ANNUAL REPORT 2013 CONTENTS

2 Eastland Group Annual Report 2013 Eastland Group Annual Report 2013 3 HIGHLIGHTS

TOTAL INCOME OVER 2 MILLION $ TONNES 72.3M RECORD-BREAKING UP FROM $61.0M IN 2012 EXPORT VOLUME NET PROFIT OUT OF EASTLAND PORT $12.8M 133,113 TOTAL PASSENGER MOVEMENTS UP FROM $5.3M IN 2012 THROUGH GISBORNE AIRPORT DIVIDEND PAID OUT TO ECT 306.2 GWHRS $ TOTAL ANNUAL ENERGY 4.6M DISTRIBUTED BY THE NETWORK UP FROM $4.4M IN 2012 NETWORK AND GENERATION ACCREDITATION GAINED TOTAL SPENT ON LOCAL FOR THE PUBLIC SAFETY GOODS & SERVICES MANAGEMENT SYSTEM AND EASTLAND GROUP STAFF WAGES, APPROXIMATELY NETWORK ACHIEVED $ REGULATED 25.0M PERFORMANCE TARGETS

4 Eastland Group Annual Report 2013 Eastland Group Annual Report 2013 5 FINANCIAL COMPARISON THE YEAR IN REVIEW 2012/2013 Financial Metrics 1992/1993 2002/2003 2012/2013 performance in a nutshell Report from Chairman and Group Chief Executive Staff 120 18 100 • Income up 18.5% to $72.3m Income $25.4m $22.6m $72.3m from 2012 Profit $1.5m $2.8m $12.8m • NPAT up 141.5% to $12.8m Shareholder Dividend - $250,000 $4.6m from 2012 Assets $28.2m $106.2m $366.1m “The record net profit of • Operating Profit (EBIT) up Equity $21.0m $48.9m $181.0m 38% to $29.0m from 2012 Bank debt as % of Assets 14.2% 29.0% 25.4% $12.8m underscores how • Assets up 3.5% to $366.1m from 2012 Since 2002-2003 we’ve grown from a Many of the company’s businesses are successful the company’s • Equity up 10% to $181.0m single electricity network business, with monopolies, or have strong monopoly from 2012 an operating profit (EBIT) of $7.5m, to a characteristics, and as such our strategy has been” mixed portfolio of businesses including customers don’t have the luxury of choice • Investment into local economy the three strong performers of logistics or a competitive market for the services (goods, services, wages) (port and airport), an electricity network, they procure from Eastland Group. approximately $25m and energy generation, so that in In all these businesses there is a price/ 2012-2013 we returned an operating • Bank Debt $93.0m quality trade-off. We can increase or profit of $29.0m. (25% of assets) improve the quality of service but this • Interest paid on shareholder Total dividends paid out to our comes at a cost. As such we work capital notes of $2.6m shareholder over the past 10 years, extensively with our customers, on a one “$7.2m has been paid to our for injection back into community to one or one to few basis, to understand • Return on Equity 7.1%, organisations and initiatives, totals their needs and to deliver fit-for-purpose shareholder, the eastland up from 3.2% in 2012 $38.7m. Equity growth in this time has infrastructure that finds the balance • Total dividend and interest grown by $132.1m meaning the $48.9m between price and quality of service and paid to shareholders $7.2m initial investment in 2003 has been also meets the needs of our shareholder community trust, in interest rewarded with $170.8m of additional for an appropriate return. shareholder value. and dividends” We strive to get the balance about right, and while many of our customers don’t Health and safety have choice, our hope is that if they did Customers and fit for purpose they would choose us. Health and safety is Eastland Group’s infrastructure number one priority and across the company we are focused on managing Eastland Group is primarily a business- From the top Eastland Port handled more than two million tonnes, highlighting hazards, building understanding of the to-business company, albeit one with a Operating profit significant growth since the 382,000 tonnes that were handled The 2013 financial year was an important one for Eastland Group, environments we work in and making strong customer focus. Our customer in 2006. Gisborne Airport successfully negotiated an increase in We define operating profit to be earnings with it being ten years since the strategy of owning, managing them safer. numbers, where we have a billing landing fees, required to underwrite future investment. before interest and tax (EBIT). The port, and growing a diversified set of businesses based around a relationship, are relatively small which There are many examples of how this network and generation businesses common set of shared services, operating in a provincial setting, Part of the company’s success has been narrowing the focus of means we are able to maintain meaningful is being progressed. Random drug and contributed the bulk of the company’s EBIT. was set in motion. The concept was a relatively simple one; use its activities around asset intensive infrastructure and that means on-going relationships with regular alcohol testing was introduced during the collective size of a number of smaller regional businesses as divesting investments that sit outside of the core and as a result communication and consultation. The operating profit for these parts of the the year and is in effect right across the a basis to recruit and retain great people who in turn can help the two aviation businesses were sold, with the resulting capital business are shown graphically below. company at all levels. The company the company meet its strategic aspirations for strong sustainable proceeds being directed to the company’s other development became a member of the Business commercial growth. projects. There was a loss on sale and this contributed to a loss Leaders’ Health and Safety Forum and from discontinued operations of $691,000. Ten years are also an adequate period to reflect back and to their ZeroHarm Workplace vision and the THREE GREAT BUSINESSES Overall, while the company is not making super-profits, it is assess whether the strategy has been a success, and on the energy sector achieved accreditation for OPERATING PROFIT back of Eastland Group’s strongest ever financial result the making strong and appropriate returns from our investments. the public safety management system. MILLIONS answer is unequivocally yes. Investing heavily in local infrastructure, while continuing Health and Safety is a specific item on to provide growth and an ever-increasing dividend for every board agenda and is discussed 30 The company delivered a record post tax profit of $12.8m, our shareholder. at each meeting in some detail. What well ahead of the previous year and also the $8.0m result we do know is that Health and Safety – 25 delivered in 2010-2011. Eastland Group has continued to look for investment outside regardless of progress and how good of the region as part of its desire to continue to grow as well as the company becomes – is a journey that It is also twenty years since Eastland Energy (now Eastland having geographic and sector diversification, at this point of time 20 never ends and in that respect we must Network) was established from Poverty Bay Electric Power 89% of its investment is inside the Wairoa and Gisborne District continue to improve and do better. Board in 1993. Council boundaries. 15 Eastland Group now has three great businesses operating in the 10 infrastructure sectors, a regulated energy distribution business, 10 and 20 years on an international seaport and a domestic airport, as well as an Our aspiration electricity generation business. From 1992-1993 until 1998 Eastland 5 At the highest-level, Eastland Group’s aspiration is simple and Energy operated as a electricity The big contributors were the port, electricity network and audacious; to be one of New Zealand’s great companies. distribution and retail company. In 1998 0 energy generation businesses who collectively represent more Great can mean many things to many people and it doesn’t it was forced to sell off its retail business than 90% of the company’s total investments. This is consistent 2003 2013 mean biggest or even necessarily best, but it captures the and became a pure electricity distribution with the company’s strategy of focusing primarily on the energy feel-good factor that our employees, customers and company and changed its name to and logistics sectors. GENERATION LOGISTICS NETWORK stakeholders hopefully have. Eastland Network.

6 Eastland Group Annual Report 2013 Eastland Group Annual Report 2013 7 “Over the next five years we plan to invest APPROXIMATELY 10 YEARS ON 2002 / 2003 2012 / 2013 $110m on infrastructure within Tairawhiti, while pumping mORE THAN $25m a year into the region through purchasing goods and services and paying wages” STAFF 18 100

Assets and equity New investment and Port investment developments Since 2003 we have invested more than Since Eastland Group’s formation into $69m in purchasing and developing a more diversified and growth focused Eastland Group looks for projects and Eastland Port and we are forecast to entity in 2003, the company has grown opportunities that fit with its strategy, and $22.6M invest a further $55m in port and airport its total assets from $106.2m to $366.1m. meets its rigorous investment criteria. INCOME $72.3M related capital projects over the next five More importantly, we have also grown These may be within Tairawhiti or outside years. These projects are likely to include shareholder value. Compound annual the region, and the diversification strategy an outer breakwater reconstruction, a growth in shareholder value (growth has resulted in generation assets that are second log berth, the upper log area’s in equity book value plus dividends) performing well and currently producing redevelopment, harbour deep dredging, is greater than 19% per annum. strong returns. and the purchase of a second port tug. $2.8M Over the next five years Eastland Group Northland debarker NPAT $12.8M Shareholder distributions plans to invest more than $110m on local infrastructure as well as additional We have reached preliminary agreement The company has continued its trend investment outside the region, in-line on terms to establish a debarking and over recent years of growing the dividend with our long-term growth strategy. anti-sap stain facility in Northland, paid to our shareholder, Eastland similar to the plant we have operating Community Trust (ECT). This year at Eastland Port. Te Ahi O Maui geothermal project dividend distributions of $4.6m were The company has a majority interest in $250,000 made to our shareholder, up from Hawaiian geothermal the Te Ahi O Maui (TAOM) geothermal DIVIDEND $4.6M $4.4m the previous year. We have a minority interest in a bid to project alongside other partners including In addition, $2.6m was paid to ECT for the Maori owners of the land. Helping the establish a 25MW geothermal power interest on capital notes. owners to derive sustainable value from station on the island of Hawaii (the Big their land and the associated resources Island). This project is in its infancy and The Shareholders support for the is part of the model that Eastland Group will facilitate the on-going development of company’s strategy and willingness to is proud to deploy. the company’s geothermal skills $106.2M have a growing dividend that still allows and capability. ASSETS $366.1M the company to retain a significant part The TAOM project proposes to design of its earnings for reinvestment has been and construct a sustainable geothermal rewarded, as in 2003 the company was power plant on a site 2.3km north-east only able to pay a dividend of $250,000. of Kawerau with the potential to generate 15-20MW of renewable electricity to “The Port supply 20,000 homes for up to 35 years. Bank debt The plant would deliver employment $48.9M opportunities and substantial return and the pursuit The amount of external debt that the on investment. EQUITY $181.0M company holds is reviewed on a regular basis, with the company’s objective being of investment to leverage the financial advantages of Transmission assets a well geared balance sheet without We continue to explore opportunities exposing the company to undue risk. to transfer assets dedicated to the opportunities transmission of electricity to Eastland The company currently has a bank-debt Network’s distribution network. Work facility of $125m of which $93m was continues on completing due diligence, outside the drawn down at year-end. fully understanding the risks and benefits $ $ $ The company sits comfortably within such transfers would provide, and working region are key all its banking covenants and bank-debt through the regulatory issues associated 21.8M 132.1M as a percentage of assets is 25.4%, with a transfer, potentially leading 38.7M to a point where we can finalise the significantly less than ten years earlier to our growth TOTAL DIVIDENDS INTEREST PAID TO ECT EQUITY GROWTH when bank-debt as a percentage of commercial terms, and sign agreements. assets was 35.1%. Part of this project will be making an assessment as to whether the company strategy” The company would ideally target debt is better placed to ensure the future above its current gearing levels but also electricity capacity demands of the recognises that its significant short-term region are met. investment program will lead to debt levels being closer to optimal.

8 Eastland Group Annual Report 2013 Eastland Group Annual Report 2013 9 “The forestry industry has been critical to the recent economic OUR BOARD OF DIRECTORS

success of Tairawhiti and the port has been IMPORTANT to Nelson Cull – Chairman Nelson is currently Director and Chair of the forestry industry being successful. It is a synergistic Eastland Group Ltd comprising Eastland Network Ltd, Eastland Port Ltd and Eastland Generation Ltd. He is also Chair and director relationship built on mutual dependency” of MSC Consulting Ltd, a structural and Civil Engineering consultancy firm and Board Adviser to Stonewood Homes West Auckland Ltd and Bike NZ, the National organisation responsible for the sport of Electricity network upgrades We continue to evolve our operations providing the potential for more growth cycling in New Zealand. Since 2003 we have invested more than while adhering to our core values and and development within the group. He has previously been Chair and Director $50m in our electricity network and we our quadruple bottom-line principles. The energy sector team will stay at of Lanzafuels Ltd and Techscape Ltd. Other are forecast to invest a further $60m in Carnarvon Street. directorships include, Guardian Healthcare At present the company is focused on John Rae – Director Ltd, Kerifresh Ltd and Netball NZ. He has capital projects within the region over John is a member of the Institute of Directors the energy and logistics sectors, along We are all positive and upbeat with the fulfiiled board advisory roles for Sports NZ in the next five years. and a Director or Chairman of a number of with diversification outside the region. outlook for the ensuing financial year. NZ Football and Swimming NZ. We give preference to opportunities where However, we must be continually aware of NZ companies involved in the infrastructure, Nelson worked in the Oil Industry in New energy, waste and fund management sectors. Gisborne Airport upgrades we can exercise managerial control, but directly adding value for our shareholder Zealand, Australia and the United Kingdom. Many regional airports in New Zealand He was involved in banking in NZ & London in we will look at minority positions if as well by growing investments, increasing their During his time with Fletcher Energy he set various treasury and capital market roles for are not able to provide their owner with an as commercial returns, we can grow our annual dividend, paying interest on the up and launched a new retail company, 10 years before returning to NZ in 1991 and appropriate return on investment which in skills and capabilities capital notes and increasing equity on Challenge Petroleum. the case of these mostly council owned undertaking a number of private equity, their assets. Consequently, the better venture capital & corporate finance airports means that the ratepayers of the we perform, the better it is for the region. transactions in NZ and Australia. region are required to subsidise those that Community and staff can afford to travel by air. Finally, we would like to thank our board For nine years until early 2010 John was Eastland Group is primarily a commercial of directors, senior management and Managing Director of Stevenson Group, one When Eastland Group took over Gisborne entity with commercial goals. However, staff for their contributions throughout of NZ’s largest private companies with more than 600 employees. He was responsible for Airport in 2005 any access to a ratepayer being a good corporate citizen means the year, and also thank the trustees subsidy ended and since then the airport a major transformation of this almost 100 year we also believe we hold a wider and management of our shareholder old company into a successful, diversified has stood on its own feet. stewardship and leadership role within the Eastland Community Trust for their investment group with significant interests Our philosophy is that the airport must the region. Therefore, we respect and support and contribution. in construction materials, quarrying, mining, recognise our community in many ways, agriculture, engineering and property. pay its way and the airlines that use the It has been a successful year which is including sponsorship of a raft of events, airport must make an appropriate financial pleasing on many levels, however as In addition to chairing the New Zealand Council organisations and initiatives every year. contribution to the maintenance, upkeep one year closes another starts and the for Infrastructure Development, John is a member of the National Infrastructure Advisory and development of the airport. Landing challenge of a good year is that it resets We aim to attract and retain outstanding Board which provides independent advice to charges at Gisborne Airport had not been people who value what Eastland Group expectations even higher and the process Anne Blackburn – Director Roger Taylor MNZM – Director Auckland-based Anne Blackburn joined the Roger Taylor is a former partner of Ernst Treasury and the Minister for Infrastructure. increased since 2000 and were needed can offer them professionally, as well as starts over. in order that some much needed capital board in September 2011. & Young and is currently an independent the lifestyle benefits offered by our unique financial consultant. He has 30 years projects could be undertaken. As a result location. We also believe providing a safe She is a banker by profession following experience of financial consulting and of a consultation process, as required and healthy environment is critical for careers in journalism and diplomacy, and auditing, and he specialises in financial, has worked extensively offshore. by law, with our larger customers we our success, so sending our team home economic and general management adjusted landing charges up, effective safely each day to their families is She spent 12 years in investment banks in advice. from 1 December 2012. non-negotiable. New York and London, before returning to a Roger has consulted to a wide range of senior management role with a New Zealand government and corporate clients both in The airport is a key piece of regional We would also like to extend a warm Nelson Cull bank in the late 1990s. infrastructure and we hope that it has New Zealand and overseas, including the welcome to our new Chief Financial Chairman Crown (in relation to the corporatisation become a more modern, secure and On her return she also began to develop Officer Aaron Snodgrass (and his wife a portfolio of directorships across the and valuation of airports and ports), friendly place under Eastland Group’s Courtney, and their two young daughters) finance, infrastructure, health, property and Wellington International Airport Limited, management. who joined the Eastland Group in March research sectors . Anne now has a wide Westgate Port Taranaki, Telecom New 2013 after relocating from New York. range of sector and professional governance Zealand Limited, and Board of Airline Representatives New Zealand in relation Aaron brings an abundance of experience experience at both main board and Michael Glover – Director committee level, in particular with audit and to asset valuation and pricing issues. Strategic intent in transactions involving raising capital, Mike has extensive experience in the human resource oversight. mergers and acquisitions, and financial Matt Todd commercial arena, having worked in The board and leadership team regularly large New Zealand companies and as an reporting. review the company’s strategy, direction, Group Chief Executive investment banker and adviser to some of risks and opportunities, as well as its John Clarke QSO – Director the biggest companies in South-East Asia performance against the current plan. John Clarke was Mayor of Gisborne and Australasia. This may lead to changes and refinements. Into the future for 12 years and, prior to his present appointment as a director of Eastland Group He developed one of the largest berryfruit We test the strategy with our Shareholder As Eastland Group has grown we have Limited, Eastland Network Limited and growing operations in New Zealand and and having received its agreement we needed to employ more people, which Eastland Port Limited, was chairman currently manages his own company, Fruit Solutions, which specialises in the plan forward and execute. means we now require more space, of Port Gisborne Limited. distribution of frozen fruits and vegetables. Eastland Group will remain a improved technology and access to He is a former co-chair of the Tairãwhiti Task Mike has a law degree and over the years commercially driven, Gisborne-based facilities. Our Carnarvon Street offices force and a member of the National Wood which had 18 people in 2003 now have Processing Strategy Group. has been a director of a number of private company producing healthy returns companies in New Zealand and Australia, over 40, so within the next calendar for our shareholder and ultimately its John is a viticulturalist, and is currently including 10 years as a director of electricity beneficiaries, being the people and year, our corporate services team will be President of NZ Grape Growers Council and distributor Network Tasman Limited. He is a businesses of the Gisborne District. moving downtown to 37 Gladstone Road, Deputy Chair of NZ Winegrowers. Fellow of the Institute of Directors.

10 Eastland Group Annual Report 2013 Eastland Group Annual Report 2013 11 WHO IS EASTLAND GROUP?

Eastland Group is a Gisborne-based Eastland Group vs Eastland Indirectly, Eastland Group benefits the national company wholly owned by Community Trust economy by spending close to $25m Eastland Community Trust (ECT). The a year on goods, services, wages and group’s subsidiary businesses provide Eastland Group is ECT’s primary sponsorship, however it is not involved in At the highest-level essential infrastructure to the Tairãwhiti commercial arm, operating as an directly funding community initiatives and region that supports the needs of the independent and commercial business organisations – that is ECT’s responsibility. wider community and contributes to the entity. Eastland Group’s role is to operate in such a manner as to maximise ECT’s Eastland Group’s betterment of the region. shareholder value and it does this directly Eastland Group is the parent company of by paying a dividend and growing the a portfolio of businesses predominantly value of their investment. within the electricity distribution, logistics Eastland Group is focused on providing aspiration is and electricity generation sectors. It is a people business and the single employer commercial benefit to its shareholder, of 100 staff within the group who are while ECT is focused on providing allocated to the subsidiary businesses community benefit to its beneficiaries. to enable them to function efficiently. simple and audaciouS OUR BUSINESSES SERVICE AND COMMUNITY BENEFIT

LOGISTICS REGULATED ELECTRICITY ENERGY GENERATION OTHER REGIONAL HOW THE TAIRÃWHITI COMMUNITY BENEFITS

Eastland Investment Properties Limited to be one of Approximately $25m to local Eastland Port goods, services Debarking Limited and wages New Zealand’s Sponsorship great $7.2m in dividends and interest distributed to ECT (2012/2013) companies Distributions to support Business and community initiatives Economic growth Benefit people of Gisborne

12 Eastland Group Annual Report 2013 Eastland Group Annual Report 2013 13 GEOGRAPHICAL LOCATION

GISBORNE

Eastland Port Debarking Limited

14 Eastland Group Annual Report 2013 Eastland Group Annual Report 2013 15 LEADERSHIP TEAM

AARON SNODGRASS GAVIN MURPHY MATT TODD ANDREW GADDUM BEN GIBSON BRENT STEWART Christopher Breen Chief Financial Officer General Manager Group Chief Executive Sector General Manager Te Ahi O Maui Sector General Manager General Manager Business Development Logistics Project Manager Energy Business Support Services

16 Eastland Group Annual Report 2013 Eastland Group Annual Report 2013 17 PORTFOLIO ALLOCATION

REGIONAL

89% Assets $’000s Regional Non Regional Total Regulated 147,094 - 147,094

Generation 25,868 39,439 65,307 11% NON REGIONAL Logistics 121,998 - 121,998 Other 31,673 - 31,673

Total 326,633 39,439 366,072 IN 10 YEARS Total % 89% 11% 100% WE’VE DEVELOPED THREE GREAT TOTAL ASSETS MILLIONS 350 300 BUSINESSES 250 200 150 100 50 MORE THAN 0 QUADRUPLING 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 EASTLAND GROUP’S INCOME vs NPAT

MILLIONS INCOME NET PROFIT MILLIONS TOTAL VALUE 70 14 60 12 50 10 40 8 30 6 20 4 10 2 0 0

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

18 Eastland Group Annual Report 2013 Eastland Group Annual Report 2013 19 3 GREAT BUSINESSES FINANCIAL PERFORMANCE TRENDS

Amounts in $m OPERATING INCOME (EBIT) TOTAL ASSETS PROFIT AND LOSS 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Income 22.6 29.2 31.6 30.8 46.1 54.9 67.5 62.0 73.2 61.0 72.3

Operating expenditure (11.0) (14.5) (16.3) (13.6) (27.4) (33.7) (45.7) (39.6) (41.9) (29.5) (32.5)

Earnings before interest, income tax, 11.6 14.7 15.4 17.2 18.6 21.2 21.8 22.4 31.3 31.4 39.9 2012 / 2013 2012 / 2013 depreciation and amortisation (EBITDA) Depreciation and amortisation (4.0) (4.2) (4.4) (5.3) (5.5) (6.2) (6.0) (7.3) (8.5) (10.5) (10.9) OTHER Earnings before interest and income 7.5 10.5 11.0 11.9 13.2 15.0 15.7 15.1 22.8 21.0 29.0 9% tax (EBIT)* $31.7M Net interest (2.9) (3.7) (3.9) (4.2) (5.2) (6.5) (7.5) (7.2) (11.2) (10.5) (9.7) Profit before income tax 4.6 6.8 7.1 7.7 8.0 8.5 8.2 7.9 11.6 10.5 19.3

2002 / 2003 NETWORK Income tax (1.8) (1.9) (2.7) (2.8) (2.4) (2.9) (1.4) (2.3) (3.6) (3.7) (5.9)

$9.7M Net profit after tax (NPAT) 2.8 5.0 4.4 4.9 5.7 5.7 6.9 5.6 8.0 6.8 13.5 LOGISTICS DISTRIBUTION LOGISTICS Discontinued operations ------(1.5) (0.7) $13.1M NETWORK $7.4M 33% 40% Net profit 2.8 5.0 4.4 4.9 5.7 5.7 6.9 5.6 8.0 5.3 12.8 $122.0M $147.1M Operating cashflows 6.4 7.9 10.6 10.7 6.9 4.9 6.4 16.4 19.3 19.9 25.9

*Referred to as operating profit

BALANCE SHEET 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 GENERATION GENERATION $7.4M 18% Total Assets 106.2 109.5 130.5 141.9 196.5 229.3 250.2 293.2 345.0 353.8 $366.1 $65.3M Total Liabilities 57.3 56.1 61.9 71.2 96.6 122.9 133.5 170.7 183.0 189.5 185.1 - Bank Debt 30.8 31.0 34.6 42.0 50.0 68.6 71.5 99.1 97.4 100.5 93.0

- Capital Notes 20.0 20.0 20.0 20.0 20.0 20.0 20.0 30.0 30.0 30.0 30.0

- Other Liabilities 6.5 5.1 7.3 9.2 26.6 34.3 42.0 41.6 55.6 59.0 62.1

Total Equity 48.9 53.4 68.6 70.6 100.0 106.3 116.8 122.5 162.0 164.3 181.0

Bank Debt % of Assets 29.0% 28.3% 26.5% 29.6% 25.4% 29.9% 28.6% 33.8% 28.2% 28.4% 25.4%

Distributions to shareholder 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Interest on capital notes 1.7 1.7 1.7 1.7 1.7 1.8 1.8 1.9 2.6 2.6 2.6 SHAREHOLDER VALUE Dividends to shareholder 0.3 1.5 5.0 2.8 4.5 3.6 3.8 4.0 4.2 4.4 4.6 Cummulative dividends paid (A) 0.3 1.8 6.8 9.6 14.1 17.7 21.5 25.5 29.7 34.1 38.7

Cummulative growth in equity (B) - 4.5 19.7 21.7 51.1 57.4 67.9 73.6 113.1 115.4 132.1

MILLIONS TOTAL EQUITY CUMULATIVE DIVIDENDS PAID (A) Shareholder value added (A+B) 0.3 6.3 26.5 31.3 65.2 75.1 89.4 99.1 142.8 149.5 170.8

Compound Dividend Return 0.6% 2.1% 5.4% 5.6% 6.3% 6.4% 6.4% 6.4% 6.4% 6.4% 6.4% 200

Business segment 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Network • • • • • • • • • • •

