2 0 0 8 A n n u A l R e p o R t

July 2007 Blessing of the Fleet at Wakefield Quay, commemorating those lost at sea

and marking the importance of the fishing industry to the region.

Modifications completed to tug WH Parr to take a cantilevered gangway,

plus new engine room fans.

AuGuST 2007 port nelson became the first new Zealand port to achieve certification

under the ISo 14001 environmental Management System requirements.

SEPTEMBER 2007 new communications room opened at the Seafarers’ Centre on McGlashen

Quay, with computers and phones for ships’ crew to phone home.

OCTOBER 2007 toyo Fuji Shipping Company’s Trans Future 5 left port with a record load of

9500 cubic metres of nelson pine Industries’ Medium Density Fibreboard.

the Vasiliy Burkhanov made its first port call - delivering steel for Swire

Shipping ltd on the trans-tasman run.

NOVEMBER 2007 paving of new Container Yard turning area completed.

Annual nelson port and transport Industry Charity Golf tournament raised

over $9,000 for the Special olympics.

noise Committee formed after public meeting, to handle issues relating to

the nCC noise Variation to the proposed Resource Management plan.

DECEMBER 2007 port nelson Santa parade attracted a crowd of 10,000 to city centre.

paul le Gros joined the port nelson Board as a new director, replacing

retiring Mayor paul Matheson.

FEBRuARy 2008 the world’s second all-suite, all-balcony ship, Seven Seas Voyager, berthed

for a day, with 600 passengers.

MARCH 2008 pre-noting cargo systems installed, allowing customers paperless cargo

check in.

the new coastal shipping vessel Anatoki went into service, based in nelson,

delivering break bulk cargo to regional ports.

APRIl 2008 the semi-submersible heavy transportation vessel Blue Marlin berthed at

Kingsford Quay for demobilisation after unloading the Maari Wellhead

platform in Admiralty Bay.

MAy 2008 port nelson Blokes Day out triathlon raced in the Maitai Valley.

EnSco 56 drilling platform arrived from taranaki for major refit.

the first of the new vessels employed on the Southern Star express

Service, Maersk Fuji, made her maiden trip to nelson.

the pacific Basin owned vessel, Mount owen, made her first call for a cargo

of nelson Forests’ logs.

JuNE 2008 Installation of foam fire protection system on Main Wharf north.

MSc Frisia made her first call, increasing the MSC service from fortnightly

to a weekly service. 2

H I G H l I G H T S F R O M T H E 2 0 0 7 - 2 0 0 8 F I N A N C I A l y E A R

“As shipping lines look for greater efficiencies, service rationalisation is inevitable

to some degree, but we firmly believe that nelson will continue to be well served

by a mix of direct call and feeder vessel operations.”

Martin Byrne, chief Executive , Port nelson Limited

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

Chief executive’s Report ...............................................................................................................................................................6

port nelson in the Community ..................................................................................................................................................8

environmental Matters ............................................................................................................................................................... 10

port people ..................................................................................................................................................................................... 14

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

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

Financial Highlights ..................................................................................................................................................................... 17

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

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

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

Income Statement ....................................................................................................................................................................... 22

Statement of Movements in equity ....................................................................................................................................... 22

Balance Sheet ................................................................................................................................................................................ 23

Statement of Cash Flows ........................................................................................................................................................... 24

Summary of Significant Accounting policies ..................................................................................................................... 26

notes to the Accounts ................................................................................................................................................................ 29

Directory .......................................................................................................................................................................................... 39

3

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

D I R E C T O R S ’ R E P O R T

As Chairman of port nelson limited it is again my pleasure to report a

positive result for the company over the last twelve months.

the net surplus after taxation and including unrealised investment

property gains was $7.5 million, on revenues that were some $4.7

million ahead of budget, with the associated operational expenses

some $1.5 million higher than budget.

the main factors behind the increased revenue were:

• Slightly higher than anticipated cargo volumes, particularly in the

areas of general cargo and fuel

• A further move towards greater containerisation of cargo previously

carried in break bulk form, such as sawn timber

• Increased revenue through vessel visits such as the Blue Marlin and

EnSco 56 associated with the offshore oil industry

• A continued increase in property values that flowed through into

higher rental income.

the main areas of increase in operating expenses related to:

• Plant hire and wages – offset by increased activity

• Electricity charges – also offset by increased activity

• Higher fuel costs

• Propeller damage to the tug Huria Matenga

• Repairs to Liebherr crane jibs.

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

Cargo volumes were once again a record for the company, with 2.677

million tonnes being handled in the previous 12 months, slightly ahead

of the budgeted figure of 2.657 million tonnes.

Fuel, general and bulk cargoes were strong during this period, with

logs and processed forestry products having moved at slightly lower

levels than had been anticipated.

once again, the continued shift of bulk commodities, in particular

processed forestry product, into containers meant yet another record

year in terms of container movements, with 77,734 teu passing through

the port as against 71,815 in 2006/07. When one considers the figure

three years ago was around 57,000 teu, there has certainly been a

significant increase, which has brought with it a number of challenges,

particularly in regards to mobile plant and overall operational space.

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

D E V E l O P M E N T

As in the previous year the major focus for capital expenditure was

the continued replacement programme for pavements within our

operational area, coupled with the purchase of a new Clark omega

toplifter forklift and also some smaller machines for our receiving and

delivery operations. the other major capital expenditure project was

the replacement of a 60 metre section of Main Wharf north adjacent

4

to the 118 metre Main Wharf South area that was rebuilt in 2001. this

project, due for completion in early September, will result in us having

almost a 180 metre section of 100 tonne axle-load wharf, which will

present a far better operational option as a backup berth to Brunt

Quay for container vessels than we currently have available.

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

D I V I D E N D

the net surplus after taxation, including unrealised investment

property gain, resulted in a return on average shareholders’ funds of

6.1% and dividends declared for the year will be $3.8 million.

With the full effect of the 2006 share buy-back now in place in terms

of increased interest payments, up from $1.5 million in 2006 to $3.2

million in the current year, we believe the overall result is one we can

be proud of.

Continued changes in shipping services within new Zealand and

overseas show no signs of abating and in the last 12 months alone

we picked up a new service importing steel ex-Australia and also

two enhanced services from Maersk and MSC, who had both been

servicing the region through a joint trans-tasman service. on the

downside we lost the pIl/MISC direct port calls in June, which was a

disappointment given how long these lines had called at port nelson.

this service loss was a direct result of the move by the lines to larger

vessels in an effort to achieve some economy of scale.

no doubt there are still more changes to come in the next 12 months

and beyond. We continue to push the case for nelson to be considered

as a direct port of call for overseas lines, but understand that there will

continue to be a move towards the use of hubbing or feeder vessels,

whether new Zealand or overseas operated. We believe we are well

positioned to meet these changes as they occur.

I should like to thank the senior management and all staff for their

excellent efforts over the last 12 months.

paul Matheson resigned in october 2007 and we thank him for the

contribution he made to port nelson during his time on the board.

He was replaced by paul le Gros who has already made a valuable

contribution around the board table and we look forward to his input

to the growth of the business in coming years.

to the shareholders and fellow directors, I thank you for your support

and commitment over the past year.

nick patterson

Chairman , port nelson limited.

5

2008 2007 2006 2005 2004Operations trade (Millions of Cargo tonnes) 2.677 2.644 2.522 2.623 2.564Container throughput (teu’s)* 77,734 71,815 61,455 57,144 51,128Vessel Arrivals (over 100Gt) 921 997 1,012 1,178 1,267total Vessel Gt Calling (Millions) 8.3 9.0 8.6 8.4 9.2employees (Fte’s) 137 132 141 143 125

Financial ($ Millions) Revenue** $36.2 $33.0 $29.6 $27.7 $27.6eBItDA *** $17.8 $15.8 $15.3 $12.2 $13.8earnings Before Interest and taxation (eBIt) $13.9 $12.2 $11.6 $9.0 $10.6net Interest expense $3.2 $2.5 $1.5 $1.3 $1.0taxation $3.2 $3.0 $3.1 $2.5 $2.9

2008 2007 2006 2005 2004Financial ($ Millions) ...continued net Surplus After taxation**** $7.5 $6.7 $7.6 $5.2 $6.6Dividends Declared (Millions) $3.8 $3.9 $5.3 $3.3 $9.2Capital expenditure $10.2 $4.0 $2.9 $7.3 $3.2net Interest Bearing Debt $41.0 $42.0 $16.5 $19.0 $16.5total non-current tangible Assets $181.8 $152.3 $149.6 $117.2 $114.2

Shareholder Return Metrics earnings per Share (cents) 29.5 26.5 22.1 16.9 21.3Dividend per Share(cents) 15.0 15.3 17.1 11.0 30.0net Assets per Share $5.29 $4.31 $4.14 $3.15 $3.12equity (%) 71.2% 67.9% 82.1% 80.6% 81.2%Return on Average equity (%) 6.1% 5.6% 6.1% 5.4% 6.6%Return on Average Assets (%) 8.0% 7.7% 8.3% 7.5% 8.9%

* twenty foot equivalent units ** Revenue includes investment property revaluations *** earnings before interest, tax, depreciation and amortisation **** Including investment property revaluation

the financial figures for 2005 and earlier years are not comparable with 2006 to 2008 as the 2006 to 2008 financial information was prepared in accordance with nZ IFRS.

P E R F O R M A N C E R E V I E w - P O R T N E l S O N G R O u P

C H I E F E x E C u T I V E ’ S R E P O R T

C A R G O

Volumes through port nelson remained steady again, and in fact

slightly exceeded 2006/07 volumes, with a total of 2.677 million tonnes

of cargo having been handled.

log exports were down on last year at around 590,000 tonnes,

although this was a better result than may have been expected around

December, when a combination of over-supply to many markets, a

lack of availability of shipping and the high new Zealand dollar were

creating something of a ‘perfect storm’ for exporters.

Fuel imports were around 40,000 revenue tonnes higher than had

been budgeted, with the import of empty containers increasing once

again on the back of further growth in export volumes moving in

containerised form. In addition to this we also received an unexpected

large import of bulk gypsum for the Holcim cement works in Westport,

adding to the overall tonnage increase for the year.

these cargo increases were offset by lower than anticipated exports

of processed forest products, and also a decrease in overall vehicle

imports - hit to some degree by this year’s change in vehicle emission

standards. Fruit exports, in particular apples, had been expected to

rebound slightly upward from 2007, but unfortunately despite some

optimism in early February for a good crop, fruit size and some quality

issues meant exports did not reach anticipated levels.

