TWL AGM 2010

Trans Wonderland Limited

2010 Annual Report

Vision To be the most profitable and respected landowner company in Papua New Guinea.

Mission To build strong partnerships with clients, promote unity among our diverse shareholders, and develop a vibrant transportation, logistics, and technical services company with strong growth potential.

Values The values of honesty, respect, and fairness drive management actions and employee behaviour in pursuit of the Company vision.

Our HONESTY indicates our commitment to truth and accuracy when communicating with other employees and with company stakeholders (shareholders, developers, contractors, government). It also means that our decisions are made in the best interests of the Company and not for individual, or small group, self-interests.

Our RESPECT involves patience, politeness, and avoiding rough or heated language even during times of disagreement. Our respect in dealing with others demonstrates a strong respect for self.

Our FAIRNESS includes our treatment of others, both inside and outside Company boundaries, without prejudice and without harm. Fair treatment encompasses landowners and non-landowners, men, women, and children. It avoids taking advantage of those who are weaker and works to address the claims of those who have been wronged.

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Trans Wonderland Limited

Annual Report 2010

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Company Information Trans Wonderland Limited

Trans Wonderland Limited is a registered company under the Papua New Guinea Companies Act 1997 and is incorporated and domiciled in Papua New Guinea.

Registered Office C/- Star Business Consultants Ground Floor, First Heritage Centre Waigani Drive, PO Box 1413 Port Moresby, NCD 121

Board of Directors Mark Sakai.....................................Chairman Larry Andagali................................Managing Director Lemson Mabiria.............................Director Dai Malingi.....................................Director Richard Budu..................................Director Henry Sasue...................................Director Edward Alina..................................Director Howard Lole...................................Director Alois Francis...................................Director Willie Kupo.....................................Independent Director Tobias Thomas...............................Secretary

Auditors KPMG Chartered Accountants PO Box 507 Port Moresby Papua New Guinea

Bankers Bank of South Pacific PO Box 75 Lae, Morobe Province 411 Phone: (675) 472 7155

Annual Report 2010

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Chairman’s Message Trans Wonderland Limited

On behalf of the Board of Directors I am pleased to present Trans Wonderland Limited’s first Annual Report for the 2010 financial year.

As part of our Company’s principals of promoting transparency and accountability, TWL will continue to present audited account to its shareholders to keep them informed of their Company’s operation.

2010 was a successful year both operationally and financially. Our net profit for 2010 was K8.52m from a K81.72m turnover. The Board of Directors have declared a 20% dividend based on the net profit, consistent with the TWL constitution. This continued demonstration of shareholder profitability remains one of our primary Company goals. A total of K1.70m in dividends will be distributed amongst 26 shareholder companies based on their share ownership percentage.

The TWL Board consists of educated professionals and project area based leaders with many years of experience in the communities, dealing with community issues such as law and order, business development, empowerment, and local sponsorship with project developers like Oil Search Limited and ExxonMobil. As part of their continuing professional development efforts, “...continued demonstration the Board of Directors have successfully completed the oneof shareholder profitability week Director’s Course organised by IBBM Enterprise Centre.

I am pleased that 2010 saw development of a strong TWL remains one of our Constitution to protect the company as well as development primary Company goals.” of a Board Charter which provides guidance to the Directors in the careful, well-directed performance of their duties.

Our shareholder distribution covers many ethnic groups; the people of Fasu, Foe, Nembi Plateau, Tuguba, Onabasulu, Huli, Phembi and Duna. 50% of the Company is owned by Kutubu, Moran, South East Mananda Oil and Gas Field and associated pipeline and road access landowners. The other 50% is owned by Hides, Angore, Juha Gas Field and associated facilities and pipeline landowners. The board consists of ten directors—eight representing landowner companies (four from each region) and two Independent directors. All shareholders now have been fully subscribed, and this share allottment shows growing interest and support for Trans Wonderland Limited in each of the project areas.

In closing, I take this opportunity to thank my Board of Directors for their undivided support to me as the Chairman and for their efforts in directing the company forward through the development of strong policies.

