49) –

Forward exchange contracts –– Outflow 96 46,170 45,237 933 – – –– Inflow (444) (47,302) (46,382) (920) – – 392,714 413,616 243,084 5,924 110,986 53,624

2011 ANNUAL Report 71 N otes to the Financial Statements For the year ended 30 June 2011 continued

21. FINANCIAL RISK MANAGEMENT CONTINUED

Company Carrying Contractual 6 months or (NZD in thousands) amount cash flows less 6-12 months 1-2 years 2-5 years

2011

Non-derivative financial liabilities Capital notes 52,568 58,475 2,444 2,444 53,587 – Finance lease liabilities 158 170 41 41 43 46 Trade and other payables 18,436 18,436 18,436 – – –

Derivative financial liabilities

Forward exchange contracts –– Outflow 254 4,853 4,853 – – – –– Inflow – (4,598) (4,598) – – – 71,416 77,336 21,176 2,485 53,630 46

Company Carrying Contractual 6 months or (NZD in thousands) amount cash flows less 6-12 months 1-2 years 2-5 years

2010

Non-derivative financial liabilities Capital notes 52,568 63,364 2,444 2,444 4,889 53,587 Finance lease liabilities 165 177 50 50 55 22 Trade and other payables 15,312 15,312 15,312 – – –

Derivative financial liabilities

Forward exchange contracts –– Outflow 5 6,070 6,070 – – – –– Inflow – (6,121) (6,121) – – – 68,050 78,802 17,755 2,494 4,944 53,609

72 Nuplex industries limited The following table indicates the periods in which the cash flows associated with derivatives that are cash flow hedges are expected to occur:

Group Carrying Expected 6 months or (NZD in thousands) amount cash flows less 6-12 months 1-2 years 2-5 years

2011

Interest rate swaps Assets 50 52 32 20 – –

Forward exchange contracts Assets 76 41,441 40,602 839 – – Liabilities (1,334) (42,782) (41,920) (862) – – (1,208) (1,289) (1,286) (3) – –

Group Carrying Expected 6 months or (NZD in thousands) amount cash flows less 6-12 months 1-2 years 2-5 years

2010

Interest rate swaps Liabilities (1,136) (1,076) (970) (155) 49 –

Forward exchange contracts Assets 444 47,302 46,382 920 – – Liabilities (96) (46,170) (45,237) (933) – – (788) 56 175 (168) 49 –

Company Carrying Expected 6 months or (NZD in thousands) amount cash flows less 6-12 months 1-2 years 2-5 years

2011

Forward exchange contracts Assets – 4,598 4,598 – – – Liabilities (254) (4,853) (4,853) – – – (254) (255) (255) – – –

Company Carrying Expected 6 months or (NZD in thousands) amount cash flows less 6-12 months 1-2 years 2-5 years

2010

Forward exchange contracts Assets – 6,121 6,121 – – – Liabilities (5) (6,070) (6,070) – – – (5) 51 51 – – –

2011 ANNUAL Report 73 N otes to the Financial Statements For the year ended 30 June 2011 continued

21. FINANCIAL RISK MANAGEMENT CONTINUED

The following table indicates the periods in which the cash flows associated with derivatives that are cash flow hedges are expected to impact profit and loss:

Group Carrying Expected 6 months or (NZD in thousands) amount cash flows less 6-12 months 1-2 years 2-5 years

2011

Interest rate swaps Assets 50 52 42 10 – –

Forward exchange contracts Assets 76 41,441 40,602 839 – – Liabilities (1,334) (42,782) (41,920) (862) – – (1,208) (1,289) (1,276) (13) – –

Group Carrying Expected 6 months or (NZD in thousands) amount cash flows less 6-12 months 1-2 years 2-5 years

2010

Interest rate swaps Liabilities (1,136) (1,075) (1,025) (109) 59 –

Forward exchange contracts Assets 444 47,302 46,382 920 – – Liabilities (96) (46,170) (45,237) (933) – – (788) 57 120 (122) 59 –

Company Carrying Expected 6 months or (NZD in thousands) amount cash flows less 6-12 months 1-2 years 2-5 years

2011

Forward exchange contracts Assets – 4,598 4,598 – – – Liabilities (254) (4,853) (4,853) – – – (254) (255) (255) – – –

Company Carrying Expected 6 months or (NZD in thousands) amount cash flows less 6-12 months 1-2 years 2-5 years

2010

Forward exchange contracts Assets – 6,121 6,121 – – – Liabilities (5) (6,070) (6,070) – – – (5) 51 51 – – –

74 Nuplex industries limited Market risk The Group is exposed to the risk that changes in foreign exchange rates and interest rates will affect the Group’s income or value of financial instruments. The objective of managing these risks is to control exposures within acceptable parameters while optimising the impact on return.

The Group utilises forward currency contracts and interest rate swaps in the ordinary course of business in order to manage these risks. All such transactions are carried out within the guidelines of the Group’s Treasury policy as set by the Board. The Group applies hedge accounting where permitted in order to limit volatility in profit and loss. Capital management The Group’s capital structure comprises a mixture of equity, capital notes, bank debt of varying tenure and cash.

The structure gives a balance between costs of each component, the liquidity risk, the quantum of unused facilities and tenure such that the Group has adequate facilities available at all times to meet its short- and medium‑term cash needs for operations, capital expenditure, financing and pursuit of growth opportunities. Interest rate risk The Group has adopted a policy of ensuring that 40-100% of its exposure to interest rates to reset within a year is fixed, that 30-80% of its exposure to rates to reset from one to three years time is fixed and that 0-60% of exposure to rates to reset from three to five years time is fixed. The Board regularly monitors compliance with this policy.