160 Generation • • • • • • • • • • •

Logistics – Airport • • • • • • • • •

Logistics – Port • • • • • • • • • • •

120 Aviation • • • • • • • Strategic property investments • • •

Network 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 80 Energy distributed (GwH) 296 272 306 302 310 303 299 300 302 305 307

Customer connections 25,264 24,848 24,854 24,871 24,975 25,196 25,300 25,432 25,514 25,567 25,550

40 Logistics 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Total export volumes (mill tonnes) N/A 0.5 0.5 0.4 0.5 0.7 0.7 1.2 1.5 1.7 2.0

20 Eastland Group Annual Report 2013 Eastland Group Annual Report 2013 21 REGULATED ELECTRICITY

22 Eastland Group Annual Report 2013 Eastland Group Annual Report 2013 23 Reticulation upgrades Overhead-to-underground conversions REGULATED ELECTRICITY Completed projects: Completed projects: • Tikitiki township – an extensive asset upgrade including a new • Ormond Road (between Dalrymple Street and Valley Road) – 11kV transformer and the associated 11kV/400V cabling and removal of overhead road crossings pole replacements • Kent Street – 400V overlay upgrade size 95/185 • Murray Street, Wairoa – new 11kV transformer and associated • Childers Road (between Carnarvon and Cobden Streets) – 11kV/400V cabling overhead-to-underground replacement • Overlay 11kV cables in Titoki Street/Lytton Road • Relocate cable conflict with GDC asset in Innes Street (industrial subdivision)

Highlights • Replacement of 50kV circuit breakers This accreditation work was carried out by at Ruatoria and Tokomaru Bay zone a third party audit of the plan against NZ • Total network energy substations 7901:2008 Electricity and Gas Industries – Safety Management Systems for Public distribution ahead of budget • Significant clearance of trees from the Safety, as required by the Electricity vicinity of overhead lines – throughout (Safety) Regulations 2010. • Maintenance and capital the Gisborne and Wairoa areas. expenditure within budget

• Complied with all regulatory New network developments requirements Network upgrades • Network performance achieved TOTAL ANNUAL Since 2003 we have invested more than regulated performance targets $50 million in our electricity network and we are forecast to invest a further $60 million in capital projects within the region over the next five years. This level of Maintenance and capital investment is only possible because all of ENERGY expenditure our other businesses are profitable. Maintenance and capital expenditure on DISTRIBUTED BY the network were successfully managed Transmission assets Overview within budget and in accordance with our We continue to explore opportunities Asset Management Plan. A number of to transfer assets dedicated to the In the 2012-13 financial year Eastland Network Limited (ENL) THE NETWORK WE’RE reticulation upgrades and overhead-to- transmission of electricity to Eastland saw a 1% increase in electricity consumption split evenly underground conversions were carried Network’s distribution network. Work between residential and commercial customers. In addition, a out in a continuing programme to meet continues on completing due diligence, new energy retailer entered into an agreement to trade on the load growth and improve security of fully understanding the risks and ENL network. This means there are now a total of eight energy ANTICIPATING supply requirements along main benefits such transfers would provide, retailers trading on the ENL network, resulting in a greater choice arterial routes and/or those with high and working through the regulatory for the region’s power consumers. amenity value within the Gisborne and issues associated with a transfer SPENDING Wairoa areas. potentially leading to a point where 306.2 we can finalise the commercial terms, Connections and developments and sign an agreement. Electricity connections to our network reduced very slightly Asset replacements $60 MILLION by 17 from 25,567 last year to 25,550 this financial year. Our planned programme of aged-asset Compliance replacement and asset maintenance GWHRS Residential continued on the Gisborne and Wairoa Public safety management plan ON THE NETWORK On par with the previous year, there were a low number of networks. Of major significance were: residential developments or subdivisions supplied with a In the 2012-13 financial year, in new electricity connection: • 13 urban ground-mount transformers accordance with the Electricity Act and replaced in urban Gisborne Electricity Safety Regulations, Eastland Group’s Public Safety Management Plan OVER THE NEXT Commercial • Completion of asset renewal projects 1% achieved regulatory compliance and In-line with residential supply, there were also a low number of in the Tahora and Tahunga areas (rural accreditation. commercial developments requiring a new connection. However, Gisborne) and Raupunga/Mohaka AHEAD FIVE YEARS upgrades and new reticulations were installed to meet the supply areas (rural Wairoa) – included The plan applies to energy sector network Of the requirements of: replacement of 11kV and 400V poles, and generation assets. It aims to ensure • Aerodrome Road – new pump station for GDC the upgrading of transformers and assets covered are designed, built and 303.596 removal of redundant overhead plant managed in such a way that they will not • New Medical Centre – Kahutia Street/Customhouse Street – pose any significant risks to members of • Replacement of poles on the coast GWHRS 11kV switchgear, 500kVA transformer and cabling the public or their property. (Gisborne to Te Araroa) 50kV TARGET • Horticultural product processing plant – upgrade in supply and subtransmission line changed a 500kVA transformer to a new 1000kVA transformer.

24 Eastland Group Annual Report 2013 Eastland Group Annual Report 2013 25 “the ironic thing about a lines company is that the better you do your job, the less people think about you”

Electricity distribution services default price – quality path determination 2010 As an electricity distribution business (an EDB) ENL is subject to default pricing and quality regulations. These regulations administered by the Commerce Commission are designed to ensure that EDBs have similar incentives and pressures to suppliers operating in competitive markets to innovate, invest and improve efficiency. It also aims to limit the ability of suppliers to earn excessive profits, while also ensuring consumer demands on service quality are met. Regulatory compliance was achieved against Electricity Distribution Services Default Price-Quality Path Determination 2010, for allowable notional revenue and reliability/network performance thresholds for the 2012-13 assessment-period.

Eastech contracting Formed in 2012 after almost 10 years outsourcing network maintenance and construction, Eastland’s contracting arm Eastech again met and in some cases exceeded its financial, services and health and safety targets. In conjunction with the industry-training organisation ESITO and other local contractors, a programme to deliver locally based training for line mechanic trainees was developed. This programme demonstrates Eastland Group’s commitment to professional development of local residents who can provide the skills required to operate and maintain the network. Additional resources were also engaged to expand Eastech’s capabilities in the area of specialist vegetation management – services that can be used by ENL and the general public.

26 Eastland Group Annual Report 2013 Eastland Group Annual Report 2013 27 ENERGY GENERATION

28 Eastland Group Annual Report 2013 Eastland Group Annual Report 2013 29 ENERGY GENERATION “Outside new energy generation opportunities Highlights in Tairawhiti, we’re also looking to invest • Gained full maintenance control over Geothermal in developments elsewhere in New Zealand, Developments plant and beyond” • Outstanding Geothermal Developments commercial complete control over the plant’s lifecycle consultation was also undertaken with all disputes resolved with maintenance regime, including scheduled interested parties. In December 2012, a favourable outcomes and fault maintenance. The first challenge resource consent application was lodged • Resource consent renewal for the company was to manage the with and accepted by the Bay of Plenty application for Geothermal annual maintenance shutdown of Regional Council. Developments lodged and the plant in November. This involved During 2013 while the application is being application accepted coordinating and managing nine specialist processed, design, construction and contractors to carry out scheduled • TAOM resource consent procurement details are being worked maintenance work. The shutdown was lodged and application through and power purchase agreements successfully completed within the allotted accepted discussed. Construction is expected window on budget with no health and to take approximately two years so by • New opportunities in Hawaii safety incidents or previously experienced 2016-17 TAOM could be operational and geothermal generation plant start-up operational issues. delivering electricity. being pursued Work was also undertaken with the • Waihi hydro maintenance plant’s designer/manufacturer to Hawaiian geothermal successful investigate and make subsequent Eastland Group has been working structural bracing improvements to alongside its Hawaiian based partner mitigate thrust loading issues, believed IDG to put in a bid for an initial 25MW to have contributed to previous main geothermal power station on the island shaft bearing failures. Continued close Another contributing factor (but with of Hawaii (the Big Island). The companies monitoring of bearing performance far less impact than the drought) was a have been working together for a number suggests the work was successful. project to carry out a 10-yearly detailed of years now, and IDG is also a minority internal inspection and condition investor in Eastland Group’s TAOM assessment of the 2m round, 1200m long geothermal project in Kawerau. New energy generation tunnel and penstocks connecting the dam The Eastland Group has a minority to the powerhouse. Inspection required interest in Hu’ena, the commercial entity TAOM – Geothermal dewatering of the tunnel and penstocks established to pursue the opportunity. Overview The TAOM geothermal project is and the results showed the tunnel and If successful with the bid, Eastland a partnership between Eastland Electricity generation is one of Eastland Group’s three core penstocks to be in excellent condition Group’s interest is likely to be 20% THE OPPORTUNITIES Generation, Kawerau A8D Ahu Whenua businesses and the company has a growing portfolio of primarily with only one minor tunnel leak detected, and its total investment in the NZ$5 Trust and Innovations Development renewable generation augmented by its existing diesel gen-sets. which was repaired by contractors. to $10 million range, depending on a Group Inc (IDG). The project proposes The financial year saw the Waihi hydro power station directly number of project variables. Eastland diesel generation to design and construct a sustainable IN GEOTHERMAL affected by the country’s drought with the plant delivering geothermal power plant on a site 2.3km The six 1MWe diesel generators Tairãwhiti hydro below its predicted target, however, strong cashflows from the north-east of Kawerau, which could collectively generated 558,900 KWhrs geothermal and diesel generation plants meant that overall the deliver local employment and education The company continues to monitor and (up 65% from last year). Most of this generation portfolio delivered above budget. opportunities, along with a substantial undertake feasibility work on several GENERATION ARE production was to maintain supply to revenue source to support and advance sites potentially suitable for hydro power During the year Eastland Generation took over all aspects of customers during faults and scheduled the surrounding region. generation within Tairãwhiti. A number maintenance and capital works at the Kawerau Geothermal maintenance, or to reduce maximum of exclusive exploration and monitoring ATTRACTIVE BOTH Developments plant. This is in-line with the Eastland Group’s demand at transmission grid supply Eastland Generation holds an 80% agreements were negotiated with overall strategic intent of developing its own internal capability points. The high use of diesel generation interest in TAOM, with its partners each landowners to facilitate ongoing research. and managing its own assets. was partly attributed to the drought. holding 10%.

The company’s second geothermal project in Kawerau – Te Ahi A major maintenance overhaul of the The potential TAOM power plant could COMMERCIALLY AND The future of energy o Maui (TAOM) - continues to move through the various phases Ruatoria genset was also carried out. generate 15-20MW of renewable of development with significant progrerss made during the year. As this work could not effectively be electricity, with around 15,000 tonnes of Development work continued on projects carried out in the field the unit was geothermal fluid extracted daily before aimed at increasing the amount of ENVIRONMENTALLY transported to the company’s workshop it is re-injected back into the reservoir to embedded generation connected to the Existing energy generation facilities in Gisborne. ensure that the field can be replenished company’s distribution network, as well and operate sustainably. The exact as seeking opportunities elsewhere. Waihi Hydro generation scheme Geothermal – Kawerau amount of reinjection will depend on the This is part of the planning to meet future The Waihi Hydro Generation Scheme’s annual production of For the past three years the operating final design of the plant, but the plant has regional demand growth and ongoing 9.84 GWhrs was 10.6% below the target of 11.0 GWhrs. This and management services of Geothermal the potential to generate enough power to business development. decrease was almost solely the result of New Zealand’s ‘Big Dry’ Developments plant in Kawerau were supply as many as 20,000 homes for up As well as the projects identified above with annual regional rainfall dropping to 1007mm, 43% below a contracted out to a third party service to 35 years. the company continues to investigate 15-year average of 1877mm. provider. In 2013 responsibility for the In the calendar year 2012 the focus wind, biomass, biofuel solar energy provision of the plant’s maintenance and was on research related to potential opportunities in the Gisborne and capital asset management transferred subsidence, the surrounding ecology, Wairoa regions. “in house” and the company now has air discharge and noise. Extensive

30 Eastland Group Annual Report 2013 Eastland Group Annual Report 2013 31 THE TE AHI O MAUI PROJECT WOULD PROVIDE 20,000 HOMES WITH ELECTRICITY FOR OVER 35 YEARS

32 Eastland Group Annual Report 2013 Eastland Group Annual Report 2013 33 LOGISTICS

34 Eastland Group Annual Report 2013 Eastland Group Annual Report 2013 35 Notable 2012-13 Port Activity provides a platform to conduct operations around the Port with machinery as opposed to using contractors, that can be expensive. LOGISTICS Ministry for Primary Industries Reaccreditation It is also planned that an excavator will be added to the barge, which Eastland Port became the first port in the country to be approved for will allow the deep dredging of the channel. reaccreditation under the Ministry for Primary Industries’ Places of First Arrival (POFA) standard. Successful reaccreditation will confirm Debarking Plant that Eastland Port has systems and procedures in place to meet bio- The Port’s joint venture with East Coast Forests on the debarking security requirements while conforming with new POFA standards. plant continues to go from strength to strength with over 200,000 tonnes processed during the year – up from 135,000 tonnes in 2012. Titirangi Makeover The year also saw an increase in debarked volume meaning vessels As an essential cog in daily life at the Port, the Titirangi is a front line could be fully loaded out of Gisborne. piece of equipment that needs to be in tip-top condition 24-7-365. And as part of marine requirements, every five years it needs to be Pukunui Refit pulled out of the water and re-surveyed, which meant this year it had The ports dredge the Pukunui was refitted during the year. As well as to be sent off to Nelson for a comprehensive million-dollar makeover. meeting its 5 year survey requirements the barge was also outfitted with a new dredge pump and water injection unit, all of which will New Barge mean a more efficient dredging operation and a deeper channel. A barge bought from the Port of Greymouth was given a complete refit in Nelson before making its way north to the Port. The barge

Highlights Forestry exports Eastland Port

• A record 2M+ tonnes In contrast to the 2012 financial year, The Port is a vital piece of infrastructure of export volume Asian demand for logs in 2013 took an for the region and for a forestry industry upward turn. This was a boon to the Port that now directly employs over 1600 • 133,000 passenger and this demand is anticipated to continue people. Since the acquisition of the Port movements at Gisborne and increase until around 2020, indicating in 2003 the company has spent more Airport a few more years of steady growth and than $50m on capital enhancements to income for the Port, the local forestry the Port – over and above purchase price • $69M invested in Logistics sector, and subsequently the entire region. and normal operational maintenance over 10 years expenditure – and is planning to invest a Debarking logs through the ports on further $55m over the next five years to • $55M planned investment port plant for China deck cargo is now accommodate the customer projections in the next five years an economically viable option for some for forestry harvest. customers. Delivering cost-savings to • Debarking plant increases forestry export clients as they can now Following on from the completion of customer margins fully load from Gisborne as opposed the Matawhero Log Yard and Inner Overview to having to top off shipments from Breakwater Refurbishment in 2012, the • Key port infrastructure A monthly record 224,480 tonnes of cargo headed out of Tauranga or Northland with methyl final section of asphalting of the main log projects completed IN 10 YEARS bromide treatment logs*. yard is now completed. Prior to this work Eastland Port in March 2013, and the full 2013 financial year saw an all-time high of 2,024,710 tonnes exported, almost 20% up on being undertaken, the area could store • Five year infrastructure Along with increased demand, the Port 2012 volumes. 60,000 tonnes, now it can comfortably plan in place also attributes record-breaking export accommodate 80,000 tonnes. More than WE’VE TAKEN THE A re-ignition of Asian demand for logs contributed to 98% of volumes to the streamlined processes and • Operational Earnings/ 30% increase in capacity export volume with the remaining 2% made up of plywood, collaborative efforts of Port management, EBIT $13M squash and kiwifruit. log marshallers, stevedores and regular The Port Users Efficiency Group is client consultation. Together, these effectively helping to smooth traffic flows PORT’S ANNUAL The increase in export volumes resulted in operational earnings factors have contributed to the Port being through the day and identifying areas for (EBIT) reaching $13.1m compared with $8.8m the previous year. nationally recognised as the most efficient improvements in productivity and truck An increase in operational earnings of 49%. Overlay this with the fact that maximum log handling port in New Zealand. turnaround times. There is still a lot of work to be done in this area but the group EXPORT VOLUME berth occupancy of a well-run log berth is *Debarking or methyl bromide treatment is a 60% means that it would be theoretically is working well together and the concept Port efficiency mandatory requirement for the shipment of possible to have a vessel alongside logs on deck into China. has been adopted at a number of other The port has limited land available adjacent to the wharves and being loaded for 220 days per year. 220 ports around the country. FROM 480,000 days per year multiplied by 7,000 is 1.5m while it has and will continue to develop offsite storage, this comes at a significant cost premium to the forestry customers tonnes per annum. as it incurs double handling costs. The port exported almost 2m tonnes TONNES TO OVER In the not-so-distance past, the maximum storage volume in the financial year and it did this with “In the 2012-2013 financial year on-port was considered to be 66,000 tonnes and logs were just 53% berth occupancy. being loaded at a rate of 7,000 tonnes per day. The reason is that it can now store 2 MILLION TONNES Therefore it would take nearly 10 days to clear the log yard 88,000 tonnes on port and it can load forestry became the biggest (assuming nothing else came in) which meant that the log yard upto 12,000 tonnes per day. could turn 37 times per year. It has over the past few years become contributor to Gisborne’s GDP” the most efficient log handling port in New Zealand.

36 Eastland Group Annual Report 2013 Eastland Group Annual Report 2013 37 Forestry has become the cornerstone of the East Coast region’s economy with annual log harvesting now at 2 million tonnes and set to steadily increase to a peak of 3.5 million tonnes by 2020

38 Eastland Group Annual Report 2013 Eastland Group Annual Report 2013 39 “The 2013 export volumes and financial results are positive indicators of a strong, well-coordinated and growing value chain, and a firm recognition of just how essential forestry and the Port are to the TairAwhiti region”

Projected 2013-14 Port activity Replacement tug The future of logistics A new high-bollard tug with more than The infrastructure at the Port is under Both Port and the Airport are critical four times the pulling power of the smaller significant pressure from increasing pieces of regional infrastructure that Turihaua it replaces will improve both forestry volumes, which has led to facilitate the efficient transport of people efficiency and safety of port operations. the company accelerating its Port and product into and out of the region. Combined with an increased channel Development Plan. Projects currently lined They are essential to a growing economy depth and second log berth, the improved up in our infrastructure plan are as follows: and made all the more important by productivity will benefit customers and Gisborne’s relative isolation from the rest the Port alike. Marine plan of the country. The company plans to undertake a Eastland Group is committed to comprehensive engineering project this Gisborne Airport continuing to invest in these assets to coming year in order to get the necessary meet the projected customer demand and The Airport is a vital transport link in and consents in place to allow the berthing of helping to grow the regional economy. out of the region, especially considering CONSIDERING GISBORNE’S a second log vessel and mitigate as much as possible the surge conditions within Gisborne’s geographical location in the port. This will include how best to terms of drive times, and the geological geographical ISOLATION reconstruct the outer breakwater. land stability issues which impact on the roading network. Over the past decade, Second log berth up to 25,000 total aircraft take-offs and “Eastland Port To meet forecast demand over the coming landings per annum have taken place at years, we’re looking to build an additional the airport. is nationally log berth. This will allow us to load logs Following lengthy consultation with Air onto two ships at once. THE AIRPORT IS A New Zealand, an increase in landing fees was introduced from 1 December 2012. recognised Upper log area redevelopment These were the first landing fee increases In order to meet the growing requirement in well over ten years and the additional VITAL transport for storage, we will also be redeveloping revenue will contribute to a number of as the most the upper log area. As with the now important capital projects including the completed southern log yard development planned resealing of the central 30-metre this will include a world class storm water wide section of the airport’s 1310-metre efficient LINK in and out treatment system. main runway. Since Eastland Group took over the Harbour deep dredging airport in 2005, it has constantly invested log-handling In order to open the ports operational and upgraded the facilities. Next on the of the region window and increase the opportunity list is the terminal. Gisborne Airport is for customers to fully load log vessels, also involved in supporting the initial port in the port plans to increase the navigation work involved in building of a new channel depth. This will be aided by the fit-for-purpose hangar for the Eastland recently refitted port dredge the Pukunui. Rescue Helicopter. New Zealand”

40 Eastland Group Annual Report 2013 Eastland Group Annual Report 2013 41 PEOPLE AND COMMUNITY

42 Eastland Group Annual Report 2013 Eastland Group Annual Report 2013 43 In the 2013 financial year, sponsorship funds were provided to a • Angels for Children Charitable raft of local organisations and events. Although the group allocates PEOPLE AND COMMUNITY • Poverty Bay Turf Club a substantial portion of this money to the Gisborne Speedway and the Gisborne Chamber of Commerce Innovation and Inspirational • The Hub Concept Speaker Series, additional recipients included: • Lions Club of Gisborne • Tertiary Study Scholarship • Relay for Life • Gisborne Tatapouri Sport Fishing Club’s Eastland Port Marlin • Child Cancer and Tuna Tournament • Eastland Rescue Helicopter Trust • Westpac Business Excellence Awards • UawaFM • Gisborne Regional Wine Awards • Leukaemia and Blood Foundation • Eastland Netball Association • War Memorial Theatre Trust • Takitimu Pilot Boat • Offshore Powerboat Series • Gisborne Bowling Club

Eastland Group’s quadruple We spend a very modest amount bottom-line is to be: each year on sponsorship and we try to channel that money into organisations • Economically profitable and initiatives that are making a positive • Socially-responsible difference in our community. • Culturally sensitive • Environmentally–aware Innovation and Inspirational Speakers Series Eastland Group is committed to Our people sponsorship of the Gisborne Chamber of Eastland Group sees the people it Commerce’s Innovation and Inspirational employs as the key component Speakers Series until 2014. This series of its success. brings in high-achieving New Zealanders to share their experience and advice to Overview In order to get the best people and the provide local business people access to best from its people, Eastland Group some of the best business and creative At Eastland Group, we constantly look for ways to benefit and OUR STAFF ARE OUR will provide an ethical environment and minds in the country. add value to the wider community, and at the same time look culture where we: to reduce the impact we have on the natural environment. Over the past three years, the series has We’re also keen supporters of many activities, events and • Appreciate the value of people hosted Rod Drury (Xero), Sarah Gibbs GREATEST ASSET progressive initiatives in the community, some of which you • Are results focused (Trilogy), Justine Troy (42 Below), Mike can read about in this section. Hutcheson (marketing guru) and Ian Taylor • Have fun and make time to (Taylormade Media). It has hit a sweet Every year, Eastland Group pumps millions of dollars into the celebrate success spot with East Coast business people with local economy boosting the economic activity of the Tairãwhiti numbers attending steadily increasing as THAT’S WHY WE region. We spend approximately $18m annually on goods • Have a sense of urgency and a word spreads. In March, Icehouse CEO and services from a wide range of providers from kitchen desire to get things done Andrew Hamilton spoke. and bathroom supplies to office stationery and equipment, • Recognise the need for a healthy engineering, taxis, architects, legal fees and training costs. INVEST SO HEAVILY work/life balance Speedway We have 98 locally based staff and pay over $7m in wages • Treat each other with honesty Eastland Group is proud to support one and salaries annually. The group also attracts new people to and respect of the region’s best attended summer the area, and helps ex-East Coasters return and resettle. sports, the Gisborne Speedway, and • Are to work for the company IN THEIR ONGOING proud during the year we renewed our Additional to the money spent on goods, services and wages, Eastland Group also injects a considerable amount • Have a strong sense of ‘team’ three-year sponsorship deal with them. of sponsorship money into the community. The season’s opening night was a UP-SKILLING AND • All participate highlight with thousands turning out to We also continue to grow the dividend paid to our shareholder enjoy the fireworks and racing action. (ECT). This year we paid a total of $7.2m in dividends and interest on capital notes. The ECT uses these funds to support business, Eastland Group community Enviroschools sponsorship WELL-BEING community and other initiatives which are likely to encourage or Eastland Port’s support of the sustain economic growth within the district, or may directly or Eastland Group sees its sponsorship Enviroschools programme continued this indirectly benefit the people of Gisborne. programme in the Tairãwhiti region as year with 50m3 of compost, bark and more than just giving money to good mulch donated to schools, kindergartens causes. Sponsorship is seen as a focused and Te Kõhanga Reo. Eastland Port is way of establishing beneficial long-term proud to be supporting Gisborne children relationships with the wider community. as they learn first-hand the benefits of gardening, feeding the land and recycling.

