APR04068 Zintel Report 2004 3/6/04 4:58 PM Page 2

CLIENT QUOTES Mortgage Choice AUCKLAND 5 WILKINS STREET, FREEMANS BAY PO BOX 90373, AMSC AUCKLAND, NEW ZEALAND TEL +64 9 360 7730 FAX +64 9 360 4238 FREE CALL 0800 ZINTEL (946 835) FREE FAX 0800 ZINFAX (946 329)

www.zintel.co.nz

"Mortgage Choice has used its 0800 CHOICE word number for three years now and I’ve always been impressed at how Zintel manages to keep up with our increasingly complex requests. With 29 Franchisees located from Auckland to Invercargill we put Zintel’s geographic call distribution system to good use.

ZINTEL GROUP LIMITED

What I like about Zintel is that their reporting is very detailed and you always get a warm welcome when you call." Mortgage Choice New Zealand

SYDNEY 1 CHANDOS STREET ST LEONARDS, NSW 2065 LOCKED BAG 3700, AUSTRALIA TEL +61 2 9462 7777 FAX +61 2 9439 5900 FREE CALL 1800 CALL ZINTEL (225 594) FREE FAX 1800 SEND FAX (736 332)

www.zintel.com.au

BMW Group "I would like to reiterate the success of installing 0800 numbers within our marketing campaigns across our brand line up. The use of both 0800 numbers has had several implications for BMW Group. We no longer need to devote time and money to producing individual advertising plates for each of our centres throughout the country. The 0800 number has replaced the need for Centre address blocks on National advertising for us. That fact alone has enabled us to free resources and budgets." Georgina Pellett, Marketing Co-ordinator, BMW Group

Southtown Motor Inn AUCKLAND 5 WILKINS STREET, FREEMANS BAY PO BOX 90545, AMSC, AUCKLAND TEL +64 9 360 9080 FAX +64 9 360 4238 WELLINGTON L2, 204-206 THORNDON QUAY PO BOX 1471, WELLINGTON TEL +64 4 462 4800 FAX +64 4 462 4801 CHRISTCHURCH 10B LESLIE HILLS DRIVE PO BOX 1035, CHRISTCHURCH TEL +64 3 341 4500 FAX +64 3 341 4509 DUNEDIN L7, NATIONAL MUTUAL BUILDING 10 GEORGE STREET, THE OCTAGON PO BOX 581, DUNEDIN TEL +64 3 471 6900 FAX +64 3 471 6998

www.ees.co.nz

"Further to our conversation today we are very impressed with the level of reporting and support offered by Zintel. The monthly reports, which are e-mailed to us, are useful for identifying where our guests originated. The Zintel suggested change to place the incoming 1800 calls on line 3 has enabled us to monitor improper use of the Freecall number. We would be happy to act as a reference site for Zintel." Geoff and Fiona Brown, Proprietors, Southtown Motor Inn, NSW, Australia

CablePrice "You wouldn't even know the implementation was happening. At most there was a 10 second outage at the changeover. It happened so quickly and effortlessly you wouldn't believe it. The technicians were brilliant. Nothing was a problem and training was comprehensive." Trish Whittaker, Administration Manager for CablePrice in March 2004 on the installation of their communications solution provided by Ericsson Enterprise Systems.

Annual Report FOR THE YEAR ENDED 31 MARCH 2004

APR04068 Zintel Report 2004 3/6/04 4:58 PM Page 2

HIGHLIGHTS Year ending 31 March 2004

01. Zintel today Zintel Group Limited is a listed Company with shares quoted on the New Zealand Alternative Exchange (NZAX), which is managed by the New Zealand Exchange (NZX).

Contents 01 Zintel Today

03

02 Chairman’s Letter

04

03 Board and Senior Management

07

04 Company Overview

09

05 Governance Statement

11

06 Financial Statements

13

07 Other Information

31

08 Glossary

35

09 Directory

35

+ 24.8%

Full year net profit before tax up 25% to $6.17m

Zintel Group is both a profitable and growing Company, and comprises Zintel Communications, a Toll Free and Tolls

Both Zintel Communications and Ericsson Enterprise Systems business divisions continue to perform strongly

service provider in NZ and Australia; Ericsson Enterprise Systems, the sole importer and distributor of Ericsson's enterprise product portfolio in New Zealand; and Zintel Leasing, which provides in-house rental and

Successful transition from Unlisted Securities Market to NZAX as 1stXV Company, 14 November 2003 Zintel Leasing commenced trading to finance operating leases Total dividends declared of 4.07 cents per share fully imputed

operating leases for Ericsson equipment. The Company has offices in the key centres of Sydney, Auckland, Wellington, Christchurch and Dunedin, plus regional outlets in Hamilton and Tauranga. With over 100 staff, and an excellent track record over the last nine years, the Zintel Group is well positioned for the future.

profit before tax CONSOLIDATED ACCOUNTS: TWELVE MONTHS TO 31 MARCH 2004

THE BOARD OF DIRECTORS IS PLEASED TO PRESENT THE ANNUAL $000 March 2004

$000 March 2003

Change

Operating revenue

39,952

35,140

13.7%

Operating expenses

33,780

30,196

11.9%

Profit before income tax (EBT)

6,172

4,944

24.8%

Net profit (Surplus after tax)

4,097

3,254

25.9%

Earnings per share

8.15 cents

6.5 cents

25.4%

Dividend declared (plus imputation credits)

4.07 cents

3.2 cents

27.2%

50.25 million

50 million

+250,000

REPORT OF ZINTEL GROUP LIMITED FOR YEAR ENDED 31 MARCH 2004 FOR AND BEHALF OF THE BOARD

N. P. (Nick) Gordon 27 May 2004

G. R. (Gavin) Walker 27 May 2004

Shares on issue

APR04068 Zintel Report 2004 3/6/04 4:59 PM Page 4

02. Chairman’s letter

04

05

APR04068 Zintel Report 2004 3/6/04 4:59 PM Page 6

+ 11.8% staff numbers

+ 11.9% operating expenses

03. Board and senior management >

The Zintel Group has been structured to provide a high level of autonomy to each of the subsidiary Companies. Each General Manager is empowered to

+ 25.9% net profit after tax

+ 25.4% earnings per share

run their business independently, within agreed boundaries. The result is innovative thinking and growth that could not be achieved as a conglomerate. The Board of Directors provides guidance, governance and strategic direction to management. BOARD OF DIRECTORS

+ 91.5% operating cash flow

+ 149.9% cash on hand

“

-

ZINTEL GROUP LIMITED

N . P. ( NICK ) GORDON MANAGING DIRECTOR AND CHAIRMAN OF THE BOARD

Born and educated in Christchurch, Nick Gordon has over twenty years experience in business management, with marketing expertise in the fields of telecommunications and technology. In the last decade, he has also gained valuable experience as a company director of publicly listed companies. Nick established Zintel Group in 1995 and is currently the Managing Director of the Company. Through family interests, he is also the principal shareholder of Zintel Group Limited, a director of Provenco Group Limited and a director of several privately held companies. G . R . ( GAVIN ) WALKER BCA NON-EXECUTIVE DIRECTOR

Flight Centre has been using

Gavin joined the Board of Zintel Group in June 2002 and is chairman of the Zintel Audit and Risk Committee. Gavin brings a wealth of business knowledge and experience to the Company. He is currently a director of Lion Nathan Limited, Baycorp Advantage Limited and Trans-union Advantage Limited. Gavin has a background in investment banking having held the position of CEO for Bankers Trust Investment Bank, Australia and prior to that was CEO/Director of Bankers Trust New Zealand Limited. He is also a director of the New Zealand Rugby Union and a trustee of the Arts Foundation of New Zealand. Gavin graduated from Victoria University in Wellington, New Zealand, with a Bachelor of Commerce and Administration (BCA), with a major in Economics.