Interest rate swaps are used to convert the interest in floating rate borrowings to a fixed rate. The notional principal or contract amounts of swap instruments outstanding at balance date are as follows:

(NZD in thousands) 2011 2010

Net interest rate swaps Group 19,448 97,999 Company – –

The Group classifies interest rate swaps as cash flow hedges and states them at fair value. The swaps are taken out for a period of three years to reprice, consistent with the underlying borrowings they hedge. Interest rate risk profile At the reporting date the interest rate profile of the Group’s interest-bearing financial instruments was:

Group Company (NZD in thousands) 2011 2010 2011 2010

Fixed rate instruments Financial liabilities 72,977 151,082 52,726 52,733 (72,977) (151,082) (52,726) (52,733)

Variable rate instruments Financial assets 66,850 82,063 4,275 12,424 Financial liabilities 67,795 3,341 – – (945) 78,722 4,275 12,424

2011 ANNUAL Report 75 N otes to the Financial Statements For the year ended 30 June 2011 continued

21. FINANCIAL RISK MANAGEMENT CONTINUED

Sensitivity analysis A change of 100 basis points in interest rates at the reporting date would have impacted equity and profit by the amounts shown below. The analysis assumes all other variables remain constant. The analysis is performed on the same basis for 2010.

Group Company Equity Equity Equity Equity (NZD in thousands) 2011 Profit 2011 2010 Profit 2010 2011 Profit 2011 2010 Profit 2010

100bp increase Variable rate instruments – 190 – 791 – 43 – 124 Interest rate swaps 66 – 280 – – – – – Cash flow sensitivity (net) 66 190 280 791 – 43 – 124

100bp decrease Variable rate instruments – (190) – (791) – (43) – (124) Interest rate swaps (67) – (284) – – – – – Cash flow sensitivity (net) (67) (190) (284) (791) – (43) – (124)

Effective interest rates and repricing analysis In respect of income-earning financial assets and interest-bearing financial liabilities, the following table indicates their effective interest rates at the balance sheet date and the periods in which they reprice.

Group Amount Effective of interest interest rate 6 months 6-12 (NZD in thousands) rate hedged Total or less months 1-2 years 2-5 years

2011 Cash and cash equivalents 1.19 – 66,850 66,850 – – –

Secured bank loans: AUD loan 5.96 19,448 (78,439) (78,439) – – – EUR loan 3.04 – (8,804) (8,804) – – – Capital notes 9.30 – (52,568) – – (52,568) – Finance lease liabilities (961) – (452) (509) – (73,922) (20,393) (452) (53,077) –

76 Nuplex industries limited Group Effective interest Amount 6 months 6-12 (NZD in thousands) rate hedged Total or less months 1-2 years 2-5 years

2010 Cash and cash equivalents 1.53 – 82,063 82,063 – – –

Secured bank loans: AUD loan 6.46 67,676 (68,906) (68,906) – – – EUR loan 4.40 8,769 (8,769) (8,769) – – – USD loan 3.73 21,555 (21,555) (21,555) – – – CNY loan 5.10 – (2,110) (2,110) – – – Capital notes 9.30 – (52,568) – – – (52,568) Finance lease liabilities (515) – (356) (159) – (72,360) (19,277) (356) (159) (52,568)

Company Effective interest Amount 6 months 6-12 (NZD in thousands) rate hedged Total or less months 1-2 years 2-5 years

2011 Cash and cash equivalents 2.02 – 4,275 4,275 – – – Capital notes 9.30 – (52,568) – – (52,568) – Finance lease liabilities (158) – (77) (81) – (48,451) 4,275 (77) (52,649) –

Company Amount Effective of interest interest rate 6 months 6-12 (NZD in thousands) rate hedged Total or less months 1-2 years 2-5 years

2010 Cash and cash equivalents 1.45 – 12,424 12,424 – – – Capital notes 9.30 – (52,568) – – – (52,568) Finance lease liabilities (165) – (91) (74) – (40,309) 12,424 (91) (74) (52,568)

Currency risk The Group has exposure to foreign exchange risk as a result of transactions in currencies other than the functional currency of the transacting Group entity. The Group uses forward exchange instruments to manage elements of these exposures. Significant exposures occur primarily in USD, EUR and AUD.

The Group aims to cover 80-100% of its three month forecast net currency exposure, up to 50% of its 4-6 month net exposure and up to 25% of its 7-12 month net exposure.

Interest on borrowings is denominated in currencies that match the cash flows generated by the underlying operations of the Group. This provides an economic hedge and no derivatives are entered into in this respect. Forecasted transactions The Group hedge accounts its forward exchange contracts. These contracts are fair valued and any effective portion of hedge valuation movement is shown in the statement of changes in equity. The net fair value of these forward exchange contracts at 30 June was NZD(1,335,000) (2010: NZD348,000), comprising liabilities of NZD1,335,000 (2010: assets of NZD444,000 and liabilities of NZD96,000) that were recognised in fair value derivatives. Contracts are taken out for periods of 1 to 12 months depending upon the timing of the anticipated foreign currency purchases that the contracts hedge.