44 Eastland Group Annual Report 2013 Eastland Group Annual Report 2013 45 Darryl Fitzgerald – Olympic kayaker Health & Safety Eastland Port has backed a winner in Olympic kayaker Darryl Fitzgerald. The ZeroHarm programme Port-sponsored K2 1000m specialist Eastland Group is now part of the finished seventh in the world with nationwide ZeroHarm Programme, teammate Steven Ferguson at the London joining companies such as ACC, Air New Olympics. Port general manager Andrew Zealand, BP, Contact Energy, Downer and Gaddum has been very impressed, not The Warehouse. Group CEO Matt Todd just with Darryl’s sporting performances, will attend seminars and workshops as but his professionalism as an athlete. part of the Business Leaders’ Health and Safety Forum – a coalition of business Eastland Wood Council and government leaders committed to Forestry Awards improving the performance of workplace The men and women who make the health and safety in New Zealand. region’s forestry industry the success it is were applauded at this year’s Eastland Man Down Alert System Wood Council Forestry Awards. The The new Man Down Alert System has awards have become a much anticipated been installed at the port’s cook stores to feature on the region’s forestry social ensure employees are safe while working calendar and are seen as much as a alone. With forklift operators often working celebration, as a chance for those from alone in a cold store where bulk bins of all sectors of the industry to get together. product are stacked high, there is always the possibility of an accidental collapse or Rutene Road Kindergarten machinery malfunction. Youngsters at Rutene Road Kindergarten The new system works on a portable have some new rope climbing gear thanks radio, which has a movement sensor to the kindness and skill of Eastland Port fitted. If no movement is detected for general hand Chris Griffin. The 61-year- a programmed period, it will beep very old grandfather upgraded the rope work loudly, and if not reset by the operator, inside a climbing frame and created a will transmit an alert to a base station new rope ladder at the kindergarten, on site that will, in turn, notify other taking more than 40 hours of his own personnel and a security service. time to complete. Incident-Reporting Programme Waikirikiri School As part of Eastland’s Organisational Eastland Port’s donation of bark to Preparedness Programme this project Waikirikiri School has proved a winner not collates incidents to establish a database just with the students, but also the wider that can then be accessed for trends community. Environment students at the including times, days and any factors school created their own ngahere (forest) that can give clues as to what is causing after being inspired by nearby school unwanted incidents. Once these trends Te Wharau’s own native patch. Already, have been identified, we can put safety they’ve planted 130 native trees in the nets in place to minimise future risk. ground near the school’s boundary.

Scholarships Eastland Group’s Tertiary Study Scholarship offers $5,000 annually to local students studying engineering, with a particular focus on civil, mechanical and electrical engineering. This year’s recipient was Sam Godwin who is in his first year of a Bachelor of Engineering with honours at Canterbury University. Sam has already sketched out his big plan, which involves post-graduate study in engineering management and his own business. While at Lindisfarne College in Hawke’s Bay, Sam played rugby for the New Zealand under-17s, made the Hurricanes under-18 squad and represented Hawke’s Bay.

46 Eastland Group Annual Report 2013 Eastland Group Annual Report 2013 47 EASTLAND GROUP LIMITED

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2013 The directors are pleased to present the Financial Statements of Eastland Group Limited for the year ended 31 March 2013.

Nelson Cull Roger Taylor Director Director

29 May 2013

48 Eastland Group Annual Report 2013 Eastland Group Annual Report 2013 49 INDEPENDENT AUDITORʼS REPORT TO THE SHAREHOLDERS OF EASTLAND GROUP LIMITED

Report on the Financial Statements

We have audited the financial statements of Eastland Group Limited and group on pages 52 to 107, which comprise the consolidated and separate statements of financial position of Eastland Group Limited, as at 31 March 2013, the consolidated and separate statements of comprehensive income, statements of changes in equity and statements of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information.

This report is made solely to the companyʼs shareholders, as a body, in accordance with Section 205(1) of the Companies Act 1993. Our audit has been undertaken so that we might state to the companyʼs shareholders those matters we are required to state to them in an auditorʼs report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the companyʼs shareholders as a body, for our audit work, for this report, or for the opinions we have formed.

Board of Directorsʼ Responsibility for the Financial Statements

The Board of Directors are responsible for the preparation of financial statements in accordance with generally accepted accounting practice in New Zealand and that give a true and fair view of the matters to which they relate, and for such internal control as the Board of Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditorʼs Responsibilities

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing and 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 financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditorʼs 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 entityʼs preparation of 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 entityʼs internal control. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates, as well as the overall 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.

Other than in our capacity as auditor, we have no relationship with or interests in Eastland Group Limited or any of its INDEPENDENT AUDITORʼS REPORT subsidiaries. INDEPENDENT AUDITORʼS REPORT TO THE SHAREHOLDERS OF TO THE SHAREHOLDERS OF EASTLAND GROUP LIMITED Opinion EASTLAND GROUP LIMITED INDEPENDENT AUDITORʼS REPORT In our opinion, the financial statements on pages 52 to 107: TO THE SHAREHOLDERS OF • comply with generally accepted accounting practice in New Zealand; Report on the Financial Statements Report on the Financial Statements EASTLAND GROUP LIMITED • comply with International Financial Reporting Standards; and We have audited the financial statements of Eastland Group Limited and group on pages 52 to 107, which comprise the •We have give aaudited true and the fair financial view of statements the financial of positioEastlann dof Group Eastland Limited Group and Limited group andon pagesgroup as52 atto 31107, Marc whichh 2013, comprise and their the consolidated and separate statements of financial position of Eastland Group Limited, as at 31 March 2013, the consolidated consolidatedfinancial andperformance separate andstatements cash flows of financialfor the year position then ended.of Eastland Group Limited, as at 31 March 2013, the consolidated Report on the Financial Statements and separate statements of comprehensive income, statements of changes in equity and statements of cash flows for the year and separate statements of comprehensive income, statements of changes in equity and statements of cash flows for the year Wethen have ended, audited and a thesummary financial of significantstatements accounting of Eastlan policiesd Group and Limited other explanatoryand group oninformation. pages 52 to 107, which comprise the Reportthen ended, on Other and aLegal summary and Regulatoryof significant Requirements accounting policies and other explanatory information. consolidated and separate statements of financial position of Eastland Group Limited, as at 31 March 2013, the consolidated This report is made solely to the companyʼs shareholders, as a body, in accordance with Section 205(1) of the Companies Act WeThis also report report is made in accordance solely to the with companyʼs section 16shareho of thelders, Financial as a body,Reporting in accordance Act 1993. with In Sectionrelation 205(1)to our ofaudit the ofCompanies the financial Act and separate statements of comprehensive income, statements of changes in equity and statements of cash flows for the year 1993. Our audit has been undertaken so that we might state to the companyʼs shareholders those matters we are required to statements1993. Our foraudit the has year been ended undertaken 31 March so 2013: that we might state to the companyʼs shareholders those matters we are required to then ended, and a summary of significant accounting policies and other explanatory information. state to them in an auditorʼs report and for no other purpose. To the fullest extent permitted by law, we do not accept or •state we to have them obtained in an auditorʼs all the information report and and for noexplanati other onspurpose. we have To required; the fullest and extent permitted by law, we do not accept or Thisassume report responsibility is made solely to anyone to the companyʼsother than theshareho complders,anyʼs asshareholders a body, in accordanceas a body, forwith our Section audit work,205(1) for of this the report,Companies or for Actthe •assume in our responsibility opinion proper to anyone accounting other than records the comp haveanyʼs been shareholders kept by Eastland as a body, Group for ourLimited audit aswork, far f oras this appears report, forrom for ourthe 1993.opinions Our we audit have has formed. been undertaken so that we might state to the companyʼs shareholders those matters we are required to opinionsexamination we have offormed. those records. state to them in an auditorʼs report and for no other purpose. To the fullest extent permitted by law, we do not accept or assumeBoard of responsibility Directorsʼ Responsibility to anyone other for than the the Financia companyʼsl Statements shareholders as a body, for our audit work, for this report, or for the Board of Directorsʼ Responsibility for the Financial Statements opinions we have formed. The Board of Directors are responsible for the preparation of financial statements in accordance with generally accepted The Board of Directors are responsible for the preparation of financial statements in accordance with generally accepted accounting practice in New Zealand and that give a true and fair view of the matters to which they relate, and for such internal accounting practice in New Zealand and that give a true and fair view of the matters to which they relate, and for such internal Board of Directorsʼ Responsibility for the Financial Statements control as the Board of Directors determine is necessary to enable the preparation of financial statements that are free from control as the Board of Directors determine is necessary to enable the preparation of financial statements that are free from Thematerial Board misstatement, of Directors whether are responsible due to fraud for orthe erro prepr. aration of financial statements in accordance with generally accepted Charteredmaterial misstatement, Accountants whether due to fraud or error. accounting practice in New Zealand and that give a true and fair view of the matters to which they relate, and for such internal 29 May 2013 controlAuditorʼs as theResponsibilities Board of Directors determine is necessary to enable the preparation of financial statements that are free from Hamilton,Auditorʼs New Responsibilities Zealand material misstatement, whether due to fraud or error. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in ThisOur audit responsibility report relates to the isfinancial to statemenexpressts of Eastlandan opinion Group Limited on andthes groupe forfinancial the year ended statements 31 March 2013 basedincluded on onEastland our Group audit. Limitedʼs We website. condu Eastlandcted Group our Limitedʼs audit Board in is responsible for the maintenance and integrity of Eastland Group Limitedʼs website. We have not been engaged to report on the integrity of Eastland Group Limitedʼs website. We accept no responsibility accordance with International Standards on Auditing and International Standards on Auditing (New Zealand). Those standards foraccordance any changes that with may haveInternational occurred to the finanStandardscial statements on since Auditing they were andinitially International presented on the website. Standards The audit reporton Auditing refers only to(New the financial Zeala statementsnd). Thosenamed above. standards It does not Auditorʼs Responsibilities provide an opinion on any other information which may have been hyperlinked to/from these financial statements. If readers of this report are concerned with the inherent risks arising from electronic data require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether communicationrequire that they we should comply refer to thewith published ethical hard copyrequirements of the audited financial and planstatements and and perform related audit the report audit dated to29 Mayobtain 2013 toreasonable confirm the information assurance included inabout the audited whether financial Ourthe financialresponsibility statements is to expressare free froman opinion material on mis thesstatement.e financial statements based on our audit. We conducted our audit in statementsthe financial presented statements on this website. Legislationare free in Newfrom Zealand material governing mis the preparationstatement. and dissemi nation of financial statements may differ from legislation in other jurisdictions. accordance with International Standards on Auditing and International Standards on Auditing (New Zealand). Those standards An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether statements. The procedures selected depend on the auditorʼs judgement, including the assessment of the risks of material statements. The procedures selected depend on the auditorʼs judgement, including the assessment of the risks of material the financial statements are free from material misstatement. misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor Anconsiders audit involvesinternal controlperforming relevant procedures to the entityʼs to obtain preparation audit ofevidence financial aboutstatements the amounts that give anda true disclosures and fair view in ofthe the financial matters considers internal control relevant to the entityʼs preparation of financial statements that give a true and fair view of the matters statements.to which they The relate procedures in order toselected design dependaudit proce on duresthe auditorʼs that are judgement, appropriate including in the circumstances, the assessment bu t of not th efor risks the ofpurpose material of to which they relate in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of misstatementexpressing an ofopinion the financial on the effectiveness statements, ofwhether the entityʼs due internalto fraud control. or error. An auditIn making also includes those riskevaluating assessme the nts,appropriateness the auditor expressing an opinion on the effectiveness of the entityʼs internal control. An audit also includes evaluating the appropriateness considersof the accounting internal controlpolicies relevant used and to the the entityʼs reasonablen preparationess of of accounting financial statements estimates, that as wellgive aas tr theue andoverall fair viewpresentation of the matters of the of the accounting policies used and the reasonableness of accounting estimates, as well as the overall presentation of the tofinancial which theystatements. relate in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of financial statements. expressing an opinion on the effectiveness of the entityʼs internal control. An audit also includes evaluating the appropriateness We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. of the accounting policies used and the reasonableness of accounting estimates, as well as the overall presentation of the financialOther than statements. in our capacity as auditor, we have no relationship with or interests in Eastland Group Limited or any of its Other than in our capacity as auditor, we have no relationship with or interests in Eastland Group Limited or any of its subsidiaries. subsidiaries. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OtherOpinion than in our capacity as auditor, we have no relationship with or interests in Eastland Group Limited or any of its Opinion subsidiaries. In our opinion, the financial statements on pages 52 to 107: In our opinion, the financial statements on pages 52 to 107: • comply with generally accepted accounting practice in New Zealand; • comply with generally accepted accounting practice in New Zealand; Opinion • comply with International Financial Reporting Standards; and • comply with International Financial Reporting Standards; and In• our give opinion, a true the and financial fair view statements of the financial on pages positio 52 ton 107: of Eastland Group Limited and group as at 31 March 2013, and their • give a true and fair view of the financial position of Eastland Group Limited and group as at 31 March 2013, and their • complyfinancial with performance generally acceptedand cash accountingflows for the practice year then in New ended. Zealand; financial performance and cash flows for the year then ended. • comply with International Financial Reporting Standards; and •Report give on a Othertrue and Legal fair andview Regulatory of the financial Requirements position of Eastland Group Limited and group as at 31 March 2013, and their Report on Other Legal and Regulatory Requirements financial performance and cash flows for the year then ended. We also report in accordance with section 16 of the Financial Reporting Act 1993. In relation to our audit of the financial We also report in accordance with section 16 of the Financial Reporting Act 1993. In relation to our audit of the financial statements for the year ended 31 March 2013: statements for the year ended 31 March 2013: Report on Other Legal and Regulatory Requirements • we have obtained all the information and explanations we have required; and • we have obtained all the information and explanations we have required; and We• also in ourreport opinion in accordance proper accounting with section records 16 of havethe Financialbeen kept Reporting by Eastland Act 1993. Group In Limited relation asto farour asaudit appears of the ffinancialrom our • in our opinion proper accounting records have been kept by Eastland Group Limited as far as appears from our statementsexamination for the ofyear those ended records. 31 March 2013: examination of those records. • we have obtained all the information and explanations we have required; and • in our opinion proper accounting records have been kept by Eastland Group Limited as far as appears from our examination of those records.

50 Eastland Group Annual Report 2013 Eastland Group Annual Report 2013 51 Chartered Accountants Chartered Accountants 29 May 2013 29 May 2013 Hamilton, New Zealand Hamilton, New Zealand Chartered Accountants This audit report relates to the financial statements of Eastland Group Limited and group for the year ended 31 March 2013 included on Eastland Group Limitedʼs website. Eastland Group Limitedʼs Board This audit report relates to the financial statements of Eastland Group Limited and group for the year ended 31 March 2013 included on Eastland Group Limitedʼs website. Eastland Group Limitedʼs Board 29is responsible May 2013 for the maintenance and integrity of Eastland Group Limitedʼs website. We have not been engaged to report on the integrity of Eastland Group Limitedʼs website. We accept no responsibility is responsible for the maintenance and integrity of Eastland Group Limitedʼs website. We have not been engaged to report on the integrity of Eastland Group Limitedʼs website. We accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website. The audit report refers only to the financial statements named above. It does not for any changes that may have occurred to the financial statements since they were initially presented on the website. The audit report refers only to the financial statements named above. It does not Hamilton,provide an opinion New on any Zealand other information which may have been hyperlinked to/from these financial statements. If readers of this report are concerned with the inherent risks arising from electronic data provide an opinion on any other information which may have been hyperlinked to/from these financial statements. If readers of this report are concerned with the inherent risks arising from electronic data communication they should refer to the published hard copy of the audited financial statements and related audit report dated 29 May 2013 to confirm the information included in the audited financial communication they should refer to the published hard copy of the audited financial statements and related audit report dated 29 May 2013 to confirm the information included in the audited financial statements presented on this website. Legislation in New Zealand governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. statements presented on this website. Legislation in New Zealand governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. This audit report relates to the financial statements of Eastland Group Limited and group for the year ended 31 March 2013 included on Eastland Group Limitedʼs website. Eastland Group Limitedʼs Board is responsible for the maintenance and integrity of Eastland Group Limitedʼs website. We have not been engaged to report on the integrity of Eastland Group Limitedʼs website. We accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website. The audit report refers only to the financial statements named above. It does not provide an opinion on any other information which may have been hyperlinked to/from these financial statements. If readers of this report are concerned with the inherent risks arising from electronic data communication they should refer to the published hard copy of the audited financial statements and related audit report dated 29 May 2013 to confirm the information included in the audited financial statements presented on this website. Legislation in New Zealand governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. Statement of Financial Performance Statement of Financial Position For the year ended 31 March 2013 As at 31 March 2013 Group Parent Group Parent 2013 2012 2013 2012 2013 2012 2013 2012 Notes $’000 $’000 $’000 $’000 Notes $’000 $’000 $’000 $’000 ASSETS Revenue 69,003 60,807 4,853 4,623 Current assets Other income 3,335 156 4,600 4,400 Cash and cash equivalents LINK 12 4,123 739 - - Total income LINK 8 72,338 60,963 9,453 9,023 Trade and other receivables LINK 13 7,524 9,792 232 439 Electricity distribution expenses LINK 7 (11,713) (10,387) - - Inventory LINK 14 144 7,321 - - Electricity generation expenses LINK 7 (1,180) (628) - - Assets held for sale LINK 17 9,352 3,827 - - Logistics operating expenses LINK 7 (3,581) (2,991) - - Related party receivables LINK 30 - - - 7,401 Personnel expenses LINK 7 (7,327) (6,682) (2,133) (2,227) Income tax - - 3,934 2,864 Administrative expenses LINK 9 (8,654) (8,834) (4,178) (7,246) Total current assets 21,143 21,679 4,166 10,704 Operating expenditure (32,455) (29,522) (6,311) (9,473) Earnings before interest, income tax, depreciation Non-current assets and amortisation (EBITDA) 39,883 31,441 3,142 (450) Investment properties LINK 18 15,535 16,026 - - Depreciation and amortisation LINK 9 (10,886) (10,454) (358) (329) Investment in subsidiaries - - 21,542 22,023 Profit before interest and income tax (EBIT) 28,997 20,987 2,784 (779) Intercompany advances - - 109,339 108,326 Finance income LINK 10 135 215 9,585 10,738 Intangible assets LINK 21 21,280 20,890 - - Finance expenses LINK 10 (9,797) (10,701) (9,764) (10,700) Long term receivables LINK 16 486 486 486 486 Profit before income tax 19,335 10,501 2,605 (741) Deferred tax LINK 11 - - 1,608 1,501 Income tax (expense)/income LINK 11 (5,878) (3,714) 309 (155) Property, plant & equipment LINK 15 307,628 294,751 926 1,082 Net profit/(loss) after tax 13,458 6,787 2,914 (896) Total non-current assets 344,929 332,153 133,901 133,418 TOTAL ASSETS 366,072 353,832 138,067 144,122 Loss from discontinued operations LINK 17 (691) (1,470) - - LIABILITIES Total profit/(loss) 12,767 5,315 2,914 (896) Current liabilities Attributable to: Cash and cash equivalents LINK 12 - - 2,659 1,887 Equity holders of the parent 12,819 5,393 2,914 (896) Liabilities associated with assets held for sale LINK 17 626 - - - Non controlling interest (52) (78) - - Derivatives financial instruments LINK 29 174 614 174 614 12,767 5,315 2,914 (896) Employee entitlements LINK 23 1,490 1,714 506 442 Income tax 2,374 1,263 - - Payables and accruals LINK 22 7,945 9,498 1,466 1,472 Related party payables LINK 30 - - 2,351 - Statement of Comprehensive Income Total current liabilities 12,609 13,089 7,156 4,415 For the year ended 31 March 2013 Group Parent Non-current liabilities 2013 2012 2013 2012 Loans and borrowings LINK 24 93,000 100,500 93,000 100,500 Notes $’000 $’000 $’000 $’000 Derivative financial instruments LINK 29 6,000 5,954 6,000 5,954 Income in advance 618 669 - - Total profit/(loss) 12,767 5,315 2,914 (896) Capital notes LINK 25 30,000 30,000 30,000 30,000 Deferred tax LINK 11 42,894 39,304 - - Other comprehensive income Total non-current liabilities 172,512 176,427 129,000 136,454 Cash flow hedges 394 (1,459) 394 (1,455) TOTAL LIABILITIES 185,121 189,516 136,156 140,869 Revaluation movements 10,685 2,028 - - NET ASSETS 180,952 164,316 1,911 3,253 Tax on comprehensive income (3,358) 304 (110) 408 Other comprehensive income, net of income tax 7,721 873 284 (1,047) EQUITY Total comprehensive income 20,488 6,188 3,198 (1,943) Equity attributable to owners of the parent 180,125 163,806 1,911 3,253 Non controlling interests in subsidiaries 827 510 - - Attributable to: TOTAL EQUITY 180,952 164,316 1,911 3,253 Equity holders of the parent 20,540 6,266 3,198 (1,943) Non controlling interest (52) (78) - - 20,488 6,188 3,198 (1,943)

52 Eastland Group Annual Report 2013 Eastland Group Annual Report 2013 53 Statement of Changes in Equity Statement of Changes in Equity (continued) For the year ended 31 March 2013 For the year ended 31 March 2013

Group 2013 PARENT 2013 Issued Hedge Asset Non- Issued Hedge Retained Total capital reserve revaluation Retained controlling Total capital reserve earnings equity reserve earnings interest equity $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 Balance at beginning of period 15,400 (4,628) (7,519) 3,253 Balance at beginning of period 15,400 (4,628) 118,175 34,859 510 164,316 Comprehensive income – Net profit for the period - - 2,914 2,914 Comprehensive income – Net profit for the period - - - 12,819 (52) 12,767 Net change in fair value of cash flow hedges - 394 - 394 Net change in fair value of cash flow hedges - 394 - - - 394 Income tax relating to components of comprehensive income - (110) - (110) Disposals of property, plant and equipment - - (724) - - (724) Total comprehensive income - 284 2,914 3,198 Revaluation of property, plant and equipment - - 11,409 - - 11,409 Income tax relating to components of comprehensive income - (110) (3,248) - - (3,358) Transactions with owners Total comprehensive income - 284 7,437 12,819 (52) 20,488 Dividends - - (4,600) (4,600) Prior period adjustment - - 60 60 Transactions with owners Total transactions with owners - - (4,540) (4,540) Movement in non-controlling interest - - - - 369 369 Balance at end of period 15,400 (4,344) (9,145) 1,911 Derecognition of reserves - - - 515 - 515 JV distributions - - - (136) - (136) Dividends - - - (4,600) - (4,600) PARENT 2012 Total transactions with owners - - - (4,221) 369 (3,852) Issued Hedge Retained Total Balance at end of period 15,400 (4,344) 125,612 43,457 827 180,952 capital reserve earnings equity $’000 $’000 $’000 $’000 Balance at beginning of period 15,400 (3,581) (1,053) 10,766 Group 2012 Comprehensive income – Net profit for the period - - (896) (896) Issued Hedge Asset Non- Net change in fair value of cash flow hedges - (1,455) - (1,455) capital reserve revaluation Retained controlling Total reserve earnings interest equity Income tas relating to components of comprehensive income - 408 - 408 $’000 $’000 $’000 $’000 $’000 $’000 Total comprehensive income - (1,047) (896) (1,943) Balance at beginning of period 15,400 (3,581) 116,255 33,767 128 161,969 Comprehensive income – Net profit for the period - - - 5,393 (78) 5,315 Transactions with owners Net change in fair value of cash flow hedges - (1,459) - - - (1,459) Acquisitions - - (1,170) (1,170) Disposals of property, plant and equipment - - (427) - - (427) Dividends - - (4,400) (4,400) Revaluation of property, plant and equipment - - 2,455 - - 2,455 Total transactions with owners - - (5,570) (5,570) Income tax relating to components of comprehensive income - 412 (108) - - 304 Balance at end of period 15,400 (4,628) (7,519) 3,253 Total comprehensive income - (1,047) 1,920 5,393 (78) 6,188

Transactions with owners Movement in non-controlling interest - - - - 456 456 Prior period adjustment - - - (210) 4 (206) JV distributions - - - 309 - 309 Dividends - - - (4,400) - (4,400) Total transactions with owners - - - (4,301) 460 (3,841) Balance at end of period 15,400 (4,628) 118,175 34,859 510 164,316

54 Eastland Group Annual Report 2013 Eastland Group Annual Report 2013 55 Statement of Cash Flows Statement of Cash Flows (continued) For the year ended 31 March 2013 For the year ended 31 March 2013

Group Parent RECONCILIATION OF THE PROFIT FOR THE PERIOD WITH NET CASH FROM OPERATING ACTIVITIES 2013 2012 2013 2012

Notes $’000 $’000 $’000 $’000 Group Parent Cash flows from operating activities: 2013 2012 2013 2012 Cash provided from: Notes $’000 $’000 $’000 $’000 Receipts from customers 72,561 75,795 5,061 2,387 Profit for the period 12,767 5,315 2,914 (896) Dividends received from subsidiaries - - 4,600 4,400

Interest received 145 122 9,585 10,734 Adjustments for: 72,706 75,917 19,246 17,521 Depreciation 10,886 10,611 358 329 Cash applied to: Customer contributions and vested assets (620) (742) - - Payments to suppliers and employees (32,221) (42,016) (5,689) (2,354) Impairment loss/(gain) 32 1,865 480 1,877 Interest paid (9,727) (11,206) (9,788) (10,826) Loss on sale of fixed assets 595 383 - - Income tax paid (4,864) (2,815) (895) (2,181) Non-controlling interest 52 78 - - (46,813) (56,037) (16,372) (15,361) Provision for loss/(gain) loan receivable - 1,519 - 1,519 Change in the fair value of investment property 353 266 - - Net cash flows from operating activities 25,893 19,880 2,874 2,160 Change in fair value of derivatives - (4) - (4) Loss from discontinued operations (1,627) - - - Cash flows from investing activities: Interest capitalised to fixed assets - (294) - - Cash provided from: Tax expense 5,878 3,746 (309) 154 Proceeds from sale of investment property 14 1,000 - - 15,549 17,428 529 3,876 Proceeds from sale of property, plant and equipment 2,470 482 - - 2,484 1,482 - - Movement in working capital: Cash applied to: (Increase)/decrease in trade and other receivables 2,056 (729) 209 (2,237) Purchase of intangibles (73) (1,047) - - (Increase)/decrease in inventory 7,177 (317) - - Purchase of property, plant & equipment (14,311) (17,549) (203) (1,412) (Increase)/decrease in aircraft deposits (discontinued operations) 913 (184) - - Related party advances - (2,005) - (2,005) (Increase)/decrease in assets held for sale (6,097) - - - Purchase of investment properties - (1,105) - - (Increase)/decrease in tax refundable - - (895) - (14,384) (21,706) (203) (3,417) Increase/(decrease) in employee entitlements (222) 411 123 442 Increase/(decrease) in income tax payable (4,696) (2,861) (6) (2,181) Net cash flows used in investing activities (11,900) (20,224) (203) (3,417) Increase/(decrease) in payables and accruals (1,554) 817 - 3,156 (2,423) (2,863) (569) (820) Cash flows from financing activities:

Cash provided from: Net cash from operating activities 25,893 19,880 2,874 2,160 Intercompany advances received - - 8,657 697 - - 8,657 697 Cash applied to: Repayments of bank borrowings (7,500) 3,100 (7,500) 3,100 Distributions from associates (136) 308 - - Equity dividends paid (4,600) (4,400) (4,600) (4,400) (12,236) (992) (12,100) (1,300)

Net cash flows from/(used in) financing activities (12,236) (992) (3,443) (603) Net cash flows used in continuing operations 1,757 (1,336) (772) (1,860) Net cashflows from discontinued operations 1,627 - - -

Net (decrease)/increase in cash and cash equivalents 3,384 (1,336) (772) (1,860) Cash and cash equivalents at beginning of period 739 2,075 (1,887) (27) Cash and cash equivalents at end of period 4,123 739 (2,659) (1,887)

56 Eastland Group Annual Report 2013 Eastland Group Annual Report 2013 57 Notes to the Financial Statements Notes to the Financial Statements (continued) For the year ended 31 March 2013 For the year ended 31 March 2013

1 REPORTING ENTITY 2 BASIS OF PREPARATION (CONTINUED) Eastland Group Limited is a company domiciled in New Zealand and registered under the Companies Act 1993. Classification of investments The address of Eastland Group Limited’s registered office is 172 Carnarvon Street, Gisborne. Eastland Group Classifying investments as either subsidiaries, associates, joint ventures or available-for-sale financial assets Limited (“Eastland Group”) is a reporting entity for the purposes of the Financial Reporting Act 1993 and its requires management to judge the degree of influence which the group holds over the investee. Management financial statements comply with that Act. The financial statements of the group and parent are for the year ended look at many factors in making these judgements, such as examining the constitutional documents that govern 31 March 2013 and were authorised for issue by the directors on 29 May 2013. decision making, governance around current and future representation amongst the board of directors, and Eastland Group is a profit-oriented entity involved in the energy and logistics sectors in New Zealand. Its primary also other less formal arrangements which can lead to having influence on the operating and financial policies. operations include electricity distribution and generation, the operation of Gisborne’s port and airport and the These judgements impact upon the basis of consolidation accounting which is used to recognise the group’s ownership of strategically located property. Eastland Group is owned by The Eastland Community Trust. investments in the consolidated financial statements. Further information regarding the basis of consolidation is included in the following section on significant accounting policies.