Zintel for a number of years now. The reports they provide enable us to make quick decisions during campaign activity. In addition, Zintel's multiple invoicing and reporting

P. A . ( PAUL ) CONNELL CA NON-EXECUTIVE DIRECTOR

service enables us to receive an

Paul joined the Board of Zintel Group in October 2003 and is chairman of the Zintel Remuneration Committee. Paul brings widespread business experience to the Company. He has over twenty five years years experience in corporate finance, management consulting and chartered accountancy in New Zealand, the UK and the Pacific region. During his career, Paul has advised listed company boards, state owned enterprises, bodies and private companies with a focus on strategic planning, management and financial structuring, and capital raising. Paul is a director of Provenco Group Limited and a number of private companies. He is a member of the Institute of Chartered Accountants and the Institute of Directors.

overview of what is happening around the country. Zintel has a great understanding of the special requirements of a very

”

busy travel company

Shane Parlato, National Marketing Manager, Flight Centre

06

07

APR04068 Zintel Report 2004 3/6/04 4:59 PM Page 8

04. Company overview THE EXECUTIVE TEAM

-

THE ZINTEL GROUP OF COMPANIES

ANTHONY ( TONY ) WALDEGRAVE GENERAL MANAGER , ZINTEL COMMUNICATIONS LIMITED

-

COMPANY OVERVIEW

•

Established in 1995, Zintel first started out by introducing the concept of toll free WordNumbers to the New Zealand business market.

•

NEW ZEALAND

•

Tony joined the Zintel Group in 1997 and is General Manager of its Zintel Communications Limited New Zealand division. He started out as Sales Manager and was promoted to General Manager in 1999. He has played a significant role in the strategic development and growth of the business since joining. Tony’s experience in telecommunications spans both PSTN and Cellular environments over 12 years. Previous roles include Business Development and Sales Management positions at Ericsson Cellular, Ubix Communications and Telephone Technology. JOHAN SCHOLTZ GENERAL MANAGER , ZINTEL COMMUNICATIONS P ty LIMITED

-

AUSTRALIA

Johan joined the Zintel Group as General Manager of its Zintel Communications Pty Limited Australia division in September 2000. Graduating from South Africa with majors in Accounting and Economics, and with over 16 years of international business experience, Johan brings strong management and financial skills to the Company. Johan has held various senior management positions and has been a director of both public and privately listed Companies. KEVIN FRANCIS BSC (HONS) MIM MISM GENERAL MANAGER , ERICSSON ENTERPRISE SYSTEMS ( NZ ) LIMITED

Kevin joined the Zintel Group as General Manager of its Ericsson Enterprise Systems division in March 2002. Educated at Bristol University, UK, where he gained an honours degree in chemistry, and the Royal Military Academy Sandhurst, Kevin brings over 15 years experience in the IT & Telecommunciations sector in senior management positions. Previous positions held include Netway Communications, Datacraft and Asia Online NZ Limited, where he developed the professional services business unit before being promoted to Country Manager in 1999. ALF WALLIS CA GENERAL MANAGER , FINANCE AND ADMINISTRATION

Alf joined the Zintel Group as General Manager of Finance and Administration in May 2002. Prior to Zintel, Alf worked as Financial Controller for the Car Distribution Group and Asia Online NZ Limited respectively. Alf gained his qualifications at Auckland University of Technology (AUT), and brings over twenty years experience in the accounting environment to the Company.

BOARD OF DIRECTORS NICK GORDON (CHAIRMAN)

Zintel’s business model has evolved considerably since 1995 and today it provides businesses with not only toll free WordNumbers but specialised voice solutions that include network design, maintenance and customer service, with billing and business information services. In 2000, Zintel Group expanded its business further by purchasing the New Zealand enterprise business of Ericsson Enterprise from Ericsson Enterprise AB in Sweden to form Ericsson Enterprise Systems (NZ) Limited. Additionally in 2000, Zintel purchased SMI Telecom in Sydney, Australia. This business is now operated in Australia as Zintel Communications Pty Limited. Today, the Zintel Group comprises four Companies: Zintel Communications Limited, a specialist toll free and toll service provider in New Zealand; Zintel Communications Pty Limited, which provides the same services in Australia; Ericsson Enterprise Systems (NZ) Limited, an Authorised Ericsson Partner and the sole importer and distributor of Ericsson’s enterprise product portfolio and applications in New Zealand; and Zintel Leasing Limited, which provides in-house finance for Ericsson Enterprise’s business communication solutions. In all areas of operations, the Zintel Group strives for excellence and this value proposition has seen the Company grow from a small EBITDA (earnings before interest, tax, depreciation and amortisation of goodwill) in the financial year ended 31 March 1999, to an EBITDA of NZ$6.61 million to 31 March 2004.

Grow market share in New Zealand for its Ericsson PABX hardware and software; Leverage opportunities from its specialist billing and reporting software; and Seek acquisitions which have synergies with the existing businesses of the Group and where Zintel can add further value.

To help realise these opportunities, the Zintel Group is reinvesting back into the business through increased staff numbers and financial support for research and development, customer service and sales and marketing efforts. Zintel now has 111 dedicated employees based in its main operating centres of Sydney, Auckland, Wellington, Christchurch, Dunedin plus regional outlets in Hamilton and Tauranga to help achieve these growth opportunities. With its proven track record of growth and profitability since it was established nine years ago, and with solid products and services, good growth opportunities and committed staff, Zintel is well positioned for the future. ZINTEL COMMUNICATIONS LIMITED AND ZINTEL COMMUNICATIONS P ty LIMITED

Zintel Communications is a specialist service provider of toll free and toll services in New Zealand and Australia. The Australian operations were previously operated as a branch of Zintel Communications Limited and on 1 October 2003 were restructured into a wholly owned subsidiary of the Company. With over nine years specialist experience, Zintel Communications has the technical and marketing expertise to design and specify solutions for toll free 0800 and 0508 in New Zealand and 1800/1300/13 in Australia from conception through implementation, on-going analysis and call management reporting.

GROWTH OPPORTUNITIES

The adoption of toll free numbers as a business tool has gained acceptance around the world and are widely recognised by users as an effective method of accessing an array of business and customer services.