2011 ANNUAL Report 77 N otes to the Financial Statements For the year ended 30 June 2011 continued

21. FINANCIAL RISK MANAGEMENT CONTINUED

Hedge of net investments in foreign subsidiaries The Group has designated one loan as a hedge of the Group’s net investments in foreign subsidiaries as detailed below:

Exchange Loan Carrying gain principal amount recognised Subsidiary (USD) (NZD) in equity

Nuplex Industries Australia Pty Ltd for Cong Ty Nuplex Resins (Vietnam) 1,400,000 1,712,957 335,147

Exposure to currency risk The Group’s exposure to foreign currency risk was as follows based on notional amounts:

Group AUD 2011 USD 2011 EUR 2011 AUD 2010 USD 2010 EUR 2010

Non ‑functional currency amounts Trade receivables and cash balances 697 17,195 26,918 596 23,408 16,980 Trade payables (2,669) (17,940) (28,328) (3,663) (20,739) (19,013) Gross statement of financial position exposure (1,972) (745) (1,410) (3,067) 2,669 (2,033) Subsidiary net assets 273,238 71,051 122,908 239,228 79,045 124,711 Forward exchange contracts 1,231 26,218 4,948 1,650 43,837 7,139 Statement of financial position exposure 272,497 96,524 126,446 237,811 125,551 129,817 Profit in functional currency 21,080 12,292 17,044 29,717 13,026 4,537

Company AUD 2011 USD 2011 EUR 2011 AUD 2010 USD 2010 EUR 2010

Trade receivables and cash balances 139 1,617 – 242 6,114 150 Trade payables (321) (2,033) (165) (2,819) (1,726) (202) Gross statement of financial position exposure (182) (416) (165) (2,577) 4,388 (52) Forward exchange contracts 819 3,539 341 1,100 4,198 524 Statement of financial position exposure 637 3,123 176 (1,477) 8,586 472

The following significant exchange rates applied during the year:

Reporting date Average rate mid-spot rate 2011 2010 2011 2010 AUD 0.77 0.80 0.77 0.81

USD 0.76 0.70 0.82 0.70 EUR 0.56 0.51 0.57 0.57

78 Nuplex industries limited Sensitivity analysis A 10% strengthening of the NZD against the following currencies at 30 June would have impacted equity and profit by the amounts shown below. The analysis assumes all other variables remain constant. The analysis is performed on the same basis for 2010.

Group Company Increase/(Decrease) Equity Profit Equity Profit Equity Profit Equity Profit (NZD in thousands) 2011 2011 2010 2010 2011 2011 2010 2010

AUD (27,453) (1,911) (24,039) (2,665) (72) 18 (97) 258 USD (7,920) (1,155) (6,628) (1,569) (302) 42 (391) (439) EUR (12,421) (1,563) (12,597) (250) (30) 17 (46) 5

A 10% weakening of the NZD would have had an equal but opposite impact. Fair values The fair values together with the carrying amounts shown in the statement of financial position are as follows:

Group Other Loans and amortised Carrying (NZD in thousands) Note At fair value receivables cost amount Fair value

2011 Trade and other receivables 11 – 310,588 – 310,588 310,588 Cash and cash equivalents – 66,850 – 66,850 66,850 Interest rate swaps: –A– ssets 50 – – 50 50 Forward exchange contracts: –– Assets 76 – – 76 76 –– Liabilities (1,334) – – (1,334) (1,334) Secured bank loans 17 – – (87,243) (87,243) (87,243) Capital notes 17 – – (52,568) (52,568) (55,449) Finance lease liabilities 17 – – (961) (961) (979) Trade and other payables 16 – – (244,718) (244,718) (244,718) (1,208) 377,438 (385,490) (9,260) (12,159) Unrecognised losses (2,899)

2010 Trade and other receivables 11 – 286,669 – 286,669 286,669 Cash and cash equivalents – 82,063 – 82,063 82,063 Interest rate swaps: –– (Liabilities) (1,136) – – (1,136) (1,136) Forward exchange contracts: –– Assets 444 – – 444 444 –– Liabilities (96) – – (96) (96) Secured bank loans 17 – – (101,340) (101,340) (101,340) Capital notes 17 – – (52,568) (52,568) (56,619) Finance lease liabilities 17 – – (515) (515) (519) Trade and other payables 16 – – (237,503) (237,503) (237,503) (788) 368,732 (391,926) (23,982) (28,037) Unrecognised losses (4,055)

2011 ANNUAL Report 79 N otes to the Financial Statements For the year ended 30 June 2011 continued

21. FINANCIAL RISK MANAGEMENT CONTINUED

Company Other Loans and amortised Carrying (NZD in thousands) Note At fair value receivables cost amount Fair value

2011 Trade and other receivables 11 – 17,485 – 17,485 17,485 Cash and cash equivalents – 4,275 – 4,275 4,275 Forward exchange contracts: –– Liabilities (254) – – (254) (254) Capital notes 17 – – (52,568) (52,568) (55,449) Finance lease liabilities 17 – – (158) (158) (164) Trade and other payables 16 – – (18,436) (18,436) (18,436) (254) 21,760 (71,162) (49,656) (52,543) Unrecognised losses (2,887)

2010 Trade and other receivables 11 – 16,617 – 16,617 16,617 Cash and cash equivalents – 12,424 – 12,424 12,424 Forward exchange contracts: –– Liabilities (5) – – (5) (5) Capital notes 17 – – (52,568) (52,568) (56,619) Finance lease liabilities 17 – – (165) (165) (162) Trade and other payables 16 – – (15,312) (15,312) (15,312) (5) 29,041 (68,045) (39,009) (43,057) Unrecognised losses (4,048)

Estimation of fair values The methods used in determining fair values of financial instruments are discussed in Note 1(x).

NZ IFRS 7 dictates a hierarchy of valuation methods for determining the fair value of financial instruments, as follows:

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

Level 3: Inputs for the asset or liability that are not based on observable market data.

All of the Group and Company assets and liabilities valued at fair value are valued using level 2 methods.