Fish volumes were in line with budget at 134,000 revenue tonnes,

despite the overall hoki quota reductions, due partly to the excellent

albacore tuna season this year.

Container numbers continue to surprise us, this year reaching 77,734

up some 8% on the previous 12 months. Behind this is the increase in

forestry products moving in containers into new markets such as the

Middle east, and the increase is also driven by a shortage in charter

shipping availability which has even seen export logs being moved in

containers, albeit in small volumes to date.

S H I P P I N G

Vessel arrivals were once again down on the previous year at 921 as

against 997 in 2006/07, although with recent shipping changes we

would expect that to increase slightly in 2008/09.

In February Swire Shipping made the decision to replace a fortnightly

lyttelton port visit for discharge of Australian steel with a nelson call, to

reduce voyage and vessel transit times. this product is now discharged

in nelson and transported to customers in Christchurch and is a

welcome addition to the services coming through port nelson.

In late May MSC and Maersk decided to cease the joint weekly Butterfly

trans-tasman service they were operating through a number of ports

including nelson, and both lines now operate their own weekly

services. this has resulted in an additional 52 port calls per annum for

our importers and exporters.

the only negative on the shipping side of things in the last 12 months

was the withdrawal of the fortnightly pIl/MISC service in mid June.

this followed the restructuring of their previous two loop - nine vessel

service into a one loop - five vessel operation, using vessels in excess

of 3,000 teu, too large to work through port nelson.

the recent Rockpoint Report on the new Zealand port Industry

commented at some length on the perceived over-investment in

infrastructure in new Zealand ports and the subsequent lack of return

on that investment. that is not a road that pnl has any intention of

travelling down.

A new sight for many residents in the last few months has been the

visit of two large vessels associated with oil industry projects off the

taranaki coast. In April the semi submersible vessel Blue Marlin called

after transporting an oil production platform down from Malaysia and

floating it off in the Marlborough Sounds. then in late May the EnSco

56 drilling platform came into port for a scheduled six week visit for

maintenance and servicing work, with both of these projects bringing

positive benefits for nelson based companies.

S T O R A G E , R E C E I V A l A N D D E l I V E R y

the further growth of containerised shipments continues to place

pressure on our existing operations and working space. We have a

major pavement replacement programme in place to strengthen

our operational areas and this will continue for some time yet. In the

past year we have introduced kiosk technology to our main entrance

gate, enabling the majority of exporters to ‘pre-note’ their cargo

information into our system on-line. this means when the trucking

company delivers their container to the gate they simply key a short

code into the kiosk and go straight through to our vehicle transfer area

for unloading, as against the previous system of all this information

being keyed in by gate staff from a paper docket.

the arrival of the new Swire Steel service in February and the Ballance

urea imports are putting ongoing pressure on our covered storage

areas and a regular turnaround of product is essential to ensure we can

handle these large volumes.

E N V I R O N M E N T A l I S S u E S

the noise variation to the nelson City Council Resource Management

plan was notified in July 2007 and in recent months we have begun

negotiations with a number of property owners over noise mitigation 6

work. the noise liaison Committee, made up of representatives from

residents, port users, the nelson City Council and pnl, is working through

the processes set down under the variation, and we are making all

possible efforts to find solutions that the various parties can live with.

We were pleased to secure ISo 14001 environmental accreditation in

August 2007.

the environment Court hearing into fumigation activities at port

nelson saw a move towards the use of recapture technology, which

will be a first for new Zealand ports. We strongly support progress on

this issue and also look forward to the relevant authorities making such

technology mandatory around the country in the future, rather than

purely in isolated cases such as ours.

the environmental Committee has continued to meet and we again

thank those committee members for their efforts and enthusiasm.

P l A N N I N G F O R T H E F u T u R E

Shipping lines continue to make service changes that alter the

dynamics of our business and we must take that into account with our

infrastructure planning. With this in mind we made the decision earlier

in the year to replace a 60 metre section of Main Wharf north, which

was only eight tonne axle load and around 100 years old. the new 100

tonne axle load structure will link up to the Main Wharf South facility

that was rebuilt in 2001.

this will now give us just under 180 metres of useful wharf space,

and will be ideal as a second berth should Brunt Quay already have a

container vessel working on it.

I would stress that we envisage Brunt Quay continuing to be our

preferred container berth going forward, but when we have to put

vessels on Main Wharf, this new wharf section will give us the ability to

work the vessels more efficiently and hopefully with less noise.

A C k N O w l E D G E M E N T S

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

executive team, our thanks to our Board of Directors for their support

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

have all contributed to another solid performance.

We also continue to appreciate the support of the importers and

exporters of the region and the support of the various shipping lines

that call through port nelson.

Martin Byrne

Chief executive, port nelson limited.7

“This year saw two large oil industry vessels visit the port - as drilling related

activities increase off-shore it is hoped further opportunities for the port will

arise and we look forward to working with local industry to promote what

this region has to offer.”

Martin Byrne, chief Executive, Port nelson Limited

P O R T N E l S O N I N T H E C O M M u N I T y

the vital role that port nelson plays for the region’s export sector is

linked to the well-being of the community and overarched by the

community ownership of the port company.

nelson-tasman is a region with a strong export focus, which means

that a good percentage of the region’s workforce is connected in some

way with the port, whether that be in forestry, seafood, fruit, wine or

imports such as fuel.

Sponsorship is a way that we can put something back into the

community and we are proud to be one of the region’s largest

supporters of sports, arts and community celebrations, contributing

over $150,000 a year to assist events, groups and projects. this

financial year we continued to further develop key partnerships in the

community.

Sports for all - the port nelson Blokes’ Day out is now four years old

and is an established fun multisport event with growing numbers that

endorse its place in the community.

Also in its fourth year, the nelson port and transport Industry Charity

Golf tournament was held in november, attracting a capacity field, and

providing an opportunity for the transport industry and customers to

get together and raise money for this year’s very worthwhile cause, the

nelson Special olympic Squad.

On Parade - we continue as naming rights sponsors of the port nelson

Santa parade and the port nelson Masked parade, which opens the

nelson Arts Festival every year. Drawing crowds in excess of 10,000,

these are nelson’s biggest free community participation events.

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

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

community and arts projects.

In the business community our support for the nelson economy

continues as a key stakeholder in the nelson Regional economic

Development Agency; we are a cornerstone sponsor of the nelson-

tasman Chamber of Commerce and supporter of the nelson Bays

educational Business partnership, with Infrastructure Manager Dick

Carter chairing the nelson engineering Cluster Group.

8

9

“Port nelson has been very generous in providing the building, computers and

significant financial support for the improvements to the Seafarers’ centre.

Ships’ captains tell us this is one of the best facilities they visit worldwide and their

crews really value what we offer.”

Milo coldren, Manager, Seafarers’ Mission

the amenities berth on Wakefield Quay is now home to the nelson

Coast Guard, provided free of charge by port nelson to support this

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

for fishing in this area.

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

Community

outward Bound youth programme

port nelson Santa parade

Richmond Santa parade

port nelson Masked parade

nelson-tasman Rescue Helicopter

School of Music Winter Festival

Motueka Yacht and Cruising Club

Brightwater Food and Wine Festival

port nelson trust

port nelson Mission to Seafarers

Sealord Rescue Centre

Da Vinci exhibition at nelson provincial Museum

Business

tourism nelson tasman

nelson tasman Chamber of Commerce

port nelson Fishermen’s Association

nelson Bays education Business partnership

Marine Farming Conference

Golfing tournaments

Wood processors Association

Sports

tasman Rugby union

nelson Rowing

port nelson Big Bay Bike Ride

Beach Volleyball

port nelson Blokes’ Day out

nelson Sportsperson of the Year

nelson Motor Cycle Racing

Phot

o:n

elso

n M

ail

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

port nelson limited has seen some significant milestones this year in

efforts to be a good neighbour and to operate in a sustainable manner.

the port nelson environmental Consultative Committee, now in its

fourteenth year, held seven meetings over the past 12 months, a reduction

from the usual monthly meetings, as the new noise liaison Committee

has taken over some of the traditional areas of work and discussion.

Subjects dealt with this year included the dredging consent application,

the new Zealand port and Harbour Safety Code, marine bio-security,

the Fumigation Code of practice review, ISo 14001 audit reports and

environmental input into the port nelson 2008 Strategic plan. As in

previous years we extend a grateful thanks to the dedicated and

knowledgeable team of volunteers guiding us in environmental matters.

N O I S E u P D A T E

the variation to the nelson Resource Management plan regarding

port noise was ‘notified with effect’ on July 14 2007. this meant

that new provisions for noise mitigation and management came into

force although the process of hearing public submissions was yet to

be completed. the port noise liaison Committee was formed and

began implementing the requirements for house insulation within the

designated time frames. the lack of certainty on the final provisions has

brought challenges to working in partnership with the community on

implementation. the committee has met four times since December and

the time and energy input from residents’ representatives is appreciated.

ensuring that the required sound reduction is achieved sensitively, and

where possible fitting with existing renovation plans, requires careful

management and good communication. the aim is to complete the

work as soon as possible, but residents may defer the mitigation work to

a time that suits them without any loss of entitlement.

Noise Management Milestones:

october 2007 . . . . . . Contour map and details of insulation

entitlement and timescale sent to 234 noise

affected properties.

november 2007 . . . . public meeting at Auckland point School

nominated representatives for the noise liaison

Committee.

December 2007 . . . .First meeting of noise liaison Committee.

January 2008. . . . . . . Building consultant selected to manage house

noise mitigation.

April 2008. . . . . . . . . . Residents’ newsletter and fact sheet circulated.

May 2008 . . . . . . . . . . noise hearing commissioners viewed cargo

operations at the port.

June 2008. . . . . . . . . . Meetings held with home owners following issue

of acoustic inspection reports.

