USSCO Annual Report 1987

anrcnrhippinggrcuplimitedAnnual Report1987

rUFIeetListas at October, 1987.l Deadweight TonnesShips Managed by Union Shipping New Zealandfor the New Zealand Oil lndustryfor Tasman Pulp and Paper Company Limitedm.v. Tasman Enterprisem.v. Tasman Venturefor the New Zealand Department of Scienlific and lndustrial Besearchd.e.r.v. RapuhiaLegendm.v. Motor Vessel d.e.v. Diesel Electric Vessel g.t.e.v. Gas Turbine Electric Vesseld.e.r.v. Diesel Electric Research Vessel*Chartered8,50&8,453COVERUnion House, the head office of the UnionShipping Group in Auckland, New ZealandLoading boxes of kiwifruit at the port of MtMaunganui.The bridge of the coastal oil tanker Taiko.lJnion Australla's Eass Stralt Service ship,Seaway Melbourne.

UContentsThe Year's HighlightsDirectors' ReportManaging Director's ReviewAuditors'Report13Statements of Profit and Loss14Balance Sheets15Statement of Accounting PoliciesNotes to the Financial StatementsStatement of Changes in Financial PositionFinancial Records24Group DirectoryKiwifruit for Japan being loaded by New Zealand Stevedoring atMt Maunganui.

tUAnnualReport 1987AlternatesF. W. Millar, CBEA. Gibbsl. A. l. GibbsR. J. HoyW. T. Jonesl. Thomas, CMGB. S. ColeW. T. JonesJ. G. FelgateDireclorsSir Peter Abeles(Chairman)Sir Russell Pettigrew(Deputy Chairman)J. N. Keegan(Managing Director)T. J. N. BeyerR. A. Brierley (to 7.10.87)S. J. Cushing (from 7.10.87)J. R. Cribb, OBER. H. FisherO. T. HanniganJ. B. Horrocks, CBE, MCR. A. OwensSir lan PotterAuditorsArthur YoungBankersBank of New ZealandSolicitorsRudd Watts & Stone,Auckland and WellingtonRegistered Ollice12th Floor,Union House,36 Quay Street,Auckland,New Zealand(Postal Address: Private Bag,Auckland).The Year'sHighlightsin BriefGroup TurnoverNet (Loss)/Profit after TaxationShareholders' FundsPercentage of Shareholders' Funds to Total AssetsEmployees:Number of Permanent EmployeesWages and Salaries:Paid to Permanent and lndustry EmployeesResults:Annual Report and Audited Accounts normally published November.1987$250,616,000(99s,000)60,629,00035Vo1,04590,409,2731986$261 ,1 1 0,000(2,181 ,000)57,761,00041o/o1,1'1886,401,124

An aerial view of Sydney Harbourwith Union Rotoiti berthed at theCompany's White Bay Terminal, onlhe left of the picture.:.,-.ii\" 1::;r,i',. .':;i. -.':l;-i'..';-..,:.;i!..;.\" -'. 5r\":- : :-,/:=; t1!;,i::r,:::L:

The Group sustained a loss for the yearunder review of $995,000 comparedwith a loss of $2,181 ,000 in the yearended 30 June, 1986. Group turnovertotalled $250,616,000 compared with$261 ,110,000 in the previous financialyear, a reduction of $10,494,000The results are indicative of the difficulttrading srtuation which faced the Groupin all its areas of activity. Continuingdepressed economic conditions in somesectors, increasing competitivepressures, and delays and stoppagesarising rom industrial disputes f alladversely affected volumes, revenuesand margins.A service industry such as transport isextremely sensitive to the process ofchange because it interfaces with allsectors of the economy,The Group is responding to thestructural changes in the economy byachieving maximum efticiency and costeffectiveness in all activities.Union Steam ShipCompany ofNew ZealandLimitedThe levels of competition which havebeen experienced in recent yearscontinued throughout the last inancialf year, with existing operators increasingUnion House, the head off rce of theUnion Shipping Group rn Auckland,New Zealand.#ffiffi'.,ffi#ffiffi,'#==mkrar==ax;#Il;AEE-lH,XtEtiiElirl=tu=2ry;*t*Y,\"aElit;€lEzlti:41417ffiDirectors'Reporttheir capacity. As a consequence,efforts were directed towards retainingmarket share and in this, the Companywas laroely successful A degree ofrationalisation has been achieved as aresult of agreement between AustralianNational Line, the New Zealand Lineand the Company through a conlainerslot charter and exchange agreemenl.This has proved beneficial to the threeparties in containing costs and moreefficiently utilising available reightf space. The benef its have also flowed onto customers.The bulk liner trade has seen asubstantial change in terms of marketoonditions in that the New ZealandWheat Board ceased operations duringthe financial year and all imports ofwheat to New Zealand are now beingundertaken by the milling companies.This has led to larger parcels of wheatbeing imported as compared with thelevels when imports were in the handsof the New Zealand Wheat Board. TheCompany continued to participate in thecarriage of a proportion of NewZealand's raw sugar imports and inother bulk raw .naterials.The ralionalisation of the fleet referred toi$r.r@ii*e:1.E$jt:,rlirfr:i?.ri.,An impressive vrew from the bridge ofthe oil tanker Taiko berthed at MarsdenPoint, Whangareiin last year's annual report has beensubstantially accomplished and theavailable tonnage now matches thecargoes offered. ln the presentdepressed market conditions, it is notanticipated that there will be anYsignificant market growth in the nextfinancial year.1li EE j:[BrffiI -:rgzrfflI lsgexerff=li,*l1ffimG