The next few years will see the Company building on solid foundations to: • Bring additional products and services on stream; • Grow market share particularly in Australia for toll free services;

GAVIN WALKER PAUL CONNELL

COMPANY CHART

MANAGING DIRECTOR NICK GORDON

ZINTEL GROUP LIMITED (HEAD OFFICE) GENERAL MANAGER ERICSSON ENTERPRISE SYSTEMS

GENERAL MANAGER ZINTEL COMMUNICATIONS NEW ZEALAND

GENERAL MANAGER ZINTEL COMMUNICATIONS AUSTRALIA

GENERAL MANAGER FINANCE AND ADMINISTRATION

KEVIN FRANCIS

TONY WALDEGRAVE

JOHAN SCHOLTZ

ALF WALLIS

08

100% Subsidiaries

ERICSSON ENTERPRISE SYSTEMS (NZ) LTD

ZINTEL COMMUNICATIONS LTD

ZINTEL COMMUNICATIONS (Pty) LTD

09

ZINTEL LEASING LTD

APR04068 Zintel Report 2004 3/6/04 4:59 PM Page 10

Zintel Communications adds value by providing expert customer service through its consultative account management approach and unique reporting solutions. Specifically, Zintel does not invest in any network or switching infrastructure. Instead it sits outside of the network operator’s legacy infrastructure, purchasing network services from various operators on a wholesale basis. Central to Zintel’s service offering is its in-house billing and reporting services platform, internally referred to as TWINS. TWINS allows Zintel to manage all telecommunications billing together with reporting and contact information management for its customers in both New Zealand and Australia. TWINS supports a range of call management reporting services which have been designed to run off the billing platform. Reports are available daily, weekly and monthly and are distributed in a variety of formats from print/post to online delivery. Zintel’s reports are designed to easily provide customers with invaluable insight regarding the effectiveness of their marketing and advertising or customer service activity on their 0800 & 0508 numbers in New Zealand and/or 1800, 1300 & 13 numbers in Australia. ERICSSON ENTERPRISE SYSTEMS (NZ) LIMITED

A wholly owned Zintel Group subsidiary and an Ericsson Authorised Partner, Ericsson Enterprise Systems (NZ) Limited is the sole partner for distribution, sales and service of Ericsson’s enterprise product portfolio within New Zealand.

Specifically, Ericsson Enterprise Systems designs, implements and supports advanced PABX hardware and software solutions for customers from the large corporate and government agencies through to small and medium sized enterprises (SME) throughout New Zealand. This includes the MD110 modular platform solution for up to 20,000 extensions, the BusinessPhone platform catering for the SME market plus a range of Business and Mobility Applications. A critical means of supporting customers is through the provision of a 24 x 7 nationwide contact and service support centre. Additionally, nearly two thirds of personnel are employed within service and technical support roles, reinforcing the service excellence approach that has driven high customer satisfaction and minimal churn.

05. Governance statement ROLE OF THE BOARD OF DIRECTORS

BOARD COMMITTEES

The Board is elected by shareholders and has overall responsibility for the proper direction and control of the Group’s activities.

The Board has two standing committees that focus on specific areas of the Board’s responsibilities. Both committees meet at regular times during the year, with additional meetings convened when required.

THIS RESPONSIBILITY INCLUDES : • •

• •

A focus on providing leading products and services ensures that Ericsson Enterprise Systems is continuously refining its product and service portfolio, helping to further meet the changing demands of the marketplace and better support customer requirements. Ericsson Enterprise Systems, with its in-house development lab and authorised partnership with Ericsson Enterprise AB, ensures all products and services are quality assured. ZINTEL LEASING LIMITED

Zintel Leasing Limited is a wholly owned Zintel Group subsidiary which has been established to provide selected business customers with an in-house option for rental or operating leases of Ericsson equipment.

•

Identification and control of the Group’s business risks; Integrity of management information systems and reporting to shareholders; Approval of all material transactions relating to the Group; Reviewing all strategic plans and approval of annual budgets and monitoring progress against plans and budgets; and Monitoring the performance of the Managing Director and ensuring that adequate succession plans for senior management are in place.

While the Board acknowledges that it is responsible for the overall control framework of the Group, it recognises that no cost effective internal control system will prevent all errors and irregularities. The system is based upon established procedures, policies and guidelines, organisational structures that provide an appropriate division of responsibility, sound risk management and the careful selection and training of qualified personnel.

AUDIT AND RISK MANAGEMENT COMMITTEE

This committee operates under a charter approved by the Board. This committee is accountable to the Board for addressing the recommendations of the external auditors and the adequacy of the external audit function. The committee provides the Board with additional assurance regarding the accuracy of financial information for inclusion in the Group’s annual report. This committee is responsible for reviewing all accounting policies adopted by the Group and is required to approve recommendations to the Board for changes in accounting policy. The committee reviews all risk management assessments made by the Group and is responsible for ensuring that all risks are monitored and managed on a regular basis.

BOARD COMPOSITION

The Board currently comprises three directors, a majority of whom are non-executive. The Company’s constitution allows for the appointment of up to seven directors.

The membership of the Audit and Risk Committee is not fewer than two non-executive directors and at least one member must have financial expertise.

The size of the Board will be increased as the business grows and the need for further skills and contributions from directors are identified.

The Audit and Risk Committee meets at least twice per year.

REVENUE AND PROFIT HISTORY CHART

1999

2000

2001

2002

2003

2004

Revenue

$3.35m $5.63m $16.70m $29.80m $35.14m $39.95m

EBITDA

$0.69m $1.43m

$1.98m

$3.21m

$5.40m

$6.61m

In recruiting further directors, the Board will consider the skills required to contribute towards the management of the business and corporate governance. All three existing directors are experienced as directors of Companies listed on the New Zealand Exchange. REVENUE GROWTH

40

EBITDA

6

30

5

BOARD MEETINGS

The Board meets at least six times a year and may meet more frequently if there is business to be conducted.

$MILLION

25

4 $MILLION

Each year one third of the directors retire by rotation. Eligible directors may be re-elected.

35

7

20

3

15

2

10

1

5

Any director may call a meeting at any time with five days notice. Such meetings may be held in person or by teleconference.

A non-executive director, who is not the chairman of the Board, chairs the Audit and Risk Committee. REMUNERATION COMMITTEE

This committee operates under a charter and makes recommendations to the Board on remuneration policies and packages applicable to the Managing Director and senior executives of the Group. This committee is also responsible for overseeing and setting remuneration policy and practices across the Group. The Remuneration Committee makes recommendations to the full Board for the remuneration of non-executive directors. The membership of the Remuneration Committee is no fewer than two directors. The Remuneration Committee meets at least twice per year.

0

CODE OF CONDUCT

The Board has adopted a code of conduct for its members, executives and staff, specifying business standards and ethical considerations in conducting its business with stakeholders.

0 1999

2000

2001

2002

2003

2004

YEARS

1999

2000

2001

2002

2003

A non-executive director, who is not the chairman of the Board, chairs the Remuneration Committee.

2004

YEARS

10

11

APR04068 Zintel Report 2004 3/6/04 4:59 PM Page 12

06. Financial information

INSURANCES

The Company undertakes an annual review of both its insurance program and any residual uncovered risk. The Group has indemnity insurance for officers and directors (refer Indemnifications and Insurance of Officers and Directors) CONFLICT OF INTEREST POLICY

CUSTOMER FOCUSED

A director is required to disclose to the Board any actual or potential conflict of interest. Except where authorised by the Company’s constitution and the Listing Rules of NZX Limited, the conflicted director may not vote at a meeting where the relevant issues are discussed, or be counted in a quorum.

EXPERTISE

CONTENTS

SHARE DEALING

The Group has adopted a code of conduct applying to the share dealings by directors, Company officers and employees. Directors, officers and employees are generally limited to trading in the Groups’ shares during periods that follow the announcement of the Groups’ half yearly and annual results. All requests for trades in the Groups’ shares must be approved in advance of any trades.

