USSCO Annual Report 1977

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UContents.Directors' ReportConsolidated Statement of Profit and LossConsol idated Balance SheetNotes to Financial StatementsAuditors'ReportFinancial RecordCompafry OperationsUnion Company Contribution to N.Z. TradeTrans-Tasrnan TradeFleet ListExecutiveOffices25681.112141B18191020DirectorsSir Peter Abeleseach fully paid up.AlternateMr A.Carmichael, CBEMr J.G.FelgateMr W.BadhamsMr l. Thomas, CMGMr W.J.SandmanMr J.W.KasslerMr J.G.FelgateMr R.M.Hall(Chairman, Chief Executive)Sir Reginald Smythe, KBE Mr D.O.Walker, OBE(Deputy Chairman)MrJ.R.Cribb, OBE(Deputy Ch ief Executive)Mr B.J.GodfreyMr O.T.Hannigan \"MrJ.B.Honocks JMr R.A.OwensMr R.H.PettigrewSir lan PotterMr C.G.SkeggsAuditorsWilkinson WilberfossBankersNew Zealandand Australia: Bank of New ZealandLondon: Royal Bank of ScotlandBank of New ZealandUNoticeofAnnualGeneralMeeting.NOTICE lS HEREBY GIVEN that the 65th AnnualGeneral Meeting of Union Steam Ship Company of NewZealand Limited will be held at 4pm on 7th December1977 althe Company's Registered Office, 36Customhouse Quay, We I I i ngton for the fo I lowi ngpurposes:1. To receive the Directors' Report and the FinancialStatements for the year ended 30th June 1977 andthe Auditors' Report thereon.2. To confirm and declare dividends.3. To consider, and thought if fit, to pass a Resolutionincreasing the remuneration of the Directors inrespect of the year ending 30th June 1978 from$35,000 to $50,000, to be allocated as they shallthink fit.4. To record the re-appointment of the Auditors,Wilkinson Wilberfoss, and to authorise the Directorsto fix their remuneration for the year to 30th June1 978.5. To transact any other business appropriate to betransacted at an ordinary general meeting.A member who is entitled to attend and vote entitledis to appoint a proxy to attend and vote on his behalf. Aproxy need not also be a member of the Company.On behalf of the Board,P.R.BremfordSecretaryWellington, N.Z.1 st November 1977NOTE: Pursuant to Article 105 of the Company's Articlesof Association, the Statement of Profit and Loss,Auditors' Report and Directors' Report will be open forinspection by any member at the Registered Office ofthe Company, from 28th November untilthe date of theabove Annual General Meeting.g lJnionSteamShipComoanvofNewZeakindLimited.Registered Office36 Customhouse Quay, Wellington,New ZealandAuthorised Capital$25,000,000Paid Up Capital$1 9,000,000 comprising -Ordinary Shares: 7,000,000 1 of $1.00 each fully paid upPreference Shares: 1,000,000 cumulative SVzo/\" of $2.00CoatofArmsThe ARMS incorporate a silver chevron with two red and blackcfrgyronels, the Company's colours, on a blue field; two wingssymbolising the Company's air associations and below agalleon on six blue and silver wavy bars, representihg theCompany's sea services.A silver and blue wreath and rampant demi-lion holding theCompany's house flag form the CBEST.On both sides the SUPPORTERS are carved Maori panelsrepresenting Tangaroa the Sea God guardingMoana-nui-a-kiwa (the Pacific Ocean).The whole stands on a ribbon with the motto Per Mare perCaelum, \"By Sea, By Sky\".

Ln Directors'R.portThe Company has recorded a netprofit after income tax of $8,930,000for the year ended 30 June 1977 aftertaking into account a non-recurringpre-tax profit of $4,870,000 arisingfrom the sale of ships. The profit fortheyear, including the profit arising on thesale of ships, represents a return of 6.9cents in each dollarof revenue earnedand reflects the better performanceachieved generally throughout thetransport industry in 1976177.Although the trading result hasimproved, the Directors regard therate of return on shareholders'funds asinadequate when the non-recurringprofit from sale of ships is excludedfrom the results.The steeply escalating replacementcosts for ships and equipmentnecessitate that not only should profitsarising from the sale of old ships be setaside for re-investment in replacementships, but thattrading profits also mustbe sufficient to allow the setting asideof a significant contribution toreplacement. Such contributions arenecessary if the Company is tocontinue to provide a modern andefficient service to its customers in theyears to come.& TradingThe satisfactory cargo levels for thefirst quarter, as noted in last year'sDirectors' Report, continuedthroughout the twelve month periodunder review. Good cargo levels wereobtained in the Australian SeawayService and.although cargo levels inthe Trans Tasman did not return to theboom levels ol 1974, the volume ofcargo showed a gradual increase.This bulk glass from Australia will soon be manufactured into windscreens and otheritems for local New Zealand industry.Th is improvement was due principal lyto adjustments to exchange rates andthe improved capacity and regularityof shipping services which werelargely untroubled by industrialstoppages. The Company is mostappreciative of the co-operation itreceived from Trade Unions over thepast year, ashore and afloat.Perhaps the outstanding feature of theyear was the completion of theCompany's fleet modernisationprogramme, the planning of whichwas commenced five years ago. Theaverage age of the Company's f leet isnow 5.2 years, compared with anaverage age of 11.0 years in 1973.Three new roll-on roll-off ships enteredthe Company's Trans Tasman fleet.The sister ships, \"UNION HOBART\"and \"UNION LYTIELTON\" of 7,350dwt, built for the Company in Nonrvay,were received into the fleet on longterm charter. The Company's $30million 14,400 dM roll-on roll-off ship\"UNION ROTORUA\" also entered thefleet following delivery from theWhyalla Shipbuilding andEngineering Works in Whyalla, SouthAustralia.\"UNION ROTORUA's\" sister ship,\"UNION ROTO|T|\", was delivered atthe end of the financial year andcommenced trading in July 1977. Allthe new ships were smoothly phasedinto service and their proven eff iciencywas a significant factor in thei mprov'ed f i nancial result for the year'soperations.The Trans Tasman roll-on roll-off fleetis now made up of five new ships:\"uNtoN ROTORUA\" 14,400 dwt\"uNtoN Rorotfl\" 14,400 dwt\"UNION HOBART\" 7,350 dwt ',.UNION LTIELTON\" 7,350 dWI\"UNION MELBOURNE\" 7,000 dwtSupplementing these new ships, andsti ll performing an effective task, theis 6,452 dwt \"MARAMA\" now eight yearsold and the only remaining unit of ourfirst generation roll-on roll-off fleet.The Australian Seaway Service isoperated by the roll-oh roll-off sisterships, \"SEAWAY PRINCE\" and\"SEAWAY PRINCESS\", built for theCompany in Whyalla, South Australia'and delivered in the previous f inancialyear.The Company is proud of its roll-onroll-off fleetwhich is second to none inthe shipping world today, and whichhas the planned capacity to cope withincreases in trade over the next fiveyears.FinancialResultsU ReuenueConsolidated Group Revenue for thefinancial year advanced by 31 7o lo alevel of $128 million. The Company isa substantial individual contributor tooverseas exchange earnings.$5'l million, being 40% of the totalrevenue, was earned in foreignexchange.UtuofilConsolidated net profit for the yearafter income tax amounted to$8,930,000. This level of profit which,as previously noted, included asubstantial non-recurring profit onNewly inkoduced g.t.e.v. Union Botorua, forging another strong Trans Tasman Tradinglin k2r