1 0

In July the Environment committee put the newly revised Port Visual code of Practice into action by helping with planting along a log yard fence. The species selected were members of the ‘coastal Flats Ecosystem’, with the port encouraging use of the specific plant lists provided by nelson city council to bring back nelson’s unique biodiversity. These plants are also adapted to the salty, dry, port climate, provide food for birds and a barrier for dust and noise.

June 2008 (cont) . . . Investigation into container crane spreaders,

incorporating noise reduction system (order

placed July 08).

By year’s end we were about to make individual offers to the eight

most affected properties (one property previously completed, one

property declined offer of insulation, one property owner overseas,

brings the total in this category to 11).

the four day noise hearings in May 2008 and follow-up day in July were

part of the RMA process to determine if the best approach is being

followed to manage port noise. the panel of three commissioners

included national experts in resource management, law and noise.

the detailed discussion will ensure that the house mitigation and noise

management package adopted will be the best solution for the nelson

situation of residential property in close proximity to a working port.

E N E R G y u S E

A detailed level 2 energy Audit of port nelson has been completed.

partly funded by the energy efficiency and Conservation Authority, it

looked at the breakdown of energy use and opportunities for savings.

energy use has been identified as a significant environmental aspect

of the port’s operations. Whilst our electricity supply is certified carbon

neutral, we contribute significantly to demand for energy as one of

new Zealand’s top 300 energy intensive businesses, and contribute

significant Co2

emissions from diesel used by tugs and container

handlers. the audit shows that a ten percent reduction in energy use

is realistic and sets out the best way to meet efficiency and cost saving

measures.

F u M I G A T I O N

Some progress was made this year towards peace of mind for port

workers and protection of the ozone layer from discharges of the toxic,

ozone-depleting gas methyl bromide. In June 2008 the final ruling of

the environment Court hearing into regulation of fumigant use by the

nelson City Council Air plan was received.

the court imposed a new chronic limit to be included in the nelson City

Council’s air quality plan, restricting annual average concentrations of

methyl bromide to 0.0025 mg/m3 or less at the port boundary.

permitted rules came into effect immediately to allow a limited

number of container fumigations without recapture at specified

distances from port boundary. A maximum of 3kgs of fumigant may

be used, staggered venting protocols must be followed and better

information is to be supplied to the port Gatehouse to allow the

activity to be monitored.

All other fumigations are controlled activities and require recapture

technology, with a longer lead-in time for this part of the ruling. A

resource consent showing how compliance will be achieved must be

lodged by December 2008.

A u S T R A l I A N l E S S O N S

environmental officer Frances Woodhead visited the ports of Brisbane

and townsville as part of a workshop on environmental Management

in ports. Highlights were tours of state-of-the-art ‘green’ buildings,

water saving technology, a specially constructed bird roost and holistic

management techniques for storm water pollution prevention.

1 1

“Emsol is glad to help PnL to achieve its energy efficiency targets. This year we

completed an extensive energy audit and advised on management of electricity

and diesel use. PnL has demonstrated good energy savings in recent years and

the audit provides a clear ‘road map’ of key energy saving measures, in a rolling

programme of management and technical actions.”

Erin Roughton, Managing Director, Emsol

P O R T N E l S O N E N E R G y F A C T S

• Annual energy cost is $1,540,000• 45% of energy cost is electricity, 55% is fuel• 36.5% of total energy use is by the two tugs• 25% of total energy use is all other plant• 88% of electricity use is refrigerated containers (64%)

and lighting (14%).

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

I S O 1 4 0 0 1 E N V I R O N M E N T A l A C C R E D I T A T I O N

We achieved this internationally recognised environmental

accreditation in August 2007. A six monthly audit in January 2008 made

the following recommendations, that we have continued to progress:

• Develop a procedure to identify environmental aspects for new

or modified activities and determine if these new activities have a

significant impact on the environment

• Review internal audit arrangements to ensure we are keeping

records of the audit results and follow-ups and providing results to

management

• Review the process by which the Environmental Management System

is reviewed by the senior management team

• Ensure that all environmental incidents, and the results of subsequent

corrective actions are recorded as per the relevant procedure

• Ensure that the relevant versions of applicable documents are

available at points of use

• Rationalise systems so that data is managed in a cohesive manner to

allow simplification of the reporting and analysis processes.

1 2

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

Aspect Indicator Baseline Baseline 2006/7 2007/8

Environmental Policy percentage of new permanent employees receiving environmental induction 23% 100%

Fuel Fuel use (litres) per teu* of cargo handled 8.08 (580,905) 8.52 (662,304)***

Power electricity use (kw hours)/per teu of cargo handled 63.89 (4,591,509) 60.60 (4,711,215)

waste Waste generated per Fte **employee (m3) 2.75 (363) 3.4 (451)

Methyl Bromide number of readings higher than the current oSH workplace standard

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

Quantity of Methyl Bromide used at port nelson (tonnes) 2.286 4.859

Noise number of noise complaints 32 33

Oil Spills number of oil spills when bunkering 3 0

Dust number of dust complaints 9 6

Codes of Practice number of audit reports completed 13 16

number of non-conformances identified 7 11

number of non-conformances resolved 6 9

Continuous Improvement number of targets reported on 15 15

number of new initiatives 19 21

water Water use (m3)per teu (site use excl ships) 0.64 (46,437) 0.38 (29,616)

* twenty foot equivalent unit for 2007/08 77,734** Full time equivalent employees for 2007/08 132***Fuel purchase records do not currently match operations accurately eg sporadic filling of tugs.

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

our performance indicators are provided in both actual units and in

teu (twenty foot equivalent units) to provide a measure of efficiency

improvements. Whilst most indicators are showing good progress in

reducing our environmental footprint, the increase in waste, despite

our active recycling campaign, requires further investigation.

E N V I R O N M E N T A l I S S u E S R E G I S T E R 2 0 0 7 / 0 8

A total of 55 incidents were recorded, a decrease on last year. this is

due to improved dust management and no marine oil spills.

D R E D G I N G C O N S E N T R E N E w A l

the application to renew the port’s maintenance dredging consent

was lodged in november. extensive consultation has accompanied

the process including a Cultural Impact Assessment completed on the

port’s behalf by tiakina te taiao, representing four of nelson’s six iwi.

Although the results of dredging since the early 1960’s show no

negative effects at the dumping ground, as a result of consultation the

proposed consent term of 35 years applied for was reduced, and more

stringent monitoring requirements were introduced. this includes

limits for pollutants at the dredging disposal area for the first time, as

a precautionary measure.

over 277,000 m3 of sediment is carried down the region’s rivers and

into tasman Bay each year, making dredging an essential annual task.

H A z A R D O u S w A S T E S

Certification to comply with the new requirements under the Hazardous

Substances and new organisms regulations was re-confirmed in

August 2007.

l O O k I N G A H E A D

targets set under the ISo 14001 system are beginning to pay off,

with development of a strategy to decrease energy consumption and

the continued focus on the area of most community concern: noise

management.

Increasing integration of health and safety, environmental and

resource management is on-going. Continued integration into day

to day operations and staff culture will allow us to make the most of

potential cost savings.

1 3

“The concept of ‘green ports’ is taking off world wide and ‘sustainability’

reporting is now mainstream. Environmental management is a rapidly changing

field and there is potential for investment in new technologies that will result

in long term savings.”

Frances Woodhead, Environmental officer, Port nelson Limited

We regard ourselves as an ‘employer of Choice’ in the nelson region.

to support this aspiration we have utilised the services of staff

development consultant John Hill for the past two years, to ensure

we have strong leadership and a workforce that understands and is

committed to achieving our objectives.

We have a committed and skilled team, with staff numbers steady in

the mid-nineties for permanent, fixed-term and part-time staff. Casual

staff boosted the total hours worked in the last financial year to137 full-

time equivalents. the average length of service is currently just over

eight years. our ‘silver servers’ (25 years) increased by one this past

year, to ten, with one staff member celebrating 45 years service.

H E A l T H A N D S A F E T y

We value our reputation for speed and efficiency in vessel turnaround,

but never at the expense of compromising the safety of staff and on-site

contractors. the Health and Safety Committee’s ‘bottom up’ approach

encourages input and suggestions from all staff members and ensures

buy-in to safe working practices. the committee has been operating

now for over 18 years and represents employees from all worksites

within the port, as well as the Ceo and three members of the executive

team. encouraging and promoting the reporting of incidents remains

a primary focus and at each committee meeting those who have

reported ‘near misses’ go into a draw for a night out at the movies.

l I F E S T y l E P R O G R A M M E S

We believe the health of our employees affects the quality of their

lives, both at home and at work. We recognise that employees who

are physically fit and emotionally healthy are likely to have a positive

impact on the workplace. to improve overall workplace wellness we

have introduced a Well-being programme to encourage staff to be

more physically active; with grants of $350 per person (tax paid) in

pursuit of the goals of the programme.

Staff are offered a range of health initiatives that include hearing,

vision and lung function tests, blood tests for heavy metals or

fumigants, ergonomic assessments for forklift drivers and computer

users, flu injections and a melanoma skin check with an on-site

Gp clinic. other Sun Smart measures are the provision of hats and

sunscreen to outdoor workers.

our employee Assistance programme continues to support staff

with counselling services for work or other matters. We continue

to have a subsidised medical insurance scheme in place, we offer a

number of retirement seminars each year and company-subsidised

superannuation schemes for all permanent waged staff.

A large contingent of staff took part in the port nelson Blokes’ Day out

with a social event afterwards.

l O S T T I M E I N J u R I E S ( l T I )

We are pleased to report, for the second year in a row, a small decrease

in ltIs over the past year, down from ten to eight. our target ltI

frequency rate of less than 1.5% was not met; with an end of year

result of 2.87%. Since we started tracking the number of consecutive

days without a lost time injury in 2004, we achieved our best result to

date in May, when we reached 166 days. A port is a workplace with

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

are thoroughly investigated and new safety measures are added to our

prevention programme where necessary. We remain committed to our

long-term company goal of ‘together towards Zero’ (ltIs).

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

port nelson is an Accredited employer in the Work Safety and

Management practices programme and currently holds the tertiary

level status. We continue to be a reimbursing employer.1 4

P O R T P E O P l E

C O M M u N I C A T I O N

All staff receive the company magazine Report nelson, which includes

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

our internal newsletter is well received and covers a wider range of

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

the minutes from the Health and Safety Meetings are circulated

internally to staff notice boards, along with monthly summaries of

incident reporting and safety messages; and there is a noticeboard

recording the number of days since the last lost time injury, at the

security gate. Divisional ‘toolbox’ meetings are held on a regular basis

and are a forum for sharing information about the business.