RELIABLE

Auditors’ Report

14

Statements of Financial Performance

15

Statements of Movements in Equity

15

Statements of Financial Position

16

Statements of Cash Flows

17

Statement of Accounting Policies

18

Notes to the Financial Statements

21

Disclosures

31

The financial statements presented on pages 13 to 34 are signed for and on behalf of the Board and were authorised for issue on the date set out below.

12

N. P. (Nick) Gordon

G. R. (Gavin) Walker

27 May 2004

27 May 2004

13

APR04068 Zintel Report 2004 3/6/04 5:00 PM Page 14

ZINTEL GROUP LIMITED (FORMERLY ZINTEL COMMUNICATIONS LIMITED) Statements of Financial Performance for the year ended 31 March 2004

AUDITOR’S REPORT

Group Notes Operating revenue Operating expenses Operating surplus before income tax Income tax Net surplus attributable to shareholders

2 3 7

2004 $'000 39,952 (33,780) 6,172 (2,075) 4,097

Parent

2003 $'000 35,140 (30,196) 4,944 (1,690) 3,254

2004 $'000 18,343 (15,077) 3,266 (1,107) 2,159

2003 $'000 22,138 (19,164) 2,974 (1,028) 1,946

Statements of Movements in Equity for the year ended 31 March 2004

Group 2004 $'000

2003 $'000

2004 $'000

2003 $'000

5

4,097 4,097

3,254 3,254

2,159 2,159

1,946 1,946

4 6

203 (2,474) 1,826

1,600 4,854

203 (2,474) (112)

1,600 3,546

Equity at the beginning of year

3,526

(1,328)

5,511

1,965

Equity at end of year

5,352

3,526

5,399

5,511

Total Equity

5,352

3,526

5,399

5,511

Net surplus for the year, comprising Parent shareholders' interest Total recognised revenues and expenses Contributions from owners Dividends paid Movements in equity for the year

14

Parent

Notes

15

APR04068 Zintel Report 2004 3/6/04 5:00 PM Page 16

ZINTEL GROUP LIMITED (FORMERLY ZINTEL COMMUNICATIONS LIMITED) Statements of Financial Position as at 31 March 2004

Statements of Cash Flows for the year ended 31 March 2004 Group

Notes

Equity Share capital Retained earnings

4 5

Total equity

Group

Parent

2004 $'000

2003 $'000

2004 $'000

2003 $'000

3,974 1,378

3,771 (245)

3,974 1,425

3,771 1,740

5,352

3,526

5,399

5,511

5,202 5,202

4,907 4,907

309 309

2,509 2,509

5,202

4,907

309

2,509

10,554

8,433

5,708

8,020

Liabilities Current liabilities Payables and accruals Total current liabilities

12

Parent

2004 $'000

2003 $'000

2004 $'000

2003 $'000

40,096 107 40,203

34,437 35 34,472

20,935 92 21,027

21,541 35 21,576

(33,755) (23) (45) (1,700) (35,523) 4,680

(29,810) (61) (162) (1,995) (32,028) 2,444

(16,181) (23) 9 (1,039) (17,234) 3,793

(18,929) (83) (1,140) (20,152) 1,424

-

-

84 84

-

(784) (784) (784)

(456) (456) (456)

(198) (198) (114)

(133) (2,055) (2,188) (2,188)

203 203

1,600 1,600

203 203

1,600 1,600

(2,474) (2,474) (2,271)

(2,785) (2,785) (1,185)

(2,474) (2,474) (2,271)

1,600

Net increase in cash held

1,625

803

1,408

836

Foreign currency translation adjustment Cash at beginning of year Cash at end of year

19 1,097 2,741

(29) 323 1,097

10 1,048 2,466

(29) 241 1,048

4,097

3,254

2,159

1,946

420 8 (30) (2) 31 427

471 291 (59) 703

170 (35) 15 150

281 47 328

23 (58) 48 (221) (2) (9) 468 (93) 156

(534) (152) 77 (426) (66) (107) (297) (8) (1,513)

3,020 60 (2,213) (80) 106 103 61 427 1,484

(631) 7 82 (95) 6 (107) (90) (22) (850)

4,680

2,444

3,793

1,424

Cash was provided from Revenue Interest received Cash was applied to Operating expenses Interest paid Net GST paid Income tax paid Net cash inflows from operating activities Investment activities

Total liabilities Total equity and liabilities Assets Non-current assets Investments in subsidiaries Property, plant and equipment Deferred tax Total non-current assets Current assets Cash and bank balances Accounts receivable Inventories Staff share loans Total current assets

14 13 8

1,155 440 1,595

10 11

Total assets

799 347 1,146

1 8 9

1 347 69 417

2,741 4,939 1,164 115 8,959

1,097 4,980 1,104 106 7,287

2,466 3,233 5,699

1,048 6,449 106 7,603

10,554

8,433

5,708

8,020

Cash was provided from Proceeds from sale of property, plant and equipment Cash was applied to Purchase of property, plant and equipment Advances and loans to subsidiaries Net cash inflows from investment activities Financing activities Cash was provided from Issue of ordinary shares Cash was applied to Repayment of term borrowings Dividends paid to Parent shareholders Net cash inflows from financing activities

Reconciliation with operating surplus Reported surplus after tax Items not involving Cash Flows Depreciation expense Impairment of property, plant and equipment Increase in estimated doubtful debts Provision for stock obsolescence Provision for bad debts Impact of changes in working capital items (Increase)/decrease in accounts receivable (Increase)/decrease in inventory (Increase)/decrease in prepayments Increase/(decrease) in trade creditors Increase/(decrease) in GST payable (Increase)/decrease in staff share loans Increase/(decrease) in tax provision (Increase)/decrease in deferred tax (Increase)/decrease in intercompany account Net Cash Flow from operating activities

16

17

APR04068 Zintel Report 2004 3/6/04 5:00 PM Page 18

ZINTEL GROUP LIMITED (FORMERLY ZINTEL COMMUNICATIONS LIMITED) STATEMENT OF ACCOUNTING POLICIES

STATEMENT OF ACCOUNTING POLICIES

for the year ended 31 March 2004

for the year ended 31 March 2004 continued

Entities reporting

Accounts receivable

The financial statements for the Parent are for Zintel Group Limited as a separate legal entity.

Accounts receivable are valued at anticipated realisable value. An estimate is made for doubtful debts based on a review of all outstanding amounts at year-end. Bad debts are written off during the period in which they are identified.

The consolidated financial statements for the Group are for the economic entity comprising Zintel Group Limited and its subsidiaries.

Statutory base Zintel Group Limited is a Company registered under the Companies Act 1993 and is an issuer in terms of the Securities Act 1978. The financial statements have been prepared in accordance with the requirements of the Financial Reporting Act 1993 and the Companies Act 1993.

Inventories Inventories are stated at the lower of cost and net realisable value. Cost is based on the average cost and includes expenditure incurred in acquiring the inventories and bringing them to their existing condition and location.

Property, plant and equipment Initial recording

Measurement base

Fixed assets are recorded at cost less accumulated depreciation.

The financial statements have been prepared on the historical cost basis, as modified by the revaluation of certain assets as identified in specific accounting policies below.

