29 AUGUST
NEW ZEALAND GAZETTE
3319

UNISON NETWORKS - LINES BUSINESS

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
For The Year Ended 31 March 2003

13 Reconciliation of Reported Net Operating Surplus After Tax With Net Cash Flows
From Operating Activities

                        2003        2002
                        $000        $000

Net Surplus 4,113 1,209

(Gain) loss on sale of property, plant and equipment (2) (58)
Amortisation 1,844 -
Debenture and working capital write-down - -
Depreciation 13,556 6,709

(Increase) decrease in receivables and prepayments (4,881) 1,525
(Increase) decrease in inventories (318) 34
Increase (decrease) in accounts payable, accruals
and employee entitlements 3,964 917
Decrease (increase) in electricity price hedging instruments - -
(Decrease) increase in taxation payable (1,683) (920)

Net cash inflow from operating activities 10,638 8,265

14 FINANCIAL INSTRUMENTS

a) Interest rate risk

The Company has a comprehensive treasury policy approved by the Board of Directors to manage the risks of financial instruments.

The Company manages interest rate exposure in accordance with treasury policy by hedging no less than 90% of all borrowings with interest rate hedge instruments.

The weighted average rates of interest rate swaps are as follows:

                        2003        2003        2002        2002
                        %           $000        %           $000

Maturing in less than 1 year 5.90% 24,000 - -
Maturing between 1 and 2 years 6.11% 24,000 - -
Maturing between 2 and 5 years 6.38% 72,000 - -
Maturing after 5 years 6.60% 60,000 - -
180,000 -

The mark to market valuation of these hedges at 31 March 2003 is $177,536,000 - 2002 ($0)

b) Credit risk

Financial instruments which potentially subject the Company to credit risk principally consist of bank balances and accounts receivables. No collateral is held on these amounts.

Maximum exposure to credit risk is the amount stated in the Financial Statements and is net of any recognised provision for losses on these financial instruments.

c) Concentration of credit risk

The Company has exposure to two electricity retailers that may account for 70% of accounts receivables. To minimise this risk, the company performs credit evaluations on all energy retailers in conjunction with the contractual requirements contained within the use of systems operating with these parties. A bond may be required where deemed necessary. At balance date one request to secure such a bond has been made.

d) Fair values

The methods and assumptions used are that carrying amounts in the Financial Statements reflect the estimated fair value of the financial instruments including receivables, bank and investments, accounts payable and term debt.

As there were no material investments at balance date, the average pre-tax interest rate on investments at balance date was 0%.

e) Currency risk

The Company enters into forward exchange contracts for any transactions conducted in currency other than the New Zealand dollar to eliminate the effects of any currency fluctuations. At balance date no forward exchange contracts were in operation (2002:nil)