Interest rates used for determining fair value The entity uses the government yield curve as of 30 June 2011 plus an adequate constant credit spread to discount financial instruments. The interest rates used are as follows:

2011 2010 Capital notes 3.5% 4.1% Leases 10%–12% 10%–12% Interest rate swaps 4.9%–5.0% 0.4%–5.0%

All assets and liabilities measured at fair value are valued using inputs other than quoted prices that are observable for the asset or liability either directly (i.e. as prices) or indirectly (i.e. derived from prices).

80 Nuplex industries limited 22.ea Op r ting leases Non-cancellable operating lease rentals are payable as follows:

Group Company (NZD in thousands) 2011 2010 2011 2010 Less than one year 8,593 7,359 1,553 1,809 Between one and five years 6,827 8,013 2,812 2,952 More than five years 12,198 11,522 11,162 11,520 27,617 26,894 15,527 16,281

The Group leases a number of warehouse and factory facilities under operating leases. With the exception of New Zealand property leases, the leases typically run for a period of three to five years, with an option to renew the lease after that date. None of the leases include contingent rentals.

During the year ended 30 June 2011, NZD10,388,000 was recognised as an expense in profit and loss in respect of operating leases (2010: NZD10,935,000).

23. Capital and other commitments Group Company (NZD in thousands) 2011 2010 2011 2010 Plant and equipment contracted but not provided for and payable: Within one year 1,917 975 – – 1,917 975 – –

24. Contingent liabilities US class action HSBC guarantee Proceedings purporting to be a class action were commenced in The Company has issued a guarantee to HSBC to enable Kentucky in March 2010 in connection with alleged contamination associate company Synthese Thailand Co Limited to borrow up of the area surrounding the plant of a wholly owned subsidiary in to USD5.6million (2010: USD5.6million). Nuplex has discharged Louisville Kentucky. the JV partner Thai Urethane Plastic Co Limited from its indemnity against 48% of all losses, costs, damages, expenses, claims The plaintiffs claim to represent a group of local residents. The and demands which may be incurred or sustained by reason claim is yet to be certified as a class action by the Kentucky court or on account of having given the guarantee. Nuplex granted and does not specify an amount of damages. this discharge as part of its commitment to increase the funds US income tax available to Synthese Thailand Co Limited to meet an obligation to purchase plant and equipment from Thai Urethane Plastic Co A wholly owned subsidiary in the USA has been the subject of Limited. This transaction was executed in January 2008. an audit of its 2007 income tax return. The IRS process is not yet completed, but at this stage of the process the IRS has indicated Weathertight Homes Resolution that it believes there is additional tax owing of approximately Plaster Systems Limited (PSL) has been notified of various claims USD14,000,000 plus any fines and penalties that may be imposed. against the Company under the Weathertight Homes Resolution Nuplex considers that it has appropriately applied the applicable Services Act 2002. PSL has provided for the costs of settlement tax regulations, that no additional tax is payable, and is defending of these claims as a current provision. PSL has denied liability for its position. As at the date of preparation of these financial damages under these claims but has participated in the settlement statements, the IRS has not imposed any obligation on Nuplex to process and contributed towards remediation as determined pay any tax in relation to this matter. by the adjudicator without reverting to its full legal remedies as Negative pledge deed a gesture of good faith and to protect the reputation of its products suitability for purpose. The Company and all the material wholly owned subsidiaries have entered into a negative pledge deed with the Group’s lenders RPC Pipe Systems Pty Limited guarantee whereby all Group companies that are party to the deed have In connection with the Group’s joint venture interest in RPC Pipe guaranteed the repayment of all liabilities in the event that any Systems Pty Limited, Nuplex Industries (Aust) Pty Limited has of these companies are wound up. provided a guarantee to Westpac Banking Corporation for up to

2011 ANNUAL Report 81 N otes to the Financial Statements For the year ended 30 June 2011 continued

AUD17.5m to secure Westpac’s facilities to the joint venture. Nuplex Industries (Aust) Pty Limited also provided additional funding for working capital purposes. Nuplex Industries (Aust) Pty Limited’s position is secured by a registered charge over the assets of RPC Pipe Systems Pty Limited, which ranks behind a charge in favour of the bank.

The Directors consider that no further provisions are required in respect of these matters as they are considered unlikely to result in future liability and/or the quantum of any future liability is not capable of reliable measurement.