The cost of self-constructed assets includes the cost of all materials used in construction, direct labour on the project and financing costs that are directly attributable to the project. Costs cease to be capitalised as soon as the asset is ready for productive use and do not include any inefficiency costs.

Accounting policies The financial statements are prepared in accordance with New Zealand generally accepted accounting practice. The accounting policies that materially affect the measurement of financial performance, financial position and cash flows are set out below.

Revenue Goods and services Revenue comprises the amounts received and receivable by the Group for goods and services supplied to customers in the ordinary course of business.

Depreciation Depreciation of property, plant and equipment, other than freehold land, is calculated using diminished value tax rates so as to expense the cost of the assets over their useful lives. The rates are as follows: Category Computer Equipment Office Equipment Motor Vehicles

Depreciation rate 39% to 48% 18% to 39% 26%

Depreciation basis diminished value diminished value and straight line diminished value

Leased assets Investment income

As lessee

Interest income is accounted for as earned.

Operating leases

Goods and Services Tax (GST) The statement of financial performance and statement of cash flows have been prepared so that all components are stated exclusive of GST. All items in the statement of financial position are stated net of GST, with the exception of receivables and payables, which include GST invoiced.

Leases whereby the lessor retains the risks and rewards are classified as operating leases and are charged as an expense in the statement of financial performance.

Investments The investments in subsidiaries are stated at cost in the statement of financial position of the Parent.

Group financial statements The Group financial statements consolidate the financial statements of subsidiaries, using the purchase method, and include the results of associate using the equity method. Subsidiaries are entities that are controlled, either directly or indirectly, by the Parent. All material transactions between parent and subsidiaries are eliminated on consolidation.

Foreign currencies Transactions Monetary assets and liabilities arising from trading transactions or overseas borrowings are translated at closing rates. Gains and losses due to currency fluctuations on these items are included in the statement of financial performance, except where monetary liabilities are identified as a hedge against an independent foreign operation.

The results of the subsidiaries are included in the consolidated statement of financial performance from the date of acquisition.

Foreign operations

Income tax

Revenues and expenses of integrated foreign operations are translated to New Zealand dollars at the exchange rates in effect at the date of the transaction, or at rates approximating them. Monetary assets and liabilities are converted to New Zealand dollars at the rate of exchange ruling at balance date.

The income tax expense charged to the statement of financial performance is based on the accounting surplus, adjusted for permanent differences between accounting and tax rules. Tax effect accounting has been applied on a comprehensive basis to all timing differences. The impact of all timing differences between accounting and taxable income is recognised as a deferred tax liability or asset. The deferred tax asset is only recognised when there is virtual certainty that the timing difference will crystallise.

18

19

APR04068 Zintel Report 2004 3/6/04 5:00 PM Page 20

ZINTEL GROUP LIMITED (FORMERLY ZINTEL COMMUNICATIONS LIMITED) STATEMENT OF ACCOUNTING POLICIES

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 March 2004 continued

for the year ended 31 March 2004

Intangible assets

1

Goodwill

Segment information

Industry segments

The excess of cost over the fair value of the net assets of the subsidiaries and branch is recognised as goodwill. This has been fully written off.

The Group is involved in the provision of telecommunication products and services. Geographic segments

Contract work in progress Contract work in progress is stated at cost plus the surplus recognised to date, less amounts invoiced to customers. Cost includes all expenses directly related to specific contracts incurred by the Group's contract operations.

New Zealand 2004 2003 $'000 $'000

2004 $'000

Australia 2003 $'000

2004 $'000

2003 $'000

Assets Consolidated

7,994

6,699

2,559

1,734

10,553

8,433

Revenue Consolidated

29,812

26,714

10,140

8,426

39,952

35,140

4,919

4,568

1,253

376

6,172

4,944

Impairment Annually, the directors assess the carrying value of each asset. Where the estimated recoverable amount of the asset is less than its carrying amount, the asset is written down. The impairment loss is recognised in the statement of financial performance.

Employee entitlements Employee entitlements to salaries and wages, annual leave, long service leave and other benefits are recognised when they accrue to employees.

Net profit before tax Consolidated

The liability for employee entitlements is carried at the present value of the estimated future cash outflows.

Total

Statement of Cash Flows The statement of cash flows has been prepared using the direct approach. The following are the definitions of the terms used in the statement of cash flows: a Operating activities include all transactions and other events that are not investing or financing activities.

The surplus is that of the Group before income tax, minority interest and extraordinary items. Intersegment sales are on an arms length basis.

2

Operating revenue

b Investing activities are those activities relating to the acquisition, holding and disposal of property, plant and equipment and of investments. Investments can include securities not falling within the definition of cash. c Financing activities are those activities that result in changes in the size and composition of the capital structure of the Company. This includes both equity and debt not falling within the definition of cash. d Cash is considered to be cash on hand and current accounts in banks, net of bank overdrafts.

Financial instruments Recognised Financial instruments carried on the statement of financial position include cash and bank balances, investments, receivables, trade creditors and borrowings. These instruments are, generally, carried at their estimated fair value. For example, receivables are carried net of the estimated doubtful receivables. The particular recognition methods adopted are disclosed in the individual policy statements associated with each item. Financial instruments that do not constitute hedges are stated at market value and any resultant gain or loss is recognised in the statement of financial performance.

Group Continuing Activities

2003 $'000

2004 $'000

2003 $'000

Trading revenue Revenue Deductions from sales

39,851 (15)

35,196 (91)

18,264 (14)

22,194 (91)

Investment revenue Interest income

107

35

92

35

Other revenue Bad debts recovered

9

-

1

-

39,952

35,140

18,343

22,138

Total operating revenue

Changes in accounting policies There have been no significant changes in accounting policies during the current year. All policies have been applied on a consistent basis throughout the year.

Comparative Information The results for the parent entity for the year ended 31 March 2004 comprises of 6 months of trading from its Australian operations until those assets and liabilities were sold to Zintel Communications Pty Limited, and 11 months of trading from its New Zealand operations until associated assets and liabilities were sold to Zintel Communications Limited - refer note 14. The above restructure did not impact on the operations of the Group because Zintel Communications Pty Limited and Zintel Communications Limited are fully owned subsidiaries of the parent.

20

Parent

2004 $'000

21

APR04068 Zintel Report 2004 3/6/04 5:00 PM Page 22

ZINTEL GROUP LIMITED (FORMERLY ZINTEL COMMUNICATIONS LIMITED) NOTES TO THE FINANCIAL STATEMENTS

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 March 2004

for the year ended 31 March 2004

3

continued

Operating expenses

4

Share capital

continued

continued

Share issue details and rights Group 2004 $'000

Ordinary shares As at 31 March 2004 there were 50,250,000 shares issued and fully paid (2003: 50,000,000). All ordinary shares have equal right to vote, to dividends and to any surplus on winding up.

Parent 2003 $'000

2004 $'000

2003 $'000

Share issue In November 2003, 250,000 shares were issued to employees at $0.81 per share with shares escrowed for 24 months.

Operating expenses include: Continuing activities

Share Issue In July 2002, 1,500,000 shares were issued to employees and a director at $0.40 per share with shares escrowed for 24 months.