sale of ships; represented a return onshareholders' funds of 19.5% givingan average return on shareholders'funds for the last five years of 1 1.5%.Of the profits made by the Companyover this five year period, 75Yo hasbeen retained within the Company asequity contribution towards the cost ofmodernisation of the fleet and only25o/\" of the profits, less than 3% as areturn on shareholders' funds, hasbeen paid to shareholders asdividends. ln money terms, the profitplough-back by shareholders hasamounted to over $15 million.Cu Cahital Expenditureand rtnancingWith the completion of fleetmodernisation and final delivery of theCompany's new ships, the book valueof the fleet increased to over$95,000,000.All of the loan finance associated withfleet modernisation has now beendrawn and term liabilities totalling$50,000,000 at balance date will-bereduced in succeeding years inaccordance with the contractual loanrepayment programme.This ship loan finance has been raisedmainly in US dollars and the loanliability as shown in the balance sheetincludes unrealised exchange lossesamounting to over $7 million broughtabout by various devaluations of theNZ dollar. ln accordance with theCompany's disclosed accountingpolicy, realised and unrealisedexchange losses on ship loan financehave been capitalised to the cost offleet and are being depreciated overthe lives of the ships to which the loansrelate.The Company's fonarard cashprojection is satisfactory, but theposition remains sensitive to furtherpossible devaluation of the NZ dollar.lU DiaidendsDuring the year, two interim dividendson ordinary share capital of 3% and2% respectively were paid, the latterdividend being declared outof capitalprofits approved for tax-freedistribution. A final dividend ol 41/q\"/\"on ordinary share capital to bedeclared out of capital profitsapproved for tax-free distribution isnow recommended, making total a of91A% tor the year.The interim ordinary dividendstogether with the recommended finalordinary dividend amount to$1,572,500, and provision for this hasbeen made in the accounts.ln respect o{ the 1 ,000,000 SVz%cumulative preference shares of $2each held throughout New Zealand,Australia, and the United Kingdom,two half-yearly dividends of 23/+\"/\"havebeen paid on 28 February 1977 and 31August 1977. Directors recommendapproval of these payments whichtotal $110,000 for the year, provisionhaving been made in the accounts.lU DirectorateDuring the year, Sir lan Potterappointed Mr J. G. Felgate as hisalternate on the Board in succession toMr J. L N. Winter; and consequentupon the resignation of Mr F. P. Golan,Sir Peter Abeles nominated Mr A.Carmichael, CBE, Managing Directorof Bulkships Limited, to act as hisalternate.lU AuditorsUnder the provisions of theCompanies'Act 1955, it is advisedthat the Company's auditors,Wilkinson Wilberfoss, will continue inoffice.eSmffThe achievement of this year'simproved result reflects the sustainedeffort put in by the people who work forthe Company at sea and ashore.We are sincerely grateful to all thosepeople and we know that through thesubstantial re-investment of profits thatis occurring within the Company, wecan continue to provide good jobs forthe people who choose to work withUS,@ Future fuospectsThe Company's future lies in theprovision of a highly efficient serviceto our customers in order to facilitatetrade to the maximum extent, withinthe areas in which we operate. Thus,our role is of considerable importanceto Governments in New Zealand,Australia and the Pacific lslandcountries. We plan to foster the closeliaison we already have with therespective Governments and toco-operate. fully in the drive foreconomic i mprovement throughoutthe areas whose trade we serve.This year, the Company will beobliged to adapt to a significantreduction in Trans Tasman cargolevels, consequent upon theintroduction of two ships by theTasman Pulp and Paper Company toThirsty work. union company carried export beer to lsland markets last yearWestport Coal arrives at Whangarei to be used for electricity generation3