Union Steam ShipCompanV ofAustralia PtyLimitedThe Bass Strait trade has continued togive cause for concern due to the extentof overtonnaging in the trade and theprice cutting being undertaken bycompetitors in order lo increase orretain market share. The directors havebeen concerned at the ultimate resultand long-term effects of suchcompetition. lnevitably such activitiesmust lead to shipowners finding they areunable to continue trading unprofitably.The Company has co-operated indiscussions with interested parties toestablish a measure of stability in thetrade. This has partly been achieved in ajoint venture with William Holyman &Sons who have withdrawn their vessel,Mary Holyman, from the trade. lt is theCompany's desire to maintain its linkwith Hobart and the continuation of BassStrait services which provide the level ofservice to customers' requirements andwhich also provide adequate return oncapital employed sufficient to allowreplacement of tonnage in due time.Union MaritimeServices LimitedThis Company has operatedsatisfactorily during the year but not withthe same profitable results as inprevious years. lndustrial disputes onthe New Zealand waterfront over wages,gang strengths and the need to closeJulie Ferguson with the UnionShipping roup's monitor equipmentG for the Reuter's money service.the Company's cargo terminals atAuckland, Wellington, Lyttelton andDunedin all contributed to the lowerreturn.With the closure of some terminals lnNew Zealand, there have beensignificant cost savings but theCompany, together with other waterfrontemployers and with the support of theGovernment, is seeking furtherimprovements in efficiency on thewaterf ront.The Government's proposals for thecorporatisation of the trading activities ofHarbour Boards have yet to be seen indetail. The Directors believe that theprogramme, to be effective, shouldprevent the domination of waterfrontservices by Harbour Boards underanother guise and should continue toallow for competing stevedorrngservices from the private sector.The acquisition of Owens lnvestmentsLimited's stevedoring actrvities at NewZealand ports will contribute markedly tothe future profitability of the Company.The settling down of the amalgamatedinterests, known as the New ZealandStevedoring & Wharf ingering CompanyLimited has been accomplished and thenew company trading is profitably.Union lndustriesLimitedLotus Yachts, the Company's boatbuilding venture, continued to operatebut at lower level a of production. Sincebalance date, negotiations have beencompleted, and the business sold. Allother elements of Union lndustries'activities have now been sold off orclosed down.DirectorateMr W J. Sandman, a Director appointedby New Zealand Maritime Holdings diedin September, 1986 and with his passingthe Board lost the services of a valuablefriend and colleague whose interest andparticipation in the Group's affairs issadly missed.As a result of shareholding changes, MrC. G. Skeggs, now Sir Clifford Skeggs,retired from the Board in October, 1986.Opportunity was taken at the Novemberl]Frozen meat being loaded into a container for lran by New Zealand Stevedoringpersonnel.

1986 Board meeting to express theBoard's appreciation for his work as aDirector and his significant contributionto the Group since he joined the Boardin 1972. Directors were delighted tolearn of Sir Clifford's knighthood in theJune 1987 Queen's Birthday HonoursList.New appointments to the Board were MrD. C. Shelton (Owens lnvestmentsLimited) and Mr T J. N. Beyer (Brierleylnvestments Limited) who hadpreviously served in the capacity ofAlternate Direclors.Since balance date, Mr R. H. Fisher(Owens Investments Limited) hasreplaced ti/r D. C. Shelton, and Mr S. J.Cushing (Brierley lnvestments Limited)Operating Union Rotoiti at Aotea Quay, Wellingtonhas replaced Mr R. A. Brierley. BothDirectors made a valuable contributionduring their time on the Board. Furtherappointments were those of Mr W T.Jones (Owens lnvestments Limited) andMr A. Gibbs (Brierley lnvestmentsL Limited) as Alternate Direclors.DividendsThe Directors have no recommedationin respect o{ a dividend in this financialyeat.AuditorsUnder the provision of the CompaniesAct 1955, the Company's Auditors,ArthurYoung, continue in office.-&s.,ii,;:;r:i;:.:*: t !:.iiajFuture Prospectsln the competitive environment in whichthe Group presently operates, efficiencyand productivity become the hallmarksof success. The Group's management ispresently progressing a restructuring ofall Group activities for the purpose ofachieving economies and improvingoverall efficiency. Directors are satisfiedthat the changes being made willenhance productivity prospects andprovide the Group with a sound base forfuture growth and development.For the Directors:'E. H P. Abeles, ChairmanR. H. Pettigrew, Deputy ChairmanAuckland1 October 1987

At the port of Hobart, Tasmania, reels of paper from the Australia Newsprint Millsbeing loaded on a ship of the Seaway Service for Australian mainland ports.;;:1'.: ,+::'!::': L:,a- : ::i:ai a: 4 :; :..:r', :

lntroductionThe shipping industry, internationallyand locally, conlinues to experiencechronic problems of overtonnaging,depressed rate levels and minimal cargogrowth. These issues have asevereimpact on established companieswhose infrastructure has been geared tomeet different demands. Only those whohave resolutely applied themselves tothe process of change are surviving.The financial results for the past yearare again disappointing if measuredagainst our aspirations of 12 monthsago. Our achievements, in terms of thechanges we have adopted to ouroperating practices and our marketingphilosophies, have been substantial.They have met resistance in somecases and the costs arising fromindustrial disputes have been high.We still have a lot to achieve in thisprocess of change but we are now rnmuch better shape to play a profitablepart in a depressed industry and moreso as the industry inevitably emergesfrom its doldrums.There is still a need to eliminate some19th century attitudes and practices onboard vessels, and costly work practicesand manning levels on our wharves.It is disappointing that efforts to achievereform at sea and on the waterfronthave not yet produced the resulls theindustry and the country so badly needs,nevertheless, it is encouraging thatsome progress has been made,particularly on the waterfront.There is the need for firm resolve topursue the path of reform.The managing director of the UnionShipping Group, John Keegan.UManagingDirector'sReviewCargo lifting equipment operated byNew Zealand Stevedoring in the portof Auckland.rncrease in overall trade volumes.However, there was a substantial shif! indirectional volume as westboundvolumes contracted and eastboundvolumes increased to an exlent thatpresent volumes are almost balanced ineach direclion.Competition between shippingcompanies continues to be intensive,with downward pressure on freight ratesprevailing throughout the year.The introduction of Union Endeavour asa replacement for Union Sydneyenabled the company to operate anefticient and effective servicethroughout July to December whichgained the strong support of customers.Upon the expiration of the charter forUnion Dunedin, the company electednot to replace this vessel and instead toenter into a space agreement withTranztas, the consortium operating theAustralian National Line and theShipping Corporation of New ZealandLimited transtasman services. ThisUnion Steam ShipCompany ofNew ZealandLimitedTasman LinerThroughout the year there was a steady