25. Investments The subsidiary and associate companies comprise: % Held Country of incorporation Principal activity Directors** other than NZ 2011 2010 Manufacturer and supplier of specialty Asia Pacific Specialty Chemicals Limited products, additives and ingredients 1, 2, 7 Australia 100% 100% Cong Ty Nuplex Resins (Vietnam) Manufacture and distribution of synthetic resins 1, 2, 3, 11 Vietnam 100% 100% Nuplex Finance Holdings Limited Investment and group finance company 2, 7 100% 100% Manufacture, import and distribution of synthetic resins and emulsions, metal driers, Nuplex Industries (Aust) Pty Limited paper-making chemicals and food ingredients 2, 10 Australia 100% 100% Nuplex Industries BV Non-operating holding company 2, 7 Netherlands 100% 100% Nuplex Industries UK Limited Non-operating holding company 2, 7 UK 100% 100% Nuplex Operations (Aust) Pty Limited Non-operating holding company 2, 7 Australia 100% 100% Nuplex Resins (Foshan) Co Limited Manufacture and distribution of synthetic resins 1, 2 China 100% 100% Nuplex Resins BV Manufacture and distribution of synthetic resins 2, 3, 5, 6, 8 Netherlands 100% 100% Nuplex Resins Limited Manufacture and distribution of synthetic resins 2, 3 UK 100% 100% Nuplex Resins LLC Manufacture and distribution of synthetic resins 2, 3 US 100% 100% Nuplex Resins (Suzhou) Co Limited* Manufacture and distribution of synthetic resins 1, 2, 3 China 100% 100% Nuplex Resins (Thailand) Limited Non-operating holding company 2, 7 Thailand 100% 100% Nuplex Sino Chemicals BV Non-operating holding company 2, 7 Netherlands 100% 100% Manufacture of pre-mixed lightweight and Plaster Systems Limited strengthening plasters 2, 7 100% 100% PT Nuplex Raung Resins Manufacture and distribution of synthetic resins 1, 2, 3 Indonesia 80% 80% Silvertown Land Holdings Limited Property holding company 2, 7 UK 100% 100% Synthese (Malaysia) Sdn bhd Manufacture and distribution of synthetic resins 1, 2, 3 Malaysia 62% 62% Nuplex Industries (Hong Kong) Limited Non-operating 2, 7 Hong Kong 100% 100% Quaker Chemical (Australia) Pty Limited Distributor of specialty products 1, 10 Australia 49% 49% Innospec Valvemaster Limited* (formerly Octel Valvemaster Limited) Distributor of specialty products 1, 2 UK 50% 50% Synthese (Thailand) Co Limited* Manufacture and distribution of synthetic resins 1, 2, 3 Thailand 47.5% 47.5% PML Holdings Limited Non-operating holding company 2, 7 100% 100% Polychem Marketing Limited Import and distribution of specialty chemicals 2, 10 100% 100% Aushold Pty Limited Non-operating holding company 2, 7 Australia 100% 100% Multichem Pty Limited Import and distribution of specialty chemicals 2, 10 Australia 100% 100% Nuplex Producao de Resinas Ltda Manufacture and distribution of synthetic resins 2, 4, 9 Brazil 100% 100% Nuplex US Holdings Limited Investment and group finance company 2, 7 100% 100% RPC Pipe Systems Pty Limited Manufacture and distribution of GRP piping 2, 10 Australia 82.2% 0%

All the above companies have a balance date of 30 June, except companies marked ‘*’ which are 31 December for statutory compliance purposes. ** Nuplex executives acting as Directors of the above companies are as follows: 1 Emery Severin. 2 Ian Davis. 3 Rob Harmsen. 4 Mike Kelly. 5 Paul Kieffer. 6 Robert Skarvan. 7 James Williams. 8 Pieter Geuze. 9 Norm Stallard. 10 Sam Bastounas. 11 John Prineas.

82 Nuplex industries limited 26.u Acq isition and disposal of subsidiaries and business assets Group Company (NZD in thousands) 2011 2010 2011 2010

The fair value of assets and liabilities acquired are as follows: Property, plant and equipment 20,895 20 – – Agency agreement – 3,177 – – Inventories 5,681 1,114 – – Current receivables 1,932 134 – – Employee benefits (740) (49) – – Current payables (11,950) – – – Net identifiable assets and liabilities 15,818 4,396 – – Minority interest 3,112 – – – Cash consideration paid in cash, net of cash acquired 12,706 5,317 – – Deferred consideration 715 (422) – – Goodwill arising on acquisition 715 499 – –

Acquisitions in 2011 On 24 June 2011 Nuplex formed a joint venture company with RPC Technologies to acquire Fibrelogic Pipe Systems (‘Fibrelogic’). At 30 June Nuplex owned 82.2% of the equity of the joint venture company for which cash consideration of AUD11.1m was paid, the amounts presented above are provisional, pending the finalisation of acquisition fair value adjustments. Subsequent to year end Nuplex reduced its ownership of the joint venture company to 50% on sale of 32.2% of its equity ownership to RPC Technologies in return for cash consideration of AUD4.35m. Acquisitions in 2010 On March 26 2010 Nuplex acquired the business assets of the Australian and New Zealand ingredients business of the Med-Chem group of companies for cash consideration of AUD2.455m and NZD2.237m respectively.

Since acquisition the Med-Chem business has generated sales revenue of NZD2.7m and net profits of NZD0.3m. It is estimated that profit for the full year for the acquired business would have been NZD1.2m had the business been owned for the full year.

During 2011 additional provision was made for amounts forecast to be payable for the current and following year under an earn-out arrangement.

27.a Rel ted parties The Company has a related party relationship with its subsidiaries and associates (see Note 25) and with its directors and executive officers. Transactions with subsidiaries and associates Transactions with subsidiaries and associates are carried out on an arm’s length basis.

The Group transacts in the normal course of business with its associates on commercial terms. In addition to dividends disclosed in Note 12, the following amounts were received from associates during the year:

2011 2010

Management fees 300 282 Toll manufacturing fees 1,544 1,424

2011 ANNUAL Report 83 N otes to the Financial Statements For the year ended 30 June 2011 continued

27.A REL Ted PARTIES CONTINUED

The following transactions are carried out between the Company and its subsidiaries:

2011 2010

Sale of goods and services 3,748 3,595 Purchases of goods and services (5,071) (5,123)

• Dividends received from subsidiaries – refer Note 3 • Interest received and paid – refer Note 7 • Loans to subsidiaries and associates – refer Note 11 • Current receivables – refer Note 11 • Current payables – refer Note 16 Transactions with key management personnel In accordance with the Company’s Constitution, the Company has made provision for a payment upon the cessation of office of one Director who has been in office since prior to 1 May 2004.

None of the key management personnel were members of the defined benefit retirement schemes referred to in Note 18.

