4008 NEW ZEALAND GAZETTE, No. 159 29 NOVEMBER 2010

10. Financial Instrument Categorisation

TRANSPOWER NEW ZEALAND LIMITED LINES BUSINESS

| Current assets | Fair value through profit or loss | Hedge accounting | Other Liabilities
| Trade and cash equivalents | (hold for trading) | (fair value method)
| Cash and other receivables | | |
| Intercompany investments | Designated fair value through profit or loss | |
| Non-current assets (foreign currency shares) | (accounting mismatch) | |
| |
| Current liabilities | |
| Trade and other payables | Fair value through profit or loss
| Current portion of non current debt | |
| |
| Non current liabilities | |
| Bonds | Euro Medium Term Notes | |
| Euro Medium Term Notes | U.S. Private Placement
| Other - |
| |
| Derivative Liabilities | |
| Interest rate swaps | Cross currency interest rate swaps | Foreign exchange contracts - not hedge accounted
| Basis swaps | |
| Cross currency interest rate swaps | Foreign exchange contracts - hedge accounted |
| Foreign exchange contracts - not hedge accounted | |
| Foreign exchange contracts - hedge accounted | |

Fair Value Through Profit or Loss Accounting Mismatch

The Transpower Lines Business used the provisions in NZ IAS 39 that allow for the use of fair value through profit or loss on the basis of preventing an accounting mismatch or achieving accounting mismatch.

Hedge Commitments

The Transpower Lines Business hedges exposures arising from foreign currency fluctuations on certain foreign purchases through the use of forward exchange contracts. The "hedge commitment" represents the notional fair value movement on the commitment to buy the goods, i.e. before the goods or an invoice are received. The fair value of the derivative (forward exchange contract) is shown separately. Note that, although all forward exchange contracts used for economically hedging foreign purchases, not all forward exchange contracts are hedge accounted.

Foreign Shares

The Transpower Lines Business holds these shares as a result of acquiring farm for the construction of new transmission lines. When dairy farms are purchased, Fonterra shares are often purchased to enable the continued operation of the dairy farm. These shares are classified as available for sale because they do not fall into the other three categories of financial instruments. If they have not traded on an active market, there are no fixed payments associated with holding the shares and they are not held for short term profit making.