Vector Limited & Subsidiaries

Gas Distribution Activities

Notes to the Financial Statements

For the year ended 30 June 2005

16. BORROWINGS (continued)

As at 30 June 2004

The debt / equity ratio of the gas distribution businesses has been apportioned to reflect the debt / equity ratio of the Vector group with any imbalance arising from the allocation process (ACAM) being recorded as an adjustment to debt. The resultant debt has been apportioned across all the debt instruments held by Vector Limited and NGC Holdings Limited as at 30 June 2005.

All borrowings are unsecured with all bank loans and medium term notes being subject to negative pledge arrangements.

Interest rates for all bank loans are floating based on the bank bill rate plus a margin. Bank loans are arranged through various facility agreements.

The Vector group has facilities with a total committed amount of $300 million which will expire in October 2008. Other facilities comprise a $400 million revolving cash advance and standby facility due to expire in November 2006 and a $250 million commercial paper programme. The working capital facility with a total commitment of $70 million is due to expire in October 2006.

Medium term notes - fixed rate NZ$ mature April 2007 and are shown at the value of proceeds received after deducting the discount on issue ($0.2 million) and adjusted for the amount amortised to 30 June 2005 ($0.1 million). The interest on NZ$ medium term notes is fixed at 6.5% per annum and is paid semi-annually.

Medium term notes - floating rate A$ mature April 2008 and April 2011. The interest on A$ medium term notes is paid quarterly, based on BBSW plus a margin.

Fixed interest rate bonds are unsecured, unsubordinated debt with a coupon rate of 6.81% maturing in March 2009.

Capital bonds are unsecured, subordinated debt and have a first election date of 15 December 2006. The interest as at 30 June 2005 is fixed at 9.75% per annum and is paid semi-annually. Following the quotation of Vector Limited’s shares on the New Zealand Stock Exchange and the issue of at least 24.9% of the total share capital of Vector Limited to persons other than the AECT, the interest rate on the capital bonds was reset to 8.25% per annum post balance date.

Private placement senior notes of US$15 million, US$65 million and US$195 million with maturity periods of 8, 12 and 15 years respectively were placed privately with US investors in September 2004 at a contract exchange rate of 0.6574 US$ for every NZ$.

Borrowings are classified between current and non-current dependent on repayment dates.

All covenants in relation to borrowings have been met for the years ended 30 June 2005 and 30 June 2004.

NGC Holdings Limited acquisition borrowings

To fund Vector Limited’s acquisition of NGC Holdings Limited, two bank loan facilities with a total committed amount of $800 million were raised. These were refinanced in October 2005.

In addition, pre-IPO equity securities were issued. Pre-IPO equity securities are subordinated debt with a total committed facility amount of $354.4 million. Vector Limited has repaid the pre-IPO equity securities subsequent to balance date.

17. CAPITAL BONDS

On 5 November 2002 Vector Limited issued 307,205,000 capital bonds for $307,205,000. The capital bonds have an initial term of four years from the date of issue. The capital bonds are convertible into Vector Limited ordinary shares in limited circumstances and have a principal amount of $1.00 each.

The capital bonds are unsecured debt obligations of Vector Limited, which are subordinated to all other creditors of Vector Limited, except the pre-IPO equity securities which rank below them, and are constituted by a trust deed entered into by Vector Limited and The New Zealand Guardian Trust Company Limited as trustee, dated 25 September 2002.