Vector Limited

Electricity Lines Business

Statement of Accounting Policies

For the year ended 31 March 2005

Reporting entity

The reporting entity is the electricity lines business of Vector Limited and therefore the electricity lines business adheres to the accounting policies of the Vector group. Those policies as they relate to the electricity lines business are detailed below.

Vector Limited is a company registered under the Companies Act 1993. Vector Limited is an issuer for the purpose of the Financial Reporting Act 1993 and its financial statements comply with that Act.

These financial statements are prepared for the year ended 31 March 2005 of the electricity lines business activity of Vector Limited and are Special Purpose Financial Reports as defined in the Institute of Chartered Accountants’ “framework for differential reporting”.

All prior year comparative numbers are as disclosed for the electricity lines business activity of Vector Limited for the year ended 31 March 2004.

Statutory base

The financial statements have been prepared in accordance with the requirements of the Financial Reporting Act 1993 and the Electricity Disclosure Requirements 2004.

Measurement base

The financial statements are prepared on the basis of historical cost modified by the revaluation of certain items of property, plant and equipment as identified in specific accounting policies below.

The avoidable cost allocation methodology (ACAM) used for allocating revenues, costs, assets and liabilities between “lines” and “other” activities is in accordance with the Electricity Information Disclosure Handbook 31 March 2004.

Specific accounting policies

The financial statements are prepared in accordance with New Zealand generally accepted accounting practice. The following specific accounting policies that materially affect the measurement of financial performance, financial position and cash flows have been applied.

a) Comparatives

Where a change in the presentational format of the financial statements has been made during the period, comparative figures have been restated accordingly.

b) Acquisitions and disposals of an entity or business

Acquisition or disposal during the year

Where an entity or business becomes or ceases to be a part of the Vector group during the year, the results of the entity or business are included in the consolidated results from the date that control or significant influence commenced or until the date that control or significant influence ceased. When an entity or business is acquired all identifiable assets and liabilities are recognised at their fair value at acquisition date. The fair value does not take into consideration any future intentions by the Vector group. Where an entity or business that is part of the Vector group is disposed of, the gain or loss recognised in the statement of financial performance is calculated as the difference between the sale price and the carrying amount of the entity or the assets and liabilities of the business.

Goodwill arising on acquisition

Goodwill arising on acquisition of a subsidiary or associate represents the excess of the purchase consideration over the fair value of the identifiable net assets acquired. Goodwill is amortised to the statement of financial performance on a straight line basis over the period during which benefits are expected to be derived up to a maximum of 20 years.

Fees and other costs incurred in raising debt finance directly attributable to the acquisition of a subsidiary are recognised as part of the cost of acquisition within goodwill and amortised on a straight line basis over a period of up to 20 years.