Operating expenses Depreciation - motor vehicles Depreciation - office equipment Depreciation - computer equipment Total depreciation

28 82 310 420

12 7 359 378

38 132 170

32 191 223

Share Issue In July 2002, 2,000,000 shares were issued to deemed investors at $0.50 per share.

Loss on sale of property, plant and equipment Rental and operating lease costs

8 375

92 350

292

57 348

Share Split In June 2002, the existing shares on issue (252,174) were split using a ratio of 184.002469194 new shares for every one share held as at that date, resulting in 46,500,000 shares on issue.

Costs of offering credit Bad debts Provision for doubtful debts

31 (30)

86 (59)

15 (35)

81 47

23

78

23

8

Auditors' fees Auditors' remuneration - audit fees Auditors' remuneration - other services

48 122

40 18

48 122

25 -

Sundry expenses Foreign currency translation loss (gain)

(20)

45

(20)

45

5

Retained earnings Group

Cost of borrowings Other interest expense

Balance at beginning of year Net surplus for the year Dividends paid and provided

6

Share capital

Group 2004 $'000

2003 $'000

2004 $'000

2003 $'000

(245) 4,097 (2,474)

(3,499) 3,254 -

1,740 2,159 (2,474)

(206) 1,946 -

1,378

(245)

1,425

1,740

Analysis

Balance at end of year

4

Dividends

Parent 2003 $'000

2004 $'000

Parent

2004 $'000

Group 2003 $'000

Parent

2004 $'000

2003 $'000

2004 $'000

2003 $'000

1,600

-

1,600

-

874

-

874

-

2,474

-

2,474

-

Issued and paid up capital Final Dividend for 2003 On ordinary shares

Ordinary shares Balance at beginning of year Share issue made during year

3,771 203

2,171 1,600

3,771 203

2,171 1,600

Closing share capital

3,974

3,771

3,974

3,771

Interim Dividend on 2004 On ordinary shares Total Dividends

The dividends are fully imputed.

22

23

APR04068 Zintel Report 2004 3/6/04 5:00 PM Page 24

ZINTEL GROUP LIMITED (FORMERLY ZINTEL COMMUNICATIONS LIMITED) NOTES TO THE FINANCIAL STATEMENTS

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 March 2004

for the year ended 31 March 2004

7

continued

10 Accounts receivable

Income tax

Group

Group

Parent

2004 $'000

2003 $'000

2004 $'000

2003 $'000

Operating surplus before tax

6,172

4,944

3,266

2,974

Current

Permanent differences Surplus subject to tax

60 6,232

91 5,035

9 3,275

55 3,029

Trade debtors Less: Provision for doubtful debts

Tax at 33%

2,038

1,662

1,081

1,000

37

28

26

28

2,075

1,690

1,107

1,028

2,131 37 (93) 2,075

1,670 28 (8) 1,690

1,020 26 61 1,107

1,022 28 (22) 1,028

Overprovision in prior year Income tax recognised in the statement of financial performance

Parent

2004 $'000

2003 $'000

2004 $'000

2003 $'000

4,912 118 4,794

4,959 148 4,811

(1) (1)

3,135 112 3,023

109 36 145

157 12 169

3,173 46 15 3,234

3,308 106 12 3,426

4,939

4,980

3,233

6,449

2004 $'000

2003 $'000

2004 $'000

2003 $'000

158

465

-

-

1,588 582 1,006

1,223 584 639

-

-

1,164

1,104

-

-

2004 $'000

2003 $'000

2004 $'000

2003 $'000

2,545 833 1,192 243 277 112

3,279 602 891 212 (191) 114

220 44 45

2,018 388 37 (59) 125

5,202

4,907

309

2,509

11 Inventories

Group

Deferred tax asset / (liability)

Group 2004 $'000

2003 $'000

2004 $'000

Parent

Current

Parent 2003 $'000

Work in progress Finished goods Less: Provision for obsolescence

Non-current

9

Intercompany Prepayments Deposits

Current receivables

Comprising Estimated current period tax assessment Underestimation in prior year Deferred income tax liability

8

continued

Balance at beginning of year Movement

347 93

339 8

69 (61)

47 22

Balance at end of year

440

347

8

69

12 Payables and accruals

Imputation balances

Group

Group

Parent

2004 $'000

2003 $'000

2004 $'000

2003 $'000

2,699 1,834 (1,209)

1,003 1,696 -

1,786 988 352 (1,209)

762 1,024 -

3,324

2,699

1,917

1,786

Parent

Current

Imputation credit account Balance at beginning of year Tax payments Credits attached to dividends received Distributed and disposed Balance at end of year

24

Unsecured Accounts payable Customer deposits Accrued expenses Employee entitlements Income tax payable Goods and services tax (GST) payable

25

APR04068 Zintel Report 2004 3/6/04 5:00 PM Page 26

ZINTEL GROUP LIMITED (FORMERLY ZINTEL COMMUNICATIONS LIMITED) NOTES TO THE FINANCIAL STATEMENTS

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 March 2004

for the year ended 31 March 2004

continued

13 Property, plant and equipment

continued

14 Investments in subsidiaries The parents investments in the subsidiary comprises shares at cost.

Cost or Valuation $'000

2004 Acc Depn

Book Value

$'000

$'000

Cost or Valuation $'000

2003 Acc Depn

Book Value

$'000

$'000

Group

Motor vehicles

184

(40)

144

101

(12)

89

Office equipment

883

(295)

588

544

(223)

321

1,481

(1,058)

423

1,258

(869)

389

2,548

(1,393)

1,155

1,903

(1,104)

799

Interest held by the Group Principle activities

Ericsson Enterprise Systems (NZ) Limited Zintel Holding (AUS) Limited Zintel Communications Pty Limited Zintel Communications Limited Zintel Leasing Limited

Telecommunications Holding Company Telecommunications Telecommunications Financing

2004

100.00% 100.00% 100.00% 100.00% 100.00%

2003 100.00% -% -% -% -%

On 12 March 2004 the former Zintel Communications Limited changed its name to Zintel Group Limited. Computer equipment

Zintel Holdings (AUS) Limited was formed on 20 October 2003 and holds the investment in Zintel Communications Pty Limited Ownership of Zintel Communications Pty Limited was transferred from N Gordon to Zintel Group Limited (formerly Zintel Communications Limited) on 30 June 2003 for consideration of $1. Certain assets and liabilities were purchased from Zintel Group Limited on 1 October 2003. These assets and liabilities were purchased at carrying value which approximates the fair value. There was no impact to the assets and liabilities of the Group.

Cost or Valuation $'000

2004 Acc Depn

Book Value

$'000

$'000

Cost or Valuation $'000

2003 Acc Depn

Book Value

$'000

$'000

Parent

Office equipment

Computer equipment

Zintel Communications Limited (formerly Zintel Limited) was formed on 10 February 2004. Certain assets and liabilities were purchased from Zintel Group Limited (formerly Zintel Communications Limited) on 1 March 2004. These assets and liabilities were purchased at carrying value which approximates the fair value. There was no impact to the assets and liabilities of the Group. Ownership of Zintel Leasing Limited was transferred from N Gordon to Zintel Group Limited (formerly Zintel Communications Limited) on 23 June 2003 for consideration of $1.

-

-

-

190

(69)

121

-

-

-

956

(730)

226

-

-

-

1,146

(799)

347

26

The results of the newly formed or acquired subsidiaries are included in the consolidated financial statements from the date of incorporation or acquisition. All subsidiary entities have a balance date of 31 March .