2 BASIS OF PREPARATION Classification of expenditure in relation to property, plant and equipment (a) Statement of compliance On initial recognition of items of property, plant and equipment, judgements must be made about whether costs incurred relate to bringing the items to working condition for their intended use, and therefore are The financial statements have been prepared in accordance with New Zealand Generally Accepted Accounting appropriate for capitalisation as part of the cost of the item, or whether they should be expensed as incurred. Practice (“NZ GAAP”). The financial statements comply with New Zealand equivalents to International Financial As required by NZ IAS 16, Property, Plant and Equipment, management must exercise their judgement to Reporting Standards (“NZ IFRS”) and other applicable Financial Reporting Standards, as appropriate for profit assess the amount of overhead costs which can be reasonably directly attributed to the construction or oriented entities. The financial statements comply with International Financial Reporting Standards (“IFRS”). acquisition of items of property, plant and equipment. For example, employee costs arising directly from such activities are capitalised within the initial cost of property, plant and equipment. Thereafter, judgement is also (b) Basis of measurement required to assess whether subsequent expenditure increases the future economic benefits to be obtained The financial statements have been prepared on the historical cost basis except for the following: from that asset and is therefore also appropriate for capitalisation or whether such expenditure should be treated as maintenance and expensed. • derivative financial instruments are measured at fair value; • electricity distribution property, plant and equipment are measured at revalued amounts; Valuation of goodwill and property, plant and equipment • certain other property, plant and equipment are measured at revalued amounts; and The carrying value of goodwill is assessed at least annually to ensure that it is not impaired. Performing this • investment properties are measured at fair value. assessment generally requires management to estimate future cash flows to be generated by operating The methods used to measure fair values are discussed further in note 4. segments to which goodwill has been allocated. Estimating future cash flows entails making judgements including the expected rate of growth of revenues, margins expected to be achieved, the level of future (c) Functional and presentation currency maintenance expenditure required to support these outcomes and the appropriate discount rate to apply when discounting future cash flows. Note 21 of these financial statements provides more information surrounding the These financial statements are presented in New Zealand dollars ($), which is Eastland Group’s functional assumptions management have made in this area. currency, and have been rounded to the nearest thousand unless otherwise stated. Property, plant and equipment is revalued by management on a cyclical basis as described in Notes 3 and 15. Valuations are performed by registered valuers. (d) Use of estimates and judgments Management must also consider whether any indicators of impairment have occurred which might require The preparation of financial statements requires management to make judgments, estimates and assumptions impairment testing of the current carrying values of property, plant and equipment. Assessing whether that affect the application of accounting policies and the reported amounts of assets, liabilities, income and individual assets or a grouping of related assets (which generate cash flows co-dependently) are impaired expenses. Actual results may differ from these estimates. may involve estimating the future cash flows that those assets are expected to generate. This will in turn Estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates involve assumptions, including rates of expected revenue growth or decline, expected future margins and the are recognised in the period in which the estimate is revised and in any future periods affected. Information selection of an appropriate discount rate for discounting future cash flows. about significant areas of estimation uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amount recognised in the financial statements are described below. Valuation of financial instruments

Management have estimated the fair value of Eastland Group’s financial instruments based on valuation Revenue recognition models that use observable market inputs. Note 29 of these financial statements provides a list of the key The timing of customer payments for services does not always coincide with the timing of delivery of these observable inputs that management have applied in reaching their estimates of the fair values of financial services. For example customers may pay for services some time after the services are delivered. Customers instruments and also provides a sensitivity analysis detailing the potential future impacts of reasonably possible may also prepay for services. Judgement is therefore required in deciding when revenue is to be recognised. changes in those observable input over the next financial period. Where the relationship between the payments and multiple services delivered under the related contract is not Outcomes in the next financial period may be different to the assumptions made. It is impracticable to quantify immediately clear, management must apply judgement in unbundling elements of the contract and allocating the impact should assumptions be materially different to actual outcomes, which may result in material payments to the respective services before applying the revenue recognition accounting policy. adjustments to the carrying amounts of investments, goodwill and property, plant and equipment and financial Sales of services are recognised at fair value of the consideration received or receivable as the services are instruments reported in these financial statements. delivered or to reflect the percentage completion of the related services where delivered over time. Third party contributions towards the construction of property, plant and equipment are recognised in the Statement of Comprehensive Income to reflect the percentage completion of construction of those related items of property, plant and equipment.

58 Eastland Group Annual Report 2013 Eastland Group Annual Report 2013 59 Notes to the Financial Statements (continued) Notes to the Financial Statements (continued) For the year ended 31 March 2013 For the year ended 31 March 2013

3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) The accounting policies set out below have been applied consistently to all periods presented in these financial Goodwill arising on acquisition of an additional interest in an associate while retaining significant statements: influence (a) Basis of consolidation Where an acquisition results in Eastland Group obtaining an additional non-controlling interest in an associate while retaining significant influence, goodwill is calculated as the difference between the fair value of the consideration paid and the amount of Eastland Group’s acquired incremental share of the fair values of the Subsidiaries total identifiable assets and liabilities of the acquiree at the date of the acquisition. Subsidiaries are entities controlled, directly or indirectly by Eastland Group. The financial statements If Eastland Group’s acquired incremental share of the fair values of the acquiree’s total identifiable assets and of subsidiaries are included in the consolidated financial statements using the acquisition method of liabilities exceeds the fair value of the consideration paid, the excess is included in the share of net profit from consolidation. associates in the Statement of Comprehensive Income.

Associates Subsequent measurement of goodwill Associates are entities in which Eastland Group has significant influence but not control over the operating Subsequent to initial recognition goodwill is tested annually for impairment. In respect of associates, the and financial policies. Investments in associates are accounted for using the equity method. Eastland Group’s carrying amount of goodwill is included in the carrying amount of the investment. share of the net profit of associates is recognised in the Statement of Comprehensive Income after adjusting for differences, if any, between the accounting policies of Eastland Group and the associates. Eastland Group’s share of any other gains and losses of associates charged directly to equity is recognised in other Transactions eliminated on consolidation comprehensive income. Dividends received from associates are credited to the carrying amount of the Intra-group advances to and from subsidiaries are recognised at amortised cost within current assets and investment in associates in the consolidated financial statements. current liabilities in the separate financial statements of the parent. Subsidiaries advances from and to the parent are repayable on demand. Any interest income and interest expense incurred on these advances Joint ventures is eliminated in the Statement of Comprehensive Income on consolidation. All intra-group advances are eliminated on consolidation. Joint ventures are contractual arrangements with other parties which establish joint control for each of the

parties over the related operations, assets or entity. Eastland Group is jointly and severally liable in respect of costs and liabilities, and shares in any resulting profit/(loss). (b) Financial instruments (i) Non-derivative financial instruments Partnerships Partnerships are those relationships that the Eastland Group has with other persons whereby the partners Financial assets carry on a business in common with a view to generating a profit. Eastland Group is jointly and severally liable Financial assets consist of cash and cash equivalents, loans and receivables. in respect of costs and liabilities incurred by the partnership. Where Eastland Group has a controlling interest in a partnership, it is accounted for in the consolidated financial statements as a subsidiary. Where Eastland Cash and cash equivalents, loans and receivables Group has significant influence but not control over the operating and financial policies of the partnership, it is accounted for in the consolidated financial statements as an associate. Trade receivables, loans, cash and cash equivalents and other receivables are initially recorded at fair value and subsequently measured at amortised cost less impairment. Fair value is estimated as the present value of future cash flows, discounted at the market rate of interest at the inception of the loan or Acquisition or disposal during the period receivable. Discounting is not undertaken when the receivable is expected to be collected within twelve Where a business becomes or ceases to be a part of Eastland Group during the period, the results of the months. A provision for doubtful debts is recognised to allow for the reduction in fair value attributable to business are included in the consolidated results from the date that control or significant influence commenced expected doubtful or delayed collection of receivables. or until the date that control or significant influence ceased. Where a business is acquired all identifiable assets, Financial assets and liabilities are offset and the net amount presented in the Statement of Financial liabilities and contingent liabilities are recognised at their fair value at acquisition date. The fair value does not Position when, and only when, Eastland Group has a legal right to offset the amounts and intend either take into consideration any future intentions by Eastland Group. settle on a net basis or realise the asset and settle the liability simultaneously. Cash and cash equivalents comprise cash on hand, cash in banks and short term deposits maturing within three months. Bank Goodwill arising on obtaining control of a subsidiary or an associate overdrafts that are repayable on demand and form an integral part of Eastland Group’s cash management are included as a component of cash and cash equivalents for the purpose of the Statement of Cash Flows. Where an acquisition results in obtaining control of a subsidiary or an associate for the first time, the carrying amount of any previous non-controlling interest held by Eastland Group is first re-measured to fair value and the difference between the carrying amount and the re-measured fair value is recognised in the Statement Financial liabilities of Comprehensive Income. Goodwill is then calculated as the sum of the fair value of the consideration paid, Borrowings are recorded initially at fair value, net of transaction costs. the re-measured fair value of the non-controlling interest previously held by the acquirer and the recognised Subsequent to initial recognition, borrowings are measured at amortised cost with any difference between amount of any remaining non-controlling interest in the acquiree held by third parties less the fair value of the the initial recognised amount and the redemption value being recognised in finance costs in the Statement total identifiable assets and liabilities of the acquiree at the date of the acquisition. of Comprehensive Income over the period of the borrowing using the effective interest rate method. If the fair value of the total identifiable assets and liabilities acquired exceeds the sum of the fair value of the Other financial liabilities comprise trade and other payables. Discounting is not undertaken when the consideration paid, the re-measured fair value of the non-controlling interest previously held by the acquirer payable is expected to be paid within twelve months. and the recognised amount of any remaining non-controlling interest in the acquiree held by third parties, then a gain representing a bargain purchase is recognised in the Statement of Comprehensive Income. Eastland Group derecognises a financial liability when its contractual obligations are discharged, cancelled or expired. Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, Eastland Group has a legal right to offset the amounts and intend to either settle on a net basis or realise the asset and settle the liability simultaneously.

60 Eastland Group Annual Report 2013 Eastland Group Annual Report 2013 61 Notes to the Financial Statements (continued) Notes to the Financial Statements (continued) For the year ended 31 March 2013 For the year ended 31 March 2013

3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (ii) Derivative financial instruments (iii) Debt and equity instruments Eastland Group enters into a variety of derivative financial instruments to manage its exposure to interest Debt and equity instruments are classified as either liabilities or as equity in accordance with the substance rate and foreign exchange rate risk, including interest rate swaps and foreign exchange contracts. of the contractual arrangement. If there is no contractual obligation to deliver cash or another financial Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are asset, then the instrument is classified as equity. All other instruments are classified as liabilities. subsequently re-measured to their fair value at each balance date. The resulting gain or loss is recognised in the Statement of Comprehensive Income immediately unless the derivative is designated and effective Compound financial instruments as a hedging instrument, in which event, the timing of the recognition in the Statement of Comprehensive Income depends on the nature of the designated hedge relationship. Eastland Group designates certain Capital notes issued by Eastland Group can be converted in to share capital or redeemed for cash at the derivatives as either hedges of the fair value of recognised assets, liabilities or firm commitments (fair option of Eastland Group. value hedges), or hedges of highly probable forecast transactions (cash flow hedges). At the inception of The liability component of a compound financial instrument is recognised initially at the fair value of a the transaction Eastland Group documents the relationship between hedging instruments and hedged similar liability that does not have an equity conversion option. The equity component is recognised initially items, as well as its risk management objectives and strategy for undertaking various hedge transactions. at the difference between the fair value of the compound financial instrument as a whole and the fair value Eastland Group also documents its assessment, both at hedge inception and on an on-going basis, of of the liability component. Any directly attributable transaction costs are allocated to the liability and equity whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in components in proportion to their initial carrying amounts. fair values or cash flows of hedged items. Subsequent to initial recognition, the liability component of a compound financial instrument is measured at amortised cost using the effective interest method. The equity component of a compound financial Fair value hedge instrument is not remeasured subsequent to initial recognition. Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the Statement of Comprehensive Income immediately, together with any changes in the fair value of Transaction costs on the issue of equity instruments the hedged asset or liability that is attributable to the hedged risk. The gain or loss relating to both the Transaction costs arising on the issue of equity instruments are recognised directly in equity as a reduction effective and the ineffective portion of interest rate swaps hedging fixed rate borrowings is recognised in of the proceeds of the equity instruments to which the costs relate. Transaction costs are the costs that are the Statement of Comprehensive Income within finance costs. Changes in the fair value of the underlying incurred directly in connection with the issue of those equity instruments and which would not have been hedged fixed rate borrowings attributable to interest rate risk are also recognised in the Statement of incurred had those instruments not been issued. Comprehensive Income within finance costs. Hedge accounting is discontinued when the hedge instrument expires or is sold, terminated, exercised, or no longer qualifies for hedge accounting. The fair value adjustment to the carrying amount of the Interest and dividends hedged item arising from the hedged risk is amortised through the Statement of Comprehensive Income Interest paid and dividends paid are classified as expenses or as distributions of profit consistent with the from that date. statement of financial position classification of the related debt or equity instruments.

Cash flow hedge (c) Property, plant and equipment The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow (i) Recognition and measurement hedges are recognised in other comprehensive income. The gain or loss relating to the ineffective portion, Property, plant and equipment are tangible assets expected to be used during more than one financial if any, is recognised immediately in the Statement of Comprehensive Income within finance costs. period and include spares held for the servicing of other property, plant and equipment owned by Amounts accumulated in other comprehensive income are recognised as finance costs in the Statement Eastland Group. of Comprehensive Income in the periods when the hedged item is recognised in the Statement of The initial cost of purchased property, plant and equipment is the value of the consideration given to Comprehensive Income. The gain or loss relating to the effective portion of interest rate swaps hedging acquire the property, plant and equipment and the value of other directly attributable costs, which have variable rate borrowings is recognised in the Statement of Comprehensive Income within finance costs, been incurred in bringing the property, plant and equipment to the location and condition necessary when the underlying transaction affects earnings. for the intended service. However, when the forecast transaction that is hedged results in the recognition of a non-financial asset The initial cost of self-constructed property, plant and equipment includes the cost of all materials used or a non-financial liability, the gains and losses previously recognised in other comprehensive income are in construction, direct labour on the project, financing costs that are attributable to the project, costs of transferred from other comprehensive income and included in the initial measurement of the cost of the ultimately dismantling and removing the items and restoring the site on which they are located (where asset or liability. an obligation exists to do so) and an appropriate proportion of the other directly attributable overheads Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or incurred in bringing the items to working condition for their intended use. Costs cease to be capitalised exercised, or no longer qualifies for hedge accounting. Thereafter, any cumulative gain or loss previously as soon as the property, plant and equipment is ready for productive use and do not include any costs recognised in other comprehensive income is only recognised in the Statement of Comprehensive Income of abnormal waste. when the forecast transaction is ultimately recognised in the Statement of Comprehensive Income. Subsequent expenditure relating to an item of property, plant and equipment is added to its gross carrying When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was amount when such expenditure can be measured reliably and either increases the future economic benefits previously recognised in other comprehensive income is recognised immediately in the Statement of beyond its existing service potential, or is necessarily incurred to enable future economic benefits to be Comprehensive Income. obtained, and that expenditure would have been included in the initial cost of the item had the expenditure been incurred at that time. The costs of day-to-day servicing of property, plant and equipment are Derivatives that do not qualify for hedge accounting recognised in the Statement of Comprehensive Income as incurred. Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any Land and buildings, electricity distribution, electricity generation equipment and walls, wharves and derivative instruments that do not qualify for hedge accounting are recognised immediately in the surfaces are subsequently stated at revalued amounts, less any subsequent accumulated depreciation Statement of Comprehensive Income within finance costs. and impairment losses. Land and buildings, electricity distribution and electricity generation equipment are revalued with sufficient regularity to ensure that the carrying amount of these items does not significantly Non-derivative financial instruments comprise of trade and other receivables, cash and cash equivalents, differ from that which would be determined using fair value at the date of the financial statements. related party borrowings, capital notes, and payables and accruals.

62 Eastland Group Annual Report 2013 Eastland Group Annual Report 2013 63 Notes to the Financial Statements (continued) Notes to the Financial Statements (continued) For the year ended 31 March 2013 For the year ended 31 March 2013

3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (c) Property, plant and equipment (continued) (e) Exploration and evaluation expenditure (continued) (i) Recognition and measurement (continued) Exploration and evaluation expenditure is partially or fully capitalised where either: Land and building revaluations are carried out on a cyclical basis that does not exceed three years, • The expenditure is expected to be recouped through the successful development and exploration of the area by independent valuers. For electricity distribution and electricity generation equipment assets and of interest (or alternatively by its sale); or wharves, walls and surfaces, revaluations are carried out on a cyclical basis not exceeding five years, by • The exploration and evaluation activities in the area of interest have not, at the end of each reporting period, independent valuers. The basis of valuation is discussed in notes 4 and 15. reached a stage that permits a reasonable assessment of the existence or otherwise of economically Any movement on revaluation is reflected through reserves for that class of asset unless there is insufficient recoverable reserves, and active and significant operations in, or in relation to, the area of interest are reserve in which case that would flow through to the Statement of Comprehensive Income. continuing. Floating plant and other plant and equipment are valued at historical cost. Capitalised costs are reviewed at the end of each reporting period to determine whether economic quantities When parts of an item of property, plant and equipment have different useful lives, they are accounted for of reserves have been found or whether further exploration and evaluation work is underway or planned as separate items (major components) of property, plant and equipment. to support the continued carry forward of the capitalised costs. Exploration and evaluation expenditure is impaired in the Statement of Comprehensive Income under the successful efforts method of accounting in the Gains and losses on disposal of an item of property, plant and equipment are determined by comparing period that exploration work demonstrates that an area of interest is no longer prospective for economically the proceeds from disposal with the carrying amount of property, plant and equipment, and are recoverable reserves or when the decision to abandon an area of interest is made. recognised in ‘other income’ or ‘other administrative expenses’. When revalued assets are sold, the amounts included in the revaluation surplus reserve are transferred to retained earnings. Land access rights for exploration activities are amortised over the life of the right.

(ii) Depreciation (f) Impairment Depreciation is recognised in the Statement of Comprehensive Income on a straight-line basis over the (i) Financial assets estimated useful life of each part of an item of property, plant and equipment. Land is not depreciated. The carrying amount of Eastland Group assets are reviewed at balance date to determine whether there The estimated useful lives for the current and comparative periods are as follows: is any evidence of impairment. Where assets are deemed to be impaired, the impairment loss is the • Buildings 40-100 years amount that the carrying amount exceeds its recoverable amount. Impairment losses reduce the carrying • Electricity distribution 10-60 years amount of assets and are recognised as an expense in the Statement of Comprehensive Income within • Electricity generation equipment 15-25 years administrative expenses. • Plant and equipment 3-20 years A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset. An impairment loss in respect of a • Motor vehicles 5-10 years financial asset measured at amortised cost is calculated as the difference between its carrying amount, • Wharves, walls and surfaces 3-100 years and the present value of the estimated future cash flows discounted using the effective interest method. • Floating Plant 25 years Receivables with a short duration are not discounted. Depreciation methods, useful lives and residual values are reassessed at the reporting date. Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics. For (d) Investment property trade receivables which are not significant on an individual basis, collective impairment is assessed on a portfolio basis based on numbers of days overdue, and taking into account the historical loss experience in Investment property is property held either to earn rental income or for capital appreciation or for both, but portfolios with a similar amount of days overdue. not for sale in the ordinary course of business, use in the production or supply of goods or services or for administrative purposes. Investment property is measured at fair value with any change therein recognised in An impairment loss is reversed if the reversal can be related objectively to an event occurring after the Statement of Comprehensive Income within administrative expenses. The basis of valuation is discussed the impairment loss was recognised. For financial assets measured at amortised cost, the reversal is in note 4. recognised in the Statement of Comprehensive Income within administrative expenses. When the use of a property changes such that it is reclassified as property, plant and equipment, its fair value (ii) Non-financial assets at the date of reclassification becomes its cost for subsequent accounting. An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds Property that is being constructed for future use as investment property is accounted for as property, plant its recoverable amount. A cash-generating unit is the smallest identifiable asset group that generates cash and equipment until construction or development is complete, at which time it is revalued to a fair value and flows that are largely independent from other assets and groups. Impairment losses are recognised in reclassified as investment property. Any gain or loss arising on revaluation is recognised in the Statement of the Statement of Comprehensive Income within administrative expenses. Impairment losses recognised Comprehensive Income within administrative expenses. in respect of cash-generating units are allocated to reduce the carrying amount of the assets in the unit (Group of units) on a pro-rata basis. When the use of a property changes from owner-occupied to investment property, the property is revalued to fair value and reclassified as investment property. Any gain arising on revaluation is recognised directly in The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair equity. Any loss is recognised immediately in the Statement of Comprehensive Income. value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. (e) Exploration and evaluation expenditure Impairment losses recognised in prior periods are assessed at each reporting date for any indications that Exploration and evaluation expenditure in relation to geothermal sites is accounted for in accordance with the the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in area of interest method. The cost of drilling wells on an established geothermal field are capitalised on the the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent basis that it is expected the expenditure will be recovered through future energy sales, or alternatively, by sale that the asset’s carrying amount does not exceed the carrying amount that would have been determined, of the assets. Depreciation commences once the wells are put into productive use. net of depreciation, if no impairment loss had been recognised. All exploration and evaluation costs, including directly attributable overheads, general permit activity, resource consents, geological testing, geophysical testing and drilling are initially capitalised as work in progress, pending the determination of the success of the area. Costs are expensed where the area of interest does not result in a successful discovery.