decision reflected the over-tonnaging inthe trade and the need to reduce bothsurplus capacity and underlying shipcosts and was implemented rn lateDecember 1986.Coinciding with the implementation ofthe space agreement with Tranztas, thecompany closed the Auckland SeacargoTerminal which resulted in a series ofindustrial problems affectingstevedoring, berth availability and shipproductivityThese problems prevailed throughoutJanuary to May and were exacerbatedby other industrial phoblems and enginebreakdowns on Union Rotoiti. As aresult, during January to June, companyvessels were operating on extendedvoyage times with a reduction in shipproductivity of 35%.The consequential effects on marketshare and costs were disastrous andimpacted severely on profitability duringthe year.More recently, industrial problems haveeased to an extent that the company isnow regaining ground.The next 12 months will be achallenging period with prospects offurther competition and capacity in thetrade and the company will be givingpriority towards maintaining industrialstability which, if achieved, will enableus to maintain a strong and profitableposition in the trade.Bulk Trades:Reduced demand for small parcel sizesresulted in the disposal of Ngapara earlyin the year and Union Auckland andln the sophisticated control room ofUnion Endeavour are fourth engineerRobert Chapman and electricd officerLarry Brierly.Ngahere were traded throughout theyear in the transtasman and Pacificlsland areas.New Zealand importers of wheat havemoved quickly towards the requirementfor larger parcel sizes which hasresulted in a virtual elimination of smallparcel cargoes thus making Ngaherealso surplus to requirements. Thisvessel has been sold since the year'send.The increased parcel sizes haveattracted new competition in the bulktrades and as a result, there has beenContainer Equipment:The standardisation of containerequipment on to the ISO module isalmost fully in place and during the yearthe company was able to build up itsfleet of container equipment through acombination of master lease andpurchase agreements at very favourablerates.Two oil drilling support ships, LadyLorraine and Ravensturm, in the Port ofTaranaki. They are manned andmanaged by New Zealand OlfshoreSerylces.t-i;=iii:-.i';ds::rr rNew Zealand:,&1,i-'1downward pressure on freight rates.Chatham lslands:Holmdale continued on charter to theGovernment throughout the year. As thisvessel is now approaching the end of itseconomic life, a replacement vesselmust be identified in the near future.In this regard, the Government isreviewing their requirements for theChatham lslands and the company hassubmitted proposals to the Governmentfor a replacement vessel to service theChatham Islands as well as, possibly,the Cook lslands.LimitedDuring the 1986/87 financial year, NewZealand Offshore Services operated anumber of vessels, both chartered andmanaged, in support of all the drillingprogrammes that took place in NewZealand's offshore exploration areas.The beginning of the year saw Lady9Offshore Services

Vera chartered from Australian OffshoreServices working with the Jack Up Rig,JFP 11.Later Lady Lorraine and Lady Penelopewere brought in under charter from thesame owners to work the JFP 11 on anew contract.As this contract drew to a close, weobtained a contract to manageRavensturm and Pacific Shogunsupporting Zapata Arctic which drilledthe Maui delineation wells.On completion of this programme, athe middle of June. Just prior to theirlaying up, we obtained a contract to mantwo sister vessels Smit Lloyd 109 and111 for a one well programmesupporting Zapala Arctic. Thisprogramme finished at the end of July.It is antlcipaled that during next year,two or three more wells will be drilled byTrans Canada Pipelines using the JFP11, and up to two further wells using asemi-submersible rig for other operators.NZOS intends lo pursue such workvigorously both now and in the future.All gears have been renewed. Further, toreduce stress excitation, a modifiedvibration damper has tjeen fitted to eachengine.Union Endeavour has continued tooperate reliably. During the year, theship's domestic water supply system,which had developed corrosion. wasrenewed.Discussions have continued throughoutthe year and no progress has beenmade with employee organisationstowards a reduction in manning levelsaboard ships.Recognising the increasing age of theconventional bulk carrier UnionAuckland, consideration is being givento a suitable replacement vessel.Four coastal tankers, managed andoperated on behalf of the New ZealandOil Consortium, two specialised pulpand paper carriers on behalf of TasmanPulp & Paper Co. Ltd and a marineresearch vessel on behalf of theDepartment of Scientific & lndustrialResearch have all performed efficientlythroughout the year.Union Steam ShipCompany ofAustralia PtyLimitedThe trading conditions in the Bass Straittrades to Northern Tasmania and toHobart have seen intense competitioncontinue throughout the financial year.There were, at the beginning of the year,JFP 11 drilling rig under tow into the Portof Taranaki by Lady Penelope and LadyLorraine. These two support shrps aremanned and managed by New ZealandOff shore Services.nr. _rial::Union Australia's Bass Slrall service ship,Seaway Melbourne.contract was obtained to manage theseismic survey vessel Western Pacificwhich was brought in to carry out urtherf seismic surveys following the promisingoil shows from the second JFP contract.There followed a short period ofinactivity following which we obtained acontract to manage Smit Lloyd 104 and105 again working with the JFP .I 1 on acontinuation of the previous programme,resulting in promising oil shows.These vessels were laid up in Nelson inIOFleet DivisionThe Company's fleet has operated well.However, some unusual technicalproblems have occupied the FleetDivision during the year.The re-engined Union Rotoiti hasexperienced timing gear failuresresulting in extensive damage to oneengine involving its removal ashore forre-construction. The source of theproblem appears to relate to highstresses locked into the material of thecamshaft intermediate gear drive wheelsduring hardening upon manufacture.