Fre..h Ta(l now llf;als a read,v nrarkei n ]ew Zealan. ii gn '7 eilrciert f leei, ald giveri aIavour-able l+:vel cf eccnorrlc aclivitv:).r ccih srijes lf the l-asri'ian, ifle l-liriarr:|rrrDe.n,i tacgs ile iutuire 'ryrthlt0iirl rsi'r'.tr,;r ii:e i)ii-ec1or'str i-r i: ,ii_.eieS. Lllr:trltanil fl :lrrrilne, ii'iiF-Ll:e 0lir,' l-.fi I i rrl;t n/^vf: L Lii'.iGTali'.jlCCcl.,lei' i!77jir alt il.-- rrg.l|v arr:,vts l:i nl r}. a1t; l-rfl r/er:liltrl r,

lU Consolidated Statement of Profit and LossUNlON STEAM SHIP COMPANY OF NEW ZEALAND LIMITED AND SUBSIDIARY COMPAN!ESFOR YEAR ENDED 30 JUNE 1977NotesParentConsolidatedIncomeTrading operationslnvestments231977$122,778,776651,779197 6$93,095,78578,0921977$127,205,979624,763197 6$97,214,43080,1 1 I123,430,55493,173,877 127,830,742 97,294,549ExpenditureDeduct:General operating expenseslnterest on fixed term loansDepreciation of fixed assetsDirectors'feesAuditors' remunerationAdd:Extraordinary items103,307,9643,124,4664,715,99435,00071,0'|-785,922,3682,097,1785,102,18735,000s6,000107,360,9423,124,4664,839,40435,35777,36489,016,5912,097,1785,222,36735,36063,584111,254,23193,212,733 115,437,433 96,435,0803,890,3573,890,357Il/et Profit before income tax12,176,3233,940,3713,851,501102,00912,393,309 4,749,826Deduct:Taxationlnterest of minority shareholdersAdd:Share of retained tax paid profitof associated company113,971,7411,224409,681279,4203,208I{et profit oft t, income tax9,235,9529,477,643511,0313,749,49211,271 ,18468,0978,930,025 4,467,198Add:Unappropriated balance from prior yearsTransfer from revaluation reserveAvai lable for appropriationDeduct:Transfer to capital reseryesDividends paid and proposed- Ordinary- PreferencePrior period adjustment9,689,478511,03110,765,31368,097'|9,224,6266,938,1541,572,500110,0001 5,088,7734,570,829425,0001 10,00019,130,5346,938,1541,572,500110,00015,300,6084,570,829425,0001 10,0009,603,9729,982,944505,30110,509,880 10,194,779505,301Un app r o1p ri at e d p r o fi t scarredJoru)ard$ 9,603,972 $ 9,477,643 $10,509,880 $ 9,689,478Unappropriated prof its :Parent and subsi diariesAssociated company10,100,199409,681$10,509,990The notes on pages to 0 B 1 form part of the accounts and should be read in conjunction therewith5

L1, C on solidate d Bal ance She e tUN!ON STEAM SHIP COMPANY OF NEWZEALANO LIMITED AND SUBSIOIARY COMPANIESAS AT 30 JUNE 1977NotesParentConsolidatedAssetsCurrent Assets:Cash at bank, on hand and depositsAccounts receivablePrepaymentsStocks - fuel and storesAmount owing by related companyAmount owing by parent companyAmount owing by subsidiary companiesTotal Current AssetslnvestmentsFixed AssetsFleetFreehold and leasehold propertiesPlant and equipmentNet Fixed AssetsDeferred Taxation101977$2,239,99212,144,0843,406,9201,356,014522,874248,811101,855197 6$2,024,8021 5,1 98,7363,657,6671,210,62660,4291 35,60292,1671977s2,281,24312,972,3253,406,8201,691,1531,368,851248,811197 6$2,144,72216,082,5393,657,6671,497,650969,0711 35,6021120,020,340 22,380,029s,129,051 5,61 1,35321,969,203 24,487 ,2512,459,020 2,532,7761295,465,193 78,172,8234,025,629 4,753,4486,709,230 6,964,30295,612,309 78,376,1205,041,223 5,727,9186,875,193 7,127,869106,200,052 89,890,573 107,529,724 91,231,907894,275501 ,410$131,349,443 $1 18,776 230 $131,956,947 $1 18,753,344i

NotesParentConsolidatedLiabilities1977s197 6$z,sa+,s6812,068,0616,796,840529,674480,0003,591,949823,6291977$2,677,7553,927,99211,277,23911,320,734914,914777,500t,t'n,2G1976$33,7032,584,56812,670,2066,796,840553,880480,000823,629and S hareholders' FundsCurrent Liabilities:Bank overdraft (secured)Short term loansCreditors and accrued expensesCurrent portion of term liabilitiesProvision for taxationProvision for dividendAmounts due to subsidiary companiesAmounts due to associated companyTotal Current Liabi litiesTerm LiabilitiesDeferred TaxationShareholders'Funds;Authorised capital23, 000, 000 Ord i nary sharesof $1 each - $23,000,0001, 000, 000 Preference sharesof $2 each - $2,000,000lssued capital1 7,000,000 Ordinary sharesof $1 fully paid1,000,000 Preference sharesof $2 fully paidCapital reserveNet surplus on consolidationAsset revaluation reserveUnappropriated profitsTotal Sharehol ders' Fundslnterest of Minority Shareholders2,406,6343,927,99210,591,15711,320,734850,716777,5003,950,2091,717,29535,542,127 26,874,721 32,613,219 23,942,82650,495,038 56,253,635 50,600,071 56,342,9203,110,952 3,027,31117,000,0002,000,00012,589,4451,007,9099,603,97217,000,000 17,000,00017,000,0002,000,0006,142,0011,993,0741,633,6029,689,4782,000,0005,651,29.11,518,9409,477,6432,000,00013,090,1551,993,0741,122,57110,509,88042,201,32635,647,874 45,705,680 38,458,15510,667 9,443$131,349,443 $1 1 8,776,230 $131,956,947 $1 18,753,344Capital Commitments andContingent Liabi lities14For and on behalf of the BoardReginald H. Smythe, K.B.E.Deputy Chairman of DirectorsJ. B. Horrocks DirectorThe notes on pages 8 to 10 form part of the accounts and should be read in conjunction therewith.