27

APR04068 Zintel Report 2004 3/6/04 5:00 PM Page 28

ZINTEL GROUP LIMITED (FORMERLY ZINTEL COMMUNICATIONS LIMITED) NOTES TO THE FINANCIAL STATEMENTS

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 March 2004

for the year ended 31 March 2004

continued

continued

15 Related party information

17 Financial instruments

The following table sets out the related party transactions during the year:

The Group is subject to a number of financial risks which arise as a result of its debt portfolio and investment activities.

Value 2004 $'000

Transaction

Balance 2004 $'000

Value 2003 $'000

Balance 2003 $'000

Related party/relationship

N Gordon Director Gordon Marketing Limited Gordon Marketing Limited Waimea Trust N P Gordon N P Gordon Gordon Family Trust

Management services Loan (repaid) Loan (repaid) Loan (repaid) Vehicle sponsorship Landlord

135 -

17 -

120

-

150 (600) (1,582) (603) 29 -

29 -

To manage and limit the effects of those financial risks, the Board of Directors have approved policy guidelines and authorised the use of various financial instruments. The policies approved, and financial instruments being utilised at balance date, are outlined below.

Currency risk Policies During the normal course of business the Group receives revenue, incurs costs and holds balances denominated in foreign currencies. As a result of these transactions exposures to fluctuations in foreign currency exchange rates arise. The currency in which the Group primarily deals is the Australian Dollar. The Group's policy is to create a natural hedge against foreign currency risk by invoicing revenues associated with foreign currency costs in the denomination of that currency.

Interest rate risk Policies The Group did not use any financial instruments to manage its interest rate risk.

J Scholtz Director (subsidiary) S Data Investments Pty Limited*

Management Services

310

47

180

14

Landlord IT services Telecommunication fee charged to Provenco

130 211

10

263 60

2 11

(47)

(4)

(49)

(4)

N Gordon, P Connell & E Christian Directors Provenco Group Limited

Repricing analysis The following tables identify the periods in which interest rates are subject to review on interest bearing financial assets and liabilities, and provides the current weighted average interest rate of each item. Trade receivables, trade creditors and sundry receivables and creditors have not been included in the table as they are not interest rate sensitive.

Group - 2004 Effective interest rates

Current $'000

Bank

4.75%

2,471

-

-

-

2,471

Staff share loans

7.08%

115

-

-

-

115

2,586

-

-

-

2,586

2,586

-

-

-

2,586

* In the year ended March 2004, S Data Investments Pty Limited provided management services of J Scholtz and one other (2003: J Scholtz).

1-2 years $'000

2-5 years $'000

>5 years $'000

Total $'000

Assets

16 Operating lease commitments Obligations payable after balance date on non-cancelable operating leases are as follows:

Total assets Group 2004 $'000

Parent 2003 $'000

2004 $'000

2003 $'000

Operating leases Group - 2003 Non cancelable operating lease commitments: Within one year One to two years Two to five years

347 295 737

179 48 2

264 237 705

154 23 -

1,379

229

1,206

177

Effective interest rates

Current $'000

3.0%

1,109

-

-

-

1,109

7.83%

106

-

-

-

106

1,215

-

-

-

1,215

1-2 years $'000

2-5 years $'000

>5 years $'000

Total $'000

Assets Bank Staff share loans Total assets

28

29

APR04068 Zintel Report 2004 3/6/04 5:00 PM Page 30

07. Other information

NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2004 17 Financial instruments

continued

DISCLOSURES

continued

Parent - 2004

SIGNIFICANT CHANGES

INTERESTS REGISTER

Total $'000

In October 2003, certain assets of Zintel Group Limited (formerly Zintel Communications Limited) were sold to the fully owned subsidiary Zintel Communications Pty Limited.

-

2,466

-

-

115

In March 2004, certain assets of Zintel Group Limited (formerly Zintel Communications Limited) were sold to the fully owned subsidiary Zintel Communications Limited.

Each Company in the Group is required to maintain an interests register in which the particulars of certain transactions and matters involving the directors must be recorded. The interests registers for Zintel Group Limited and its subsidiaries are available for inspection at its registered office.

-

-

2,581

Effective interest rates

Current $'000

Bank

4.75%

2,466

-

-

Staff share loans

7.08%

115

-

2,581

-

1-2 years $'000

2-5 years $'000

>5 years $'000

Assets

Total assets

In March 2004, Zintel Communications Limited (the parent Company) changed its name to Zintel Group Limited (formerly known as Zintel Communications Limited).

Parent - 2003 Effective interest rates

Current $'000

1-2 years $'000

2-5 years $'000

>5 years $'000

Total $'000

Assets Bank Staff share loans

3.0%

1,060

-

-

-

1,060

7.83%

106

-

-

-

106

1,166

-

-

-

1,166

Total assets

Director

Position

Company

N P Gordon

Director and Shareholder

Gordon Marketing Limited Provenco Group Limited Gordon Family Trust Waimea Trust

Trustee Trustee

E R Christian 1

Credit risk The only concentration of credit risk is with a single customer which comprises approximately 10% of the overall accounts receivable balance.

Director and Shareholder

Wiltshire Equities Limited Provenco Group Limited New Zealand Residential Property Trust Limited Wiltshire Holdings Limited

Shareholder

G R Walker 2

Fair values

Details of all matters that have been entered in the interests register by individual directors are outlined below and set out in related party information (Note 15). Where a director has declared an interest in a particular entity, as a shareholder and/or director, the declaration serves as notice that the director may benefit from any transactions between the Parent or Group and the identified entities.

Director and/or Shareholder

Walker Consulting Group Limited Lion Nathan Limited New Zealand Rugby Promotions Limited Baycorp Advantage Limited Lion Nathan Nominees Limited Trans-union Advantage Limited Arts Foundation of New Zealand Waiata Trust, Trahlee Trust and Tirohanga Trust

Methods and assumptions The following methods and assumptions were used to estimate the fair value of each class of financial instrument: Cash at bank, bank overdraft, term deposits, loans issued, receivables and trade creditors The carrying value of these items are equivalent to their fair value.

Trustee

Investments Unlisted investments are valued by the directors based on cost less any provisions for impairment.

Borrowings Borrowings are based on discounted cash flows using the borrowing rate the directors expect would be available to the Group for debt of similar maturity at balance date. Fair values are estimated to be the same as carrying values for all items.

P Connell

Director

Wiltshire Equities Limited Provenco Group Limited Wiltshire Holdings Limited New Zealand Residential Property Trust Limited New Zealand Residential Investment Trust Limited

18 Capital commitments and contingencies The Group had no capital commitments or contingencies at balance date (2003: Nil).

19 Events occurring after balance date

E R Christian acquired 1,200,000 shares in July 2002. Interests associated with Gavin Walker acquired 500,000 shares in June 2002 and 250,000 shares in October 2003. ER Christian resigned as a director in October 2003, and P Connell was appointed as a director in October 2003.

1

There have been no events subsequent to the balance date which require disclosure in or adjustment to the financial statements.