The key management personnel compensation was as follows:

(NZD in thousands) 2011 2010

Directors’ remuneration 925 789

Executive officers’ remuneration: Short ‑term benefits 5,717 5,477 Post‑employment benefits 324 327 Long‑term incentives 577 1,288 Termination and retirement benefits 1,403 3,056 Share‑based payments accrued 1,200 – 9,220 10,148

84 Nuplex industries limited 28.n Reco ciliation of the Net Profit with the Net Cash Flows from Operating Activities Group Company (NZD in thousands) 2011 2010 2011 2010

Profit for the period 69,271 66,982 22,655 54,619

Non-cash items: Depreciation 19,876 20,028 1,327 1,322 Tax 22,939 20,478 1,263 (959) Amortisation 2,488 2,821 1 11 Impairment – 7,345 – – Non‑current provisions (2,654) 1,714 (74) 970 Doubtful debts provisions (385) 1,792 127 (97) Restructuring and remediation provisions 2,085 5,667 – 569 Intercompany dividends and interest – – (20,744) (59,327) Equity earnings of associate (1,907) (2,131) – – 42,442 57,714 (18,100) (57,511)

Classified as investing/financing: Loss/(profit) on sale of property, plant and equipment – 782 – (5) – 782 – (5)

(Increase)/Decrease in working capital: Receivables (28,614) (48,941) (4,101) (3,060) Inventories 3,162 (25,797) (105) (360) Creditors 4,046) 62,712 4,128 4,806 (29,498) (12,026) (78) 1,386

Income tax (paid)/received (23,413) (9,590) 292 – Dividend received from associate 1,334 844 – – Cash flow from operating activities 60,136 104,706 4,769 (1,511)

2011 ANNUAL Report 85 N otes to the Financial Statements For the year ended 30 June 2011 continued

28.n Reco ciliation of the Net Profit with the Net Cash Flows from Operating Activities CONTINUED Reconciliation of statement of financial position working capital movements to operating cash flow

Creditors Total and current working Receivables Inventories provisions capital

2011 Balance as at 1 July 287,113 192,780 (272,957) 206,936 Balance as at 30 June 310,713 196,508 (280,843) 226,378 Statement of financial position movement (23,600) (3,728) 7,886 (19,442) Retranslation of foreign currency balances (7,331) 968 1,661 (4,702) Business investment/divestment impacts 1,932 5,681 (13,405) (5,792) Movement in provision for doubtful debts 385 – – 385 Movement in provision for obsolete stock – 241 – 241 Movement in provisions – – (885) (885) Movement in hedges – – 697 697 Working capital cash flow from operating activities (28,614) 3,162 (4,046) (29,498)

Creditors Total and current working Receivables Inventories provisions capital

2010 Balance as at 1 July 256,489 173,668 (227,622) 202,535 Balance as at 30 June 287,113 192,780 (272,957) 206,936 Statement of financial position movement (30,624) (19,112) 45,335 (4,401) Retranslation of foreign currency balances (16,659) (8,377) 16,463 (8,573) Business investment/divestment impacts 134 1,114 (49) 1,199 Movement in provision for doubtful debts (1,792) – – (1,792) Movement in provision for obsolete stock – 578 – 578 Movement in provisions – – (5,667) (5,667) Movement in hedges – – 6,630 6,630 Working capital cash flow from operating activities (48,941) (25,797) 62,712 (12,026)

29. Subsequent events In addition to the renewal of the Group’s renewal of multi-currency cash advance facilities as detailed in Note 17 and the partial disposal of the Group’s interest in the Fibrelogic joint venture company detailed in Note 26, the following event occurred subsequent to 30 June 2011. Acquisition of Acquos’ Masterbatch business On 18 August 2011 the Group announced its entry into an agreement to acquire Acquos’ Masterbatch business. The transaction is subject to ACCC regulatory approval. If approved, the transaction is expected to have a positive but not material impact on earnings per share and no material impact on net assets.

86 Nuplex industries limited F rive-yea Statistical Summary For the year ended 30 June 2011

(NZD in thousands) 2011 2010 2009 2008 2007 Earnings

Sales 1,575,014 1,459,933 1,493,693 1,532,065 1,451,619 EBITDA (Earnings before Interest, Tax, Depreciation, and Amortisation) 130,905 139,436 91,530 121,823 104,068

EBITDA as % of sales 8.3% 9.6% 6.1% 8.0% 7.2% Depreciation and amortisation 22,365 22,849 24,566 19,951 21,601 Interest (net) 16,577 20,706 31,028 24,467 22,360 Share of profits of associates (1,907) (2,131) 42 (997) (1,321) Minority interests 2,728 2,772 2,342 1,742 1,973 Tax on operating profits 23,174 23,796 9,966 23,275 21,791 Operating profit 67,968 71,444 23,586 53,385 37,664

Unusual items after tax 1,425 7,234 6,857 5,081 11,468 Net profit 66,543 64,210 16,729 48,304 26,196

Srha eholder returns

Equity 560,732 523,330 521,622 365,061 298,755 Operating profit as % of average equity 12.5% 13.7% 5.3% 16.1% 11.9% EBITDA as % of average total funds employed 19.3% 19.5% 12.1% 17.4% 15.8% Shares on issue at 30 June ('000) 196,748 192,233 189,798 81,719 79,903 Dividend per share (cents) 21.0 21.0 8.5 43.0 36.0 Dividend % of operating profit 61% 56% 68% 65% 76% NZ imputation per share (cents) 0.0 0.0 0.0 2.0 6.0 Australian imputation 55% 59% 100% 100% 100%