lU Notes to Financial StatementsAS AT 30 JUNE 1977Note 1.: Statement ofAccounting PoliciesGenera! Accounting PoliciesThe general account.-rng principles recognised as appropriate for the measurement and reporting of prof it andfinantial position on an historical cost basis have been followed by tl-re company in the preparation of theseaccounts except that land, freehold and leasehold property are at valuation.Particular Accounting PoliciesThe following particular accounting policies have been applied:Consolidation of AccountsThe consolidated financialstatements comprisethe accounts of the holding company and all subsidiarycompanies viz:Abel Tasman Shipping Company Proprietary LimitedAnchor Dorman LimitedHolm Shipping Company LimitedMercantile lnvestments LimitedPacific and World Travel LimitedRichardson and Company LimitedSmokeless Fuel Company LimitedTasmanian Steamers Proprietary LimitedT Dorman Engineering LimitedThe Canterbury Steam Shipping Company LimitedUnion Citco LimitedWellington Marine Repair Works LimitedAll signifi6ant inter-comiany transactions have been eliminated on consolidation. The company's interest inassociated companies has been accounted for by the equity accounting method viz:Union Bulkships Proprietary Limited 50%Valuation of AssetsFleet at cost less accumulated depreciation and ships under construction at cost. Cost includes realised andunrealised currency exchange flubtuations on ship loan finance, interest charges in the case of ships underconstruction and delivery costs of company-owned ships. Cost also includes modifications carried outtochartered ships.Land, at market valuation at March 1975 as determined by independent registered valuers.Freehold and leasehold buildings, at market valuation at March 1975 as determined by independent registeredvaluers, plus additions at cost, less accumulated depreciation.Plant and equipment, at cost less accumulated depreciation.lnvestrnents, at the lower of cost or market value.Stocks-fuel and stores, at the lower of cost or market valueDepreciation of Fixed AssetsFlebt, less residual value, from the time of entering service, on a straight line basis over estimated useful life.The estimated useful life of roll on roll off ships is 15 years and for conventional ships 20 years. Modificationcosts Ior chartered ships, on a straight line basis over term of the charter.Land is not depreciated. Buildings, on a straight line basis over estimated useful life o{ 30 to 63 years.Plant and equipment, on a straight line basis over estimated life of 7 to 10 years.Chartered ShipsThe company iharters ships from various owners. There is normally delivery a voyage to New Zealand at thecommenbem'ent of the charter and redelivery voyage a at the conclusion of the charter. The actual delivery costsare amortised over the term of the charter. A piovision for redelivery costs is made over the same period.Foreign CurrenciesAccou-nts of foreign subsidiaries and balance sheet items of the company and its New Zealand subsidiariesdenominated in foreign currencies are translated at the rates of exchange ruling at balance date.!ncome Recognitionlncome from stiips trading is accounted for on a completed voyage basis.Sale of ShipsThe net surplus or deficit on sale of ships associated with changes in the fleet is recorded under trading operations.Where a ship remains within the fleet but is sold and leased back the net surplus or deficit on disposal is treated asan extraordinary item.TaxationTaxation currently payable has been calculated after allowing for non{axable income and non-deductibleexpenses.Deferred taxation is the net amount of accumulated tax credits and charges resulting from timing differencesbetween depreciation and other expenses charged for financial reporting purposes and depreciatio-n and-otherexpenses d6ducted for income tax'purposes. Th-e calculation of deferred taxation includes the tax effect oflosses for income tax purposes wnibn rjvitt not be realised until the company derives taxable income in futureyears. The net deferred taxation credit is carried forward to future years when it will reduce incom.e tax chargesin statements of profits as timing differences result taxable income exceeding accounting in profits.8

Note 2: Income - Tiading OperationsThe 1977 figure for income - trading operations includes a surplus arising from the sale of shipstotalling $4,867,233.Note 3: Inuestment IncomeParentGroupFor the year ended 30 June 1 977Government securities interestDividends from companiesOther investment ncomei Note 4: TaxationI!\"- prlryq facie taxationpayabte on the pretax accounting profit of$.12,176,323 (Group - $12,393,309) is i.econcited to the i\"n6ome iaxcharge provided in the accounts as follows:Tax calculated at 45 cents in the dollarFrom which is deducted the tax effect of:Non{axable income arising from capital gains on sale of shipsOther non{axable income, net of non tax-ieductibleexpenses and additional deductions for income taxpurposes in respect of losses on repayments ofoverseas loansTo which is added tax currenily payable inoverseas countriesNote 5: Extraordinary ltems (1976)21730,019621,5422172,325622,221$ 651,778$ 624,7635,479,3451,049,29891 1,6765,576,9891,049,2981,1 19,6063,518,371422,0003,408,085463,656$ 3,940,371$ 3,871,741The 1976 f igure for exf raordinary items stated is net of income taxation effect and represents a surplus arising onsale and leaseback of a ship and consequential losses resulting from fire on ship.a Note 6: Short TermloansThe sum of $3,927,892 represenlslcridging finance on ship construction payments which was replaced by asecured term liability in August 1977.Note 7 : Term LiabilitiesSecured loansUnsecured deferred creditorsLong term portion 1973 taxLess current portion56,1 19,5075,239,193457,07256,1 19,5075,300,258501,04061,815,77211,320,73461,920,80511,320,734$ 50,495,038$ 50,600,071Note B: CapitalResenteBalance at beginning of yearTax-f ree prof its earl ier yearsCapital plrofits from sal'e of assets current yearLess tax-free d ivi dends5,651,2915,576,9462,423,7086,142,0015,576,9462,423,70813,651,945 14,142,6551,062,500 1,062,500$ 12,589,445 $ 13,080,155