five operators providing services out ofnorthern Tasmanian ports and Hobart tothe mainland. The trade wasconsiderably overtonnaged and intensecompetitron to attract cargoes existedbetween all operators.The Company was able to maintain itsshare of the market through Hobart.Nonetheless, the operators to thenorthern coast ports endeavoured toattract Hobart cargo to their services bya variety of marketing ploys.During the year, there have beendiscussions with the principal operatorin the Bass Strait trade, AustralianNational Line, with a view torationalisatron of services.While agreement in principle for such adevelopment was reached between theCompany and ANL, the necessaryapproval of the AustralianCommonwealth Trade PracticesCommission was not forthcoming.The question of lhe Commission givingits approval is still under considerationfollowing urther f discussions betweenthe parties and the Commission.ln the interim, ANL have withdrawn oneship from the trade and our companyhas merged its interests in a jointventure with William Holyman & Son swhose vessel, Mary Holyman,has been withdrawn from the trade.As a consequence of this merger ofinterests, the Company's vessels havenow extended their services to Adelaidefrom Hobart as well as to Melbourne andSydney and have included the northcoasl porl of Burnie in their voyageprogrammes.The Company's terminals at MelbourneCKD Nlssan cars from Japan beingunloaded in Auckland by NewZealand Stevedoring.and Sydney have suffered from thedownturn in transtasman cargoes.However, the terminals, including that alHobart traded profitably, but not at thelevel which had been forecast at thebeginning of the year.Union MaritimeServices LimitedThe Company had its most difficult yearsince it was established in 1981 andfaced major challenges.Senior management were involved inthe Government's Ports lndustry Reviewwhlch has highlighted the need forchange in the waterfront industry.Similarly, the Company has recognisedthe need for change in its ownoperations.Agency:Revenue was at lower levels thanprevious years, principally due to thereduction in earnings from transtasmanliner agency work.There were also reduclions in agencywork in other areas, all of which calledfor a lowering of costs and greatereff iciency.There were studies made on thepossibility of rationalisation in the shipagency area including a merger withother rnterests. While somerationalisation is being progressed, nomerging of interests has beenaccomplished to date.Stevedoring:The Division entered into discussionsearly in the year with the OwensUnion Maritime Serylces is handlingagent for Air New Zealand flights inTonga.lnvestments Limited subsidiary, SeaportOperations Limited. The partiesultimately agreed to a merger whichbecame effective on 1 November 1986.The rationalisation of stevedoringactivities at each port was beneficialand the new and much stronger NewZealand Stevedoring & WharfingeringCompany Limiled is able to provide animproved range of services to its

customers. The changes introduced arein line with those being advocated byGovernment and recommended in thePorts lndustry Review.During the financial year, the Companyhas again handled the important meatcontracts to lran and USSR and has hadmajor involvement in the loadingprogrammes for New Zealand applesand kiwifruit.ln the latter area, the Company wasinvolved in the research anddevelopment of new handling methodswhich included the supply of specialisedpallet loaders.Terminals:During the year, the decision was takento discontinue terminal operationsfollowing management's inability tonegotiate acceptable reduced manninglevels.This has had a major impact on the styleof stevedoring operations with Companyvessels now being stevedored on aconventional basis at common userberths. The exception is MountMaunganui where the Companymainlains an efficient terminal withrealistic manning levels.Travel:The investment in Thomas Cook (NZ)Limited continued to return acceptableprofits whilst the Company's remainingtravel activities were profitable but at alower level than budget. This wasprincipally due to the poor results fromRarotonga following the severehurricane damage to tourist plant.The Company's subsidiary, SouthPacific Passenger Services (Cooklslands) Limited successfully set up thegeneral agency functions for Cooklslands lnternational Airline which is nowmaintaining weekly services betweenRarotonga, Auckland and Sydney.UnionShipping GroupLimitedprovided exchange gains on offshoreloans and lowered the costs of offshoreoperating costs.Data Processing:The IBM computer network is wellestablished and provided 99% systemavailability to users. Attention during theyear has been directed at improvedefficiencies in accounting systems andlmproved information in the freight andThomas Cook (NZ) Ltd, 49 percentowned by the Union Shipping Group,has two locations in DowntownAuckland.This is involving changes inmanagement's structure, the eliminationof inefficient work practices and thedisposal of activities which are notclosely associaled with the Group's corebusiness.A significant step in this re-organisationhas been the decision to transfer theFleet Division of Union Steam ShipCompany of New Zealand Limited toAuckland so that the activities of theCommercial and Fleet Divisions may bemore closely integrated.The decision to cease working through:}:tthe Group's own terminals has alreadyshed a significant sum in fixed costs andwith the effort to achieve more efficientstevedoring operations in New Zealandand Australia, there should be significantsavings in Group stevedoring cosls.The managements of Group companiesare confident that the changes instructure and in methods of operationwill return Group companies toprofitability and provide staff with thesatisfaction of working for a Groupwhich is ready to expand its services.J. N. Keegan,Managing DirectorSeptember, 1987Finance:During the early part of the year, UnionMaritime Services Limited made a $12million redeemable preference shareissue, the proceeds of which were usedprincipally to repay various term loans.The effect of the unacceptably high NewZealand unding f costs during the yearwas partially offset by low offshorefunding costs and the benefit of theredeemable preference share issue.The strengthening New Zealand dollarl2equipment syslems.The use of personal computers hasincreased for specialised reporting inareas such as insurance, stevedoringcontracting and ancillary accountingfunctions. This growth is expected tocontinue, improving the availability andpresenlation of information by linking thepersonal computers with the centralprocessor.A Forward Look:The Group recognised that to achieveprofitability, there must be further costreductions associated with improvedefficiency and in this year furtherrationalisation and re-organisation of theGroup is proceeding.