Assetc Ba king

Total assets 1,032,053 1,004,294 1,046,749 1,099,449 920,774 Tangible assets 879,662 844,196 879,715 938,923 787,910 Net tangible assets (NTA) 408,341 363,232 354,588 204,535 165,891 NTA as % of tangible assets 46.4% 43.0% 40.3% 21.8% 21.1% NTA per share $2.08 $1.89 $1.87 $2.50 $2.08 Interest‑bearing debt (net) 73,921 72,360 129,194 352,660 319,878 Debt as % of tangible assets 8.4% 8.6% 14.7% 37.6% 40.6% Debt as % of total funds employed 11% 11% 17% 46% 50%

2011 ANNUAL Report 87 Sr ha eholder Information For the year ended 30 June 2011

Diro ect rs’ Shareholdings 2011 2010

Robert M Aitken – beneficial 77,424 77,424 Emery S Severin – beneficial 120,000 120,000 David A Jackson – beneficial 46,996 45,000 Peter M Springford 19,979 19,131 Michael R Wynter – beneficial 18,248 18,248

Number of Percent of T WEnty LARGEST SHAREHOLDERS AS AT 2 SEPTEMBER 2011 shares issued capital

Accident Compensation Corporation 19,601,359 9.96 AMP Investments Strategic Equity Growth Fund 6,800,517 3.46 Citicorp Nominees Pty Limited 6,249,974 3.18 JP Morgan Nominees Australia Limited 6,067,094 3.08 National Nominees New Zealand Limited 5,945,503 3.02 Masfen Securities Limited 5,772,039 2.93 National Nominees Limited 5,752,054 2.92 HSBC Nominees (New Zealand) Limited A/C State Street 4,954,905 2.52 New Zealand Superannuation Fund Nominees Limited 4,678,303 2.38 Citibank Nominees (New Zealand) Limited 3,932,120 2.00 NZ Guardian Trust Investment Nominees Limited 3,547,153 1.80 HSBC Custody Nominees (Australia) Limited 3,183,855 1.62 FNZ Custodians Limited 3,017,599 1.53 NZGT Nominees Limited – AIF Equity Fund 2,664,820 1.35 Investment Custodial Services Limited 2,422,706 1.23 Custodial Services Limited 1,889,159 0.96 Asteron Life Limited – NZCSD 1,836,196 0.93 HSBC Nominees (New Zealand) Limited 1,822,662 0.93 Investment Custodial Services Limited 1,694,994 0.86 Custody and Investment Nominees Limited 1,498,760 0.76 Total 93,331,772 47.44

88 Nuplex industries limited Stubs an ial Security Holders The following persons are deemed to be substantial security holders in accordance with section 26 of the Securities Markets Act 1988 (as recorded in the Company’s Register of Substantial Shareholders): Number of Percent of shares issued capital

Orbis Group 19,018,060 9.67%

Accident Compensation Corporation 18,153,034 9.23%

AMP Limited 16,460,590 8.37%

DTIBIS R U ION OF SHAREHOLDERS AND SHAREHOLDINGS (2 SEPTEMBER 2011) Holding range Holder count Shares Percentage

1 to 1,000 1794 876,805 0.45 1,001 to 5,000 3982 11,157,348 5.67 5,001 to 10,000 2062 15,161,898 7.71 10,001 to 100,000 2073 48,550,545 24.67 100,001 to 1,000,000 94 20,624,314 10.48 > 1,000,001 26 10 0,377,40 6 51.02 10031 196,748,316 100.00

There are 206 shareholders holding 6,788 shares, with less than a marketable parcel of shares under the NZX Listing Rules.

There are 420 shareholders holding 40,431 shares, with less than a marketable parcel of shares under the Listing Rules of the Australian Securities Exchange.

CLA Sses OF SHARES AND VOTING RIGHTS The Company has fully paid ordinary shares on issue. At a general meeting every ordinary shareholder present in person or by proxy, attorney or authorised representative has one vote on a show of hands and on a poll, for every fully paid share held.

2011 ANNUAL Report 89 S tatutory Information For the year ended 30 June 2011

DOIRECT RS The following Directors held office during the year ended 30 June 2011:

Robert M Aitken Company Chairman; member ex officio of all Board Sub-Committees; Emery S Severin Managing Director Barbara J Gibson Remuneration Committee, Chair; member of the Safety, Health & Environment Committee David A Jackson Audit Committee, Chairman Peter M Springford Safety, Health & Environment Committee, Chairman; member of the Audit Committee Michael R Wynter Remuneration Committee

In accordance with Regulation 10.6 of the Company’s Constitution, Peter Springford and Michael Wynter retire by rotation. Peter Springford, being eligible, offers himself for re-election. Michael Wynter has advised that he will not offer himself for re-election. M EetINGS During the year ended 30 June 2011, Directors’ meetings were held and attended by Directors as per the following table:

Board Audit Remuneration SHE meetings committee Committee Committee

Robert M Aitken 14/14 6/6 3/3 3/3 Emery S Severin 14/14 – – – Barbara Gibson 14/14 – 3/3 3/3 David Jackson 14/14 6/6 – – Peter M Springford 14/14 6/6 – 3/3 Michael R Wynter 13/14 – 2/3 –

Board meetings were held at the registered office of the Company and at subsidiary Company premises. The Audit Committee met to discharge its responsibilities as outlined in the Audit Committee Charter. The Remuneration Committee met to discharge its responsibilities as outlined in the Remuneration Committee Charter. The SHE Committee met to discharge its responsiblities as outlined in the SHE Committee Charter. The NZ Securities Committee was an ad hoc committee established to manage the NZ Securities Commission Litigation.