30

2

31

APR04068 Zintel Report 2004 3/6/04 5:00 PM Page 32

ZINTEL GROUP LIMITED (FORMERLY ZINTEL COMMUNICATIONS LIMITED)

ZINTEL GROUP LIMITED (FORMERLY ZINTEL COMMUNICATIONS LIMITED)

DISCLOSURES continued

DISCLOSURES continued

DIRECTORS SHAREHOLDINGS AS AT 31 MARCH 2004

Twenty Largest Registered Shareholders As At 25 May 2004 2004

Non Beneficial ownership Nick Gordon

Holder Name

29,796,030

Gavin Walker Evan Christian

Balance at 24-05-2004

%

22,576,373

44.93

Nicholas Peter Gordon & Richard Anthony Johnston & Lynda Rae Gordon

7,215,657

14.36

Wiltshire Holdings Limited

2,973,567

5.92

John Harold Wynn Kirby

1,907,032

3.80

New Zealand Central Securities Depository Limited

1,785,988

3.55

Mirror Lake Investments Ltd

1,703,960

3.39

Johannes Adolf Scholtz

997,893

1.99

Anthony Charles Waldegrave

825,154

1.64

Wiltshire Equities Limited

775,824

1.54

Ronald David Smith

628,838

1.25

Domino Holdings Limited

490,440

0.98

Leveraged Equities Custodians Limited

441,000

0.88

Susan Eleanor Walker & Gavin Ronald Walker & William Malcom Paterson

375,000

0.75

Gavin Ronald Walker & Susan Eleanor Walker & William Malcom Paterson

375,000

0.75

Stephen C Montgomery & Charlotte V J Montgomery

359,000

0.71

Beanie Investments Limited

296,188

0.59

Ronald Joseph Gillatt

271,000

0.54

Energy Retailers Limited

264,500

0.53

Henry Christian & Logan Scott Christian

260,000

0.52

Investit Limited

239,517

0.48

Nicholas Peter Gordon & Richard Anthony Johnston

750,000 4,162,390

INFORMATION USED BY THE DIRECTORS

EMPLOYEE REMUNERATION

No member of the Board of Zintel Group Limited (formerly known as Zintel Communications Limited), or its subsidiaries, issued a notice requesting to use information received in their capacity as directors which would not otherwise have been available to them.

100,000 120,000 140,000 150,000 220,000 250,000

DIRECTORS REMUNERATION

There was no director remuneration for the year ended 31 March 2004 (2003: Nil).

109,999 129,999 149,999 159,999 229,999 259,999

2004 Parent 1 1

Subsidiaries 3 1 1 3 1

1

AUDITORS INDEMNIFICATION AND INSURANCE OF OFFICERS AND DIRECTORS

The Parent indemnifies all directors named in this report, and current and former officers of the Group against all liabilities (other than that to the parent or member of the Group) which arise out of the performance of their normal duties as director or executive officer, unless the liability relates to conduct involving lack of good faith. To manage this risk, the Group has indemnity insurance. The total cost of this insurance during the financial year was $8,660.

The principal auditor for the Group is PricewaterhouseCoopers. In addition to audit services, PricewaterhouseCoopers provide tax and advisory services. The Group acquired the advisory assistance while restructuring its operations. The remuneration for services provided by PricewaterhouseCoopers for the current financial year was: 2004 Audit Other $ $ 48,000 122,000

DIRECTORS AND SUBSIDIARIES

As at 31 March 2004 the directors of Zintel Communications Pty Limited were Nick Gordon and Johan Scholtz. Nick Gordon is the sole director for Zintel Leasing Limited and Ericsson Enterprise Systems (NZ) Limited. Paul Connell is the sole director for Zintel Holding (AUS) Limited.

2003 Audit $ 40,000

Other $ 18,000

DONATIONS

The Group made no donations during the year (2003: Nil). CHANGES IN ACCOUNTING POLICIES

There have been no significant changes in accounting policies during the current year. All policies have been applied on a consistent basis throughout the year.

EXECUTIVE REMUNERATION

The number of employees within the Group receiving remuneration and benefits above $100,000 are indicated in the following table.

Distribution of Ordinary Shareholders as at 25 May 2004 Holdings Ranges 1-1,000

Number of Shares

19

5.29%

15,633

0.03%

1,001-5,000

111

30.92%

417,673

0.83%

5,001-10,000

88

24.51%

791,954

1.58%

10,001-100,000

115

32.03%

3,213,432

6.39%

100,001-and over

26

7.24%

45,811,308

91.17%

359

100.00%

0,250,000

100.00%

Totals

02 32

Number of Shareholders

33

APR04068 Zintel Report 2004 3/6/04 5:00 PM Page 34

ZINTEL GROUP LIMITED (FORMERLY ZINTEL COMMUNICATIONS LIMITED)

DISCLOSURES continued

No of Shareholders

AUSTRALIA NEW ZEALAND Total

09. Directory

“BUSINESSPHONE” AND “BP” is the product name for Ericsson’s telephone system designed for small and medium sized businesses, up to 250 extensions.

DIRECTORS

Nicholas Peter Gordon (CHAIRMAN AND MANAGING DIRECTOR) 22A Waimea Lane, Remuera, Auckland

“DIRECTORS”

Registered Address of Shareholders as at 25 May 2004 Registered Address

08. Glossary

No of Shares

Gavin Ronald Walker, BCA 6 Tirohanga Avenue, Remuera, Auckland

“EBITDA” means earnings before interest, tax, depreciation

Paul Anthony Connell, CA 30 Ennismore Road, Mt Albert, Auckland

% of Capital

7

101,439

0.20

352

50,148,561

99.80

359

AND “ BOARD ” means the Board of Directors for the time being of the Company.

50,250,000

100.00

and amortisation. REGISTERED OFFICE

“EES”

AND

“ERICSSON

Level 1, 5 Wilkins Street, Freemans Bay, Auckland

ENTERPRISE ” means Ericsson

Enterprise Systems (NZ) Limited. AUDITOR

PricewaterhouseCoopers PricewaterhouseCoopers Building, 188 Quay Street, Auckland

“ERICSSON” AND “ERICSSON AB” means Ericsson AB of Sweden.

Substanial Security Holders The following persons were substantial security holders (as defined in the Securities Amendment Act 1988) in Zintel Group Limited as at 25 May 2004 in respect of the number of voting securities set opposite their names. Number of Voting Securities

% of Capital

Nicholas Peter Gordon *

29,796,030

59.30%

Gordon Family Trust *

22,576,373

44.93%

Waimea Trust *

7,215,657

14.36%

Evan Christian t

4,159,390

8.28%

Wiltshire Holdings Limited t

2,973,567

5.92%

“GROUP”, “THE COMPANY”, “ZINTEL” AND “ZINTEL COMMUNICATIONS” means Zintel Group Limited.

SOLICITORS

Jones Young Level 14, ASB Bank Centre, 135 Albert Street, Auckland

“MD110” is the product name for Ericsson’s telephone system SHARE REGISTER

designed for large corporates and government departments, up to 20,000 extensions.

BK Registries Limited 138 Tancred Street, PO Box 384, Ashburton Telephone: (03) 308 8887

“TWINS” is the name given to Zintel’s billing and reporting software. “USM” means the Unlisted Securities Market. “0800”, “0508”, “1800/1300/13” are all toll free prefix numbers used in New Zealand and Australia respectively.

* These relevant interests include the same securities. t These relevant interests include the same securities.

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