UAuditors'ReportARTHURVOCHARTERED ACCOUThe MembersUnion Shipping Group LimitedWe have obtained all the.information and explanations that we have required. ln our opinion proper accountingrecords have been kept by the company so far as appears from our examination of ihose recdrOs.ln our opinion, according to the best of our information and the explanations given to us and as shownby the said records, the financial statements on pages 141o21 are properly drairn up so as to give, underthe historical cost convention varied by the revaluation of certain fixed assets, a true and fair view of thestate.of the company's affairs as at 30 June 1987 and the results of its business for the year ended onthat date.We have also examined the group financial statements on pages l4to22with the audited financial statementsof the companies dealt with thereby.ln our opinion, the group financial statements have been properly prepared in accordance with the provisionsof the C_ompanies Act 1955, and give, under the historical cost cbnvention varied by the revaluation ofcertain fixed assets, a true and fair view of the state of affairs, the changes in finaniial position and theresults of the business of the company and its subsidiaries dealt with thereby so far as concerns membersof the company.According to such information and explanations the balance sheet and the group financial statements givethe information required by the companies Act .1955 in the manner so require?.4{L#AucklandNEW ZEALAND \"I28 August 1987aooUNGNTANTS

UStatements ofProfit and LossFor the Year Ended 30 June 1987INCOMEEXPENDITUREOPERATING (LOSS)/PROFIT before taxationTaxation (charge)/creditOperating (loss)/profit after taxationExtraordinary (loss) / prof it(Loss)/profit after extraordinary item(Profit) attributable to minority shareholdersNet (loss)/profit before share of associatedcompanies profitsShare of retained tax paid profit of associatedcompaniesNET(LOSS)/PROFTTRetained profits from prior yearsAVAILABLE FOR APPROPRIATIONTransfer to capital reserveLoss on translation of overseas assetsPreference share dividend due to minorityshareholder in subsidiary companyGoodwill written offRETAINED PROFITS carried forward14,07918318324,55sNote12rttIIIiIUNION SHIPPING GROUP LIMITEDAND SUBSIDIARY COMPANIES1987$ooo2s0,616251,970(1,354)(32)(1,386)(6t )(1,447)(e)(1,4s6)461(ee5)24,55523,560349461,313567GROUP1986$000261,110268,601(7,4e1)6,229(1,262)(1,558)(2,820)PARENT1987$ooo12,06112,085(24\"(24).20718314,07914,26214,2621986$ooo12,5026,5995,903(2,674)3,229(3,526)(2e7)(2e7)(2e7)14,37614,079(2,820)639(2,181)28,59926,4181,695168_4_&.l4

UNION SHIPPING GROUP LIMITEDAND SUBSIDIARY COMPANIESASSETSCURRENT ASSETSCash at bank and on depositAccounts receivablePrepayments and stocksTOTAL CURRENT ASSETSINVESTMENTSGOODWILL ON CONSOLIDATIONDEFERRED TAXATIONFIXED ASSETSFleetProperty and equipmentTOTAL FIXED ASSETSLIABILITIES AND SHAREHOLDERS' FUNDSCURRENT LIABILITIESBank overdraft and short term borrowingsAccounts payableSecured loansUnsecured loansTOTAL CURRENT LIABILITIESTERM LIABILITIESDEFERRED TAXATIONSHAREHOLDERS' FUNDSAuthorised capital issued and fully paid up24,000,000 ordinary shares of gl eachCapital reserveAsset revaluation reserveRetained profitsSHAREHOLDERS IN SUBSIDIARY COMPANIESRedeemable preference shares issued bysubsidiary company, redeemable July lg9'lShare premium reserveMinority share of retained earnings in subsidiarycompanyCONTINGENT LIABILITIES AND CAPITALCOMMITMENTSAs at 30 June 1987NoteGROUP1986$ooo7,46125,4678,78541,7133,5835,957s0,83739,27490,111141,364PARENT1986$00010,81720,07611331,00625,4281tu3412,0005,43517,43539024,000252814,07938,60956,434BalanceSheets1987$ooo1987$ooo563,67'l33,4299,01746,1173,8931,1335,81267,50049,486116,986173.94118,75247,43712,1514978,38919,5403,28124,O002,05313,29121,28560,6291211,98810212,102173,94112,13642,0886,3154660,58519,7193,20624,0001,7047,50224,55557,7619393u,36!43,72621243,93825,428uruo5,154_11,520_13,850201734,617'1,11124,O002s2814,26238,792_11,520.78I10111213131314'151618The attached notes form part of the accounts and should be read in conjunction lhereto.For and on behalf of the Board.lussgll H. Pettigrew, Deputy Chairman and DirectorJ. B. Horrocks, Directorl5