DROI ECT RS’ REMUNERATION The following amounts were paid to each Director in the form of remuneration and benefits:

Robert M Aitken $287,301 Fees for the 2011 financial year Barbara Gibson $162,871 Fees for the 2011 financial year David A Jackson $158,831 Fees for the 2011 financial year Emery S Severin AUD$1,921,756* Total remuneration for the 2011 financial year Peter M Springford $167,726 Fees for the 2011 financial year Michael R Wynter $144,956 Fees for the 2011 financial year

* Includes provisioned amounts.

90 Nuplex industries limited SHE ARE D ALINGS The Board has received the following disclosures of dealings by Directors in the Company’s ordinary shares:

Number of shares Consideration Date

Acquisitions David Jackson 1005 (DRP ISSUE) NZD3316.50 8-Oct-10 991 (DRP ISSUE) NZD3082.33 1-Apr-11 Peter M Springford 427 (DRP ISSUE) NZD1409.95 8-Oct-10 421 (DRP ISSUE) NZD1310.39 1-Apr-11

Disposals Nil

DL ISC OsuRES OF INTEREST

Robert M Aitken Director Alesco Corporation Limited Director Rubicor Group Limited Barbara J Gibson Chairman Warakirri Asset Management Pty Limited Director GrainCorp Limited David A Jackson Director Pumpkin Patch Limited Chairman The New Zealand Refining Company Limited Director Fonterra Co-Operative Group Limited Chairman The Dame Malvina Major Foundation Trustee New Zealand Maritime Museum Michael R Wynter Trustee Mitsui Education Foundation Peter Springford Director The New Zealand Refining Company Limited Director Creating Tracks NZ Limited Director NZ Wood Products Ltd Director NZ Frost Fans Ltd Trustee The Graeme Dingle Foundation

DROI ECT RS’ INDEMNITY INSURANCE As permitted by Regulation 13.4 of the Company’s Constitution, Directors and employees have been insured against liability for any act or omission in their capacity as Directors and employees. Insurance has also been obtained to indemnify Directors and employees for costs incurred in defending or settling claims in such liability. The insurance does not cover liabilities arising from criminal actions.

To comply with s162(8) of the Companies Act 1993, Directors have certified that the cost of the insurance is fair to the Company.

2011 ANNUAL Report 91 S tatutory Information For the year ended 30 June 2011 continued

E MPLOyee REMUNERATION During the year the following numbers of current and former employees, not being Directors of the Company received remuneration of at least NZD100,000.

NZ Overseas Employees Employees

100,000 – 110,000 8 105 110,000 – 120,000 11 100 120,000 – 130,000 5 62 130,000 – 140,000 4 42 140,000 – 150,000 3 29 150,000 – 160,000 7 38 160,000 – 170,000 4 20 170,000 – 180,000 1 16 180,000 – 190,000 1 17 190,000 – 200,000 14 200,000 – 210,000 1 9 210,000 – 220,000 10 220,000 – 230,000 1 5 230,000 – 240,000 11 240,000 – 250,000 3 250,000 – 260,000 5 260,000 – 270,000 5 270,000 – 280,000 1 3 280,000 – 290,000 5 290,000 – 300,000 2 300,000 – 310,000 5 310,000 – 320,000 320,000 – 330,000 1 2 330,000 – 340,000 2 340,000 – 350,000 360,000 – 370,000 1 1 370,000 – 380,000 2 380,000 – 390,000 2 390,000 – 400,000 400,000 – 410,000 1 420,000 – 430,000 2 430,000 – 440,000 1 460,000 – 470,000 3 470,000 – 480,000 1 510,000 – 520,000 1 530,000 – 540,000 1 550,500 – 560,600 1 740,000 – 750,000 1 820,000 – 830,000 1 1,440,500 – 1,440,600 1 2,760,000 – 2,770,000* 1 *Former Managing Director’s remuneration attributable to previous financial year

92 Nuplex industries limited Coo rp rate Directory

Diro ect rs Npu lex Executive team Rob Aitken Emery Severin Chairman Managing Director & Chief Executive Officer

Emery Severin Sam Bastounas Managing Director Regional President Australasia

Barbara Gibson Paul Davey Vice President Human Resources David Jackson Ian Davis Jeremy Maycock Chief Financial Officer Peter Springford Paul Kieffer Michael Wynter Regional President Europe, Middle East and Africa

Clive Deetlefs Audo it rs Group General Manager Operations KPMG Mike Kelly Soolicit rs Regional President, USA Allens Arthur Robinson Ruben Mannien Regional President Asia Bell Gully Hasan Shafi Insua r nce Brokers Vice President Corporate Development and Planning

Marsh Limited William Weaver Vice President Technology S hare Registrars Computershare Investor Services Limited James Williams Private Bag 92119 Vice President General Counsel & Company Secretary Auckland 1142

Bankers Westpac Banking Corporation Commonwealth Bank of Australia Australia and New Zealand Banking Group Limited Hong Kong Shanghai Banking Corporation

Rei g stered Office 12 Industry Road, Penrose Auckland 1061, New Zealand P O Box 12-841, Penrose, Auckland 1642

Phone +64 9579 2029 Fax +64 9571 0542 [email protected] www.nuplex.co.nz

Coo rp rate Office 49 – 61 Stephen Road Botany NSW 2019, Australia Locked Bag No.6 Botany NSW, 1455 Australia

Phone +61 2 9666 0331 Designed and produced by FCR www.fcr.com.au Fax +61 2 9666 3368 www.nuplex.co.nz