64 Eastland Group Annual Report 2013 Eastland Group Annual Report 2013 65 Notes to the Financial Statements (continued) Notes to the Financial Statements (continued) For the year ended 31 March 2013 For the year ended 31 March 2013

3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (g) Provisions (j) Income tax expense A provision is recognised if, as a result of a past event Eastland Group has a present legal or constructive Income tax expense is made up of current and deferred tax. Income tax expense is recognised in the obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be Statement of Comprehensive Income except to the extent that it relates to items recognised directly in equity. required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. liability. Deferred tax is recognised using the balance sheet method, which provides for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for (h) Revenue taxation purposes. Deferred tax is not recognised for the following temporary differences: Revenue is recognised to the extent that it is probable that the economic benefits will flow to Eastland Group • The initial recognition of assets or liabilities in a transaction that is not a business combination and that and the revenue can be reliably measured. affects neither accounting nor taxable profit. The following specific recognition criteria must also be met before revenue is recognised. • Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when (i) Customer contributions they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities Revenue from customer contributions is recognised in the Statement of Comprehensive Income as and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity. revenue when the contribution is received from the customer. Non-monetary customer contribution revenue is recognised at cost to the customer. A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which temporary differences can be utilised. Deferred tax assets are reviewed at each reporting date (ii) Sales of goods and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Revenue from sales of goods is recognised in the Statement of Comprehensive Income when Additional income taxes that arise from the distribution of dividends are recognised at the same time as the Eastland Group has delivered products to the customer, the customer has accepted the products and liability to pay the related dividend is recognised. collectability of the related receivables is reasonably assured. The revenue is net of returns,

trade discounts and volume rebates. (k) Intangible assets (iii) Sales of services (i) Goodwill Revenue from sales of services is recognised in the Statement of Comprehensive Income in the accounting period in which the services are rendered, by reference to completion of the specific transaction assessed Goodwill represents the excess of the cost of the acquisition over the Group’s interest in the fair value of on the basis of the actual service provided as a proportion of the total services to be provided. the identifiable assets, liabilities andcontingent liabilities of the purchase. When the excess is negative (negative goodwill), it is recognised immediately in the statement of comprehensive income. Impairment (iv) Management fee losses are not reversed. Gains and losses on the disposal of an entity include the carrying amount of Revenue from management services rendered is recognised in the Statement of Comprehensive Income goodwill relating to the entity sold. in proportion to the stage of completion of the transaction at the reporting date. The stage of completion is Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made assessed by reference to costs incurred to date over total expected costs. to those cash-generating units or groups of cash-generating units that are expected to benefit from the (v) Rental income business combination in which the goodwill arose. Rental income from investment property is recognised in the Statement of Comprehensive Income on a The useful lives of the goodwill as assessed as indefinite and tested for impairment each year. straight-line basis over the term of the lease. Lease incentives granted are recognised as an integral part of (ii) Other intangibles the total rental income, over the term of the lease. Other intangibles held by the Group are amortised over the defined finite life of the intangible asset. Rental income arising from line rentals is recognised as income in the periods in which it is earned, based on usage rates of the relevant customer. (l) Employee benefits (i) Finance income and expenses (i) Short-term benefits Finance income comprises of interest income on funds invested, changes in the fair value of financial assets Short-term benefits, payable within 12 months, are measured on an undiscounted basis and are at fair value through the statement of comprehensive income and gains on hedging instruments that are expensed as the related service is provided. This includes wages, salaries, annual leave and sick leave. recognised in the Statement of Comprehensive Income. Interest income is recognised as it accrues, using the A provision is recognised for the amount expected to be paid under short-term cash bonus or effective interest method. Foreign exchange gains and losses are further detailed in policy (m) below. profit-sharing plans if Eastland Group has a present legal or constructive obligation to pay this amount Finance expenses comprises of interest expense on borrowings, changes in the fair value of financial assets as a result of past service provided by the employee and the obligation can be estimated reliably. at fair value through the statement of comprehensive income and impairment losses recognised on financial (ii) Termination benefits assets (except for trade receivables), and losses on hedging investments that are recognised in the Statement Termination benefits are recognised as an expense when Eastland Group is demonstrably committed, of Comprehensive Income. without realistic possibility of withdrawal, to a formal detailed plan to terminate employment before the All borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, normal retirement date. Termination benefits for voluntary redundancies are recognised if Eastland Group which are assets that necessarily take a substantial period of time to get ready for their intended use, are has made an offer encouraging voluntary redundancy, it is probable that the offer will be accepted, and the added to the cost of those assets, until such time as the assets are substantially ready for use. All other number of acceptances can be estimated reliably. borrowing costs are recognised in the profit or loss section of the Statement of Comprehensive Income in the period which they are incurred. The change is not retrospective and no changes have been made to prior periods as a result of the amended accounting policy.

66 Eastland Group Annual Report 2013 Eastland Group Annual Report 2013 67 Notes to the Financial Statements (continued) Notes to the Financial Statements (continued) For the year ended 31 March 2013 For the year ended 31 March 2013

3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (m) Foreign currency transactions (r) Dividend distribution Transactions in foreign currencies are translated to the respective functional currencies of Eastland Group Dividend distributions to Eastland Group’s shareholders are recognised as a liability in Eastland Group’s entities at exchange rates at the dates of the transactions. Statement of Financial Position in the period in which the dividends are approved by the Directors. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is (s) Joint ventures the difference between amortised cost in foreign currency at the beginning of the period, adjusted for effective Joint Ventures are accounted for through inclusion of Eastland Group’s share of the joint venture’s operations interest and payments during the period. in the financial statements, using the proportionate method of consolidation. The amortised cost in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Foreign currency differences arising on retranslation are recognised in the Statement of Comprehensive Income. (t) Prior period errors Prior period errors are recognised in the Statement of Movements in Equity as an adjustment to opening equity balances if any have occurred during the year. (n) Inventory

Inventories are stated at the lower of cost and net realisable value. The estimated costs of marketing, selling and distribution are deducted from the estimated selling price in net realisable value. Cost is based on the (u) Statement of Cash Flows first in first out principle and includes expenditure incurred in acquiring inventories and bringing them to their For the purpose of the Statement of Cash Flows, cash and cash equivalents include cash on hand and in existing condition and location. banks and investments in money market instruments, net of outstanding bank overdrafts. The following terms are used in the Statement of Cash Flows; (o) Leases (i) operating activities are the principal revenue producing activities of Eastland Group and other activities that are not investing or financing activities; Finance leases (ii) investing activities are the acquisition and disposal of long term assets and other investments not including Property, plant and equipment under finance leases, where the group as lessee assumes substantially all the cash equivalents; and risks and rewards of ownership, are recognised as non-current assets in the statement of financial position. Leased property, plant and equipment are recognised initially at the lower of the present value of the minimum (iii) financing activities that result in change in the size and composition of the contributed equity and lease payments or their fair value. A corresponding liability is established and each lease payment apportioned borrowings of the entity. between the reduction of the outstanding liability and the finance expense. The finance expense is charged to the Statement of Comprehensive Income in each period during the lease term so as to produce a constant (v) Non current assets held for sale periodic rate of interest on the remaining balance of the liability. Leased property, plant and equipment are Individual non-current non-financial assets (and disposal groups) are classified as held for sale if they are depreciated over the shorter of the lease term and the useful life of equivalent owned property, plant and available for immediate sale in their present condition subject only to the customary sales terms of such equipment. assets (and disposal groups) and their sale is considered highly probable. For a sale to be highly probable, management must be committed to a sales plan and actively looking for a buyer. Furthermore, the assets Operating leases (and disposal groups) must be actively marketed at a reasonable sales price in relation to their current (i) as lessee fair value and the sale should be expected to be completed within one year. Non-current non-financial assets (and disposal groups) which meet the criteria for held for sale classification are measured at the Payments made under operating leases, where the lessors effectively retain substantially all the risks lower of their carrying amount and fair value less costs to sell and are presented within assets held for sale and benefits of ownership of the leased property, plant and equipment are recognised in the Statement in the Statement of Financial Position. The comparatives are not re-presented when non-current assets of Comprehensive Income on a straight-line basis over the lease term. Lease incentives received are (and disposal groups) are classified as held for sale. If the disposal group contains financial instruments, recognised as an integral part of the total lease expense over the term of the lease. Property, plant and no adjustment to their carrying amounts is permitted. There has been a change in presentation and the equipment used by Eastland Group under operating leases are not recognised in Eastland Group’s comparative balances have been re-presented. Statement of Financial Position. (ii) as lessor (vi) Discontinued operations Assets leased under operating leases are included in investment property in the Statement of Financial Position. Rental income (net of any incentives given to lessees) is recognised o a straight line basis over the Discontinued operations are presented separately in the Statement of Comprehensive Income if an entity lease term. For more details see policy (d). or a component of an entity has been disposed of or is classified as held for sale and (a) represents a separate major line of business or geographical area of operations, (b) is part of a single coordinated plan

to dispose of a separate major line of business or geographical area of operations, or (c) is a subsidiary Leasehold improvements acquired exclusively with a view to resale. Net income (loss) from discontinued operations includes the The cost of improvements to leasehold property are capitalised and depreciated over the unexpired period net total of net income (loss) before tax from discontinued operations and discontinued operations tax of the lease or the estimated useful life of the improvements, whichever is the shorter. expense. Similarly the net cash flows attributable to the operating, investing and financing activities of discontinued operations have to be presented separately. The comparative Statement of Comprehensive (p) Goods and Services Tax (GST) Income and cash flow information is re-presented for discontinued operations.

The Statement of Comprehensive Income has been prepared so that all components are stated exclusive of GST. All items in the Statement of Financial Position are stated net of GST, with the exception of receivables and payables, which include GST.

(q) Share capital Ordinary shares are classified as equity.

68 Eastland Group Annual Report 2013 Eastland Group Annual Report 2013 69 Notes to the Financial Statements (continued) Notes to the Financial Statements (continued) For the year ended 31 March 2013 For the year ended 31 March 2013

4 DETERMINATION OF FAIR VALUES 6 ADOPTION OF NEW AND REVISED STANDARDS AND INTERPRETATIONS A number of Eastland Group’s accounting policies and disclosures require the determination of fair value, for both The following accounting pronouncements were not effective as of 31 March 2013 and therefore have not been financial and non-financial assets and liabilities. Fair values have been determined for revaluation and/or disclosure applied in preparing these financial statements. Reference below is made to the pronouncements issued by the purposes based on the following methods. Where applicable, further information about the assumptions made in International Accounting Standards Board (“IASB”), which have been approved by the External Reporting Board determining fair values is disclosed in the notes specific to that asset or liability. (“XRB”) for use by Tier 1 for-profit entities.

(a) Property, plant and equipment XRB A1 The fair value of certain property, plant and equipment is based on market values. The market value of In April 2012, XRB issued a new Accounting Standards Framework (the “Framework”), which establishes an property is the estimated amount for which a property could be exchanged on the date of valuation between a accounting standards framework for those entities that have a statutory obligation to prepare general purpose willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties have financial reports. The Framework defines NZ GAAP, which comprises accounting standards issued by the XRB. acted knowledgeably, prudently and without compulsion. Fair values are determined by independent valuers. As a for-profit entity the Framework is applicable to Eastland Group for periods beginning on or after 1 December The market value of plant and equipment (excluding electricity distribution, port wharves walls and surfaces) 2012. As Eastland Group already applies NZ GAAP and NZ IFRS it is not expected that the Framework will have a is based on the quoted market prices for similar items. In the absence of current prices in an active market, material impact on its consolidated financial statements. the valuations are prepared by considering the aggregate of the estimated cash flows expected to be received from the operation of that plant and equipment. A yield that reflects the specific risks inherent in the net cash NZ IAS 1 flows is then applied to the net annual cash flows to arrive at the valuation. In June 2011, the IASB issued amendments to IAS 1, “Presentation of Financial Statements” to require companies Electricity distribution plant and equipment and port wharves, walls and surfaces, are valued using optimised to group together items within other comprehensive income (“OCI”) that may be reclassified to the statement of depreciated replacement cost methodology. income. The amendments also reaffirm requirements that items in OCI and profit or loss should be presented as either a single statement or two separate statements. The amendments are effective for annual periods (b) Investment property beinginning on or after 1 July 2012. Eastland Group presents its comprehensive income in a single statement. An external, independent valuation company with appropriate recognised professional qualifications and The adoption of the amendments is therefore not expected to have a material impact on the presentation of recent experience in the location and category of property being valued, values the Group’s investment Eastland Group’s consolidated financial statements. property portfolio annually. The fair values are based on market values, being the estimated amount for which a property could be exchanged on the date of valuation between a willing buyer and a willing seller in an NZ IFRS 10, NZ IFRS 11, NZ IFRS 12, NZ IAS 27 and NZ IAS 28 arm’s length transaction after proper marketing wherein the parties have acted knowledgeably, prudently and In May 2011, the IASB issued IFRS 10, “Consolidated Financial Statements”, IFRS 11, “Joint Arrangements”, IFRS without compulsion. 12, “Disclosure of interests in Other Entities”, a revised version of IAS 27, “Separate Financial Statements”, and a revised version of IAS 28, “Investment in Associates and Joint Ventures” which have been amended for conforming (c) Trade and other receivables and trade and other payables changes based on the issuance of IFRS 10 and IFRS 11. In June 2012, the IASB issued amendments to the The fair value of trade and other receivables and trade and other payables is estimated as the present value transition guidance for IFRS 10-12 which provides relief from all but the prior year comparative periods which need of future cash flows, discounted at the market rate of interest at the reporting date. The carrying values of to be restated. trade and other receivables and trade and other payables that are of a short-term duration are a reasonable IFRS 10 replaces IAS 27, “Consolidated and Separate Financial Statements” and SIC-12, “Consolidation – Special approximation of their fair values. Purpose Entities”, and establishes a single control model that applies to all entities and modifies the definition of control. An investor controls an investee when it has the power over the relevant activities, exposure to available returns from the investee, and the ability to affect those returns through its power over the investee. The (d) Derivative financial instruments assessment of control is based on all facts and circumstances and the conclusion is reassessed if there is an The fair value of interest rate swaps is based on broker quotes obtained by the Group’s treasury advisors, indication that there are changes in facts and circumstances. Bancorp Treasury Services Limited. IFRS 11 supersedes IAS 31, “Interests in Joint Ventures” and SIC 13, “Jointly-Controlled Entities – Non-Monetary These quotes are tested for reasonableness by discounting estimated future cash flows based on the terms Contributions by Ventures”. IFRS 11 classifies joint arrangements as either joint operations or joint ventures and and maturity of each contract and using the Bloomberg discount factor. focuses on the nature of the rights and obligations of the arrangement. IFRS 11 requires the use of the equity method of accounting for joint arrangements by eliminating the option to use the proportionate consolidation (e) Intangible assets method, which is current applied by Eastland Group. The fair value of intangible assets is based on the discounted cash flows expected to be derived from the use IFRS 12 require an entity to disclose the nature, associated risks, and financial effects of interests in subsidiaries, and eventual sale of the assets. joint arrangement, associate and unconsolidated structured entities. IFRS 12 requires more comprehensive disclosure in comparison to IAS 27 or SIC 12. Eastland Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated in note 3 (k). Each of the standards are effective for annual periods beginning on or after 1 January 2013, with earlier application permitted as long as each other the other standards are also applied early. However, entities are permitted to The recoverable amounts of cash-generating units have been determined based on discounted cash flow include any of the disclosure requirements in IFRS 12 into their consolidated financial statements without early calculations. These calculations require the use of estimates (note 21). adoption of IFRS 12. Eastland Group will apply each of the standards in the financial year ending 31 March 2014. The adoption of NZ IFRS 10, NZ IFRS 11 and NZ IFRS 12 is not expected to have a material impact on Eastland Group’s consolidated financial statements. 5 CHANGES IN ACCOUNTING POLICIES A new policy has been added regarding non current assets held for sale and discontinued operations. NZ IFRS 13 Refer to Note 17 for details. In May 2011, the IASB issued IFRS 13, “Fair Value Measurement” which establishes a single source of guidance The revenue and expenses in the Statement of Financial Performance have been re-presented in order to better for fair value measurement under IFRS. IFRS 13 provides a revised definition of fair value and guidance on how it reflect the segments of the Eastland Group, and the comparatives re-presented accordingly. should be applied where its used is already required or permitted by other standards within IFRS and introduces more comprehensive disclosure requirements on fair value measurement. IFRS 13 is effective for periods beginning on or after 1 January 2013. The impact of IFRS 13 is not material to Eastland Group.

70 Eastland Group Annual Report 2013 Eastland Group Annual Report 2013 71 Notes to the Financial Statements (continued) Notes to the Financial Statements (continued) For the year ended 31 March 2013 For the year ended 31 March 2013

6 ADOPTION OF NEW AND REVISED STANDARDS AND INTERPRETATIONS (CONTINUED) Group 2013 Improvements to IFRS 2009-2011 Cycle All Other Inter- Distribution Generation Logistics Segments segment Total In May 2012, the IASB issued amendments to IFRS, which resulted from the IASB’s annual improvement project. They comprise amendments that result in accounting changes for presentation, recognition or measurement $’000 $’000 $’000 $’000 $’000 $’000 purposes as well as terminology or editorial amendments related to a variety of individual IFRS standards. The 7 SEGMENT REPORTING (CONTINUED) amendments are effective for periods beginning on or after 1 January 2013. The adoption of the amendments will External revenue: not have a material impact on Eastland Group’s consolidated financial statements. Operating revenue 34,437 6,817 26,410 1,339 - 69,003 Other income 48 3,250 37 - - 3,335 IAS 32 and IFRS 7 Intersegment revenue 1,113 3,043 15 4,827 (8,998) - In December 2011, the IASB issued amendments to IAS 32, “Offsetting Financial Assets and Financial Liabilities” Segment revenue 35,598 13,110 26,462 6,166 (8,998) 72,338 (IAS 32 R) to clarify the requirements for offsetting financial instruments. The amendments are effective for annual periods beginning on or after 1 January 2013. The adoption of the amendments will not have a material impact on External operating expenditure: Eastland Group’s consolidated financial statements. Operating expenditure (11,713) (1,180) (3,581) - - (16,474) Personnel expenditure (2,379) (356) (2,459) (2,133) - (7,327) IFRS 9 (2009) and IFRS 9 (2010) Other administrative expenditure (1,203) (1,640) (1,865) (3,946) - (8,654) IFRS 9 (2009) – In November 2009, the IASB issued IFRS 9, “Financial Instruments”, as a first step in its project Intersegment expenditure (6,058) (753) (1,271) (807) 8,889 - to replace IAS 39, “Financial Instruments: Recognition and Measurement”. IFRS 9 (2009) introduces new Operating expenditure (21,353) (3,929) (9,176) (6,886) 8,889 (32,455) requirements for how an entity should classify and measure financial assets that are in the scope of the new requirements for how an entity should classify and measure financial assets that are in the scope of IAS 39. The Earnings before interest, income tax, standard requires all financial assets to be classifies on the basis of the entity’s business model of management depreciation and amortisation (EBITDA) 14,245 9,181 17,286 (720) (109) 39,883 the financial assets, and the contractual cash flow characteristics of the financial asset. Depreciation and amortisation (4,538) (1,745) (4,165) (438) - (10,886) IFRS 9 (2010) - In October 2010, the IASB issued a revised version of IFRS 9, “Financial instruments” (“IFRS 9 Segment profit before interest and income tax 9,707 7,436 13,121 (1,158) (109) 28,998 (2010)”). The revised standard adds guidance on the classification and measurement of financial liabilities. IFRS Loss from discontinued operations - - - (691) - (691) 9 (2010) required entities with financial liabilities designated fair value through profit or loss to recognise changes Assets 147,094 65,307 121,998 31,673 - 366,072 in fair value dues to changes in the liability’s credit risk in other comprehensive income. However, if recognising these changes in other comprehensive income creates an accounting mismatch, an entity would present the entire Liabilities 27,483 8,081 19,219 130,337 - 185,120 change in fair value within in profit or loss, but accumulated gains or losses may be transferred within equity. Segment capital expenditure 5,153 1,291 7,257 823 255 14,779 Based on the amendments to IFRS 9 (2009), IFRS 9(2010) and IFRS 7, “Mandatory Effective Date and Transition Guidance” issued by the IASN in December 2011, IFRS 9 (2009) and IFRS 9 (2010) are effective for annual periods beginning on or after 1 January 2015, with earlier application permitted. Once adopted, IFRS 9 should be applied Group 2012 to all financial instruments outstanding as of the effective date, as if the classification and measurement under IFRS 98 had always applied, but comparative periods do not need to be restated. The adoption of the amendments will All Other Inter- Distribution Generation Logistics Segments segment Total not have a material impact on Eastland Group’s consolidated financial statements. $’000 $’000 $’000 $’000 $’000 $’000 External revenue: Operating revenue 32,947 5,794 20,737 1,329 - 60,807 7 SEGMENT REPORTING Other income 28 5 116 6 - 156 The Group’s internal reporting to the Group Chief Executive Officer (“CEO”) and board is focused on the following businesses which are the Group’s operating segments reported in accordance with NZ IFRS 8 Operating Intersegment revenue 965 2,881 77 4,598 (8,521) - Segments. These consist of: Segment revenue 33,940 8,680 20,930 5,933 (8,521) 60,963 • Distribution – Ownership and management of electricity line distribution and contracting business Eastech. External operating expenditure: • Generation – Ownership and management of electricity generation; including Waihi hydrogeneration and Operating expenditure (10,387) (628) (2,991) - - (14,006) Geothermal generation at Kawerau. Payroll expenditure (2,009) (210) (2,236) (2,227) - (6,682) • Logistics – Ownership and/or management of Port, Airport Coolstore and debarker operations. Other administrative expenditure (639) (937) (1,774) (5,484) - (8,834) • All other segments – Corporate activities, business development and investment property and aviation Intersegment expenditure (5,913) (574) (1,071) (2,765) 10,323 - (now a discontinued operation). Operating expenditure (18,948) (2,349) (8,072) (10,476) 10,323 (29,522) All other revenues and costs (including head office costs) are included in All Other Segments. Earnings before interest, income tax, Intersegment transactions included in the operating revenues and expenditures for each segment are on an arms’ depreciation and amortisation (EBITDA) 14,992 6,331 12,858 (4,543) 1,802 31,441 length basis. All segment information presented is prepared in accordance with Eastland Group’s accounting Depreciation and amortisation (4,460) (1,528) (4,071) (395) - (10,454) policies. Monthly internal reporting to the Group CEO and board is also prepared on this basis. Segment profit reported to the Group CEO and board is profit before interest and income tax. All financing costs and finance Segment profit before interest and income tax 10,532 4,803 8,787 (4,938) 1,802 20,987 income are incorporated within Corporate activities and are not allocated to the segments. Loss from discontinued operations - - - (1,470) - (1,470) Assets 147,661 54,242 118,633 33,296 - 353,832

Liabilities 27,017 3,971 18,827 139,701 - 189,516 Segment capital expenditure 6,049 1,248 11,752 345 - 19,394

72 Eastland Group Annual Report 2013 Eastland Group Annual Report 2013 73 Notes to the Financial Statements (continued) Notes to the Financial Statements (continued) For the year ended 31 March 2013 For the year ended 31 March 2013

Group Parent Group Parent 2013 2012 2013 2012 2013 2012 2013 2012 Notes $’000 $’000 $’000 $’000 Notes $’000 $’000 $’000 $’000 8 REVENUE 9 ADMINISTRATIVE EXPENSES Continuing operations Continuing operations Electricity distribution revenue 31,644 30,180 - - Change in fair value of investment property 353 - - - Logistics revenue 24,429 18,557 - - Impairment losses and bad debt write-offs on trade receivables 32 22 - - Energy sales 6,387 5,656 - - Impairment losses on intangible assets - 1,859 - - Property rentals 3,243 3,437 - - Provision of loan receivable - 1,519 - 1,519 Management fees to related parties 60 34 4,837 4,582 Loss on revaluation - 266 - - Other income 3,240 2,943 16 41 Loss on sale of property, plant and equipment 595 43 - - Total revenue 69,003 60,807 4,853 4,623 Loss on sale of investment property - 331 - -

Direct operating expenditure arising on investment OTHER INCOME properties that generated rental income 435 461 - - Continuing operations Auditor’s remuneration to Deloitte comprises: Other income 8a 3,322 122 - - - audit of financial statements 246 239 107 105 Impairment losses recovered 13 16 - - Other 6,993 4,094 4,071 5,622 Gain on disposal of assets - 5 - - Total continuing administrative expenses 8,654 8,834 4,178 7,246 Change in fair value of investment property - 12 - - Dividends received - - 4,600 4,400 Discontinued operations Total other income 3,335 155 4,600 4,400 Other 2,391 4,551 - - Total Income 72,338 60,962 9,453 9,023 Total administrative expenses 11,045 13,385 4,178 7,246

Discontinued operations Donations of $358 were made during the financial year (2012: $10,846). Aviation services 3,159 3,001 - - Sale of goods 11,915 12,419 - - Depreciation and amortisation Other income 40 41 - - Discontinued operations 49 168 - - Total discontinued operations LINK 17 15,114 15,461 - - Continuing operations 10,860 10,443 358 329 Depreciation as per property, plant and equipment LINK 15 10,909 10,611 358 329 8a In June 2013 Geothermal Developments Limited, a subsidiary of Eastland Group, entered into a revised Investment property LINK 18 21 7 - - agreement with a supplier to provide operations and management services for its geothermal generator in Amortisation LINK 21 5 4 - - Kawerau. Separately, an agreement was entered into to provide a one-off payment of $3.3 million from the supplier Continuing operations total depreciation 10,886 10,454 358 329 to Geothermal Developments Limited to allow the release from the original agreement. This has been recognised as other income in the Statement of Comprehensive Income.