rUNION SHIPPING GROUP LIMITEDAND SUBSI DIARY COMPANI ESStatement ofAccounting PoliciesFor the Year Ended 30 June 1987General Accounting Policies:Tlre general accounting principles recognised as appropiate for the measurement and reporting of profit and financial positionon an historical cost basis are consistently followed by the company in the preparation of its accounts except that certainland, freehold and leasehold property are included in the balance sheet at valuation as noted below. Accrual accounting is usedto match revenue and expenses and reliance is placed on the fact that the company is going concern.a Particular Accounting Policies:The following particular accounting policies have been applied:Consolidation ol Accounts:The group financial statements are prepared using the purchase method of consolidation and incorporate the accounts ofthe parent company and all significant subsidiary companies. All significant inter-company transactions are eliminated onconsolidation. Significant subsidiary companies are:Union Steam Ship Company of New Zealand LimitedUnion Steam Ship Company of Australia Proprietary LimitedNew Zealand Offshore Services Limited - 600/o ownedUnion Maritime Services Limited:Union Stevedoring Services Limited - 500/o owned (associated)Union Citco Travel Limited - 51o/o ownedNew Zealand Stevedoring and Wharfingering Company LimitedUnion ndustries LimitedI Union Merchants LimitedUnion lndustrial and Marine LimitedDiver Services lnternational LimitedThe interest in associated companies is accounted for by the equity accounting method.Valuation ol Assets:Fleet is valued at cost less accumulated depreciation. Cost includes interest charges incurred during constructiondelivery costs of company-owned ships. Cost also includes modifications carried out on chartered ships.Land and buildings are revalued annually at the discretion of the directors to 85 per cent of market valuation onof reports by independent registered valuers. Revaluation increments are taken direct to reserves.Plant and equipment is valued at cost less accumulated depreciation.lnvestments are valued at the lower of cost or market value.Stocks fuel and stores are valued at the lower of cost or market value, with cost being determined using theout\" and \"weighted average\" methods.in firstDepreciation ol Fixed Assets:Fleet is depreciated on cost, less residual value, from the time of entering service, on a straight line basis over estimateduseful life. The estimated useful lives of roll-on/roll-off ships are 15 to 20 years and for conventional ships 20 years. Modificationcosts for chartered ships are depreciated on a straight line basis over the terms of the charters.Land and buildings situated in New Zealand are not depreciated in the profit and loss statement as any reduction in valueis reflected in the annual revaluation increment. (Refer valuation of assets accounting policy.)Plant and equipment is depreciated on a straight line basis over estimated lives of 7 to 10 years.Chartered Ships:The group charters ships from various owners. Where there is a delivery voyage to New Zealand at the commencement ofthe charter and a redelivery voyage at the conclusion of the charter, the costs are provided and amortised over the termof the charter.l6and initialthe basis

yfl_ol.,l SHtPPtNG GROUP LtM|TEDAND SUBSIDIARY COMPANIESUStatement ofFor the Year Ended 30 June iggTForeign Currencies:fl?:,;lTil:i:[1ff#3iffi,??f\"?:H\"\":;l\"T;r\"fl: flL':i,:?#:a7,,T. its New zeatandsubsidiaries denominated inProfil Recognition:Profit from ships trading is accounted for on a completed voyage basis.Taxation:Taxation charged aoainst profrts for the year includes both current and deferred laxation.ueterred laxation' which is catcutaieo';\":i;; riaoirity meino-o;i;;i.;. trom umounis of income or expenditure decrared fortaxalion purposes;p period! oiti\"i\"nilro, tnol\" in *6i\"nl'n\"v J,J'i\"\"rrr rnitn i. in\" iir\".\"iuiJtrt\"r\"nt.. By recognising thesel[i'#fl',:TiiSii;,ili\"liXiJfifirp,,\"jJ,.*:\"?:.;,.i' i' iiif?v [,li& to in' p.rit. ,frf-,t?ol'Lo,ses are tax erre-ct accountedFinance Leases:The group is the owner of vessels and certain .plant and equipment under finance leases, thattransfer all the risks and rewards ot o*n\"rin'ipio the lessee.Changes in Accounting policies:There have been no rig;iri\"ani changes in accounting poricies during the year.is leases which substantiallyUnion Endeavour berthed atA uckland's B led is loe Com plex.Policies

UNotes to theFinancial StatementsFor the Year Ended 30 June 1987NOTE 1. INCOMETrading operationsOther investmenl incomeNOTE 2. EXPENDITUREGeneral operating exPenditurelnterest on fixed term loanslnterest otherDepreciation of fixed assetsDirectors'feesDirectors' retiring allowanceAudit feesNOTE 3. TAXATIONThe prima facie taxation charge isreconciled to the taxation charge providedin the accounts as follows:Pre tax accounting (loss)/Profit(Minus) /plus permanent differencesTax credit/(charge) calculated at 48 centsin the dollar ( 1986 - 45 cents in thedolla0Prior period adiustmentsChange in tax rate from 45 cents to 48cents (Australia 46 cents to 49 cents)Losses not tax effect accountedOther adjustmentsTax (charge)/creditTotal estimated Australian and New Zealandtax losses carried forward for utilisation infuture years.NOTE 4. EXTRAORDINARY (LOSS)/PROFIrSurplus on sale of branches and assetsLoss arising in subsidiariesRecovery from 'SeawaY Prince'fireSubvention payment to subsidiarYProvision for loss on investment insubsidiaryGROUP1987$oo0249,6121,004250,616rUNION SHIPPING GROUP LIMITEDAND SUBSIDIARY COMPANIES1986$000259,6341,47620ulg249,4285,4495,7517,650132(7,491)(5,288)(12,779)5,7511,761(1,013)(270\"6,229_44p591,141(2,6ee)PARENT1986$ooo1,88610,61612,5021987$oo07,6664,39512,061229,5226,1444,69611,24111555197251,9707,103353,5351,204115553812,085(2418258,,,__0.5995,942(2,674),rlru,925535,4681o,g-|2q9,041(1,354)(21,388)(22,742)10,918332165(11,447)__Jg69,098199(1,339)'lon(770\"45,90339(28)rB+s(872)(770)207(26):o(2,674\"(3,526)t8(1,558)