T R A I N I N G

there have been ongoing updates for forklift drivers, first aid certification

refresher training, fire extinguisher training, heavy truck licences,

computer courses and staff have also attended business, administration,

supervisory, legal compliance and administration courses throughout

the year.

In May, Workshop Supervisor, Craig terris, and Mechanic, Grant Cottle,

went to the liebherr factory in Austria where our cranes are made, for

a week-long course on the hydraulics, electrical systems and safety

features of the cranes.

Also in May, Stevedoring operations Manager, Digby Kynaston, attended

a training programme at the port of Singapore, held under a government

cooperation programme and drawing participants from 25 countries.

We have continued to send two staff members per year to the outward

Bound eight day ‘navigator’ course.

G O V E R N A N C Ethe Finance and Risk Committee and Remuneration Committees met

as required by their respective terms of Reference and have been

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

Board attention. Both committees report to the Board.

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

Mr paul Matheson retired in october 2007 due to retirement from

the Mayoralty. Mr Matheson was a Director of port nelson for nine

years. In his place Mr Viesturs Altments (nelson City Council Ceo) was

appointed for a period of two months until a new director could be

appointed. In December 2007 Mr paul le Gros was appointed as the

nelson City Council representative. Mr tim King was re-appointed post

the local body elections as the tasman District Council representative.

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

A S A T 3 0 J u N E 2 0 0 8

Board:

nick patterson (Chair)

phil lough (Deputy Chair)

tim King

paul le Gros

Bronwyn Monopoli

peter Schuyt

Finance and Risk Committee:

peter Schuyt (Chair)

Bronwyn Monopoli (Director)

Martin Byrne (Chief executive officer)

parke pittar (Chief Commercial officer, Company Secretary)

Remuneration Committee:

nick patterson (Chair)

phil lough (Director)

paul le Gros (Director)

Meeting attendance:

Meeting type

Board Finance and Risk Remuneration

Meetings held 11 1 2

V R Altments 2

t B King* 10

p D le Gros 5 1

p V lough 9 2

p K Matheson* 3

B A Monopoli 11 1

A o patterson 11 2

p M Schuyt 9 1

* Attendance includes any meeting attended by alternates.

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

During the year the Fraud policy was approved and implemented.

Additionally, in September 2007 a Board evaluation process was

finalised and a full internal review undertaken in october 2007. the

review process considered the effectiveness of the Board and the

Chairman. the review will be undertaken on an annual basis in the

future.

port nelson’s Governance Framework continues to be reviewed and

enhanced where appropriate on an annual basis.1 5

“Foremost for the workshop staff is the need to ensure the company’s plant and

equipment function safely, correctly and with a minimum of downtime.

covering mechanical, electrical, infrastructure, marine and utilities maintenance,

we have a skilled and experienced team that takes pride in

keeping port plant humming along smoothly.”

craig Terris, Workshop Supervisor, Port nelson Limited

D I R E C T O R S

N I C k P A T T E R S O Nnick is the Managing Director of Wai-West Horticulture ltd, an integrated horticulture

company with extensive plantings and post-harvest investments in the nelson district.

nick also has directorships in associated companies including Fruit logistics (nelson)

ltd, a company that provides coolstorage and associated services for around 20% of

the nelson pip fruit industry.

P H I l l O u G Hphil is currently chair of Methven limited and hold directorships in a range of other

new Zealand companies. He was previously Ceo of the Sealord Group and is based in

nelson.

P A u l l E G R O Spaul recently retired from his partnership with nelson legal practice

Duncan Cotterill, and is now a consultant with that firm, along with other business and

board appointments. over the past 30 years paul has been extensively involved with

the YMCA movement in nelson, nationally and internationally.

T I M k I N Gtim is Deputy Mayor of the tasman District Council and chairs their Corporate Services

Committee. He farms on the Waimea plains and has governance roles on a range of

community organisations including chairing the Waimea Rural Fire Authority and the

Wakefield and Community Health Centre trust.

P E T E R S C H u y Tpeter is Chief Financial officer for the new Zealand post Group. He is also a director of a

number of companies in and outside that group. prior to his current role, peter was CFo

of the new Zealand Dairy Board.

B R O N w y N M O N O P O l IBronwyn is a Chartered Accountant, with her Richmond based practice providing

specialist accounting and financial advice to mainly rural businesses.

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

and a trustee of various arts-related organisations.1 6

1 7

F I N A N C I A l R E P O R T 2 0 0 8

FINANCIAl HIGHlIGHTS

2008 2007 $Millions $Millions

Revenue $36.2 $33.0

net Surplus After taxation* $7.5 $6.7

Dividend $3.8 $3.9

Basic earnings per ordinary Share 29.5¢ 26.5¢

Return on Average Shareholders’ Funds 6.1% 5.6%

net Asset Backing per Share $5.29 $4.31

Dividend - Recommended per Share 15.0¢ 15.3¢

Return on Average total Assets** 8.0% 7.7%

Ratio of Shareholders’ Funds to

total Assets 71.2% 67.9%

TR ADE HIGHlIGHTS

2008 2007

Cargo tonnes 2.68M 2.64M

Vessel Arrivals 921 997

Container throughput (teu’s) 77,734 71,815

* Including Investment property Revaluation

** Based on eBIt

1 8

AuDIT REPORT

TO THE READERS OF PORT NElSON lIMITED’S FINANCIAl STATEMENTS FOR THE yEAR ENDED 30 JuNE 2008

the Auditor-General is the auditor of port nelson limited (the company). the Auditor-General has appointed me, Scott tobin, using

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

year ended 30 June 2008.

unqualified opinion

In our opinion:

• The financial statements of the company on pages 22 to 38:

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

- give a true and fair view of:

• the company’s financial position as at 30 June 2008; and

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

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

the audit was completed on 29 August 2008, and is the date at which our opinion is expressed.

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

explain our independence.

Basis of opinion

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

Standards.

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

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

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

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

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

those procedures in forming our opinion.

Audit procedures generally include:

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

accurate data;

• verifying samples of transactions and account balances;

• performing analyses to identify anomalies in the reported data;

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

• confirming year-end balances;

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

• determining whether all financial statement disclosures are adequate.

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

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

explanations we required to support our opinion above.

Responsibilities of the Board of Directors and the Auditor

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

new Zealand. those financial statements must give a true and fair view of the financial position of the company as at 30 June 2008.

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

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

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

responsibility arises from section 15 of the public Audit Act 2001 and section 19 of the port Companies Act 1988.

Independence

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

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

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

S M tobin

Audit new Zealand

on behalf of the Auditor-General

Christchurch, new Zealand

1 9

S T A T u T O R y I N F O R M A T I O Nt o t h e s h a r e h o l d e r s , o n t h e a f f a i r s o f p o r t n e l s o n l i m i t e d

f o r t h e Y e a r e n d e d 3 0 J u n e 2 0 0 8

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

the company is primarily engaged in the commercial operation of the port of nelson. there has been no significant change in the nature of the

Company’s business during the year.

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

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

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

the surplus for the company for the year was $7.491 million. (2007 $6.725 million)

D I V I D E N D S

Dividends of $6,700,000 were paid or provided for during the year. ($2,900,000 final dividend for 2007 financial year, $1,000,000 interim dividend

for 2008 financial year, and a provision for $2,800,000 final dividend for 2008 financial year)

D I R E C T O R S

In accordance with the Company’s constitution Messrs A o patterson and p V lough will retire by rotation at the AGM in September 2008.

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

Fees paid to Directors during the year were as follows:

A o patterson $44,960

V Altments* - Appointed in october 2007 $3,833

- Resigned in December 2007

p D le Gros - Appointed in December 2007. $11,500

t B King $23,000

p V lough $24,260

p K Matheson - Resigned in october 2007. $7,667

B A Monopoli $25,205

p M Schuyt $24,890

TOTAl $165,315

* paid to nelson City Council

D I R E C T O R S ’ I N S u R A N C E

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

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

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

D I R E C T O R S ’ I N T E R E S T

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

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

• Ms B A Monopoli has the following entries in the Register of Directors’ Interests: Directorships; Deputy Chairman of New Zealand Forest Research

Institute limited (SCIon), Director of Visitor Information network Inc, was a Director of the Cawthron Institute. trusteeships; Chairman of nelson

Millennium Centre trust, trustee of Wearable Arts Development Charitable trust, trustee of new Zealand International Arts Festival trust. other;

principal of Bronwyn Monopoli Chartered Accountant.

• Mr A O Patterson has the following entries in the Register of Directors’ Interests: Directorships; Director of Cold Storage Nelson Ltd, Director of Freshco

nelson ltd, Director of Wai-West Horticulture ltd, Director of nelson Berryfruits ltd, Director of Wai-West Farms ltd. trusteeships; nil. other; nil.

• Mr P M Schuyt has the following entries in the Register of Directors’ Interests: Directorships; Director of Express Couriers Ltd, Director of Airpost Ltd,

Director of Business Investments (no 9) ltd, Director of Dairy Investments Fund ltd, Director of Franchise urban network limited, Director of Datamail

limited, Director of Datacom Group limited, Director of Reach Media limited, Director of new Zealand post Holdings limited, Director of new Zealand

post Supply Chain pty, Director of the eCn Group limited, Director of post Blue limited, Director of transend Worldwide (uK) limited, Director of

express Couriers Australia limited. trusteeships; trustee of new Zealand post Superannuation plan. other; Councillor of Waikato university.

• Mr P V Lough has the following entries in the Register of Directors’ Interests: Directorships; Director of Dairy Equity Ltd, Chairman of NZ Trade and

enterprise (retired 2008), Director of Arc Innovations (Meridian energy), Director of tatua Dairy Company, Director of lIC, Chairman of Methven.

trusteeships; nil. other; nil.