I also would like thank my hard-working management team and employees for bringing the Company to its current position. I would like to encourage everyone to continue the hard work and take TWL to the next level in the years to come. I encourage shareholders from different geographical locations to continue support the Company and also support Oil Search Limited and ExxonMobil and their contractors to deliver the long awaited PNG LNG Project.

Mark Sakai, Chairman Annual Report 2010

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Trans Wonderland Limited

Managing Director’s Message

It gives me great pleasure to present this 2010 Annual Report for Trans Wonderland Limited. We saw a tremendous amount of growth, as well as a building up of our infrastructure, in 2010. And as we continue to support our vision, “To be the most profitable and respected landowner company in Papua New Guinea,” we are focusing on expanding our business to strengthen our service offerings while continuing to protect the existing base business which is so important to us.

Significant progress was made in March 2010 when Trans Wonderland Limited and Agility Limited signed a Heads of Agreement to work together to provide integrated transportation and logistics services for ExxonMobil and its EPC contractors for the PNG LNG Project. At the same time, TWL spearheaded the establishment of Northern Transport Alliance (NTA) which resulted in the current membership of TWL, Mapai Transport, Treisa Transport and Kutubu Transport. The Heads of Agreement developed into a Shareholders Agreement in October 2010 to established Northern Logistics Group (NLG), a company owned equally by TWL and Agility. NTA members currently provide all transportation and material handling equipment and services for the PNG LNG project along the Northern Logistics route.

Another significant decision of the Board of TWL was to set aside 10 Prime Movers to provide a unique “...focusing on expanding subcontracting opportunity for landowners. Five our business to strengthen trucks were allocated to be purchased by Kutubu, our service offerings while Moran and the Strategic Partners and other the five were allocated to landowners from Hides, Angore continuing to protect the and Juha Gas Fields. It was a great opportunity for existing base business which is landowners invest in the spin-off opportunities so important to us.” associated with the PNG LNG project from the Seed Capital funds allocated by the National Government.

I am also pleased to announce that TWL’s infrastructure development, staff recruitment, finance and asset acquisitions are on track and progressing well to meet our contractual obligations from Oil Search Limited and ExxonMobil. I would also like to thank the financial institutions who are working with us for having confidence in TWL and helping provide for our financial needs as a growing and developing business entity.

I would like to express my appreciation to the members of the Board for their leadership, vigilance and attention to the business matters throughout the 2010 term. I also want to thank the management team and staff for their efforts in keeping the business on track and maximising the return on investment. Finally, I would like to thank the company employees who carry out the daily tasks of running the company and are the heart and soul of the company. I am proud to be managing such a team of individuals who daily implement the ONE TEAM—ONE DREAM approach to running this business.

Larry Andagali, Managing Director Annual Report 2010

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Company Directors Trans Wonderland Limited

Larry Andagali Managing Director

Mark Sakai Chairman

Lemson Mabiria Director

Dai Malingi Director

Richard Budu Director

Edward Alina Director

Henry Sasue Director

Howard Lole Director

Alois Francis Director

Willie Kupo Independent Director

Tobias Thomas Secretary

Annual Report 2010

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Senior Management Team Trans Wonderland Limited

Larry Andagali Managing Director Larry has nearly 20 years of experience in PNG’s growing oil and gas development activities starting his career with British Petroleum at Hides Gas Field in 1990 in the areas of community affairs and business development. He served as General Manager, Gigira Development Corporation Limited, BD Advisor for Chevron Texaco, and then ExxonMobil on the abundant PNG to Queensland Gas Project, and was recently working for Oil Search Limited as Business Development and Sustainable Manager before taking up his current position with TWL in December 2009. His focus areas were the development of community affairs policies, managing of community affairs issues, leading clans to organise themselves into landowner companies and umbrella companies, raising awareness in communities and at the national government level to maximise landowner and government participation in developing projects, assisting in the establishment of several joint venture companies, mediating disputes, obtaining regulatory approvals, obtaining landowner agreements, evaluation business opportunities, resurrecting shelved project initiatives, and developing long-term and sustainable projects that benefit project developers, shareholders, clients, and stakeholders. Trans Wonderland’s concept and its shareholding structure was initiated and implemented by Mr. Andagali as part of his vision to unify landowners and maximise opportunities.