IrIiUNION SHIPPING GROUP LIMITEDAND SUBSIDIARY COMPANIESNOTE 5. ACCOUNTS RECEIVABLETrade receivablesNon-trade receivablesRelated companiesSubsidiary companiesAssociated companiesNOTE 6. PREPAYMENTS AND STOCKPrepaymentsStock-fuel and storesNOTE 7. INVESTMENTSI nvestment in subsidiariesShares in companiesOther investmentsNOTE 8.NOTE 9.For lhe Year Ended 30 June 198718,633,oluu5,6383,3799,017UNotes to theFinancial StatementsGROUPPARENT1986$000741_99,4291987$ooo1986$0001987$ooo18,0716,995401%.46?2393170342,753_43J26_212212,u:,'t,84817518,053_2ApZ0113____rg25,42!8n1,0631.2661,431461980(24511,1962,627_i.qgg5,0263,759__!,zgq1031,063't,'t661,437639391(50)9802,4173,58325,42825,4288 42825/28Investment in associated companies at coslShare of profit after taxShare of retained profits from prior yearsDividend paid by an associated companyShare of retained profits carried forwardFleet - at costLess depreciationNet book valueThe profits in respect of an associated company for the year ended 30 June 1986 ere equity w accounted tor a 20month period.GOODWILL ON CONSOLIDATIONGoodwill on consolidation arises from the acquisition during the year of a now wholly owned subsidiary company,which amount is being amortised over three years in equal instalments.FLEET113,46745,96767,50091,05140.214_5q,qgzln accordance with Statement of Standard Accounting Practice No 18, a subsidiary company capitalised foraccounting purposes at 1 July 1986 the charter of two ships which it has the option of pLirchasing at less than marketvalue.

UNION SHIPPING GROUP LIMITEDAND SUBSI DIARY COMPANIESNOTE 10. PROPERTY AND EQUIPMENTLand - at revaluationFreehold properties - at cost or revaluationLeasehold properties - at cost or revaluationLess depreciationNet book valuePlant and equipment - at costLess depreciationNet book valueNOTE 11. BANK OVERDRAFTThe bank overdralt is secured by floatinga charge over the assets of the company andwholly owned subsidiaries.NOTE 12. ACCOUNTS PAYABLEAccounts payable and accrued expensesProvision for taxationAssociated comPanYSubsidiary comPaniesNOTE 13. TERM LIABILITIESTerm loansUnsecured deferred creditorsLess current Portion - secured- unsecuredNOTE 14. CAPITAL RESERVEBalance at 30 June 1986Transferred from retained earningsBalance at 30 June 1987201081,13531,40132,6442,19130,45331,01811,98519,03349,4863,305328PARENT1987 1986$ooo $ooo3,3052,9775,4013,2242,177__5J54T\" yn18,248 5,1062222IAll properties were revalued by a qualified external valuer at 1 May 1987. Aggregate valuation, including the cost ofproperty and improvements not specifically valued is $36'268,700._42p88_24,7391,34.126,0806,3154620,767_ll3qLoans, which are repayable over a period to 1999, are denominated in New Zealand dollars, Australian dollars, USdollars and yen and are .\"tur\"O Oy ftoating and fixed charges over the group's assets. lnterest rates at 30 June 1987averaged 13.14o/o Pa.47,16218491_47_g_30,2791,46131,74012,15149_19,54q1,7043492,05341,66831610419,719q1,6951,704Notes to theFinancial StatementsFor the Year Ended 30 June 1987GROUP1987 1986$ooo $ooo.t6166425,95826,7831,85724,92631,49417,14614,34839,274

UNION SHIPPING GROUP LIMITEDAND SUBSIDIARY COMPANIESUNotes to theFinancial StatementsFor the Year Ended 30 June 1987NOTE 15. ASSET REVALUATION RESERVEBalance at 30 June 1996Less amount realised on properties soldPlus current year revaluationsBalance at 30 June 1987NOTE 16. RETAINED PROFITSUnion Shipping Group LtdSubsidiary companiesAssociated companiesNOTE 17. CHARTER HIRE AND RENTALSNOTE 18. CONTINGENT LIABILITIES ANDCAPITAL COMMITMENTSLiabilities under guarantee and othercontingencies were estimated at:Commitments for capital expenditureamounted to approximately:NOTE 19. DEFERRED RECEIVABLE AND TERM LIABILITYGROUPPARENT1987$ooo1986$000'1987$ooo7,5021485,937'13,29114,2625,8271,19621,2853,4671414,1767,50214,0799,49698024,5557801,857528s2814,Xiz14.26295,6398752814,079ln addition to owning ships, the group also charters ships from various owners. Charter hire is payable iin variouscurrenctes.Ctrarter hire of ships and rental of-properties, plant and equipment charged to profit during the year ended 30 June1987 amounted to $16,257,000 (1986 $26,168,686).78020994,205A subsidiary company owns a tanker 'Taiko' which is chartered to the oil industry and mortgaged to IBJ Leasing CoLimited for 15 years. This ship was purchased under a deferred payment agreement and the amount of the loanoutstanding at any time is equivalent to the minimum future revenu-e from tfie cnarter exctuJlng interest charges andunearned profit. Accordingly, these amounts are not disclosed in the Balance Sheet. The deferred receivable and loanoutstanding were Yen 5,083,077j92 at 30 June 19g7. (yen s,27g,T2s5og at 30 June l9g6l