2 0

S T A T u T O R y I N F O R M A T I O Nt o t h e s h a r e h o l d e r s , o n t h e a f f a i r s o f p o r t n e l s o n l i m i t e d

f o r t h e Y e a r e n d e d 3 0 J u n e 2 0 0 8

• Mr p D le Gros has the following entries in the Register of Directors’ Interests: Directorships; Director of Venture Accelerator nominee limited, Director

of pakim Holdings (no 5) limited, Director of Solitaire Investments no 3 limited, Director of Duncan Cotterill nominees limited, Director of Fico Finance

limited, Director of le Gros Family Vines limited, Director of on Shelf no 3 limited, Director of Denny’s Restaurants (n.Z) limited, Director of Fast Wire

enterprises limited, Director of pearl River Holdings limited, Director of Clover Road estate limited, Director of Solitaire Investments no 6 limited, Director

of Chatton properties (2004) limited, Director of Beachcomber Investments limited, Director of orinoco Winery limited, Director of Real property Kiwisaver

limited, Director of Duncan Cotterill nelson trustees (2008) limited, Director of nelson Malibu Holdings limited, Director of Real property Kiwisaver

nominee limited, Director of Flaxmark Holdings limited, Director of Markit Graphics limited, Director of Six thirtynine limited, Director of Ahimia limited,

Director of Venture Accelerator limited, Director of Super Conductors Corporation limited. trusteeships; trustee of nelson YMCA. other; nil.

• Mr T B King has the following entries in the Register of Directors’ Interests: Directorships; Nil. Trusteeships; Nil. Other; Deputy Mayor of Tasman District

Council, which is a shareholder of the Company.

D I R E C T O R S ’ l O A N S

there were no loans by the Company to Directors.

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

no Directors hold shares in the Company.

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

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

would not otherwise have been available to them.

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

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

the Financial Reporting Act 1993 and a Remuneration Committee.

A u D I T O R S

under section 15 of the public Audit Act 2001 and section 19 of the port Companies Act 1988, the Auditor General is the Auditor of the Company. the Auditor

General has appointed Audit new Zealand to undertake the audit on its behalf. Fees paid to the Auditors are disclosed in the Financial Statements.

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

As required under Section 16 of the port Companies Act 1988, performance indicators in the Statement of Corporate Intent are given on page 21.

D O N A T I O N S

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

E M P l O y E E R E M u N E R A T I O N

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

Remuneration Number of employees Number of employees

2008 2007 2008 2007

$100,000 to $110,000 - 3 $160,000 to $170,000 - 1

$110,000 to $120,000 1 - $180,000 to $190,000 1 -

$120,000 to $130,000 1 3 $210,000 to $220,000 - 1*

$130,000 to $140,000 1 1 $240,000 to $250,000 - 1

$140,000 to $150,000 3 - $300,000 to $310,000 1 -

* employee retired during year

C H A N G E S I N A C C O u N T I N G P O l I C I E S

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

Chairman of Directors Director

For and on behalf of the Board

Date: 29 August 2008

2 1

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

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

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

shippers.

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

the environment of an export port.

O B J E C T I V E S

1. to operate as a successful business.

2. to be a good employer.

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

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

revenue.

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

6. to ensure that port development takes place which meets the needs of the region.

7. to ensure that high environmental standards are maintained.

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

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

Target 2008 2007 2006 Target Met?

lost time Injury Frequency Rate * <1.5 2.9 3.3 4.1 No

net Debt / equity Ratio <66.67% 30.5% 36.3% 12.9% yes

Dividends Declared $3.8m $3.8m $3.9m $5.3m yes

Cargo throughput (Cargo tonnes) 2.65m 2.68m 2.64m 2.52m yes

Shipping tonnes (Gross Registered tonnes) 8.1m 8.3m 9.0m 8.6m yes

Ships Visits 948 921 997 1,012 No

Revenue $31.5m $36.2m $33.02m $29.6m yes

Return on Average Shareholders Funds 6.0% 6.1% 5.6% 6.1% yes

Return on Funds employed 9.0% 8.6% 8.3% 8.8% No

Capital expenditure <$6.6m $10.1m $4.0m $2.9m No

Incidents leading to pollution of Harbour nil Nil 3 nil yes

Compliance with all Resource Consent Conditions Full Full Full Full yes

Compliance with nZ Maritime Safety Standards Full Full Full Full yes

* lost time Injury Frequency Rate = lost time Injuries

Hours Worked in period x 100,000

the Summary of Significant Accounting policies and notes to the Accounts on pages 26 to 38 form part of these Financial Statements.

2 2

I N C O M E S T A T E M E N Tf o r t h e Y e a r e n d e d 3 0 J u n e 2 0 0 8

the Summary of Significant Accounting policies and notes to the Accounts on pages 26 to 38 form part of these Financial Statements.

Notes 2008 2007 $000 $000

R E V E N u E

operations 30,260 27,864

property 5,954 5,159

totAl ReVenue 1 36,214 33,023

E x P E N S E S

operations and property 22,269 20,767

Financing 3,281 2,513

totAl expenSeS 2 25,550 23,280

net SuRpluS BeFoRe tAxAtIon 10,664 9,743

less taxation expense 3 3,173 3,018

N E T S u R P l u S 7,491 6,725

S T A T E M E N T O F M O V E M E N T S I N E q u I T yf o r t h e Y e a r e n d e d 3 0 J u n e 2 0 0 8

2008 2007 $000 $000

opening equity 109,605 128,405

Movements in Hedging Reserve 6g (368) 812

Revaluations 6f 21,406 2,563

net Surplus 7,491 6,725

total Recognised Revenues and expenses for the period 28,529 10,100

Distribution to owners 6b (3,800) (3,900)

Share Repurchase 6a - (25,000)

C l O S I N G E q u I T y 134,334 109,605

2 3

B A l A N C E S H E E Ta s a t 3 0 J u n e 2 0 0 8

the Summary of Significant Accounting policies and notes to the Accounts on pages 26 to 38 form part of these Financial Statements.

Notes 2008 2007 $000 $000

C u R R E N T A S S E T S

Cash and Cash equivalents 7 138 2,170

trade and other Receivables 8 4,051 3,518

Inventories 9 370 394

prepayments and Accruals 738 361

properties Intended for Sale 5 - 394

Hedging Asset 13 709 1,290

6,006 8,127

l E S S C u R R E N T l I A B I l I T I E S

Call Advance (overdraft) 100 -

trade and other payables 10 2,809 1,721

employee Benefit liabilities 17 1,344 1,103

tax payable 78 69

Dividend payable 6b 2,800 2,900

7,131 5,793

w O R k I N G C A P I T A l (1,125) 2,334

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

property, plant and equipment 11 168,322 137,960

Intangible Assets 12 754 742

Investment properties 5 13,492 14,311

other non-Current Assets 110 -

182,678 153,013

N O N - C u R R E N T l I A B I l I T I E S

employee Benefit liabilities 17 201 190

Deferred tax liability 4 6,018 3,552

term loan 13, 14 41,000 42,000

47,219 45,742

T O T A l N E T A S S E T S 134,334 109,605

S H A R E H O l D E R S ’ F u N D S

Issued Capital 6a 6,046 6,046

Retained earnings 6b 37,149 31,860

Asset Revaluation Reserves 6f 90,643 70,835

Hedging Reserve 6g 496 864

T O T A l S H A R E H O l D E R S ’ F u N D S 134,334 109,605

Chairman of Directors Director

For and on behalf of the Board

Date: 29 August 2008

2 4

S T A T E M E N T O F C A S H F l O w Sf o r t h e Y e a r e n d e d 3 0 J u n e 2 0 0 8

the Summary of Significant Accounting policies and notes to the Accounts on pages 26 to 38 form part of these Financial Statements.

2008 2007 $000 $000

C A S H F l O w S F R O M O P E R A T I N G A C T I V I T I E S

Cash was provided from:

Receipts from Customers 28,579 27,241

Rent Received 5,954 4,447

Interest Received 106 107

34,639 31,795

Cash was applied to:

payments to Suppliers and employees (17,938) (16,693)

Interest paid (3,459) (2,604)

taxes paid (3,397) (3,176)

net GSt paid 75 (70)

(24,719) (22,543)

Net Cash In Flows from Operating Activities 9,920 9,252

C A S H F l O w S F R O M I N V E S T I N G A C T I V I T I E S

Cash was provided from:

property plant and equipment Sold 3,026 170

Cash was applied to:

purchase of property plant equipment (9,903) (3,778)

purchase of Intangibles (275) (258)

Net Cash Out Flows from Investing Activities (7,152) (3,866)

C A S H F l O w S F R O M F I N A N C I N G A C T I V I T I E S

Cash was provided from:

loans Raised - 25,000

Cash was applied to:

loans paid (1,000) (2,000)

Shares purchased and Cancelled - (25,000)

Dividend paid (3,900) (3,700)

Net Cash Out Flows from Financing Activities (4,900) (5,700)

net Increase/(Decrease) in Cash Held (2,132) (314)

Cash at 1 July 2,170 2,484

C A S H A T 3 0 J u N E 38 2,170

Represented by:

Cash at Bank 138 269

Deposits - 1,901

Call Advance (overdraft) (100) -

C A S H A T 3 0 J u N E 38 2,170

2 5

S T A T E M E N T O F C A S H F l O w Sf o r t h e Y e a r e n d e d 3 0 J u n e 2 0 0 8

the Summary of Significant Accounting policies and notes to the Accounts on pages 26 to 38 form part of these Financial Statements.

2008 2007 $000 $000

R E C O N C I l I A T I O N w I T H N E T S u R P l u S

net Surplus 7,491 6,725

Add non Cash Items:

Depreciation and Amortisation 3,839 3,636

Increase (Decrease) in Deferred tax (233) (259)

less:

unrealised Gains (1,069) (722)

2,537 2,655

Add (less) Movements in other Working Capital Items:

(Increase)/Decrease in Accounts Receivable (474) (451)

Increase/(Decrease) in Accounts payable (excluding Assets payable) 578 372

Increase/(Decrease) in Current and non Current employee Benefit liabilities 11 (12)

Increase/(Decrease) in tax payable 9 101

(Increase)/Decrease in Inventory 24 (31)

(Increase)/Decrease in net GSt 75 (70)

(Increase)/Decrease in prepayments and Accruals (310) (18)

(87) (109)

Add (less) Items Classified as Investing Activities:

net (profit) loss on Sale of Assets (21) (19)

N E T C A S H I N F l O w F R O M O P E R A T I N G A C T I V I T I E S 9,920 9,252

the GSt (net) component of operating activities reflects the net GSt paid and received with the Inland Revenue Department. the GSt (net)

component has been presented on a net basis, as the gross amounts do not provide meaningful information for financial statement purposes.

