28 NOVEMBER 2008 NEW ZEALAND GAZETTE, No. 185 4805

VECTOR LIMITED & SUBSIDIARIES

GAS DISTRIBUTION ACTIVITIES

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 30 JUNE 2008

6. NOTIONAL RESERVES
   | | 2008 | 2007 |
   |------------------------------|--------|--------|
   | | $000 | $000 |
   | Balance at beginning of the year | 111,238 | 104,480 |
   | Net surplus for the year | 4,852 | 6,758 |
   | Balance at end of the year | 116,090 | 111,238 |

7. INTANGIBLE ASSETS
   | | COST / VALUATION | ACCUMULATED AMORTISATION | CARRYING AMOUNT |
   |------------------------------|------------------|---------------------------|-----------------|
   | | $000 | $000 | $000 |
   | 2008 | | | |
   | Goodwill | 167,869 | - | 167,869 |
   | Software | 10,286 | (7,415) | 2,871 |
   | Total | 178,155 | (7,415) | 170,740 |

8. PROPERTY, PLANT AND EQUIPMENT
   | | COST / VALUATION | ACCUMULATED DEPRECIATION | NET BOOK VALUE |
   |------------------------------|------------------|---------------------------|-----------------|
   | | $000 | $000 | $000 |
   | 2008 | | | |
   | Freehold land | 56 | - | 56 |
   | Distribution systems | 416,714 | (34,588) | 382,126 |
   | Plant, vehicles and equipment| 14,509 | (9,525) | 4,984 |
   | Capital work in progress | 15,540 | - | 15,540 |
   | Total | 446,819 | (44,113) | 402,706 |

Distribution systems assets acquired as a result of the acquisition of NGC Holdings Limited on 14 December 2004 were restated to reflect their fair value at that date. Distribution systems, distribution land and distribution buildings in the Auckland region were revalued in March 2006 to a total of $276.5 million in accordance with the group's accounting policies at that time before transition to NZ IFRS. These fair values plus subsequent additions and disposals up to 30 June 2006 have been deemed the historic cost of those assets on transition to NZ IFRS on 1 July 2006. There were no changes to the total carrying amounts of those classes of property, plant and equipment from that reported under previous NZ GAAP on adoption of these deemed costs.

Interest and other internal costs are capitalised to property, plant and equipment while under construction. Interest is capitalised against property, plant and equipment largely at a capitalisation rate of 8% per annum. During the year $0.5 million (30 June 2007: $0.2 million) of interest and other costs were capitalised.