Dave Howell General Manager, Trucking Operations Dave has been involved with the Transport Industry in PNG since 1978. He was a founding Manager of Pagini Transport, the first large PNG owned transport business operating along the Highlands Highway. Previously, Dave worked for 8 years with the Public Service as a Business Development Officer, starting as a Field Officer and progressing to Provincial Manager responsible for Special Projects. Dave brings with him, a wealth of experience in the road transport industry, especially as it applies to the unique conditions we experience along PNG’s highways. His Business Development experience has proven invaluable in contract negotiations and establishment of competitive rates. Dave’s aspirations for the company involve establishing a strong and durable core business which will provide a springboard for further diversification.

Ripen Sarepo General Manager, Finance and Shared Services Ripen has over 16 years in the finance and accounting field and holds a bachelor degree in business majoring in accountancy. He is TWL’s first employee hired to set up the finance, accounting and administrative systems, has worked in various service and manufacturing industries where his recent job prior to joining TWL was financial controller of Airlink Ltd for 7 years. Ripen is a very strong believer in internal controls and procedures, promotes transparency at all levels and in all areas covering finance, administration and operations. The challenge is to ensure maximum returns to the shareholders of TWL from the massive oil and gas projects in PNG which we are fortunate to be a part of.

Annual Report 2010

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Gary Thornton General Manager, Northern Logistics Group Gary has over 34 years of field experience in the Logistics/Supply Chain industry having worked for Toll Australia, Patrick Corporation and Mayne Nickless during that period. He began his career as an Accountant before moving into land logistics, quality, shipping and business development. For the past 12 years Gary has been responsible for implementation of Supply Chain Solutions for a number of Australia’s leading companies. Gary brings valuable skills and insight to the management team as we work to strengthen our operational capabilities and systems supporting Exxon/PNG-LNG, and other national business interests, across PNG.

Capt. Albert Tagua Manager, Special Projects and Public Relations Albert is a very experienced fixed and rotary wing pilot with a history in both the military and general aviation (GA) industries. Trained by the Royal Australian Air Force, he commenced his career with the Air Transport Wing (ATW) of the PNG Defence Force. He retired from the PNGDF after serving 23 years with the rank of Major and as the Acting Commanding Officer of the ATW. Prior to joining TWL, he was employed by several GA companies as a senior pilot with check and training approval. With over 6,000 hours of PNG in-country experience on both fixed and rotary wing aircrafts, Albert brings to TWL a wealth of experience. Albert is currently working on TWL`s Aviation Project in close consultation with TWL`s partner, Lynden Air. Belinda (Bea) Amaya Manager, Projects and Systems Development Bea has over 20 years of field experience in the petrochemical industry having worked for Chevron, ExxonMobil, and Dow Chemical during that period. She began her career as an instrument technician before moving into operations, safety, and training. For the past 10 years she has run a successful business in Houston providing technical support to ExxonMobil’s GREF organisation.

Although relatively new to the trucking industry, Bea brings valuable skills and insight to the management team as we work to strengthen our processes and systems and as we deal with major oil and gas, and other industrial business interests, across the globe.

Andrew Ross Project Manager, Moro With 23 years of experience working in PNG, Andrew’s trucking experience is extensive. Andrew has 15 years of experience as a workshop manager for a major automotive dealership, Boroko Motors, working in various locations. He has spent the last 8 years working in Kutubu in both workshop and operations management. His strong understanding of PNG culture and work ethics, as well as his commitment to fair management and employee relations, make him a valuable asset on our management team. And with his strong focus on customer service excellence while continuing to maintain company goals and contribute to shareholder profits make him valuable to our organisation as a whole.

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Trans Wonderland Limited

John Riddell National Workshop Manager A diesel fitter by trade, John has been involved in the operations and maintenance of earthmoving equipment and highway transport for over 40 years. The first 20 years was spent in this line of work in Australia. Here in PNG, John first served as the Highlands Branch Manager for Madang Excavation and Transport Services based in Kundiawa and Madang for 11 years. After that he served as the Mill Workshop Manager for Jant Timbers in Madang for 4 years.