2 6

S u M M A R y O F S I G N I F I C A N T A C C O u N T I N G P O l I C I E S

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

port nelson limited is a public company registered under the Companies Act 1993 and created pursuant to the port Companies Act 1988.

port nelson is a reporting entity in terms of the Financial Reporting Act 1993. the financial statements of port nelson have been prepared in

accordance with the Financial Reporting Act 1993.

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

the financial statements have been prepared in accordance with Generally Accepted Accounting practice in new Zealand (‘nZ GAAp’). they

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

appropriate for profit orientated entities.

the financial statements are presented in new Zealand dollars and the functional currency of port nelson is new Zealand dollars.

the financial statements were authorised for issue by the directors on the 29 August 2008.

S T A N D A R D S A N D I N T E R P R E T A T I O N S I S S u E D A N D N O T y E T A D O P T E D

there are no standards, interpretations and amendments that have been issued, that are not yet effective and relevant to port nelson, other than

nZ IFRS 8, that port nelson has not yet applied. When effective these standards will require additional disclosures in the financial statements.

A C C O u N T I N G P O l I C I E S

unless otherwise stated, all accounting policies applied are consistent with those of the prior year.

M E A S u R E M E N T S y S T E M

those accounting principles considered appropriate by the new Zealand Institute of Chartered Accountants for the measurement and reporting

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

property, have been followed.

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

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

S P E C I F I C A C C O u N T I N G P O l I C I E S

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

set out below:

1.1 Revenue Recognition

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

reliably measured as follows:

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

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

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

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

1.2 Provisions

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

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

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

the obligation.

1.3 Property Plant and Equipment and Depreciation

property, plant and equipment, except land, buildings, and wharves, are stated at valuation taken over from the nelson Harbour Board

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

estimated economic lives of the assets, ranging as follows:

years years

Wharves, Quays and Berths 20-72 Buildings 50-100

Vessels 20 Cranes 15-20

Forklifts 15-25 tractors and Vehicles 10

Sundry plant and equipment 5-20 navigation and pilot equipment 10-40

office equipment 5-15 Hard Standing 50

Software 5

2 7

S u M M A R y O F S I G N I F I C A N T A C C O u N T I N G P O l I C I E S

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

land is included at the valuation as at 30 June 2008. land owned and leased to third parties is valued at the market value of the lessor’s

interests. non leased land is recorded at market value. Additions between valuations are recorded at cost. the land valuation was

completed by Ian McKeage, Registered Valuer, FnZIV, FpInZ of telferYoung.

Buildings are stated at fair value. Fair value was determined as at 30 June 2008 using either a market based approach (where evidence

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

valued at least every five years. the buildings’ valuation was completed by Ian McKeage, Registered Valuer, FnZIV, FpInZ of telferYoung.

Wharves are stated at fair value as determined by a Chartered professional engineer employed by port nelson and reviewed by Ian

McKeage, Registered Valuer, FnZIV, FpInZ of telferYoung. Fair value was determined as at 30 June 2008 using optimised depreciated

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

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

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

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

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

those assets are transferred to retained earnings.

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

associated with the item will flow to port nelson and the cost of the item can be reliably measured.

1.4 Investment Properties

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

Gains or losses from changes in the fair value of investment property are included in the profit or loss in the period in which they arise.

Investment properties are not depreciated.

1.5 Cash and Cash Equivalents

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

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

1.6 Trade and Other Receivables

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

less any provision for impairment.

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

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

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

1.7 Inventories

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

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

1.8 Intangible Assets

Intangible assets are limited to computer software. on acquisition they are capitalised at cost which equates to fair value. the

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

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

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

basis.

1.9 Impairment of Assets

At each reporting date, port nelson reviews the carrying amount of its tangible and intangible assets to determine whether there is

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

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

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

recoverable amount. For revalued assets the impairment loss is recognised against the revaluation reserve for that class of asset. Where

that results in a debit balance in the revaluation reserve, the balance is recognised in the Income Statement. For assets not carried at a

revalued amount the impairment loss is recognised in the Income Statement.

the reversal of an impairment loss on a revalued asset is credited to the revaluation reserve. However, to the extent that an impairment

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

Income Statement.

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

2 8

S u M M A R y O F S I G N I F I C A N T A C C O u N T I N G P O l I C I E S

1.10 Goods and Services Tax

All items in the financial statements are exclusive of goods and services tax (GSt) with the exception of receivables and payables which

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

expense.

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

payables in the Balance Sheet.

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

cash flow in the Statement of Cash Flows.

Commitments and contingencies are disclosed exclusive of GSt.

1.11 Income Tax

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

adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and

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

Deferred tax assets and liabilities are recognised for temporary differences at the rate expected to apply when the assets are recovered

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

the deferred tax asset or liability.

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

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

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

which case the tax is dealt within equity.

1.12 Borrowings

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

effective interest method where this differs from face value.

1.13 Derivative Financial Instruments

port nelson uses derivative financial instruments such as interest rate swaps to hedge against interest rate fluctuations. port nelson

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

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

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

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

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

1.14 Financing Costs

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

capitalised as part of the cost of those assets.

1.15 Employee Entitlements

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

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

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

1.16 Foreign Exchange Transactions

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

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

1.17 leases

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

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

1.18 Dividends

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

date.

1.19 Critical Judgements

Management have not had to exercise any critical judgements in the period ending 30 June 2008.

2 9

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

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

2008 2007Includes the following revenue: $000 $000

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

port operations 30,122 27,702

Interest 106 107

Gain on Sale of Assets 32 55

total port operations 30,260 27,864

P R O P E R T y

non Investment property 4,128 3,542

Investment property 757 895

Fair Value Adjustment to Investment property 1,069 722

total property 5,954 5,159

T O T A l R E V E N u E 36,214 33,023

All revenue relates to continuing operations.

N O T E 2 : N E T S u R P l u S B E F O R E T A x A T I O N

2008 2007Includes the following expense: $000 $000

Administration Related 2,444 2,439

Audit Fees – IFRS Restatement - 21

Audit Fees – Non IFRS 53 54

Bad Debts Written off 11 112

Depreciation and Amortisation 3,839 3,636

Directors Fees 165 159

Donations/Corporate Sponsorship 164 195

employee Wages and Related expenses 8,070 7,703

Interest 3,281 2,513

Investment property expenses 63 12

loss on Sale of Assets 11 36

operating leases 22 20

other operating expenses 7,427 6,380

T O T A l E x P E N S E 25,550 23,280

All expenses relate to continuing operations.

N O T E 3 : P R O V I S I O N F O R T A x A T I O N 2008 2007 $000 $000

Current tax 3,448 3,277

Deferred tax (279) (143)

Deferred tax Relating to Changes in tax Rates 47 (116)

Adjustments to prior Year estimates (43) -

T A x E x P E N S E 3,173 3,018

profit from Continuing operations 10,664 9,743

tax at 33% 3,519 3,215

non Deductible expenses 10 57

non taxable Income (360) (238)

Deferred tax Relating to Changes in tax Rates 47 (116)

Adjustments to prior Year estimates (43) 100

T A x E x P E N S E 3,173 3,018

3 0

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

N O T E 4 : D E F E R R E D T A x ( A S S E T S ) A N D l I A B I l I T I E S Employee Intangible PP&E Derivatives Entitlements Assets Total

2008 $000 $000 $000 $000 $000

opening Balance 3,342 426 (297) 81 3,552

Charged to profit and loss (248) - (19) 34 (233)

Charged to equity 2,912 (213) - - 2,699

B A l A N C E A T 3 0 % 6,006 213 (316) 115 6,018

2007

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

Charged to profit and loss (200) - 36 21 (143)

Charged to equity (189) 400 - - 211

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

Tax Rate Adjustment

Charged to profit and loss (114) - 6 (8) (116)

Charged to equity (220) - - - (220)

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

N O T E 5 : I N V E S T M E N T P R O P E R T y 2008 2007 $000 $000

opening Balance 14,311 13,983

Additions 84 -

Revaluations 1,069 722

Reclassification (20) -

properties Intended for Sale - (394)

properties Sold (1,952) -

C l O S I N G B A l A N C E 13,492 14,311

Properties Intended for Sale

there are no Investment properties for sale as at 30 June 2008.

Basis of Valuation

Investment property is stated at fair value. Fair value was determined as at 30 June 2008 being the market value of the lessor’s interests as at 30 June

2008, and is valued annually. Valuation was completed by Ian McKeage, Independent Registered Valuer, FnZIV, FpInZ of telferYoung.

N O T E 6 : E q u I T y 2008 2007

(a) Share Capital $000 $000

opening Balance 6,046 31,046

Redeemed During the Year - (25,000)

B A l A N C E A T 3 0 J u N E 6,046 6,046

At 30 June 2008 the company has 25,415,404 ordinary shares. All shares are fully paid and have no par value. All shares carry equal voting rights

and the right to share in any surplus on winding up of the company. none of the shares carry fixed dividend rights.

(b) Retained Earnings 2008 2007 $000 $000

Retained earnings 31,860 29,035

net Surplus 7,491 6,725

Dividends paid (1,000) (1,000)

transfer to Dividend payable (2,800) (2,900)

transfer to Revaluation Reserve - properties Sold 537 -

transfer to Revaluation Reserve - Wharf Reclassification (133) -

transfer from Revaluation Reserve 1,194 -

R E T A I N E D E A R N I N G S A T 3 0 J u N E 37,149 31,860

3 1

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

(c) Asset Revaluation Reserve (land and Improvements) 2008 2007 $000 $000

opening Balance 64,491 61,853

Revaluation Movement 14,749 2,638

transfer to Retained earnings - properties Sold (537) -

Deferred tax Movement (40) -

transfer to Retained earnings 40 -

C l O S I N G B A l A N C E 78,703 64,491

(d) Asset Revaluation Reserve (wharves)

opening Balance 4,679 4,495

Revaluation Movement 7,983 -

Revaluation Movement - Wharf Reclassification 133 -

Deferred tax Movement (2,395) 184

transfer to Retained earnings (418) -

C l O S I N G B A l A N C E 9,982 4,679

(e) Asset Revaluation Reserve (Buildings)

opening Balance 1,665 1,924

Revaluation Movement 1,590 225

Deferred tax Movement (477) (484)

transfer to Retained earnings (820) -

C l O S I N G B A l A N C E 1,958 1,665

(f) Asset Revaluation Summary

opening Balance 70,835 68,272

Revaluation Movement 24,322 2,154

Revaluation Movement - Wharf Reclassification 133 -

transfer to Retained earnings - properties Sold (537) -

Deferred tax Movement (2,912) 409

transfer to Retained earnings (1,198) -

C l O S I N G B A l A N C E 90,643 70,835

(g) Hedging Reserve

opening Balance 864 52

Fair Value Movement (581) 1,212

Deferred tax Movement 213 (400)

C l O S I N G B A l A N C E 496 864

Revaluation Reserves

the Revaluation Reserves relate to the revaluation of land, wharves, buildings.