rNote 9: Asset Reualuation ReserueParent1,518,94051 1,031GroupBalance at beginning of yearLess transfer to appropriation accountof amounts realised on properties sold1,633,60251 1,031s 1,007,909 $ 1,122,571Note 10: Accounts ReceiuableAt 30 June 1977 debtor balances were:Trade debtorsNon{rade debtors10,140,877 10,969,1 1B2,003,207 2,003,207$ 12,144,084 $ 12,972,325Note 1\" 1: InuestmentsAt 30 June 1977 investments comprisedlnvestments in subsidiarieslnvestment in associated companyGovernment securitiesShares in companiesOther investmentslnvestment in associated company at coslShare of profit before taxation $725,495less share of taxation $315,8143,142,5215,0006,1 7381,5011,893,856414,6A6,1 7392,4891,945,677$ 5,129,051 $ 2,459,0205,000409,681414,681Note 12: AssetsAt 30 June 1977 asset balances were:FleetLess depreciationNet book valueLandPlus revaluationFreehold and leasehold propertiesPlus revaluationLess depreciationNet book valuePlant and equipmentLess depreciationNet book valueNet fixed assets104,171,377 105,371,7698,706,184 9,759,46195,465,193-----w699,47895,612,308252,922699,478952,4002,089,6032,333,333952,4002,711,3842,929,5795,375,3361,349,7076,593,3631,552,1404,025,62914,452,6177,743,3875,041,22314,991 ,655B,116,4626,709,2306,875,193$106,200,052 $107,528,724It{ote 13: CharterHireln addition to owning ships, the company also charters ships from various owners. Charter hire is payable in variouscurrencies. The estiirated liability of the-company {or charter hire in the 1977178 financ-ial year ylttft-fgrg1O^n ^^ .currencies converted to New Zeiland dollars'at exchange rates applying at 30 June 1977 is $1 7,600,000 (30 June1976 $21,143,000).Note 14: Capital Commitments and Contingent LiabilitiesAt June 1977 lhe liabilities under guaranteeand other contingencies were estimated atCommitments for capital expenditure amounts Ioapproximately565,0003,149,000565,0003,149,000t0

1@f116i6^'R.portThe Members,Union Steam Ship Company of New Zealand Limited:We have obtained all the information and explanations we have required. ln our opinion proper booksof account have been kept by the company so far as appears from our examination of those books.In our opinion according to the best of our information and the explanations given to us and as shownby thesaid books, the financial statements on pages 5 to .l0 are properly drawn up so as to give a trueand fair view of the state of the company's affairs as at 30 June, 1977 and of the re'sults of itsbusinessfor the year ended on that date.We have also examined the annexed group financial statements on pages 5 to 10 with the auditedfinancial statements of the companies dealt with thereby. ln our opinion the group inancialf statements have been prepared in accordance with the provisions of the Compan ies Act, 1 955, so asto give a trug and fair view of the company and its subsidiaries dealt with thereby so far as concernsmembers of the company.According to such information and explanations, the company financial statements and the groupfinancial statements give the information required by the Act in the manner so required.Wilkinson WilberfossChartered AccountantsWellington, N.Z.'19 August, 1977ll

@Financial RecordUNION STEAM SHIP COMPANY OF NEWZEALAND LIIIITED AND SUBSIDIARY COMPANIESPERIODS ENDING 30JUNE1977$127,831110,5981976 1975$97,29591,214s82,06574,3951974$79,1 6974,0061973$71,24263,222Statement ofProfit items : ( $ OOOITurnoverTrading costsProfit from trading before depreciationDepreciationProfit before income tax and extraordinaryitemsExtraordinary itemsNet profit before income taxlncome taxNet profit after extraordinary itemsNet share of profit in associated companyNet profit after income taxTax paid profit as percentage ofshareholders'fundsFive year averageTax paid profit as percentage of revenueFive year averageTax paid profit per $'l ordinary share(capital was increased in April 1975)Dividends paid $'000FleetPlant and equipmentFreehold and leasehold propertiesCurrent assets, investments anddeferred taxationDeduct:Current liabilitiesLong term liabilitiesDeferred taxationFunds, being issued capital and reservesThese funds were provided by:Minority shareholders of subsidiariesGroup shareholdersPaid up share capitalReservesLong term loans as percentage of issuedcapital and reserves plus long term loansTonnes shipped per ship trading dayAverage age of fleet in yearsNumber permanent employees17,2334,8406,0815,2227,6703,8805,1 633,7418,0203,69712,3938593,8903,7904111,4221 ,0104,3238512,3933,8724,7492794,2011,0292,4321844,4082,1808,5214094,4703,1722,2482,2284,4703,1722,2482,22819.5 o/o11.5o/o6.9%4.3o/o53c1,69211 .6Y\"4.60/o26c5358.9/\"3.9/o19c9378.5/\"2.8o/o19c9208.9\"/\"3.1o/\"19c1,310Statement of Financial Position items: ($OOO195,6136,8755,041107,52924,42878,3767,1285,72850,7215,6606,1 5132,918 23,0513,661 3,2624,128 4,92091,23227,52162,53217,37240,707 31,23314,677 12,751131,95732,61350,6003,0271119,00026,7061 18,75324,82555,46179,90421,13423,73355,384 43,98415,575 14,14313,400 o,ry45,71738,46735,03726,409 25,081919,00019,458619,00016,0313-14,000 14,00012,406 1 1,08145,71738,46735,03726,409 25,08152.5o/o3745.21,57359.1o/o3055.61,62740,4%2346.11,90729.5%2879.81,91916.0\"/\"2341 1.02,033

lU FinancialRecordUNION STEAM SHIP COMPANY OF NEWZEALAND LIMITEDAND SUBSIDIARY COMPANIESPERIODS ENDING 30 JUNE$1 50$1 20$90$60ffi0$0Tuntoaer ($OOOI$10,000$8,000$6,000$4,000$2,000$07.0%5.6%A ao/+,L /o2.8%a Ao/l.+ /ou/oTox baid brofitas percaitagebfinenue$50,000$40,000ffio 000$20,000$10,000$01977Tzt1 97619751974197320%16%l ao/tL /oB%4%07\"$150,000$120,000$90,000$60,000$30,000$0Total assets employd ($OOO1Tax paid($ooo1Slrmeholders($oool1977tv/b1 97519741 973197619751974 1973t3