74 Eastland Group Annual Report 2013 Eastland Group Annual Report 2013 75 Notes to the Financial Statements (continued) Notes to the Financial Statements (continued) For the year ended 31 March 2013 For the year ended 31 March 2013

11 INCOME TAX (CONTINUED) Group Parent A reconciliation of income tax expense applicable to accounting profit before income tax, at the statutory income tax rate 2013 2012 2013 2012 to income tax expense at Eastland Group’s effective income tax rate for the year ended 31 March 2013, is as follows: Notes $’000 $’000 $’000 $’000 10 FINANCE INCOME AND EXPENSES Group Parent Interest income on cash and cash equivalents 145 122 9,585 10,624 2013 2012 2013 2012 Net foreign exchange gains 177 132 - 110 % $’000 % $’000 % $’000 % $’000 Fair value gains on derivative instruments at fair value Accounting profit before income tax 19,335 10,501 2,605 (741) through profit or loss - 4 - 4 At the statutory income tax Total finance income 322 258 9,585 10,738 rate of 28% (28.0%) (5,414) (28.0%) (2,940) (28.0%) (729) (28.0%) 207 Acquired adjustments in respect of current income tax of previous years (0.9%) (176) (0.9%) (98) (3.4%) (89) (30.2%) 224 Attributable to: Discontinued Operations 1.9% 355 3.9% 412 0.0% - 0.0% - Continuing operations 135 215 9,585 10,738 Subvention payment 0.0% - 0.0% - 0.0% - 117.0% (867) Discontinued operations LINK 17 187 43 - - Non-deductible expenses (1.5%) (288) (12.0%) (1,086) (6.2%) (161) 128.4% (952) 322 258 9,585 10,738 Tax exempt income 0.0% - 0.0% - 49.4% 1,288 (166.3%) 1,232 Interest expense on financial liabilities measured at amortised cost 9,622 10,700 9,589 10,700 (28.6%) (5,523) (41.1%) (3,712) 11.9% 309 20.9% (155) Net foreign exchange losses 180 29 175 - Note: The tax rate changed from 30% to 28% at the end of the prior financial year. Total finance expense 9,802 10,729 9,764 10,700 Deferred tax assets and liabilities Attributable to: Group 2013 Continuing operations 9,797 10,701 9,764 10,700 Property Provisions Plant and and Investment Hedge Discontinued operations LINK 17 5 28 - - Equipment Accruals Property Reserve Other Total Net finance costs 9,802 10,729 9,764 10,700 $’000 $’000 $’000 $’000 $’000 $’000 Deferred tax from continuing operations Balance at beginning of the period (41,300) 470 84 1,442 - (39,304) 11 INCOME TAX Amounts recognised in the Statement of Current tax expense Comprehensive Income - Relating to the current period 310 (17) - 377 - 670 Current period (6,016) (4,207) 2 (73) - Prior period adjustments recognised Adjustment for prior periods 721 (143) 173 224 in the current period (581) (226) (24) (66) - (897) Total current tax (expense)/income (5,295) (4,350) 175 151 Amounts recognised directly in other comprehensive income (3,248) - - (110) - (3,358) Deferred tax expense Net deferred tax liabilities on Temporary differences for the year 669 593 396 561 continuing operations (44,819) 227 60 1,643 - (42,889) Adjustment for prior periods (897) 45 (262) - Deferred tax from discontinued operations - (5) - - - (5) Total deferred tax (expense)/income (228) 638 134 561 Total Deferred Tax (44,819) 222 60 1,643 - (42,894) Subvention payment - - - (867) Total income tax (expense)/income (5,523) (3,712) 309 (155) Group 2012 Property Provisions Attributable to: Plant and and Investment Hedge Equipment Accruals Property Reserve Other Total Continuing operations (5,878) (3,714) 309 (155) $’000 $’000 $’000 $’000 $’000 $’000 Discontinued operations LINK 17 355 2 - - Balance at beginning of the period (41,337) 378 70 605 43 (40,241) (5,523) (3,712) 309 155 Amounts recognised in the Statement of Comprehensive Income

- Relating to the current period 363 (173) 14 431 (43) 592 - Prior period adjustments recognised in the current period (220) 265 - - - 45 Amounts recognised directly in other comprehensive income (106) - - 406 - 300 Net deferred tax liabilities (41,300) 470 84 1,442 - (39,304)

76 Eastland Group Annual Report 2013 Eastland Group Annual Report 2013 77 Notes to the Financial Statements (continued) Notes to the Financial Statements (continued) For the year ended 31 March 2013 For the year ended 31 March 2013

11 INCOME TAX (CONTINUED) 12 CASH AND CASH EQUIVALENTS (CONTINUED) Deferred tax assets and liabilities (continued) Bank balances earn interest at floating rates based on daily bank deposit rates. Refer to Note 24 for further PARENT 2013 discussion on Eastland Group’s funding facilities. Property Provisions Eastland Group is party to funding and banking facilities made available to related companies. Since April 2010 the Plant and and Tax Hedge related companies’ cash receipts and payments have been made through the bank accounts of Eastland Group Equipment Accruals Losses Reserve Other Total Limited (Parent), who provides treasury services to Eastland Group. $’000 $’000 $’000 $’000 $’000 $’000 The effective interest rate on call deposits in 2013 were as follows: - NZD denominated 2.5% (2012: 2.5%). Balance at beginning of the period (74) 132 - 1,443 - 1,501 - USD denominated 0% (2012: 0.0%) Transfer from subsidiary 84 - - - - 84 Amounts recognised in the Statement of Group Parent Comprehensive Income 2013 2012 2013 2012 - Relating to the current period 33 (12) - 375 - 396 Notes $’000 $’000 $’000 $’000 - Prior period adjustments recognised 13 TRADE AND OTHER RECEIVABLES in the current period (110) (88) - (65) - (263) Continuing operations Amounts recognised directly in other Trade receivables 6,564 7,277 - 48 comprehensive income - - - (110) - (110) Customer deposits - 287 - - Net deferred tax liabilities (67) 32 - 1,643 - 1,608 Other receivables 960 2,228 232 391 Total trade and other receivables 7,524 9,792 232 439 PARENT 2012 Property Provisions Discontinued operations Plant and and Tax Hedge Equipment Accruals Losses Reserve Other Total Trade receivables LINK 17 1,553 - - - $’000 $’000 $’000 $’000 $’000 $’000 GST receivable 168 - - - 1,721 - - - Balance at beginning of the period - - - 605 - 605 Total trade and other receivables 9,245 9,792 232 439 Deferred tax liability from subsidiary acquisition (72) - - - - (72) Amounts recognised in the Statement of Trade receivables are stated net of impairment loss allowances of $8,000 (2012: $29,991). Trade receivables Comprehensive Income that are less than three months past due are not considered impaired, unless there is evidence to the contrary. - Relating to the current period (2) 132 - 431 - 561 For an aging analysis of trade receivables see note 29 (e). No impairment losses have been recognised on related party receivables. - Prior period adjustments recognised in the current period ------Group Parent Amounts recognised directly in other 2013 2012 2013 2012 comprehensive income - - - 407 - 407 Notes $’000 $’000 $’000 $’000 Net deferred tax liabilities (74) 132 - 1,443 - 1,501 Impairment loss allowance account Balance at beginning of year 105 75 - - Eastland Group files tax returns using a consolidated tax group. Impairment losses recognised (8) 30 - - Total impairment allowance 97 105 - - Group deferred tax net liability The $42.9 million (2012: $39.3 million) net deferred tax liability includes $44.8 million (2012: $41.3 million) that relates to accounting depreciation on property, plant and equipment revalued, with the remaining differences Group Parent between accounting and tax depreciation rates. As the network and port assets are held for the long term, this 2013 2012 2013 2012 liability is unlikely to be realised. Notes $’000 $’000 $’000 $’000 14 INVENTORY Group Parent Consumables 12 13 - - 2013 2012 2013 2012 Work in progress 132 4,042 - - Notes $’000 $’000 $’000 $’000 Finished goods - 3,266 - - 12 CASH AND CASH EQUIVALENTS 144 7,321 - - Current accounts (2,932) (1,811) (2,982) (2,619) Classified as part of assets held for sale LINK 17 4,051 - - - Petty cash 1 5 - 3 Total inventory 4,195 7,321 - - Call deposits 7,054 2,545 323 729 Total cash and cash equivalents 4,123 739 (2,659) (1,887) No inventory is pledged as security for liabilities. An impairment of $490,464 was recognised on helicopter inventory (2012: $nil).

78 Eastland Group Annual Report 2013 Eastland Group Annual Report 2013 79 Notes to the Financial Statements (continued) Notes to the Financial Statements (continued) For the year ended 31 March 2013 For the year ended 31 March 2013

15 PROPERTY, PLANT AND EQUIPMENT 15 PROPERTY, PLANT AND EQUIPMENT (CONTINUED) Year ended 31 March 2013 Year ended 31 March 2013 Group PARENT Electricity Wharves Other Other Land and Electricity Generation Walls and Floating Plant and Work In Land and Electricity Generation Walls and Floating Plant and Work In Notes Buildings Distribution Equipment Surfaces Plant Equipment Progress Total Notes Buildings Distribution Equipment Surfaces Plant Equipment Progress Total $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 At 1 April 2012, At 1 April 2012, cost or fair value 41,832 147,204 12,386 79,790 3,671 36,269 3,937 325,089 cost or fair value 128 - - - - 2,200 12 2,340 Additions 1,151 5,223 13 3,779 74 1,302 3,237 14,779 Additions - 231 19 250 Disposals (1,054) (737) - (355) (19) (1,711) - (3,876) Disposals - (487) (487) Revaluations (437) - 9,867 - - - - 9,430 At 31 March 2013, Transfers to/from inv. cost or fair value 128 - - - - 1,944 31 2,103 prop/prop held for sale/classes 234 - - - - (67) - 167 Accumulated depreciation, At 31 March 2013, at 1 April 2012 17 - - - - 1,241 - 1,258 cost or fair value 41,726 151,690 22,266 83,214 3,726 35,793 7,174 345,589 Disposals - - - - - (439) - (439) Accumulated depreciation, Depreciation charge for the year 3 - - - - 355 - 358 at 1 April 2012 728 12,257 3,547 4,810 1,192 7,804 - 30,338 At 31 March 2013, Disposals (165) (143) - (39) (18) (1,078) - (1,443) accumulated depreciation 20 - - - - 1,157 - 1,177 Revaluations (239) - (1,604) - - - - (1,843) At 31 March 2013, net of Depreciation charge for the year 514 4,225 917 2,909 322 2,022 - 10,909 accumulated depreciation 108 - - - - 787 31 926 At 31 March 2013, accumulated depreciation 838 16,339 2,860 7,680 1,496 8,748 - 37,961 At 31 March 2013, net of Year ended 31 March 2012 accumulated depreciation 40,888 135,351 19,406 75,534 2,230 27,045 7,174 307,628 PARENT Other Land and Electricity Generation Walls and Floating Plant and Work In Notes Buildings Distribution Equipment Surfaces Plant Equipment Progress Total Year ended 31 March 2012 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 Group At 1 April 2011, Electricity Wharves Other cost or fair value ------Land and Electricity Generation Walls and Floating Plant and Work In Notes Buildings Distribution Equipment Surfaces Plant Equipment Progress Total Additions 1 - - - - 455 12 468 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 Disposals - - - - - (2) - (2) At 1 April 2011, Transfer from group companies 127 - - - - 1,747 - 1,874 cost or fair value 38,806 142,589 12,318 64,353 3,662 35,701 5,970 303,399 At 31 March 2012, Additions 1,112 5,210 83 13,568 9 1,445 (2,033) 19,394 cost or fair value 128 - - - - 2,200 12 2,340 Disposals - (595) (15) - - (771) - (1,381) Accumulated depreciation, Revaluations 1,518 - - - - (26) - 1,492 at 1 April 2012 ------Revaluation of property Disposals - - - - - 2 - 2 held for sale LINK 17 2,185 ------2,185  Transfers 14 - - - - 913 - 927 Transfers between Depreciation charge for the year 3 - - - - 326 - 329 asset classes (1,789) - - 1,869 - (80) - - At 31 March 2012, At 31 March 2012, accumulated depreciation 17 - - - - 1,241 - 1,258 cost or fair value 41,832 147,204 12,386 79,790 3,671 36,269 3,937 325,089 At 31 March 2012, net of Accumulated depreciation, accumulated depreciation 111 - - - - 959 12 1,082 at 1 April 2012 954 8,175 2,859 1,893 882 6,072 - 20,835  Disposals - (77) (12) - - (294) - (383) There are no restrictions on title, and property, plant and equipment pledged as security for liabilities. Revaluation Revaluations (699) - - - - (26) - (725) surplus has increased by $11.2 million this year (2012: $2.2 million), there is no restriction on the distribution of this Transfers (164) - - 188 - (24) - - balance to our shareholder. Depreciation charge for the year 637 4,159 700 2,729 310 2,076 - 10,611 There has been no impairment of property, plant and equipment during the current year. At 31 March 2012, In the year to 31 March 2013 $0 (2012: $19,705) of interest has been capitalised. accumulated depreciation 728 12,257 3,547 4,810 1,192 7,804 - 30,338 At 31 March 2012, net of accumulated depreciation 41,104 134,947 8,839 74,980 2,479 28,465 3,937 294,751

80 Eastland Group Annual Report 2013 Eastland Group Annual Report 2013 81 Notes to the Financial Statements (continued) Notes to the Financial Statements (continued) For the year ended 31 March 2013 For the year ended 31 March 2013

15 PROPERTY, PLANT AND EQUIPMENT (CONTINUED) 15 PROPERTY, PLANT AND EQUIPMENT (CONTINUED) Land and buildings The carrying values of revalued items of property, plant and equipment that would have been recognised had the Network operational land and buildings were valued on 31 March 2013 (total fair value of $4.6 million) by an assets been recognised on the cost model is as follows: independent valuer; Michael Blair of Lewis Wright Valuation and Consultancy Limited. The method of valuation was depreciated replacement cost, calculated using current market data on building costs, adjusted by an appropriate Group Parent multiple based on the type of asset being valued. 2013 2012 2013 2012 Port land and buildings were last revalued on 31 March 2011 (total fair value of $32.8 million) by an independent $’000 $’000 $’000 $’000 valuer; Logan Stone. The method of valuation was depreciated replacement cost calculated on current market data on current building costs adjusted, by an appropriate multiple based on the type of asset being valued. Land and buildings 12,772 12,851 - - Electricity distribution 98,622 98,279 - - Electricity distribution Wharves, walls and surfaces 19,760 19,245 - - Electricity distribution assets and related land and buildings were last revalued on 31 March 2009, (fair value 131,154 130,375 - - $130.1 million) by PricewaterhouseCoopers (“PwC”) using modern equivalent replacement costs and depreciated against the asset lives which reflect the service potential of each asset class. Any assets which do not meet the used and useful test are not included in the valuation. In reviewing the depreciated replacement cost PwC have relied on advice from Sinclair Knight Merz Limited (“SKM”). In particular SKM has reviewed the asset lives, 16 LONG TERM RECEIVABLES replacement costs and optimisation of the system fixed assets. SKM also confirmed the physical existence of a sample of assets included in the asset register. As part of the Te Ahi o Maui project, Eastland Group has advanced to Innovations Development Group (IDG) a total of USD $1.7 million which, as at 31 March 2013 has a carrying value of NZD $486,000. USD $400,000 of this loan is repayable in 6 monthly instalments, once management fees payable to IDG in accordance with the TAOM Electricity generation equipment project development agreement are paid to them. The remaining USD $1.3 million is repayable within five years The Waihi Hydroelectric Scheme was revalued as at 1 April 2012 (total fair value of $16.8 million) by an either in cash or by the exercise of an option held by Eastland Group to invest in a Hawaiian based geothermal independent valuer; Sinclair Knight Merz. The valuation used was a discounted cash flow basis, using the following project controlled by IDG. After taking into consideration the stage that the TAOM and Hawaiian projects are at assumptions: as at 31 March 2012, and in accordance with the requirements of International Financial Reporting Standards, • Outputs are based on an average plant availability of 26% of capacity. the Directors provided for the USD $1.3 million. There is a general charge over the IDG interest in TAOM of $413,219 (2012: $253,962) as security over the balance owed to Eastland Group. • Wholesale electricity prices are based on the Gisborne reference nodal price path estimates prepared by an independent consultant; Energylink in October 2012. • Forecast operating costs are based on current operating costs adjusted for inflation of 2%. Group Parent 2013 2012 2013 2012 • A major half-life overhaul of the generator and turbine equipment has been assumed in the forecast of capital expenditure. $’000 $’000 $’000 $’000 • A corporate tax rate of 28%. Loan receivable • A nominal post tax discount rate of 9.6% has been assumed which is reflective of the expectation an investor Cost would expect to receive on private generation projects. Balance at 1 April 2012 2,005 - 2,005 - Advances - Innovations Developments Group - 2,005 - 2,005 Wharves, walls and surfaces Balance at 31 March 2013 2,005 2,005 2,005 2,005 The Port wharves, walls and surfaces and some other plant and equipment were revalued on 31 March 2011 (total fair value $63.1 million) by independent valuers Opus International Consultants Ltd. The method of valuation Amortisation and provisions was depreciated replacement cost which is supported by a discounted cash flow valuation prepared, using the Balance at 1 April 2012 1,519 - 1,519 - following assumptions: Provision - 1,519 - 1,519 • Revenues are based on management’s best estimate of cargo volumes (predominantly logs) over the years to 2030 with these estimates supported in the case of log exports by external reports and customer forecasts of Balance at 31 March 2013 1,519 1,519 1,519 1,519 likely log volumes. • Port charges for all cargos (excluding logs) grow at 3% per annum. Carrying values • Port charges for all log cargos increase by 3.75% from 2021 when planned capital growth projects are expected At 1 April 2012 486 - 486 - to be complete. At 31 March 2013 486 486 486 486 • Operating costs are based on current operating cost to volume ratios plus inflation of 3% per annum. • Capital expenditures include both maintenance and growth capital expenditure. • A corporate tax rate of 28% is assumed. • The post-tax discount rate of 10.9% is per the recently completed independent report on the weighted average cost of capital (WACC) for Eastland Port as prepared by PricewaterhouseCoopers. • The terminal value is based on free cash flow at 2030 with the valuation tested at terminal value growth rates of 1.5-3.5%.

82 Eastland Group Annual Report 2013 Eastland Group Annual Report 2013 83 Notes to the Financial Statements (continued) Notes to the Financial Statements (continued) For the year ended 31 March 2013 For the year ended 31 March 2013

Group Parent 2013 2013 2012 2013 2012 $’000 $’000 $’000 $’000 $’000 17 ASSETS HELD FOR SALE (CONTINUED) 17 ASSETS HELD FOR SALE b) Discontinued operations (continued)

Assets and liabilities held for sale Property held for sale a) 3,255 3,827 - - Trade and other receivables 1,721 Discontinued operations held for sale b) 6,097 - - - Inventory 4,051 9,352 3,827 - - Income tax refundable 320 Total current assets 6,092 a) Property held for sale

Investment properties held for sale 1,918 2,571 - - Non-current assets Operational land and buildings held for sale 1,337 1,256 - - Deferred income tax 5 Total property held for sale 3,255 3,827 - - Total non-current assets 5 TOTAL ASSETS 6,097 An agreement for sale and purchase with Port Gisborne Limited provided for a transfer of certain lands between Eastland Port Limited and the Gisborne District Council following completion of the new port access road. Under the terms of this agreement, the Gisborne District Council would receive the land on which the Liabilities new road is constructed, plus areas of reserve and car park and in return Eastland Group will receive stopped Current liabilities road and other land at Dunstan Road. The transaction has subsequently settled during the 2014 financial year. Trade and other payables (626) The investment property at Christchurch has been sold during the 2013 year.

Total liabilities associated with assets b) Discountinued operations classified as held for sale (626) On 28 March 2013, the property, plant and equipment and all parts inventory of the aviation businesses, Eastland Holdings 2 Limited and Eastland Holdings 1 Limited, were sold. The retained inventory consists of Net assets of aviation business held for sale 5,471 four helicopters which are on consignment to the purchaser. On sale the purchaser will pay the proceeds from the sale less commission. Interest is payable on two helicopters, valued at $1.9 million at a rate of 7.5% pa if sold in the first 12 months preceding the sale of the business or 15% thereafter. Book value of assets sold

2013 2012 Current assets $’000 $’000 Inventories 4,160 Cash 1 Revenue 15,074 15,420 Receivables 30 Cost of Sales (13,902) (12,229) Non-current assets Property, plant and equipment 1,395 Other income 40 42 Current Liabilities Administrative expenses (2,391) (4,552) Current Liabilities (63) Depreciation (49) (168) Net assets disposed 5,523

Finance income 187 43 Consideration received 4,140 Finance expenses (5) (28) Loss before tax (1,046) (1,472) Net loss on disposal (1,383) Income tax (expense)/income 355 2

Cash flows from discontinued operations Loss from discontinued operations (691) (1,470) Net cash flows from operating activities - Net cash flows from investing activities 1,627 Net cash flows from financing activities - Net cash flows 1,627

In accordance with NZ IFRS 5: Non-current assets held for sale and

discontinued operations, the statement of financial position prior year comparatives have not been restated.

84 Eastland Group Annual Report 2013 Eastland Group Annual Report 2013 85 Notes to the Financial Statements (continued) Notes to the Financial Statements (continued) For the year ended 31 March 2013 For the year ended 31 March 2013

20 INVESTMENT IN JOINT VENTURE Group Parent Eastland Group (via Eastland Port Debarking Limited) has a 50% share in the Eastland Debarking Joint Venture 2013 2012 2013 2012 with the other 50% held by East Coast Forests Limited. The joint venture provides debarking and anti-sap $’000 $’000 $’000 $’000 treatment of export logs stored at the port. 18 INVESTMENT PROPERTIES Opening balance at 1 April 16,026 16,968 - - Eastland Debarking Joint Venture Additions 199 1,105 - - 2013 2012 Additions from business combinations - - - - $’000 $’000 Disposals - (1,278) - - Transfers out to Operational Property (248) 7 - - Revenue 3,796 2,247 Depreciation (21) (7) - - Expenses (1,670) (910) Transfers to property held for sale (68) (781) - - Net Income 2,126 1,337 Fair value adjustment (353) 12 - - Closing balance at 31 March 15,535 16,026 - - Current assets 2,321 1,479 Current liabilities (268) (163) Investment properties include parcels of land and buildings strategically located at Eastland Port, Inner Harbour, Non current assets 128 72 Gisborne Airport and various other locations in Gisborne. Net assets 2,181 1,388 They are measured at fair value, based on an annual valuation by an independent valuer; Mr M Blair ANZIV, SPINZ, of Lewis Wright Valuation and Consultancy Limited. Commitments The fair value is based on a DCF model using expected market rentals for the highest and best use of the property. At 31 March 2013, total capital expenditure committed but not yet incurred was Nil (2012: Nil). An analysis of current property sales is also assessed in determining the value.

Contingent Liabilities At 31 March 2013, total contingent liabilities were Nil (2012: Nil). 19 INVESTMENT IN SUBSIDIARIES Country of incorporation Ownership Interest (%) Impairment 2013 2012 No assets employed in the jointly controlled operations were impaired during the year. Eastech Limited Contracting New Zealand 100% 100% Eastland Debarking Limited (bare trustee - non trading) Debarker services New Zealand 50% 50% Eastland Generation Limited Electrical Generation New Zealand 100% 100% 21 INTANGIBLE ASSETS Eastland Port Debarking Limited Debarker services New Zealand 100% 100% Group 2013 Eastland Investment Properties Limited Investment Property New Zealand 100% 100% Development Vended Berth Obstruction Eastland Network Limited Electrical Distribution New Zealand 100% 100% Rights Assets Licences Survey Goodwill Total Eastland Port Limited Port Services New Zealand 100% 100% $’000 $’000 $’000 $’000 $’000 $’000 Eastland Holdings 1 Limited Aviation services New Zealand 100% 100% Cost Geothermal Developments Limited Geothermal Generation New Zealand 100% 100% Balance at beginning of the period 1,770 456 - 21 20,546 22,793 Gisborne Airport Limited Airport services New Zealand 100% 100% Acquisitions - 370 25 - - 395 Inner Harbour Marina Limited Harbour services New Zealand 100% 100% Balance at end of the period 1,770 826 25 21 20,546 23,188 Eastland Holdings 2 Limited Aviation services New Zealand 100% 100% Accumulated amortisation and impairment losses Te Ahi O Maui General Partnership Limited Geothermal Generation New Zealand 100% 100% Balance at beginning of period - - - 4 1,899 1,903 Te Ahi O Maui Limited Partnership Geothermal Generation New Zealand 80% 80% Amortisation for the period - - 1 4 - 5 Impairment losses ------There are no restrictions in place on the ability of subsidiaries to transfer funds to the parent in the form of cash Balance at end of the period - - 1 8 1,899 1,908 dividends or to repay loans or advances. Eastland Group provides funding and treasury services to Carrying value at 31 March 2013 1,770 826 24 13 18,647 21,280 these subsidiaries. There were no business combinations in the current and prior year.

