CENTRALINES LIMITED - LINES BUSINESS

Notes to the financial statements

For the year ended 31 March 2004

| | 2004
$000 | 2003
$000 |
|----------------|----------------|

Note 1:

(i) OPERATING REVENUE

• Network line rentals net of customer rebates | 6,399 | 6,762 |
• AC loss-rental rebates | 82 | 1,231 |
• Newly identified Assets | 272 | - |
• Customer contributions | 246 | - |
• Interest income | 182 | 257 |
  Total revenue | 7,181 | 8,250 |

(ii) OPERATING EXPENSES

• Audit fees | 36 | 29 |

• Auditors fees for other services | 7 | 7 |

• Fees paid to other auditors | 22 | 6 |

• Bad debts written off | - | - |

• Bad debts recovered | - | - |

• Depreciation |

  • Buildings | - | - |
  • Office and computer equipment | - | - |
  • Distribution system | 1,038 | 1,013 |
  • GIS | 25 | - |
  • Motor vehicles | 6 | 3 |
  • Plant, equipment and tools | - | - |
    Total depreciation | 1,069 | 1,016 |

• Directors fees | 85 | 85 |

• Donations | - | - |

• Change in provision for doubtful debts | - | - |

• Interest paid | 5 | 2 |

• Lease payments | - | 21 |

• Customer Discount | 484 | 1,430 |

• Cost of sales & other operating expenses | 3,793 | 3,612 |
  Total operating expenses | 5,501 | 6,208 |

Surplus Before Income Tax | 1,680 | 2,042 |

Note 2: Taxation

Taxation Reconciliation

• Accounting net operating surplus before taxation | 1,680 | 2,042 |
• Taxation at 33% | 554 | 674 |
• Plus tax effect of:
  • Non deductible expenditure | - | - |
  • Timing differences not recognised | (479) | (200) |
  • Permanent differences | 172 | 250 |
  • Prior year adjustment | (242) | 2 |
    Income tax (benefit)/charge for the year | (245) | 726 |

Income tax charge for the year comprises:

• Current taxation benefit/(liability) | 5 | 726 |

The Company has not recognised deferred taxation liabilities on cumulative timing differences of $2.5 million (2003 $3 million) as these are not expected to reverse in the foreseeable future.

Imputation Credit Account:

• Opening balance | 699 | 642 |
• Tax paid during the year | 1,056 | 127 |
• Tax refunds during the year | - | (33) |
• Resident withholding tax paid | - | 2 |
• Credits attached to dividends paid | (78) | (39) |
  Closing balance at end of the year | 1,677 | 699 |