Hedging Reserve

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

hedged transactions that have not yet occurred.

N O T E 7 : C A S H A N D C A S H E q u I V A l E N T S 2008 2007 $000 $000

General Account 138 269

Call Account - 1,901

T O T A l 138 2,170

N O T E 8 : T R A D E A N D O T H E R R E C E I V A B l E S 2008 2007 $000 $000

trade Receivables 4,194 3,580

Related party Receivables 1 10

T O T A l 4,195 3,590

less provision for Impairment 144 72

T O T A l 4,051 3,518

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

At 1 July 72 -

Additional provisions made during the Year 72 72

A T 3 0 J u N E 144 72

the status of the receivables as at 30 June 2008 and 2007 are detailed below:

not past Due 2,659 2,413

past Due 1-31 Days 1,178 828

past Due 32-61 Days 137 162

past Due 62-92 Days 46 7

past Due > 92 Days 31 108

T O T A l 4,051 3,518

N O T E 9 : I N V E N T O R I E S

opening Balance 394 363

purchases 417 365

expensed (441) (334)

C l O S I N G B A l A N C E 370 394

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

N O T E 1 0 : T R A D E A N D O T H E R P A y A B l E S

Accruals 2,153 561

GSt payable 175 181

trade payables 464 874

Related party payables 17 105

C l O S I N G B A l A N C E 2,809 1,721

N O T E 1 1 : P R O P E R T y P l A N T A N D E q u I P M E N T

Accumulated Accumulated Depreciation Current Depreciation and Current Current year and Cost/ Impairment Carrying year Current year Depre- Cost/ Impairment Carrying Revaluation Charges Amount Additions/ year Impairment ciation Revaluation Revaluation Charges Amount2 0 0 8 1/07/07 1/07/07 1/07/07 Transfers Disposals Charges Charges Surplus 30/06/08 30/06/08 30/06/08A S S E T C l A S S $000 $000 $000 $000 $000 $000 $000 $000 $000 $000 $000

Mobile plant 17,304 (9,002) 8,302 1,024 (23) - (987) - 18,093 (9,777) 8,316

Floating plant 5,338 (3,340) 1,998 - - - (301) - 5,338 (3,641) 1,697

Wharves & Berths 18,103 (1,761) 16,342 (445) - - (890) 7,092 22,099 - 22,099

Wharves leased 2,633 (334) 2,299 - - - (168) 891 3,022 - 3,022

plant, Furniture & Fittings 9,113 (4,621) 4,492 886 (5) - (660) - 10,006 (5,293) 4,713

It equipment 1,543 (1,267) 276 112 - - (107) - 1,655 (1,374) 281

Hardstanding & Roadways 5,736 (874) 4,862 557 - - (131) - 6,293 (1,005) 5,288

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

Buildings 8,273 (405) 7,868 (84) - - (187) 1,458 9,055 - 9,055

Buildings leased 3,045 (176) 2,869 4,385 - - (145) 132 7,241 - 7,241

land Reclamation - - - - - - - - - - -

land 45,898 - 45,898 1,382 - - - 8,099 55,379 - 55,379

land leased 39,590 - 39,590 (468) (639) - - 6,650 45,133 - 45,133

Work in progress 1,075 - 1,075 2,934 - - - - 4,009 - 4,009

159,740 (21,780) 137,960 10,283 (667) - (3,576) 24,322 189,412 (21,090) 168,322 3 2

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

3 3

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

Accumulated Accumulated Depreciation Current Depreciation and Current Current year and Cost/ Impairment Carrying year Current year Depre- Cost/ Impairment Carrying Revaluation Charges Amount Additions/ year Impairment ciation Revaluation Revaluation Charges Amount2 0 0 7 01/07/06 01/07/06 01/07/06 Transfers Disposals Charges Charges Surplus 30/06/07 30/06/07 30/06/07A S S E T C l A S S $000 $000 $000 $000 $000 $000 $000 $000 $000 $000 $000

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

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

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

Wharves leased 2,633 (167) 2,466 - - - (167) - 2,633 (334) 2,299

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

It equipment 1,492 (1,133) 359 51 - - (134) - 1,543 (1,267) 276

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

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

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

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

land Reclamation 1,443 - 1,443 (1,443) - - - - - - -

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

land leased 36,946 - 36,946 1,074 - - - 1,570 39,590 - 39,590

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

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

During 2007 the year the Company received title to the reclaimed land and revalued it in accordance with the Company’s accounting policies.

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

Wharves and buildings were valued as at 30 June 2008. the financial effect of the revaluations is the depreciation charge for the 2009 financial year

will increase by $468,261.

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

2 0 0 8 Accumulated Accumulated Amortisation Current Amortisation and Current Current year and Impairment Carrying year Current year Amort- Impairment Carrying Cost Charges Amount Additions/ year Impairment isation Cost Charges Amount 1/07/07 1/07/07 1/07/07 Transfers Disposals Charges Charges 30/06/08 30/06/08 30/06/08

A S S E T C l A S S $000 $000 $000 $000 $000 $000 $000 $000 $000 $000

Software 2,209 (1,467) 742 275 - - (263) 2,484 (1,730) 754

2,209 (1,467) 742 275 - - (263) 2,484 (1,730) 754

2 0 0 7 Accumulated Accumulated Amortisation Current Amortisation and Current Current year and Impairment Carrying year Current year Amort- Impairment Carrying Cost Charges Amount Additions/ year Impairment isation Cost Charges Amount 01/07/06 01/07/06 01/07/06 Transfers Disposals Charges Charges 30/06/07 30/06/07 30/06/07

A S S E T C l A S S $000 $000 $000 $000 $000 $000 $000 $000 $000 $000

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

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

All Intangible Assets are externally generated.

N O T E 1 3 : F I N A N C I A l I N S T R u M E N T S

Financial Risk Management Objectives

port nelson does not enter into or trade financial instruments, including derivative financial instruments for speculative purposes. treasury

functions are governed by a treasury policy approved by the Board of Directors. Approved instruments include:

• Forward rate agreements • Interest rate swaps

• Options on a swap • Interest rate options

• Interest rate collars • Spot and forward foreign exchange

3 4

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

Fixed rate hedging parameters are as follows:

Term Minimum Fixed Rate Amount Maximum Fixed Rate Amount

less than 1 year 50% 100%

1 year to 4 years 30% 70%

5 years to 10 years 0% 50%

Market Risk

currency Risk

port nelson purchases plant and equipment from time to time from overseas which require it to enter into forward foreign exchange contracts to

hedge the foreign currency risk exposure. this means that port nelson is able to fix the new Zealand dollar amount payable prior to delivery of the

plant and equipment from overseas. As at balance date port nelson had nIl currency risk exposure.

cash flow interest rate risk

Cash flow interest rate risk is the risk that the cash flows from a financial instrument will fluctuate due to changes in market interest rates. Borrowings

issued at variable interest rates expose port nelson to cash flow interest rate risk.

port nelson’s treasury policy is to maintain a portion of its borrowings using interest rate swap instruments within the parameters as set out in the

Hedging parameter table disclosed under the Financial Risk Management objectives section. under the interest rate swaps, port nelson agrees

with other parties to exchange, at specified intervals, the difference between fixed contract rates and floating-rate interest amounts calculated by

reference to the agreed notional principle amounts.

Credit Risk

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

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

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

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

month following or 7 working days. the majority of debtors are major international companies with extensive histories of payment. there are no

major concentrations of credit risk with respect to accounts receivable and any single debtor.

Maximum exposures to credit risk at balance date are: 2008 2007 $000 $000

Bank 138 269

Short term Deposits - 1,901

trade and other Receivables 4,051 3,518

Derivative Financial Instrument Assets 709 1,290

TOTAl CREDIT RISk 4,898 6,978

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

accounts.

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

Credit quality of Financial Assets

the credit quality of financial assets that are neither past due nor impaired can be assessed by reference to Standard and poor’s credit rating (if

available) or to historical information about counterparty default rates:

2008 2007 $000 $000

Cash at bank and term deposits

AA 138 2,170

Derivative financial instrument assets

AA 709 1,290

Debtors and receivables arise in the ordinary course of port nelson’s business. there are no procedures in place to monitor or report the credit

quality of debtors and other receivables with reference to internal or external credit ratings. port nelson does instigate a credit check on new

debtors prior to providing business on port nelson Standard terms and Conditions.

liquidity Risk

Management of liquidity risk

liquidity risk is the risk that port nelson will encounter ‘difficulty’ raising funds to meet commitments as they fall due. prudent liquidity risk

management implies maintaining sufficient cash, the availability of funding through an adequate amount of committed credit facilities and the

3 5

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

ability to close out market positions. port nelson aims to maintain flexibility in funding by keeping committed credit lines available.

port nelson has financing arrangements with Westpac Banking Corporation. the total facility is $57,000,000 for a term of 5 years. (2007: $57,000,000

for a term of 5 years).