86 Eastland Group Annual Report 2013 Eastland Group Annual Report 2013 87 Notes to the Financial Statements (continued) Notes to the Financial Statements (continued) For the year ended 31 March 2013 For the year ended 31 March 2013

21 INTANGIBLE ASSETS (CONTINUED) 21 INTANGIBLE ASSETS (CONTINUED)

Group 2012 Inner Harbour Marina Limited Future cash flows are projected based on expected cash flows using estimates of market conditions over the next Development Vended Berth Obstruction five years. Costs are expected to increase at an assumed inflation rate of 1.0%. Discount rates used ranged from Rights Assets Licences Survey Goodwill Total 6.77% to 8.77%. $’000 $’000 $’000 $’000 $’000 $’000

Cost The recoverable amount of each division exceeds the net assets plus goodwill allocated. Therefore Eastland Group Balance at beginning of the period 793 - - 21 20,546 21,360 has determined that no impairment to goodwill has occurred during the period. Acquisitions 977 456 - 1,433 Balance at end of the period 1,770 456 - 21 20,546 22,793 Accumulated amortisation and impairment losses Group Parent Balance at beginning of period - - - - 40 40 2013 2012 2013 2012 Notes $’000 $’000 $’000 $’000 Amortisation for the period - - - 4 - 4 22 PAYABLES AND ACCRUALS Impairment losses - - - - 1,859 1,859 Trade payables 3,943 4,794 490 496 Balance at end of the period - - - 4 1,899 1,904 Non-trade payables and accrued expenses 3,323 2,787 333 169 Carrying value at 31 March 2013 1,770 456 - 17 18,647 20,890 Interest payable 562 672 562 672 The board has reviewed the Te Ahi O Maui project and concluded that the carrying amount is reasonable after GST payable 106 12 81 135 considering the progress of the resource consent process, the roadway access to the site and the economic valuation model. Income in advance 11 1,233 - - Amortisation and impairment charge Total trade and other payables 7,945 9,498 1,466 1,472 Impairment losses are recognised in administrative expenses in the Statement of Comprehensive Income. The amortisation of the airport obstruction survey is over a five year period. As the development rights were Classified as associated with part of acquired part way through the previous financial year and the Geothermal Generation project to which they relate assets held for sale LINK 17 626 - - - has not yet reached the effective date as set out in the development agreement, amortisation of this asset has Total 8,571 9,498 1,466 1,472 not yet commenced. Amortisation will commence upon effective date (expected to be during the 2014 year), and is expected to result in amortisation of this development right over a period of up to five years. The berth licence All cash receipts and payments are made through the bank accounts of Eastland Group Limited (Parent), recently purchased will be amortised over the period up until 2026. who provides treasury services to the Eastland Group. Impairment testing for cash-generating units containing goodwill Trade and other payables generally have terms of 30 days and are interest free. The directors consider the carrying amount of trade and other payables approximates fair value because the amounts due will be settled Goodwill is allocated to Eastland Group’s operating divisions, which represent cash generating units, the lowest within 12 months and are interest free. level within Eastland Group at which the goodwill is monitored for internal management purposes.

The aggregate carrying amounts of goodwill allocated to each unit are as follows: Group Parent 2013 2012 2013 2012 Group Parent $’000 $’000 $’000 $’000 2013 2012 2013 2012 23 EMPLOYEE ENTITLEMENTS $’000 $’000 $’000 $’000 Provisions for:

Annual leave 672 801 112 120 Geothermal Developments Limited 17,937 17,937 - - Short-term benefits 724 820 394 301 Port Weighbridge (owned by Eastland Port Limited) 500 500 - - Post-employment benefits 94 93 - 21 Inner Harbour Marina Limited 210 210 - - Total employee benefit liability 1,490 1,714 506 442 Total goodwill 18,647 18,647 - - The recoverable amounts attributable to impairment testing of goodwill is calculated on the basis of value in use using discounted cash flow models. Key assumptions used are as follows: Expenses recognised in profit or loss Wages and salaries 10,902 9,778 2,052 2,180

Geothermal Developments Limited Termination benefits 214 - 145 Future cash flows are projected based on the current supply agreement and from 2015 the price path published by Contributions to defined contribution plans 412 227 366 195 the Ministry of Economic Development with an assumed inflation rate of 2.5% to 2036. Operating costs are based Total employee entitlement expenses 11,528 10,005 2,563 2,375 on actual costs with an assumed inflation rate of 2.5%. The terminal value has been calculated as the present value of the plant in 2036 when it is assumed that plant will have a further 10 years of use at a reduced output. Attributable to : Discount rates used ranged from 7.27% to 7.41%. Continuing operations 8,052 6,998 2,563 2,375 Discontinued operations 3,476 3,007 - - Port Weighbridge Employees remuneration 11,528 10,005 2,563 2,375 Future cash flows are projected based on expected cash flows using estimates of market conditions over the next five years. Revenues are expected to increase at by 1.5% per year and costs increase at an assumed inflation rate of 1.0%. Discount rates used ranged from 6.1% to 8.1%.

88 Eastland Group Annual Report 2013 Eastland Group Annual Report 2013 89 Notes to the Financial Statements (continued) Notes to the Financial Statements (continued) For the year ended 31 March 2013 For the year ended 31 March 2013

23 EMPLOYEE ENTITLEMENTS (CONTINUED) 24 LOANS AND BORROWINGS (CONTINUED) During the year the following number of employees received remuneration of at least $100,000. Eastland Group Limited (Parent) has arranged bank funding from the ANZ Bank on behalf of Eastland Group. At 31 March 2013 there were total bank facilities of NZD $125 million (2012: $125 million) including a USD facility (2012: $3 million), which are unsecured and subject to a Deed of Negative Pledge. The borrowings are in the 460,000 - 470,000 1 name of Eastland Group Limited. The guaranteeing subsidiaries of the Group debt held by the Parent entity 240,000 - 250,000 1 are as follows: 200,000 - 210,000 3 190,000 - 200,000 2 Gisborne Airport Limited Geothermal Developments Limited 170,000 - 180,000 1 Eastland Port Limited Inner Harbour Marina Limited 150,000 - 160,000 1 Eastland Network Limited Eastland Port Debarking Limited 140,000 - 150,000 1 Eastland Investment Properties Limited Eastech Limited 120,000 - 130,000 4 Eastland Generation Limited 110,000 - 120,000 4 100,000 - 110,000 2 These borrowings are rolled over at 90 day intervals spread throughout the year. The interest rates on these borrowings is the BKBM rate at the rollover date plus a margin of 0.77% to 0.90% (2012: 0.77% to 0.90%). At 31 March 2013, the rates on borrowings ranged from 3.46% to 3.49% (2012: 3.54% to 4.11%). Facilities with the ANZ Bank had expiry dates of 12 December 2016 Tranch A ($25 million) and 12 December 2014 24 LOANS AND BORROWINGS Tranch B ($100 million) (2012: $25 million and $100 million) There have been no defaults during the period of This note provides information about the contractual terms of Eastland Group’s interest-bearing loans and principal, interest, sinking fund, or redemption terms of those loans payable. borrowings. For more information about Eastland Group’s exposure to interest rate and foreign currency risk, see Note 29. Group Parent 2013 2012 2013 2012 25 TRANSACTIONS WITH OWNER $’000 $’000 $’000 $’000 (a) Issued capital There was no movement in the total number of shares during the year. All shares are classed as ordinary, have The borrowings are repayable as follows: no par value and are subject to the same rights and privileges and are subject to the same restrictions. There are no restrictions on the distribution of dividends and the repayment of capital. On demand within one to two years 93,000 100,500 93,000 100,500

Total bank borrowings 93,000 100,500 93,000 100,500 (b) Dividends paid Dividends of $4.6 million were paid during the year (2012: $4.4 million). The dividend paid per share is $4,600 Classified as follows: (2012: $4,400). Amount due Settlement after 12 Months (Non Current) 93,000 100,500 93,000 100,500 Total bank borrowings 93,000 100,500 93,000 100,500 (c) Imputation credits As at 31 March 2013, the imputation credits available to the shareholders of the parent and the GROUP AND PARENT Eastland Group, total $9.4 million (2012: $6.9 million). Drawn Undrawn $’000 $’000 (d) Capital notes As at 31 March 2013 Eastland Group Issued capital notes on 1 April 2010 of $30 million to the Eastland Community Trust. This issue Tranch A maturing 14 December 2016 - 25,000 is for five years and incurs interest at 8.6% paid quarterly. At the end of this period Eastland Group may elect to redeem all or part of the notes for cash. If Eastland Group does not make an election to redeem the capital Tranch B maturing 14 December 2014 93,000 7,000 notes for cash the note holders can elect to either renew the capital notes for a further period or convert the 93,000 32,000 note held to ordinary shares based on a predetermined formula contained in the capital notes Deed.

As at 31 March 2012 Tranch A maturing 14 December 2016 3,500 21,500 26 COMMITMENTS Tranch B maturing 14 December 2014 97,000 3,000 At 31 March 2013, Eastland Group had total capital commitments payable within the next 12 months of 100,500 24,500 $3.4 million (2012: $6.9 million).

90 Eastland Group Annual Report 2013 Eastland Group Annual Report 2013 91 Notes to the Financial Statements (continued) Notes to the Financial Statements (continued) For the year ended 31 March 2013 For the year ended 31 March 2013

27 OPERATING LEASES 29 FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS (a) Operating leases receivable Eastland Group has a comprehensive treasury policy approved by the Directors to manage the risks of financial Eastland Group leases out its investment properties (refer to note 18) and some other land and buildings, instruments. The policy outlines the objectives and approach Eastland Group applies in its treasury management under operating leases. The future minimum lease payments receivable under non-cancellable leases processes. The policy covers, among other things, management of credit risk, interest rate risk, funding risk, are as follows: liquidity risk, currency risk and operational risk. Non-derivative financial liabilities are categorised as ‘amortised cost’. Derivative financial instruments are categorised as ‘fair value through profit and loss’ unless hedge Group Parent accounting is applied. Hedge accounting is applied for all derivative financial instruments. 2013 2012 2013 2012

$’000 $’000 $’000 $’000 (a) Financial assets and liabilities GROUP Less than one year 2,346 2,556 - - Other Between one and five years 4,133 5,204 - - Cash Loans liabilities at Total More than five years 579 714 - - and cash Cash-flow and amortised carrying Fair Total operating leases receivable 7,058 8,474 - - equivalents hedges receivables cost amount value At 31 March 2013 Notes $’000 $’000 $’000 $’000 $’000 $’000 Financial assets (b) Operating leases payable Long term receivables LINK 16 - - 486 - 486 486 Eastland Group leases land and/or buildings in Gisborne and Kawerau, as well as some other office equipment and vehicles. Trade and other receivables LINK 13 - - 7,524 - 7,524 7,524 Eastland Group leases land sites throughout the East Coast for the right to lay and maintain power cables and Cash and cash equivalents LINK 12 4,123 - - - 4,123 4,123 radio transmissions on these sites. Total financial assets 4,123 - 8,010 - 12,133 12,133 Eastland Generation Ltd has a subsidiary, Geothermal Developments Limited, which has now settled the Maori Land Court proceedings relating to its lease. This has increased the rent to a maximum of 3% of the Financial liabilities production output per annum. Derivative financial instruments LINK 29 - (6,174) - - (6,174) (6,174) Group Parent 2013 2012 2013 2012 Loans and borrowings LINK 24 - - - (93,000) (93,000) (93,000) $’000 $’000 $’000 $’000 Payables and accruals LINK 22 - - - (7,945) (7,945) (7,945) Employee entitlements LINK 23 - - - (1,490) (1,490) (1,490) Less than one year 289 437 - - Capital notes LINK 25 - - - (30,000) (30,000) (30,000) Between one and five years 1,784 1,634 - - Total financial liabilities - (6,174) - (132,435) (138,609) (138,609) More than five years 4,947 3,159 - - Total operating leases payable 7,020 5,230 - - Total net financial assets/(liabilities) 4,123 (6,174) 8,010 (132,435) (126,476) (126,476)

Operating lease payments of $566,515 were made during this financial year (2012: $487,651). Estimation of fair values The methods used in determining the fair values of the financial instruments are discussed in note 4. GROUP 28 CONTINGENCIES Other A s s e t s Cash Loans liabilities at Total and cash Cash-flow and amortised carrying Fair In conjunction with the purchase of Geothermal Developments Limited (GDL), Eastland Group negotiated lease terms equivalents hedges receivables cost amount value for land use. The terms of this lease may result in the reimbursement to the Eastland Group for amounts paid and held At 31 March 2012 Notes $’000 $’000 $’000 $’000 $’000 $’000 in escrow pending the settlement. The amount and timing of the settlement is uncertain and subject to approval by the Financial assets Maori Land Court. This claim remains unchanged from 2012. Long term receivables LINK 16 - - 486 - 486 486 In June 2012, GDL entered into a binding agreement with a supplier of a long-term contract that will entitle it to receive it to receive $750,000 after three years if it continues to use the services of supplier. The payment of this amount is a key factor Trade and other receivables LINK 13 - - 9,792 - 9,792 9,792 in the pricing of the services provided and GDL does not plan to change the terms of this agreement. Cash and cash equivalents LINK 12 739 - - - 739 739 Liabilities Total financial assets 739 - 10,278 - 11,017 11,017 Upon achieving of Effective Date as specified in the Project Development Agreement (PDA) for the Te Ahi O Maui (TAOM) geothermal project administration and scholarship fee obligations will commence as set out in the PDA. These fees total Financial liabilities $975,000 payable to the minority partners in the TAOM partnership for a period of approximately three and a half years Derivative financial instruments LINK 29 - (6,568) - - (6,568) (6,568) from the Effective Date. The payment of fees by TAOM will rely on Eastland Generation Limited funding these obligations. Under clause 16 of the Participation agreement with IDG there is an obligation to cover an NZ based consulting costs Loans and borrowings LINK 24 - - - (100,500) (100,500) (100,500) regarding the project. Payables and accruals LINK 22 - - - (9,498) (9,498) (9,498) Employee entitlements LINK 23 - - - (1,714) (1,714) (1,714) Capital notes LINK 25 - - - (30,000) (30,000) (30,000) Total financial liabilities - (6,568) - (141,712) (148,280) (148,280)

Total net financial assets (liabilities) 739 (6,568) 10,278 (141,712) (137,263) (137,263)

92 Eastland Group Annual Report 2013 Eastland Group Annual Report 2013 93 Notes to the Financial Statements (continued) Notes to the Financial Statements (continued) For the year ended 31 March 2013 For the year ended 31 March 2013

29 FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS (CONTINUED) 29 FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS (CONTINUED) (a) Financial assets and liabilities (continued) (b) Fair value measurements recognised in the Statement of Financial Position PARENT The following methods and assumptions were used to estimate the carrying amount and fair value if each Other asset class of financial instrument carried at fair value. Where financial instruments are measured at fair value Cash Loans liabilities at Total they have been classified at the following levels. and cash Cash-flow and amortised carrying Fair Level 1: Quoted prices (unadjusted) in active markets for assets or liabilities; or equivalents hedges receivables cost amount value Level 2  Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, At 31 March 2013 Notes $’000 $’000 $’000 $’000 $’000 $’000 either directly (prices) or (derived from prices): or Financial assets Level 3 Inputs for the asset and liability that are not based on observable market data Long term receivables LINK 16 - - 486 - 486 486 (unobservable inputs). Trade and other receivables LINK 13 - - 232 - 232 232 Total financial assets - - 718 - 718 718 The valuation of derivative financial instruments are based on level 2 fair value hierarchy, and were calculated using valuation models applying observable market data. Financial liabilities

Cash and cash equivalents LINK 12 (2,659) - - - (2,659) (2,659) Derivative instruments Derivative financial instruments LINK 29 - (6,174) - - (6,174) (6,174) The total carrying amount of derivative instruments is the same as the fair value and includes interest accrued. Loans and borrowings LINK 24 - - - (93,000) (93,000) (93,000) The calculation of fair value for each financial instrument for either measurement or disclosure purposes are explained below. In each case, interest accrued is included separately in the statement of financial position Payables and accruals LINK 22 - - - (1,466) (1,466) (1,466) either in receivables and prepayments for interest payable. Related party payables LINK 30 - - - (2,351) (2,351) (2,351) Employee entitlements LINK 23 - - - (506) (506) (506) Loans and receivables, trade payables and other creditors, cash and cash equivalents Capital notes LINK 25 - - - (30,000) (30,000) (30,000) and short term deposits. Total financial liabilities (2,659) (6,174) - (127,323) (136,156) (136,156) The total carrying amounts of these items is equivalents to their fair value. Loans include the principal and interest accrued. Bank overdrafts are set-off against cash balances pursuant to any right of set-off. Total net financial assets/(liabilities) (2,659) (6,174) 718 (127,323) (135,438) (135,438) Receivables are net of doubtful debts provided.

PARENT Bank loans, working capital loans and floating rate notes Other The total carrying amount includes the principal, interest accrued and unamortised costs. Cash Loans liabilities at Total and cash Cash-flow and amortised carrying Fair equivalents hedges receivables cost amount value Capital notes At 31 March 2012 Notes $’000 $’000 $’000 $’000 $’000 $’000 The total carrying amount includes the principal, interest accrued and unamortised costs.

Financial assets

Long term receivables LINK 16 - - 486 - 486 486 Related party receivables LINK 30 - - 7,401 - 7,401 7,401 Trade and other receivables LINK 13 - - 439 - 439 439 Total financial assets - - 8,326 - 8,326 8,326

Financial liabilities Cash and cash equivalents LINK 12 (1,887) - - - (1,887) (1,887) Derivative financial instruments LINK 29 - (6,568) - - (6,568) (6,568) Loans and borrowings LINK 24 - - - (100,500) (100,500) (100,500) Payables and accruals LINK 22 - - - (1,472) (1,472) (1,472) Employee entitlements LINK 23 - - - (442) (442) (442) Capital notes LINK 25 - - - (30,000) (30,000) (30,000) Total financial liabilities (1,887) (6,568) - (132,414) (140,869) (140,869)

Total net financial assets/(liabilities) (1,887) (6,568) 8,326 (132,414) (132,543) (132,543)

Estimation of fair values The methods used in determining the fair values of the financial instruments are discussed in note 4.

94 Eastland Group Annual Report 2013 Eastland Group Annual Report 2013 95 Notes to the Financial Statements (continued) Notes to the Financial Statements (continued) For the year ended 31 March 2013 For the year ended 31 March 2013

29 FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS (CONTINUED) (c) Interest rate risk 29 FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS (CONTINUED) Eastland Group actively manages interest rate exposures in accordance with its treasury policy. In this respect, (d) Liquidity risk (continued) at least fifty percent of all debt must be at fixed interest rates or effectively fixed using interest rate swaps, forward rate agreements, options and other derivative instruments. The main objectives are to minimise the Maturity analysis cost of total debt, control variations in the interest expense of the debt portfolio from year to year and to match GROUP where practicable the interest rate risk profile of debt with the risk profile of Eastland Group’s assets. The <6 months 6-12 months 1-3 years 3-5 years >5 years Total treasury policy sets parameters for managing the interest rate risk profile. The parameters depend upon the At 31 March 2013 Notes $’000 $’000 $’000 $’000 $’000 $’000 Reserve Bank of New Zealand continuing to implement monetary policy through adjustments to the official Financial assets cash rate. Long term receivables LINK 16 - - 486 - - 486 Trade and other receivables LINK 13 7,524 - - - - 7,524 Eastland Group enters into interest rate swaps, collars and caps to hedge its exposures to changes in the floating interest rates on loans. Eastland Group has elected to apply cash-flow hedging to 17 interest rate Cash and cash equivalents LINK 12 4,123 - - - - 4,123 swaps, collars and caps on external loans totalling $70 million (2012: $70 million) in compliance with NZ IAS 39 Total financial assets 11,647 - 486 - - 12,133 ($65 million of these have start dates ranging from 15/07/2013 to 30/06/2016).

Financial liabilities Interest rate swaps, collars and caps are between 24 and 69 months and swap interest on a floating rate for Derivative financial instruments LINK 29 (138) (36) (2,791) (1,457) (1,752) (6,174) fixed interest of between 3.40% and 7.15% (2012: 4.17% and 8.07%). The interest rate swaps, collars and caps LINK settle on a quarterly basis. The last cash-flow hedge swap matures on 30 June 2020. Bank borrowings: long term 24 - - (93,000) - - (93,000) Payables and accruals LINK 22 (7,945) - - - - (7,945) LINK The interest rate swaps, collars and caps that have been designated as cash-flow hedges affect profit and loss Employee entitlements 23 (1,490) - - - - (1,490) at the same time as the underlying interest expense is recognised on the retrospective borrowings (see note Capital notes LINK 25 - - - (30,000) - (30,000) 22). Any ineffective portion of cash-flow hedges is removed from equity and recognised immediately in the Total financial liabilities (9,573) (36) (95,791) (31,457) (1,752) (138,609) Statement of Comprehensive Income (2012: Nil). The hedge relationships are expected to be highly effective over the life of the swaps. Liquidity gap 2,074 (36) (95,305) (31,457) (1,752) (126,476)

GROUP AND PARENT 2013 GROUP AND PARENT 2012 Notional Amount Notional Amount GROUP $’000 $’000 <6 months 6-12 months 1-3 years 3-5 years >5 years Total Interest Rate Swaps (Floating to Fixed) At 31 March 2012 Notes $’000 $’000 $’000 $’000 $’000 $’000 Maturing in less than 1 year 15,000 20,000 Financial assets Maturing between 1 and 2 years 50,000 30,000 Long term receivables LINK 16 - - 486 - - 486 Maturing between 2 and 5 years 45,000 65,000 Trade and other receivables LINK 13 9,792 - - - - 9,792 Maturing after 5 years 25,000 30,000 Cash and cash equivalents LINK 12 739 - - - - 739 135,000 145,000 Total financial assets 10,531 - 486 - - 11,017

(d) Liquidity risk Financial liabilities Liquidity risk is the risk that Eastland Group will not be able to meet its financial obligations as they fall due. Derivative financial instruments LINK 29 - (614) (4,105) (1,024) (825) (6,568) Eastland Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have Loans and borrowings LINK 24 - - (3,500) (97,000) - (100,500) sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to Eastland Group’s reputation. Payables and accruals LINK 22 (9,498) - - - - (9,498) Eastland Group’s cash management function is managed at Group level with all cash transactions and funding Employee entitlements LINK 23 (1,714) - - - - (1,714) taking place as part of Eastland Group’s treasury function. Eastland Group Limited has sufficient funding and Capital notes LINK 25 - - - (30,000) - (30,000) banking facilities available to meet the liquidity requirements of Eastland Group. For details of the funding and Total financial liabilities (11,212) (614) (7,605) (128,024) (825) (148,280) banking facilities arranged by Eastland Group Limited (Parent), please refer to note 22. Eastland Group has entered into interest rate swaps, caps and collars to hedge its exposure to variability in interest rate payments on these borrowings. This is discussed further below. Liquidity gap (681) (614) (7,119) (128,024) (825) (137,263)

96 Eastland Group Annual Report 2013 Eastland Group Annual Report 2013 97 Notes to the Financial Statements (continued) Notes to the Financial Statements (continued) For the year ended 31 March 2013 For the year ended 31 March 2013

29 FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS (CONTINUED) 29 FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS (CONTINUED) (d) Liquidity risk (continued) (e) Credit risk Credit risk is the risk of financial loss to Eastland Group if a customer or counterparty to a financial instrument Maturity analysis fails to meet its contractual obligations, and arises principally from the cash and cash equivalents, trade PARENT receivables and related party balances. <6 months 6-12 months 1-3 years 3-5 years >5 years Total The treasury function of Eastland Group is provided to all the subsidiary companies. Credit risk exposure in At 31 March 2013 Notes $’000 $’000 $’000 $’000 $’000 $’000 relation to the subsidiaries is not considered to be significant, and no specific risk management policies have Financial assets been put in place in relation to inter-group balances. The majority of the parent company’s receivables are with subsidiaries for the year ended 31 March 2013. Long term receivables LINK 16 - - 486 - - 486 Credit risk in relation to customers is spread across Eastland Group with the largest customers by $ value Trade and other receivables LINK 13 232 - - - - 232 being in the energy and logistics sectors. The retailers are of good credit standing and management believes Total financial assets 232 - 486 - - 718 that Eastland Group is not exposed to any undue risk, which is supported by past history of payment by these customers. The credit risk in relation to the remaining trade receivables is not considered to be significant. Financial liabilities There are no financial assets that have been pledged as collateral for liabilities or contingent liabilities.