t'UNION SHIPPING GROUP LIMITEDAND SUBSIDIARY COMPANIESUStatement of Changesin Financial PositionFor the Year Ended 30 June 1987SOURCES OF FUNDS:DepreciationSale of fixed assetsNet decrease/(increase) in deferred taxPreference share issueLoan in respect of capitalisation of shipsLess: net decrease in term and secured financeNet increase in working capitallncrease/(decrease) in minority interestAPPLICATION OF FUNDS:Net lossPurchase of fixed assetsCapitalisation of shipsNet increase/(decrease) in investmentsAcquisition of subsidiary .Dividends paid or proposedLoss on translation of overseas assetsr NcREASE/(DECREASE) lN WORKING CAPITAL:CURRENT ASSETS:Cash at bank and depositAccounts receivablePrepayments and stockCURRENT LIABILITIES:Bank overdraftAccounts payableUnsecured loansNet increase in working capital. Acquisition of subsidiary:GoodwillAssetsLess goodwill written offGROUP1987$ooo9,7182,65322012,00012,069(6,412)7,5648_37,8n_9959,99323,2333101,9321,313441986$0007,6501,925,u1no,(467)18,944(66)_4-&9_2,18120,653(1,826)oaa37,820_4-499(3,7e0)7,9622324,4046,6165,349311,9687,564(9,760)(5,959)(12.263\"(27,982\"15,466(6,425)(3)9,03818,9441,7007992,499567,,__rcge

UNION SHIPPING GROUP LIMITEDAND SUBSIDIARY COMPANIESFinancialRecordsStatement ol Prolit ltems: (9000)INCOMETrading Costs(LOSS)/pROFtT FROM TRADTNG BEFORE DEpRECtATtONDepreciation( LOSS) / pROFtT BEFORE TAXATT ON AND EXTRAORD I NARyITEMSExtraordinary (loss) / prof itNET (LOSS)/pROFtT BEFORE TAXATTONTaxation (charge) credit/ NET (LOSS)/pROFtT AFTER EXTRAORDTNARY TTEMS ANDTAXATIONlnterest of minority shareholdersNet share of profii in associated companiesNET (LOSS)/PROFtT AFTER TAXATTONTax paid.(loss)/profit as percentage of averageshareholders' fundsFive year averagelax paid profit/(loss) as percentage of revenuerrve vear averaoeTax piaid profit/('ioss) per $1 ordinarv shareDividends paid $000 - OrdinaryPreferenceStatement of Financial Position llems: (9000)FleetPlant and equipmentFreehold and leasehold propertiesDeferred receivables and investmentslntangible assetsCurrent assetsDeduct:Current liabilitiesTerm liabilitiesDeferred taxationFunds being issued capital and reservesTHESE FUNDS WERE PROVIDED BYShareholders in subsidiary companiesGroup shareholders:Paid up share capitalReservesTons shipped per ship trading dayNumber of permanerit emplo\"yee5 (all locations)For the Year Ended 30 June 1 9871987250,616240,7299,88711,241(1,354)(61)(1,415)(3211985 .1984289,135 268,176266,791 249,16922,344 19,0079,238 10,1121986261,110260,9511597,650(7,491)(1,558)(e,049)6,229(2,820)1983229,183230,056(873)9,834(6,02e)2963_15,932)(11.70/o)(2.60/o)?nt71,5787,00717,14295,7273,88130,647130,25513,1061,50314,609(5,450)9,1598480__g&47_17.90/o3.3%4006,56341,9189,88723,19374,99813,01669,695157,70971,97317,83611 ,34656,5548,895 (10,707)(604) 6078,291 (10,100)(2,725) 4,071(1,447)(e)461(99s)osg5,566(s0238IJ]-L(1.60/o)2.5o/o(0.4oh)0.3o/ojnr'1,3'1367,50019,03330,453116,9869,7051,13346,117173,94178,38919,5403,281_22J3112,10224,00036,629J2JY8241,045_lzJ_qt(3.80/o)(0.8%)]nnl50,83714,34824,92690,1119,54041,713141,36460,58519,7193,206_5rc54_9324,00033,761_52.q547341,11815924,00032,395_50J547581,18311 .60/o2.10/o24A3,24062,4776,89119,43488,8023,71937,782130,30358,333 41,61910,187 31,65910,71.t 8,102t1f12 _4e,gz5125 11924,000 24,00026,947 24,756t1_92 _4e,qzq608 - 6621,210 1,29323

Tasman Liner Service:UNION ROTOITIUNION ROTORUAUNION ENDEAVOURCoastal Liner SerYice:AustraliaSEAWAY HOBABTSEAWAY MELBOURNEChatham lslands:HOLMDALEBulk Trades:UNION AUCKLAND7 dav service:Auc(land /Sydney/ Melbourne10 dav service:Taurahga Wellington / Lyttelton / /Sydney/ Melbourne2t day service:Nelson /Sydney/ MelbourneWeekly Service:Sydney/ Hobart/SydneyThrice Fortnightly Service:Melbourne/ Hobart/Melbourne14 day service:Melbourne/ Burnie/ Port Adelaide/ Burnie/Hobart/SydneyMonthly Service:Lyttelton / Chatham I slands / LytteltonTrans-Tasman:WheatGypsumSugarUreaNZ Coastal:WheatPacific lslands:SugarIUServicesWhite Bay terminal, Sydney, withU nion Rotoiti alongside.

UGroupDirectoryGollowing Group Reorganisation October,lgT )Union Shipping AustraliaShipowners, Termlnal Operalors and ManagersHead Office 'Tower 1, TNT Pl5za, Lawson Square, Redfern, NSW 2016K. A Urry Chief Executive (Sydney)

Proil.ceLr 'itr llii llrr arr Sir f)il rq alrlrl[] ! ll'teiLr, f fd :1t lttrt ral ( & As:,lr- ::1es L rll laral Al,il(:llalfrur-r I Fe :tl ails Lirllill lilllls /r tr(lI a]llDts glf & Arlrriork.llhr l.'lrlrrlarr Gtaph a Llrrs !lf t r\" 1r.fyparsrli fq Batff as .lslral a,rls L rrl lr!P. fl fr Pr f:,lath L lrr 1a,l