lU Compary OperationslU MAfitime Greymouth. Coal loadings have at from New Zealand Governmentrhe pastyearhas been chailenqing in :e:?JlnY,g:?JJ'ff J:3i B::'. lfi:\"xXJf;3i ],i'.33;iJ:fry.affected bvview of the changes in the f leet. During conditi5ns at Westfoh harbour November 1976. Australian exports tothis period in the Australian, coastal entrance. UNION AUCKLAND, the New Zealand are still below 1974and trans Tasman services, 5 roll Company's large bulk carrier, traded levelsparticularlybecauseofthedropon/roll off ships were withdrawn from continuoi,rsly and on one sailing lifted in sales of motoi vehrcles in Newservice and large 4 new roll oniroll off the largest single shipment of iorest Zealand involving Australian sourcedships were commissioned to industry cargo to move from Tauranga cars in particular.complete a planned 5 year to Austialia;-13600 manifest tonnes. The Company faces a significant lossprogramme to_introduce an efficient, Conventional vessels were laid up of cargowiththeentryintotheTasmanmodern fleet. Delivery and redelivery without employment for less days trade of ships operated by 2 Tasmang?fg^og.s w^ere arranged inc_luding during the last year than expecied. Pulp and Paper Company Limited.UNION HOBART and UNION Although the firSt half of the trading The Company witl continue to activelyLTIELTON which both loaded in yearwas marred on both sides of the encourage trade between AustraliaE,irqpqlot the Arabian Gulf. UNION Tasman bypoliticalstrikesagainstthe and New Zealand against otherROTORUA the largest roll on/roll off presence oi nuclear vesselsl vessels countries seeking markets in thesevessel to be employed in the trans generally worked through with a areas. Already new cargoes earningTasman trade entered service during minimurir of delay revenue to the Company in excess oftheyearand immediatelyestablished ln the Pacific lslands the UNION $1 million ayear have been secureda high standard of efficiency an^d an SOUTH pAClFlC operated as and new budiness prospects inimproved service for shippers She expected and was'normally full from transhipment cargoes arehas since b^e_gn_jg[rgqby_the sister Auckland. However the vedsel's encouraging and will be developedvessel UNION ROTOITI. The smooth speed, mechanical and electrical for cargoes originating from orintroduction of these two new ships breakdowns prevented a regular destineid for ar6as ouGide theintoservicereflectstheattentiongiven timetabled sdrvice being off6red. The Company's trading area.to their design for local operating LUHESAND was placedon charter to Development of transhipment cargoconditions and the provision of the New Zealand'Government and will be of material assistance to thespecialised shorefacilitiestoensurea lifted cargo to expectations. export trade by widening portsspeedy stevedoring operation. covered.[,\"J8!?,!lfilEyi\"f.T,,fiXi ,*,r.. @ Commercial .',]13]i.'?J\"'!\":il?53,ifJ'r-[?\".3i\"1,:.tiYiLfXH\":533JiX\",,.\" nre introduction orthe new sh ps in the X:'J.l,i\"r?T,t;lI,:\"i:\"i3:i:ri;3:?3which nas received erle\"rLnisriiort trans Tasman trade provided ;il;l X\"; I;;;.: iII.Y,.,'Xi\",from shippers. substantially increaseO cXlgl 9:]{: and there is continuinga The conventionat fleet has continueo carrying cabacity ano a JiXiienge to 9:lld for additional containerto regutarty service tne ^rLw 2eiranO 1131(eti\"nO iiaff tdobtai. .;;;r;;;. space which the Companv is planningcoastat and Austratian oorts with vvnilethelalesdrivenasi#n-io,.\"iei lo^:'li.tfvoccasionat charters to 6ther areas. carg.oes, attention has rb; b\";;gi;;; [:.,?:tion of the AustralianKAREpo undertook a vovaoe to to e-ffective customer coniic\"t\"in\"''\"' llovernment in rationalising freight,,.3H*:tT ayn\";isiug:nf. 1,;;fi*#,'\"113'Jiffii#i*,\".?,\"I,H lli[i3:1,I:dt*ls#?\"t*n,,tSotomon tstands to bfi;AiJ,.'io\"s, glgortshasbeendepressed rheNew f\"*:;iii:3'fl,:l?3f.t\"\"[for veneer plywood factory a at -\"iianO eiporter, ufinougif,\"n;;il;U Seaway trade Marketing is vigorousSouthland Wheat destined for Auckland's daily bread. Regular shipments are the key to ensuring the top quality o{ these Australian oranges