Cash and cash equivalents LINK 12 (2,659) - - - - (2,659) Eastland Group recognises impairment losses on trade and other receivables that are believed to be irrecoverable. Specific impairment losses are made for individually significant exposures that are known at year Derivative financial instruments LINK 29 (138) (36) (2,791) (1,457) (1,752) (6,174) end. The impairment loss allowance at 31 March 2013 was $22k (2012: $30k). Actual bad debts written off in Loans and borrowings LINK 24 - - (93,000) - - (93,000) the Statement of Comprehensive Income were $32k (2012: $22k )and there was no adjustment to the specific Payables and accruals LINK 22 (1,466) - - - - (1,466) allowance. A collective impairment loss component is established for groups of similar receivables in respect Related party payables LINK 30 (2,351) - - - - (2,351) of losses that have been incurred but not yet identified. The collective loss allowance is determined based on historical data of payment statistics for similar financial assets. Employee entitlements LINK 23 (506) - - - - (506)

Capital notes LINK 25 - - - (30,000) - (30,000) Maturity profile Total financial liabilities (7,120) (36) (95,791) (31,457) (1,752) (136,156) GROUP Current 60 days 90 days 180 days >1 year Total Liquidity gap (6,888) (36) (95,305) (31,457) (1,752) (135,438) At 31 March 2013 $’000 $’000 $’000 $’000 $’000 $’000 Past due, but not impaired Trade and other receivables PARENT - Trade receivables 6,577 1,130 119 106 207 8,139 <6 months 6-12 months 1-3 years 3-5 years >5 years Total Total past due, but not impaired At 31 March 2012 Notes $’000 $’000 $’000 $’000 $’000 $’000 financial assets 6,577 1,130 119 106 207 8,139 Financial assets

Long term receivables LINK 16 - - 486 - - 486 Impaired Related party receivables LINK 30 7,401 - - - - 7,401 Trade and other receivables Trade and other receivables LINK 13 439 - - - - 439 - Trade receivables - - - 22 - 22 Total financial assets 7,840 - 486 - - 8,326 Total impaired financial assets - - - 22 - 22 The above receivables are determined to be impaired due to the nature of the debtor and the lack of Financial liabilities payment to date. Cash and cash equivalents LINK 12 (1,887) - - - - (1,887) GROUP Derivative financial instruments LINK 29 - (614) (4,105) (1,024) (825) (6,568) Current 60 days 90 days 180 days >1 year Total Loans and borrowings LINK 24 - - (3,500) (97,000) - (100,500) At 31 March 2012 $’000 $’000 $’000 $’000 $’000 $’000 Past due, but not impaired Payables and accruals LINK 22 (1,472) - - - - (1,472) Trade and other receivables Employee entitlements LINK 23 (442) - - - - (442) - Trade receivables 6,136 806 137 228 - 7,307 Capital notes LINK 25 - - - (30,000) - (30,000) Total financial liabilities (3,801) (614) (7,605) (128,024) (825) (140,869) Total past due, but not impaired financial assets 6,136 806 137 228 - 7,307

Liquidity gap 4,039 (614) (7,119) (128,024) (825) (132,543) Impaired Trade and other receivables - Trade receivables - - - 30 - 30 Total impaired financial assets - - - 30 - 30 The above receivables are determined to be impaired due to the nature of the debtor and the lack of payment to date. The parent company has not recognised any impairment on it’s financial assets (2012: $nil). The 2012 comparative has been updated to include unbilled revenue for Eastland Network Limited, and included within the past due but not impaired financial assets is continuing operations and discounted operations. 98 Eastland Group Annual Report 2013 Eastland Group Annual Report 2013 99 Notes to the Financial Statements (continued) Notes to the Financial Statements (continued) For the year ended 31 March 2013 For the year ended 31 March 2013

29 FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS (CONTINUED) 29 FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS (CONTINUED) (f) Market risk (h) Hedge accounting and sensitivity analysis (continued) Market risk is the risk that changes in market prices, such as interest rates will affect Eastland Group’s income Forward starting interest rate swaps and collars hedging the forecasted floating rate debt are also hedge or the value of its holdings of financial instruments. The objective of market risk management is to manage accounted and treated as cash flow hedges and hence any changes in interest rates would have no material market risk exposures within acceptable parameters, while optimising the return. Those risks include: impact on profits as changes in the fair value of these swaps are taken through comprehensive income where (i) Cash Flow interest rate risk the hedge is an effective hedge. The fair value of these interest rate swaps and collars is a $2.8 million loss (2012: $2.6 million loss). A fall of 1% in interest rates would result in a loss in other comprehensive income Eastland Group’s main interest rate risk exposure arises on external borrowings (see note 24). of $2.0 million (2012: $2.2 million) whereas an increase of 1% in interest rates would result in a gain in other All borrowings are at variable interest rates, which expose Eastland Group to cash flow interest rate risk. comprehensive income of $1.8 million (2012: $2.0 million). Eastland Group adopts a policy of ensuring that a portion of its exposure to changes in interest rates on borrowings is on a fixed rate basis. This is achieved by entering into interest rate swaps, caps and collars. For further details on interest rate swaps, caps and collars refer to note 29 (a). Eastland Group is exposed to interest rate risks on that portion of external loans not swapped to fixed 30 RELATED PARTIES rates, gains or losses arising from the differences between variable rates and fixed rates on the swap (a) Parent and ultimate controlling party instruments in place, and interest payable on the loans and capital notes. At balance date, an increase Eastland Group Limited is fully owned by Eastland Community Trust. Payments were made during the year of of 100 basis points on borrowings would result in a decrease in profit before tax of $230,000 (2012: $2.6 million of interest on Capital notes of $30 million, and dividends paid of $4.6 million. $505,000). A decrease of 100 basis points on borrowings would result in an increase in profit before tax of $230,000 (2012: $505,000). (b) Key management personnel compensation (ii) Foreign exchange rate risk Key management personnel compensation comprises of: Eastland Group is exposed to foreign currency exchange rate risk primarily against the US dollar. Group Parent Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities 2013 2012 2013 2012 denominated in a currency that is not the entity’s functional currency. Management has set up a policy that $’000 $’000 $’000 $’000 requires each entity in the Eastland Group to manage its own foreign exchange risk against its functional currency. At balance date, an decrease of 10 percent of the NZ dollar against the US dollar would result in a decrease in profit before tax of $331,000 (2012: $262,000). A increase of 10 percent would result in an Short term employee benefits 1,616 1,586 833 808 increase in profit before tax of $331,000 (2012: $262,000). Kiwisaver and other contributions 120 78 120 69 (iii) Price risk Termination benefits 145 - 145 - Eastland Group is exposed to price risk on bank facilities when they mature and capital notes on their Total key management personnel compensation 1,881 1,664 1,098 877 election date if the capital notes are not redeemed for cash or converted to ordinary shares. The price

for new bank facilities and capital notes is determined when they are refinanced or reissued and reflects market pricing at that time. At balance date, an increase of 25 basis points on bank facility fees would (c) Directors’ fees result in a decrease in profit before tax of $312,000 (2012: $312,000). A decrease of 100 basis points on Directors’ fees are paid by Eastland Group Limited to the Directors, as the Directors of the Group. Total fees bank facility fees would result in an increase in profit before tax of $312,000 (2012: $312,000). paid were $269,733 (2012: $251,666). There are no separate fees paid in respect of the subsidiaries.

(g) Capital management J Clarke $38,000 The Director’s policy is to maintain a strong capital base so as to maintain investor, creditor and market J Rae $40,000 confidence and to sustain future development of the business. The Directors monitors the return on capital on N Cull $70,400 Chairman a regular basis. This involves the management of reserves and issued capital. The Directors also monitors the R Taylor $42,000 Chairman of audit and finance committee level of dividends to ordinary shareholders. M Glover $41,333 The Directors seeks to maintain a balance between the higher returns that might be possible with higher levels A Blackburn $38,000 of borrowings and the advantages and security afforded by a sound capital position. There were no changes in Eastland Group’s approach to capital management during the current or prior year. Eastland Group is not subject to externally imposed capital requirements. Mr N J P Cull gave general notice that he is a director and/or officer of the following companies and will therefore be interested in all transactions between any of them and Eastland Group: Msc Consulting Group Limited (h) Hedge accounting and sensitivity analysis Eastland Port Limited The sensitivity analysis has been determined based on the exposure to interest rates and foreign exchange rates for both derivatives and non-derivative instruments at balance date. It is assumed that the amount of Gisborne Airport Limited the liability at balance date was outstanding for the whole year. A one percent increase or decrease is used Eastland Network Limited for interest rates and these changes represent management’s current assessment of the reasonably possible Eastland Group Limited change over a year. Stonewood Homes West Auckland Limited (Advisor) Interest rate swaps and collars hedging the floating rate debt are hedge accounted and treated as cash flow Bike Nz Inc (Advisor) hedges and hence any changes in interest rates would have no material impact on profits as changes in the fair value of these swaps and collars are taken through other comprehensive income where the hedge is an effective hedge. The fair value of these interest rate swaps is a $3.4 million loss (2012: $4.0 million loss). A fall of 1% in interest rates would result in a loss in other comprehensive income of $0.9 million (2012: $1.1 million) whereas an increase of 1% in interest rates would result in a gain in other comprehensive income of $0.9 million (2012: $1.1 million).

100 Eastland Group Annual Report 2013 Eastland Group Annual Report 2013 101 Notes to the Financial Statements (continued) Notes to the Financial Statements (continued) For the year ended 31 March 2013 For the year ended 31 March 2013

30 RELATED PARTIES (CONTINUED) 30 RELATED PARTIES (CONTINUED) (c) Directors’ fees (continued) (c) Directors’ fees (continued) Mr W J Clarke gave general notice that he is a director and/or officer of the following companies and will M J Glover gave general notice that he is a director and/or officer of the following companies and will therefore therefore be interested in all transactions between any of them and Eastland Group: be interested in all transactions between any of them and Eastland Group: International Chardonnay Challenge Limited Gisborne Airport Limited Gisborne Wine Centre Limited Eastland Network Limited Eastland Port Limited Eastland Group Limited Gisborne Airport Limited Cold Storage Nelson Limited Eastland Network Limited Goldpine Group Limited Eastland Group Limited Goldpine Properties Limited Eastwood Hill Trust Board Fruit Solutions Limited Wines of Gisborne Events Limited Rio Dolores (2006) Limited New Zealand Winegrowers Goldpine Industries Limited

Mr R N Taylor gave general notice that he is a director and/or officer of the following companies and will M A Blackburn gave general notice that she is a director and/or officer of the following companies and will therefore be interested in all transactions between any of them and Eastland Group: therefore be interested in all transactions between any of them and Eastland Group: Mckee Nominees Limited Gisborne Airport Limited Miti Partners Limited Eastland Network Limited Icon Textiles Limited Eastland Group Limited Eastland Port Limited Ten Gracie Square Limited Victoria University Of Wellington Auckland Council Property Limited Gisborne Airport Limited Fidelity Life Limited Eastland Network Limited Committee For Auckland Eastland Group Limited Royal District Nursing Service New Zealand Limited Port Taranaki Limited unitec New Zealand Venture Investment Fund Limited & Subsidiaries J M Rae gave general notice that he is a director and/or officer of the following companies and will therefore be Warren And Mahoney interested in all transactions between any of them and Eastland Group: Centre For Clinical Trials And Effective Practice (Ccrep) Eastland Port Limited Forsyth Barr Group Limited Gisborne Airport Limited TSB Bank Eastland Network Limited Eastland Group Limited (d) Chief Executive F J Hawkes & Co Limited Mr M Todd, Group Chief Executive Officer, leases a private hangar and uses the landing services at Gisborne Hawkes Limited Airport. Landing charges and the terms of Mr Todd’s lease are on a commercial arms length basis and identical to those for other hangar occupants and airport users. The annual rental paid for the hangar and Kingyo Foods Limited landing charges is $4,251 plus GST per annum. (2012: $3,537). Mr Todd also uses his own aircraft for Eastland Smart Environmental Limited Group business charging the equivalent to the ruling aero club hire charge for a similar aircraft. Payments Gobble Limited made during the year totalled $3,521 (including GST) (2012: $7,682). NZ Council for Infrastructure Development National Infrastructure Advisory Board (e) Employee related parties Playtime Holdings Limited During the year the following individuals who are related to key personnel of Eastland Group Limited were paid Tepu Limited the following amounts for services provided. Group Parent 2013 2012 2013 2012 $’000 $’000 $’000 $’000

D Murphy 53 43 53 43 J Logan 13 - 13 - B Penny 14 64 14 64 80 107 80 107

102 Eastland Group Annual Report 2013 Eastland Group Annual Report 2013 103 Notes to the Financial Statements (continued) Notes to the Financial Statements (continued) For the year ended 31 March 2013 For the year ended 31 March 2013

30 RELATED PARTIES (CONTINUED) 30 RELATED PARTIES (CONTINUED) (f) Other related party transactions (iii) Eastland Network Limited (continued) Please note all inter-entity transactions have been eliminated on consolidation. During the year Eastland Network Limited made purchases from Eastech Limited totalling $3.0 million Credit risk exposure in relation to the subsidiaries is not considered to be significant, and no specific risk (2012: $2.6 million) and made sales to Eastech Limited of $30,702 (2012: $22,859). Services were provided management policies have been put in place in relation to inter-group balances. There are no guarantees held to Gisborne Airport Limited with a balance owing of $18,514 (2012: $nil). regarding subsidiary balances. The management of all Eastland Group debtors and creditors is carried out by Dividends were paid to the parent company during the year totalling $2.2 million (2012: $3.6 million). Eastland Group Limited (Parent). The balance owing to Eastech Limited at 31 March was $505,646 (2012: $440,664) and receivable from Eastech Limited was $8,224 (2012: $2,093). (i) Gisborne Airport Limited Gisborne Airport Limited is 100% owned by Eastland Group Limited. See note c above regarding (iv) Eastland Holdings 1 Limited directors fees. Eastland Holdings 1 Limited is 100% owned by Eastland Group Limited. The property, plant and Eastland Group Limited (Parent) holds a current account with Gisborne Airport Limited of $683,023 equipment and parts inventory of this business was sold during the year. Refer to note 17 for more detail. payable to Gisborne Airport Limited (2012: $601,354). Eastland Group Limited (Parent) provides the Eastland Group Limited (Parent) provided management services to Eastland Holdings 1 Limited. Fees for management services to the other entities in Eastland Group. Fees for these services amounted to these services amounted to $59,057 (2012: $45,163). $72,068 (2012: $71,558) There are borrowings of $530,418 (2012: $530,418) owing to the parent company. During the year, Eastland Holdings 1 Limited made sales of $376,849 (2012: $304,871) to Eastland Rent is also received from Eastland Investment Properties Limited for a rented property of $14,931 (2012: Holdings 2 Limited. Eastland Holdings 1 Limited has also made purchases of $57,305 (2012: $60,556) $14,931) Rental income was also received from Eastland Port Limited for log storage and bark storage of from Eastland Holdings 2 Limited during the year. $0 (2012: $48,000). At 31 March 2013, there is a current account balance of $1.4 million (2012: $288,846) payable to Services were contracted from Eastech during the year to the value of $0 (2012: $8,586). Services were Eastland Holdings 2 Limited. also provided by Eastland Network Limited of $18,514 (2012: $nil). During the year, Eastland Group Limited (Parent) has received deposits from and made advances to Eastland Holdings 1 Limited via a current account. At 31 March 2013 the balance was $621,735 receivable (ii) Eastland Port Limited from Eastland Holdings 1 Limited (2012: $2.0 million payable). Advances outstanding from Eastland Group Eastland Port Limited is 100% owned by Eastland Group Limited. Limited (Parent) at 31 March 2013 were $0 million (2012: $2.7 million). No interest was paid to the parent company during the year (2012: $Nil). Eastland Group Limited (Parent) provided management services to Eastland Port Limited. Fees for these

services amounted to $1.1 million (2012: $0.9 million). (v) Eastech Limited During the year, Eastland Group Limited (Parent) has managed the payables and receivables of each subsidiary through a current account. At 31 March 2013 the balance was $2.7 million payable to Eastland Eastech Limited is 100% owned by Eastland Group Limited. Port Limited (2012: $0.6 million). Advances outstanding from Eastland Group Limited (Parent) at 31 March Eastland Group Limited (Parent) provides management services to Eastech Limited. Fees for these 2013 were $13.1 million payable to Eastland Group Limited (Parent) (2012: $13.1 million). Interest paid to the services amounted to $85,080 (2012: $89,273). parent company during the year totalled $1.5 million (2012: $1.8 million). During the year, Eastech Limited made purchases of $30,702 (2012: $22,859) from Eastland Network Dividends were paid to the parent company during the year totalling $1.4 million (2012: $840,000). Limited and made sales to Eastland Network Limited of $3.0 million (2012: $2.6 million). The balance owing There was also a receivable balance owing from the Debarker Joint Venture of $58,831 (2012: $12,769) at from Eastland Network Limited was $505,108 (2012: $440,664). 31 March 2013. Charges of $348,675 were passed through to the Debarker Joint Venture during the year Eastech Limited also rents workshop and office space from Eastland Network Limited totalling $34,492 for (2012: $97,188). this financial year (2012: $34,492). Rental charges were paid to Gisborne Airport Limited for log and bark storage of $0 (2012: $48,000). During the year, Eastland Group Limited (Parent) has received deposits from and made advances to Services were contracted from Eastech Limited during the year to the value of $0 (2012: $47,880). Eastech Limited. Interest paid to the parent company during the year totalled $0 (2012: $Nil). During the year, Eastland Group Limited (Parent) has managed some of the payables and receivables of each subsidiary through a current account. At 31 March 2013 the current account balance was $1.3 million (iii) Eastland Network Limited payable to Eastech Limited (2012: $1.4 million). Eastland Network Limited is 100% owned by Eastland Group Limited.

Eastland Group Limited (Parent) provided management services to Eastland Network Limited. Fees for (vi) Eastland Holdings 2 Limited these services amounted to $2.2 million (2012: $2.3 million). Eastland Holdings 2 Limited is 100% owned by Eastland Group Limited. The property, plant and Eastland Group Limited (Parent) leases office space in Eastland Network Limited’s Carnarvon Street equipment and parts inventory of this business was sold during the year. Refer to note 17 for more detail. premises for which an annual rent of $80,088 is charged (2012: $80,088). Eastech Limited also leases office space from Eastland Network Limited for which an annual rent of $34,492 is charged (2012: Eastland Group Limited (Parent) provides management services to Eastland Holdings 2 Limited. Fees for $34,492). these services amounted to $0 (2012: $Nil). During the year, Eastland Group Limited (Parent) has managed the payables and receivables of each During the year, Eastland Holdings 2 Limited made purchases of $57,306 (2012: $304,872) from Eastland subsidiary through a current account. At 31 March 2013 the balance was $10.4 million payable to Eastland Holdings 1 Limited and made sales to Eastland Holdings 1 Limited of $376,849 (2012: $60,556). Network Limited (2012: $9.1 million). Advances outstanding from Eastland Group Limited (Parent) at 31 At 31 March 2013, there is a current account balance of $1.4 million receivable from Eastland Holdings 1 March 2013 were $47.8 million (2012: $47.8 million). Interest paid to the parent company during the year Limited (2012: $288,846). totalled $5.0 million (2012: $5.3 million). During the year, Eastland Group Limited (Parent) has made advances to Eastland Holdings 2 Limited. During the year maintenance charges were oncharged to Eastland Generation Limited of $242,831 Advances outstanding at 31 March 2013 were $2.0 million (2012: $2.0 million). No interest was paid to the (2012: $264,804), avoided transmission charges received of $2.6 million (2012: $2.8 million) and avoided parent company during the year (2012: $Nil). distribution charges received of $0.4 million (2012: $nil). Rental income was paid to Eastland Investment Properties Limited of $50,000 (2012: $50,000). During the year, Eastland Group Limited (Parent) has received deposits from and made advances to Eastland Holdings 2 Limited. The balance at 31 March 2013 was $4.0 million receivable from Eastland Holdings 2 Limited (2012: $2.6 million payable).

104 Eastland Group Annual Report 2013 Eastland Group Annual Report 2013 105 Notes to the Financial Statements (continued) Notes to the Financial Statements (continued) For the year ended 31 March 2013 For the year ended 31 March 2013

30 RELATED PARTIES (CONTINUED) 30 RELATED PARTIES (CONTINUED) (vii) Eastland Generation Limited (xi) Eastland Port Debarking Limited Eastland Generation Limited is 100% owned by Eastland Group Limited. Eastland Port Debarking Limited is 100% owned by Eastland Port Limited. Eastland Group Limited (Parent) provides management services to Eastland Generation Limited. Fees for Eastland Group Limited (Parent) provides management services to Eastland Port Debarking Limited. Fees these services amounted to $197,808 (2012: $nil). A dividend was declared and paid to Eastland Group for these services amounted to $60,328 (2012: $33,727). There was also a payable balance owing to Limited $1.0 million (2012: $nil). Eastland Port Limited of $62,537 (2012: $12,769) at 31 March 2013 and a balance owing to Eastland Group Eastland Generation Limited has an advance to Geothermal Developments Limited. Advances outstanding Limited (Parent) of $18,366 (2012: $4,492). at 31 March 2013 were $24.3 million (2012: $24.3 million). There was no interest paid on these loans during During the year, Eastland Group Limited (Parent) has managed the payables and receivables of each the year (2012: nil). subsidiary through a current account. At 31 March 2013, the current account balance was $260,269 Advances outstanding from Eastland Group Limited (Parent) at 31 March 2013 were $42.2 million payable to Eastland Port Debarking Limited (2012: $114,942). (2012: $42.2 million). Interest paid on these loans during the year totalled $2.7 million (2012: $1.3 million). Charges for operating costs and management services were passed on from Eastland Port Limited and During the year, Eastland Group Limited (Parent) has managed the payables and receivables of each Eastland Group Limited (Parent) during the year to the value of $348,675 and $173,242 respectively (2012: subsidiary through a current account. At 31 March 2013, the current account balance was $6.9 million $97,188 and $33,727 respectively). payable to Eastland Group Limited (Parent) (2012: $4.3 million). Management service fees were charge to the Limited Partnership Te Ahi O Maui during the year to the (xii) Te Ahi O Maui (TAOM) value of $230,000 (2012: $172,500). Te Ahi O Maui is a limited partnership that Eastland Generation is a partner in holding 80% of the Eastland Generation Limited has made capital payments to IDG regarding development rights in Te partnership units. Ahi O Maui of $0 (2012: $977,060) during the year which complete the commitments within the project Charges for management services were passed through to the Te Ahi O Maui Limited Partnership during development agreement. the year from Eastland Generation Limited totalling $230,000 (2012: $172,500). A management fee of Maintenance charges were paid to Eastland Network Limited of $242,831 (2012: $264,804). Avoided $120,000 was also charged from Eastland Group Limited (Parent) during the year (2012: $120,000). transmission charges were received from Eastland Network Limited of $2.6 million (2012: $2.8 million).

Avoided distribution charges were received from Eastland Network Limited of $0.4 million (2012: $0). (xiii) Innovative Developments Group (IDG) IDG is also a partner in the Te Ahi O Maui limited partnership holding 10% of the partnership units. (viii) Geothermal Developments Limited Eastland Group Limited (Parent) has made a loan advance of $2.0 million (USD $1.7 million) to IDG, the Geothermal Developments Limited is 100% owned by Eastland Generation Limited. carrying amount of this loan is $486,000. Refer to Note 16 for more detail. This loan is interest free. This During prior years, Eastland Generation Limited has made advances to Geothermal Developments loan is associated with a contract option to investment in further geothermal power station development. Limited. Advances outstanding at 31 March 2013 were $24.3 million (2012: $24.3 million). Interest paid

on these loans during the year totalled $0 (2012: $1.8 million). During the year, Eastland Group Limited (Parent) has managed the payables and receivables of each subsidiary through a current account. (xiv) East Coast Farms Limited (ECFL) At 31 March 2013, the current account balance was $12.2 million payable to Geothermal Developments ECFL is the partner in the Debarking Joint Venture with Eastland Port Debarking Limited. There have been Limited (2012: $5.6 million). no transactions between the Group entities and this party in this financial year. Eastland Group Limited (Parent) provides management services to Geothermal Developments Limited. Fees for these services amounted to $156,647 (2012: $154,591). 31 SUBSEQUENT EVENTS Services were contracted from Eastech during the year to the value of $0 (2012: $6,191). An agreement for sale and purchase with Port Gisborne Limited provided for a transfer of certain lands between Eastland Port Limited and the Gisborne District Council following completion of the new port access road. Under (ix) Eastland Investment Properties Limited the terms of this agreement, the Gisborne District Council would receive the land on which the new road is Eastland Investment Properties Limited is 100% owned by Eastland Group Limited. constructed, plus areas of reserve and carpark and in return the Group will receive stopped road and other land at Dunstan Road. During the year, Eastland Group Limited (Parent) has managed the payables and receivables of each subsidiary through a current account. At 31 March 2013, the current account balance was $18.0 million On 29 April 2013 the landswap between Gisborne District Council and Eastland Port Limited was settled. The final receivable from Eastland Investment Properties Limited (2012: $19.0 million receivable). Interest paid on subdivision took place in January 2013. The final agreed on amount was reduced slightly regarding the foreshore these loans during the year totalled $240,000 (2012: $330,000). and seabed changes and their impact. The final transaction of land for land and cash has resulted in a net positive transaction for the Group. Eastland Group Limited (Parent) provides management services to Eastland Investment Properties Limited. Fees for these services amounted to $148,244 (2012: $148,245). A management fee was charged to Inner Harbour Marina Limited of $5,000 (2012: $nil). Rental income was charged to Eastland Holdings 2 Limited during the year to the value of $50,000 (2012: $50,000). Rent was charged by Gisborne Airport Limited during the year to the value of $14,931 (2012: $14,931).

(x) Inner Harbour Marina Limited Inner Harbour Marina Limited is 100% owned by Eastland Investment Properties Limited. During the year, Eastland Group Limited (Parent) has managed the payables and receivables of each subsidiary through a current account. At 31 March 2013, the current account balance was $225,729 payable to Inner Harbour Marina Limited (2012: $218,664). A management fee was paid to Eastland Investment Properties Limited of $5,000 (2012: $nil).

106 Eastland Group Annual Report 2013 Eastland Group Annual Report 2013 107 EASTLAND GROUP LIMITED

Board of Directors Nelson Cull (Chairman) COMPANY INFORMATION Anne Blackburn John Clarke Michael Glover FOR THE YEAR ENDED John Rae Roger Taylor 31 MARCH 2013 Chief Executive Matt Todd

Chief Financial Officer Aaron Snodgrass

Corporate Executive Team Christopher Breen Andrew Gaddum Ben Gibson Gavin Murphy Brent Stewart

Auditors Deloitte

Lawyers Chapman Tripp

Bankers ANZ Bank New Zealand Ltd Bank of New Zealand Ltd Westpac Banking Corporation

Registered office 172 Carnarvon St, PO Box 1048 Gisborne, New Zealand T: 06 869 0700 F: 06 867 8563 E: [email protected] W: www.Eastland.co.nz

108 Eastland Group Annual Report 2013 Eastland Group Annual Report 2013 109 www.eastland.co.nz