Vector Limited & Subsidiaries

Gas Distribution Activities

Statement of Accounting Policies

For the year ended 30 June 2005

Statutory base

The financial statements have been prepared in accordance with the requirements of the Gas (Information Disclosure) Regulations 1997.

Entities reporting

The financial statements comprise the gas distribution business activities of Vector Limited and its subsidiaries. Gas distribution activities involve the ownership and supply of pipeline function services for the distribution of gas.

The gas distribution businesses form part of the Vector group and adhere to the accounting policies of the Vector group. Those policies as they relate to the gas distribution businesses 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 consolidated financial statements for the gas distribution business activities of the Vector group are Special Purpose Financial Reports as defined in the Institute of Chartered Accountants' “framework for differential reporting”.

The financial statements are presented for the first time since the acquisition by Vector Limited of a majority shareholding in NGC Holdings Limited in December 2004. In accordance with the Gas (Information Disclosure) Regulations 1997, these consolidated financial statements have been prepared on the basis that the acquisition of 67.21% of NGC’s gas distribution business occurred at the beginning of the financial year (1 July 2004). The actual date of acquisition of this interest was 14 December 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 gas distribution and “other” activities is in accordance with the methodology prescribed in the Electricity Information Disclosure Handbook 31 March 2004.

Going concern

The financial statements have been prepared on a going concern basis which the directors believe is appropriate. All debts are an allocated portion of the Vector group’s debts which the directors believe will be paid as they fall due.

Specific accounting policies

The financial statements are prepared in accordance with the Gas (Information Disclosure) Regulations 1997. The following specific accounting policies that materially affect the measurement of financial performance and financial position 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. All comparative figures for prior years are as disclosed for the gas distribution business activity of Vector Limited excluding NGC’s gas distribution business.

b) Acquisitions and disposals of an entity or business

Acquisition or disposal during the year

In accordance with the Gas (Information Disclosure) Regulations 1997, where an entity or business becomes a part of the Vector group’s gas distribution business during the year, the results of the entity or business are included in the consolidated results from the beginning of the financial year that control or significant influence commenced. When an entity or business is acquired all identifiable assets and liabilities are recognised at their fair value at the beginning of the financial year in which the entity or business was acquired. 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.