between the different transPortoperators but the ComPanY issecuring a satisfactory level of tradevolume,lU SteaedoringThere has been further rationalisationwithin the New Zealand stevedoringindustry and as a result the ComPanYis now one of only two which havenational coverage of all New Zealandports with resident staff and gearbtores. The Company stevedoring s ofconventional ships while serving theCompany vessels has exPanded itsinf luence in the past year to service awide range of charter and linervessels. As a result, the ComPanY hasstevedored frozen meat cargoes forRussia and the Middle East. Milkpowder cargoes for variousdestinations have been handled forthe Dairy Board and the Company hascontinued to stevedore soda ashcargoes imported into New Zealand.The stevedoring contract forAustralian steel cargoes now coversfour New Zealand ports.During the year, the Ports Authority ofFiji completed the takeover of allstevedoring operations at Suva andLautoka. The Company had beeninvolved in this area for many yearsand was disappointed to lose its directassociations, lntended benefits fromthe rationalisation are yet to beachieved and Present costs aresigniiicantly higher than those whichpreviously applied. Stevedoringoperations at APia have beenstrengthened with the provision ofadditional plant and mechanicalequipment and the ComPanY is nowthe major stevedore at this Porthandling wide a range of work fornumerous companles.lU Seacargo nrminalsThe Company's Roll-on terminals atNew Zealand and Australian Portshave provided problem-free servicefor the new vessels During the year,the Shipping Corporation of NewZealand vessel COASTAL RANGEBprovided aIerry service withstevedoring at Wellington andLyttelton Seacargo termi nalsprovided by us under a contractarrangement. ln November 1976,Auckland operations were transferredfrom Fergusson Wharf to a newcomplex at Bledisloe Wharf This isproviding much improved faci litiesDevelopment at Lyttelton iscontinuing and the year was a difficultone for staff who maintainedoperations wh i lst construction workwas in progress. Mount Maunganuidevelopment has continuedaccording to plan. ln Australia wehave moved to a new terminal area atVictoria Dock, Melbourne, and theSydney terminal facilities have beenaltered by relinquishing a lease onthe lrnkspan and berth at No 6 DarlingHarbour and taking over the area atNo B. adioininq ourtraditional berth atNo 7, to enablS uNloN ROTORUAand UNION ROTOIT|to work theirquarter ramp faci ities.I lU Agenciesln line with the ComPanY PolicY ofmaking greater use of the expertise indifferent divisions, the agencYcoverage for ships visiting Portswhere the Company has branchoperations has significantlYadvanced by securing new agencies.ln the Pacific lslands, the agencYcoverage for Dilmun NavigationCompany tankers has beenexpanded to include Tonga while inWestern Samoa the agencY forPolynesia Line is now wellestablished During the Year theCompany acted as charterers agentfor the cable ship PHOTINIA whichwas involved in the repair oJ the CookStrait electricity cable. New Plymouthbranch has continued to Provide awide range of agency services andattendant manning of the fleet ofvessels associated with theconstruction programme for the Mauigas field. There has been a similarinvolvement with the oil explorationprogramme south of New Zealand.4l E\"sineeringWorlcsEopsDespite the difficult economicsituation, more outside work has beenobtained to compensate for revenuelost due to the modernisation of theCompany's fleet.A diversification programme at ourengineering workshops at Nelson hasincludedthe formation of amerchandising comPanY to marketlight industrial and engineeringequipment.During the year plans were drawn uPto transfer the Wellington Workshopoperation from its Present site atN.Z. Tiles Transform Australian RoofsUnion Company transports such basic commodities as potatoes and onlons

Evans Bay, which it has occupiedsince 1 912, to a location closer to thepresent whad area. The new site willbe more efficient and establish acentral operational base.l-u PersonnelThe Company has enjoyed a year ofstaff stability in all areas and hasmaintained it s long standing recordo{ low turnover. Staff numbersdeclined by about 4'/\" during the yearreflecting improved systems andbetter utilisation of staff resources.Staff training and development is animportant management function andrelevant educational programmeshave involved a large number of bothshore and sea staff. For example, aseries of seminars was held forsenior deck and engineer officerswith the theme of 'lndustrial RelationsAboard Ship'aimed at improvingcommunications between head officeand the sea staff. Training courses ingas turbine control techniques wereheld in Sydney and Auckland.Present at the Auckland course weref ifty members of the Company'sengineering sea staff.lU IndustrialLong negotiations withrepresentatives of both the NewZealand Seamen's Union and Cooks'and Stewards' Union resulted in theintroduction of paid roster schemescovering job allocation for theirmembers under the control oJ theMinistry of Transport. Once theindustry requirements and Unionmembership reach a balanced state,problems associated with crewshortages shou ld largely isappear.d The year saw the introduction in NewZealand of the redrafted Waterfrontlndustry Act. The aim to bringis together under the Waterfront lndustryTribunal, all cargo handling groupsand overcome some of thedemarcation issues which havetended to create serious anomalies.@ Data ProcessingFollowing on the successfulimplementation of a computerisedfreight listing system at Auckland Iastyear using an IBM terminal, it wasdecided to effect control of cargoequipment using the same IBMterminal and further to extend thesystems to all New Zealand Roll-onports and later to Australia. Acomputerterminal has now beeninstalled at Mount Maunganui and isoperating successfully. There hasbeen a marked improvement in theturn-around of cargo equipment to thebenefit of customers and theCompany.lU StoresWith the cessation of the Wellington toLyttelton passenger service, it wasdecided to transfer the Evans BayStore to Auckland. Alterations weremade to the Auckland Store to copewith the linen and other lines notpreviously held there.offices for redevelopment which willbe investigated in the new year.During the year the lnvercargillproperty, occupred for many years asthe Company's branch office wassold, the Company's travel businesscontinuing in more centrally situatedpremrses.Since balance date a small propertyhas been purchased in Wellingtonadjacent to the Company's Tory Streetproperty in order to enable theredevelopment of the Tory Street siteto house the Wellington MarineRepair Works Divison. This transfer isfreeing major leasehold a site atEvans Bay for alternative possibleuses which are under investigation atthe present time.LUUnion TiauelDespite the difficult economic climatein the travel field and thediscouraging effect of the NewZealand Government 10% travel tax,the travel division has increased itsprofitability.The development of new tourprogrammes by a special section ofthe travel division has beensuccessful and further increases inprofitability have been achieved inPacific lsland travel operations bothin the use of existing establishmentsand in the marketing of Pacific lslandtours by branch offices.@ Properti'esln Wellington and Auckland transferof the majority of treight and agencyoffice staff to convenientaccommodation at the Seacargoterminals has freed space in the cityFisher and Paykel has now established an enviable reputation on both sides of theTasman.Simental sludstock, bred in New Zealand and in high demand by Australian buyers

The reception is far from chlll to expo( quality New Zealand ice creamCopra from the islands to be used in the manufacture ol margarineUnion Company carries the bulk of New Zealand's primary expods to Australia