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

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

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

Notional Amount Fair Value Interest 0 to 1 1 to 2 2 to 3 3 to 4 5 to 6 8 to 9 9 to 10 ($000’s) gain/(loss) rate %* year years years years years years years

2 0 0 8 ( A T B A l A N C E D A T E )

$3,000 Swap 35 6.98 3,000 - - - - - -

$7,000 Swap 19 7.91 7,000 - - - - - -

$7,000 Swap 24 8.00 - - 7,000 - - - -

$4,000 Swap 91 6.75 - - 4,000 - - - -

$5,000 Swap 140 6.55 - - 5,000 - - - -

$3,000 Swap 252 6.49 - - - - - 3,000 -

$9,000 Swap 148 6.19 - - - - 9,000 - -

2 0 0 8 T O T A l 709 - 10,000 - 16,000 - 9,000 3,000 -

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

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

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

the following table summarises the port nelson exposure to interest rate risk as at 30 June 2008:

2 0 0 8 (000’s) weighted Fixed Maturity Dates Average NonFinancial Effective Floating 0 to 1 2 to 3 8 to 9 Interest Instruments Interest Rate Interest year years years Bearing Total

F I N A N C I A l A S S E T S

loans and Receivables

Cash 8.25% 138 - - - - 138

trade and other Receivables - - - - 4,051 4,051

TO TA l lOA N S A N D O T H E R R E C E I VA B l E S 138 - - - 4,051 4,189

F I N A N C I A l l I A B I l I T I E S

Financial liabilities at amortised Cost

Borrowings 7.91% 12,100 10,000 16,000 3,000 - 41,100

trade and other payables - - - - 2,809 2,809

TO TA l F I N A N C I A l l I A B I l I T I E S AT A M O R T I S E D CO S T 12,100 10,000 16,000 3,000 2,809 43,909

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

F I N A N C I A l A S S E T S

loans and Receivables

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

trade and other Receivables - - - - - 3,518 3,518

TO TA l lOA N S A N D O T H E R R E C E I VA B l E S 2,170 - - - - 3,518 5,688

F I N A N C I A l l I A B I l I T I E S

Financial liabilities at amortised Cost

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

trade and other payables - - - - 1,721 1,721

TO TA l F I N A N C I A l l I A B I l I T I E S AT A M O R T I S E D CO S T 15,000 12,000 3,000 9,000 3,000 1,721 43,721

3 6

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

Sensitivity Analysis

the following table illustrates the potential profit and loss and equity impact for reasonably possible market movements, with all other variables

held constant, based on port nelson’s financial instrument exposure at the balance date.

Carrying Interest rate amount NzD 000’s -100bp -100bp +100bp +100bpFinancial assets Profit Equity Profit Equity

Cash and cash equivalents 138 (1) (1) 1 1

Derivatives – designated as cash flow hedges 709 - (942) - 942

Financial liabilities

Borrowings 12,100 121 121 (121) (121)

Fair Values

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

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

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

the following table details the fair value comparison of the long term borrowings as at 30 June 2008.

Carrying Value Fair Value 2008 2007 2008 2007 $000 $000 $000 $000F I N A N C I A l l I A B I l I T I E S

term Debt 41,000 42,000 41,000 42,000

Fair Value Movement - - (709) (1,290)

T O T A l F I N A N C I A l l I A B I l I T I E S 41,000 42,000 40,291 40,710

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

Interest Rate Contracts:

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

1. $3,000,000 for 2 years @ 6.98% p.a. terminating 31 May 2009

2. $7,000,000 for 1 year @ 7.91% p.a terminating 30 May 2009

3. $7,000,000 for 3 years @ 8.00% p.a terminating 28 February 2011

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

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

6. $3,000,000 for 9 years @ 6.49% p.a. terminating 30 november 2016

7. $12,100,000 at floating interest rate.

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

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

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

2008 2007 $000 $000

Capital Development 674 197

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

Non-cancellable operating leases as lessee 2008 2007 $000 $000

not later than one year - 3

later than one year and not later than five years 52 46

T O T A l N O N - C A N C E l l A B l E O P E R A T I N G l E A S E S 52 49

3 7

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

N O T E 1 7 : E M P l O y E E B E N E F I T l I A B I l I T I E S

2008 2007 $000 $000

Accrued pay 388 282

Annual leave 632 593

long Service leave 88 88

Retirement Gratuities 132 125

other Benefits 305 205

T O T A l E M P l O y E E B E N E F I T l I A B I l I T I E S 1,545 1,293

Comprising:

Current 1,344 1,103

non-current 201 190

T O T A l E M P l O y E E B E N E F I T l I A B I l I T I E S 1,545 1,293

N O T E 1 8 : C O N T I N G E N T A S S E T S A N D l I A B I l I T I E S

2008

the noise Variation within the nelson City Resource Management plan was notified with effect on 14 July 2007. port nelson is required to make

offers to either fully fund noise mitigation work or to purchase 11 closest properties in the residential zone adjacent to the port. (these are houses

that are exposed to night time ldn from port generated noise of 65 dBa or more). Arrangements for some of these properties are underway and

an estimated $550,000 has been budgeted to carry out this mitigation work. purchase valuations are also available on 3 of these properties at a

combined cost for these 3 of $2,425,000 (exact price subject to agreement between valuers). It is the intention of port nelson, subject to market

conditions, to resell any purchased properties once mitigation work has been completed.

For the properties in the 55 to 59.9dBa and 60 to 64.9 dBa areas, offers have been made by port nelson to owners in these areas to cover 50 percent

of the noise mitigation cost. there is no offer for the purchase of these properties required. For properties in the 60 to 64.9 dBa area port nelson is

required to approach all owners with this offer. For properties in the 55 to 59.9 dBa area the owners are required to approach port nelson and seek

approval for this. offers will include 50 percent of the costs of building work, any professional fees, building consents, preparation of drawings and

project management.

2007

the noise Variation has been notified by the nelson City Council with effect. over the next 6 months it is expected that remedial noise mitigation

work will be required.

N O T E 1 9 : R E l A T E D P A R T y D I S C l O S u R E 2008 2007 $000 $000Nelson City Council

Services provided by port nelson 16 41

Services provided to port nelson 379 485

Accounts payable by port nelson 12 104

Accounts Receivable by port nelson 1 10

*Dividends paid by port nelson 1,950 1,850

Share Buy Back by port nelson - 12,500

Tasman District Council

*Dividends paid by port nelson 1,950 1,850

Share buy back by port nelson - 12,500

Nelmac

Services provided to port nelson 56 21

Accounts payable by port nelson 5 1

* net of imputation credits

3 8

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

Nelmac

nelmac is 100% owned by nelson City Council and is therefore a related party.

All Related Parties

there were no nil or nominal value transactions between the Company and related parties (2007 nil).

no inter entity debt has been forgiven or written off (2007 nil).

Directors

Mr A o patterson is a director of Cold Storage nelson ltd that leases land from the Company. the amount received from Cold Storage nelson ltd

was $415,755 for the year (2007 $408,745), and $217 was receivable at year end (2007 $nIl). the amount paid to Cold Storage nelson ltd was $nIl

(2007 $1,871) for the year, and $nIl was payable at year end (2007 $nIl).

Mr p M Schuyt is a director of eCn Group ltd from which the Company purchased eDI services. payments for the year to 30 June totalled $5,050.

(2007 $5,067) the Company owed $412 as at 30 June (2007 $400). Mr p M Schuyt is a director of express Couriers ltd from which the Company

purchased courier services. payments for the year to 30 June totalled $2,652 (2007 $1,503). the Company owed $75 as at 30 June (2007 $71). Mr p

M Schuyt is also an employee of new Zealand post ltd. the amount paid to new Zealand post ltd was $7,216 for the year (2007 $6,722), and $580

was payable at year end. (2007 $425)

key Management Personnel

Details of compensation paid to key management personnel during the financial year:

2008 2007 $000 $000

total remuneration to Key Management personnel 1,356 1,136

T O T A l 1,356 1,136

N O T E 2 0 : F I N A N C I A l R E P O R T I N G B y S E G M E N T S

port nelson operates in one industry and one geographical segment providing and managing port facilities, marine services, cargo handling

operations, and investment properties at the port of nelson.

N O T E 2 1 : I M P u T A T I O N C R E D I T S

Imputation Credits Available to Shareholders: 2008 2007 $000 $000

opening Balance 10,692 9,338

tax paid 3,401 3,176

Credits Attached to Dividends paid (1,921) (1,822)

C l O S I N G B A l A N C E 12,172 10,692

N O T E 2 2 : E V E N T S O C C u R R I N G A F T E R B A l A N C E D A T E

(2008) no significant events have occurred after balance date that require disclosure.

(2007) Subsequent to balance date port nelson entered into an agreement to purchase a number of properties and divest a number of other

properties with a single counterparty. this transaction resulted in the company obtaining freehold title to a number of strategic properties while

divesting a number of non strategic properties. Settlement was 31 July 2008.

the net effect of this transaction was that port nelson acquired an additional $2,887,000 of non current assets.

Registered Office 10 low Street, port nelson

po Box 844, nelson 7040

new Zealand

tel. (03) 548 2099

Fax. (03) 546 9015

info@portnelson.co.nz

www.portnelson.co.nz

Auditors Audit new Zealand, on behalf of the

office of the Auditor General

Solicitors pitt & Moore

Barristers and Solicitors

po Box 42

nelson 7040

J A levenbach

Barrister and Solicitor

po Box 35

nelson 7040

Simpson Grierson

Barristers and Solicitors

po Box 2402

Wellington 6140

Bankers Westpac Banking Corporation

po Box 643

nelson 7040

3 9

Board of DirectorsA o patterson Chairman

t B King

p D le Gros

p V lough Deputy Chairman and

Chairman Remuneration Committee

B A Monopoli

p M Schuyt Chairman Finance and Risk Committee

Secretaryp J pittar

Executive OfficersM J Byrne Chief executive officer

K M Barnett Human Resources and Quality Manager

R J Carter Infrastructure Manager

p n Francois Cargo operations Manager

p J pittar Chief Commercial officer

C J Shand tasman Bay Stevedoring Manager

R J Skucek Marine operations Manager

C e Williams Marketing Manager

D I R E C T O R y

M I S S I o n S t A t e M e n t

to operate the Company as a successful business providing cost efficient, effective

and competitive services and facilities for port users and shippers.

to provide for the present and future needs of the Company in ways that are

sensitive to people, use resources wisely, and are in harmony with the

environment of an export port.

10 low Street, port nelson

po Box 844, nelson 7040

new Zealand

tel. (03) 548 2099

Fax. (03) 546 9015

info@portnelson.co.nz

www.portnelson.co.nz