1-LJD Uri* Company Contribution to New ZealandTiadeU Trans-Thsman TradeA'STRALIA 'tg6z4 m(te.s%)JAPAN$53Om115.2s/lOII{ERIMPOHTS$362m. rc6r)Arstralia$3e!.^fi2AUnion €niedla

LlDFleetList.Cargo Vesselsm.v. Holmdalem.v. Karepom.v. Karetum.v. Marama*m.v. Ngaherem.v. Ngakutam.v. Ngaparag.t.e.v. Seaway Princeg.t.e.v. Seaway Princessm.v. Titokim.v. Totaram.v. Union Aotearoam.v. Union Auckland*m.v. Union Australia*m.v. Union Melbourne*m.v. Union New Zealand*m.v. Union South Pacific.m.v. Union Trans Tasman*m.v. Union Hobart*m.v. Union Lyttelton.g.t.e.v. Union Rotoruag.t.e.v. Union RotoitiLegendm.v. Motor Vesselg.t.e.v. Gas Turbine Electric Vessel* : CharteredAnother sea freighter ol A.H.l. batts insulation bound Ior energy conscious Auslralia.DeadweightTonnes1 09437083708645261 16607661474216422091491412,80020,1 61 5393700053841 8905300735073501440014400lU Executive.B.S. ColeD.C. JuryA. NotleyGeneral ManagerAssistant General ManagerAssistant General Manager (Fi nance)P.E.Maxwell AdministrationManagerP.R. Bremford SecretaryD.A. Graham Manager- Branchesl.P. Carr Operations ManagerV.L. Kilgour Fleet ManagerK.G. Keech General Manager- Union TravelD.C. Shelton Corporate Planning ManagerR.J. Ross lndustrial ManagerE.J. Hobbs Development ManagerG.R. Peebles Personnel ManagerA. McNab GeneralTraffic ManagerP.R. Romanos Commercial ManagerW. R. HoldsworthAccounting ManagerS.D. Judson Finance ManagerT.N. Petherick Commercial Manager-WorkshopsR.J. O'Brien Manager- Pacific lsland andCoastalTradesAUSTRALIAE.L. Chester Operations ManagerUNITED KINGDOMP.E. Hewett London RepresentativeNLV Rotoiti. One of the new generation roll on roll off ships fitted with both stem andbow loading facilities.lo

7iruOffices.Head OlficeWELLINGTON36-48 Customhouse Quay,P.O. Box 1799.New Zealand Branchesand TravelOfficesAUCKLAND36-38 Quay Street,P.O. Box 287.TravelOffice,164 Queen Street.BLENHEIM63 High Street,P.O. Box 24.BLUFFHarbour Board Bui lding,lsland Harbour,P.O. Box 94.CHRISTCHURCHCnr Armagh and Colombo Streets,P.O. Box 2090.DUNEDIN38 Water Street, C..l ,P.O. Box 650.HAMILTONBryant Trust Building,Cnr Collingwood and Barton Streets,P.O. Box 486.HASTINGS218 Heretaunga Street West,P.O. Box 1146.INVERCARGILL39 Tay Street,P.O. Box 3.LEVIN280 Oxford Street,P.O. Box 266.LOWER HUTTBank of New Zealand Building,185 High Street,P.O. Box 30-130.LYTIELTONPort Building,Nonruich Quay,P.O. Box 3.MOUNT MAUNGANUICnr Tasman Quay and Hull Road,Mount Maunganui South,P.O. Box 4120.NAPIERHawke's Bay Motor Co. Ltd.Building,Dickens Street,P.O. Box 641.NELSONAnchor Dorman Ltd.,Port Nelson,PO. Box 5007.NEW PLYMOUTH40 Devon Street East,P.O. Box 545.OAMARU61 Thames Street,P.O. Box 41.PALMERSTON NORTH1 54 Broadway Avenue,P.O. Box 1'12.PORIRUAEvening Post Building,Cobham Court,P.O. Box 5G074.TAURANGA65-67 Devonport Road,P.O. Box 640.TIMARU257 Stafford Street,P.O. Box 185.WELLINGTON36-48 Customhouse Quay,P.O. Box 1799.TravelOfftce,70 Manners Street.WESTPORT10 Wakefield Street,P.O. Box 246.WHANGAREI'lst Floor,N.Z.l. Building,28 James Street,P.O. Box 749.Pacific lsland BranchessuvA, FijiThompson Street,P.O. Box 43.LAUTOKA, FijiVitogo Parade,P.O. Box 49.APIA, WESTERN SAMOASavalalo Buildings,Main Beach Road,P.O. Box 50.NUKUALOFA, TONGATungi Arcade,Main Street,P.O. Box 4.PAGO PAGO, AMERICANSAMOAB.F. Kneubuhl lnc. (Agent)Agents, AustraliaHOBARTUnion-Bulkships Pty. Ltd.2 Elizabeth Street,G.P.O. Box 1023K, 7001MELBOURNEUnion-Bulkships Pty. Ltd.,94 William Street,G.P.O. Box 12751,3001.TravelOffice,Union Travel,94 William Street.SYDNEYUnion-Bulkships Pty. Ltd.,339 George Street,G.P.O. Box 534, 2001.TravelOffice,Union Travel17th Floor,CapitalCentre,255 Pitt Street.PORT ADELAIDEUnion-Bulkships Pty. Ltd.,St. Vincent Chambers,259 St. Vincent Street,P.O. Box 162, 5015.FREMANTLEUnion-Bulkships Pty. Ltd.,17 Henry Street,P.O. Box 434, 6160BRISBANEUnion-Bulkships Pty. Ltd.,Pearl Assurance House,379-391 Queen Street,P.O. Box 2205,4001United KingdomC/- Mcllwraith McEacharn Ltd.,Stevinson House,1 55 Fenchurch Street,London EC3M 6AU.TravelOffice,Pacific and World Travel Ltd.,8-10 Royal Opera Arcade,PallMall.20