The rest of John’s time here in PNG has been spent in Moro working on OSL drill pad projects with United Pacific Drilling/Maka Investments, then with Kutubu Transport (2008) as the Moro Workshop Manager where he remained during the transition to Trans Wonderland Limited.

Alphonse Aitsi Human Resources Manager A human resource managment generalist with more than 30 years of handson experience, having served in various capacities both in public and private enterprises. Alphonse has held several similar senior positions with various organisations, including S.P. Brewery, National Agriculture Research Institute and Airlink Limited. Alphonse has a sound knowledge of Industrial Relations and Labour Laws having served one term on the PNG Industrial Arbitration Tribunal. He was also awarded a Winston Churchill Fellowship in Australia.

Annual Report 2010

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Operations Report Trans Wonderland Limited

Highway Operations—Oil Search Limited Jan-Aug The contract between TWL and Oil Search Limited (OSL) continues to be an important part of our operations, and our business with them continues to run smoothly.

During the first 8 months of 2010, the trips per month for the OSL-Dedicated work were down a bit due to the allocation of highway trucks to the Koroba Rig move while the final 4 months showed a resurgence in activity.

The average trips per month for the 8-month period for OSL-Dedicated work was 55.375 with a low of 44 (Jun) and a high of 76 (Aug). The average trips per month for the same period for the Koroba Rig Move was 120.875 with a low of 37 (Aug) and a high of 166 (Jul).

Sep-Dec For the last 4 months of the year, OSL-Dedicated trips increased significantly and a number of OLS-Ad Hoc trips were made as well. The average trips per month for the 4-month period for OSL-Dedicated work was 82 with a low of 66 (Sep) and high of 92 (Oct). The average trips per month for the same period for OSL-Ad Hoc work was 10.25 with a low of 5 (Sep) and a high of 14 (Nov).

Highway Operations—LNG TWL commenced as a sub-contractor to the Northern Logistics Group (NLG) from 1 November 2010. Before that time, TWL had operated as a direct client to CCJV and other EPCs. Activity on this project work has been generally slow. Major productivity constraints included slow loading and turn-around at the 11 Mile base, poor coordination of unloading at sites, and landowner issues and road closures.

A total 119 trips were completed in 2010, most in the last 5 months. The average for the entire year was 9.92 trips per month, but the average during the 6 months that had any activity at all was 19.83 with a low of 11 (Aug) and a high of 30 (Nov & Dec).

180

120 100 80 60 40 20 0 Jan

Mar

Apr

May

Jun

Jul

Aug

OSL-Dedicated

90

OSL-Ad Hoc

80 70 60 50 40 30 20 10 0 Sep

Oct

Nov

Dec

35 LNG 30 25 20

Although there has been little change to the overall fleet numbers operating at Moro, improvements of the assets operating there continues. The fleet composition has been improved by the scrapping of old prime movers, replacing them with Kenworths that had previously been operating on the highway. Moro based Hinos are being moved to Lae as town trucks as they are replaced by the oder highway Kenworths.

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Workshops

50

The beginning of 2010 showed a highway fleet of 22, comprised of 17 Kenworths, 2 Astras, and 3 Western Stars. By the end of 2010, the total highway prime mover count stood at 45. This was composed of 17 Kenworths, 20 Astras, and 8 Western Stars.

Feb

100

15

Fleet

OSL-Dedicated

140

Infield Operations

The Moro workshop continued to operating normally throughout 2010.

Koroba Rig Move

160

5 0 Jan

Feb Mar Apr May Jun

Jul

Aug Sep Oct Nov Dec

Jul

Aug Sep

Western Star

45

Astra

40

Kenworth

35 30 25 20 15 10 5 0 Jan

Annual Report 2010

Feb Mar

Apr

May Jun

Oct

Nov Dec

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HSES Report Trans Wonderland Limited

Health, Safety, Environment and Security (HSES) Culture 2010 was a year for building foundations for Company growth in multiple areas including the laying of groundwork for further development of a widespread HSES culture. TWL began by initiating HSES programs that are simple, engaging, and systematic.

We built this culture by leveraging learnings from our interactions with other well-established international companies, and working with their guidance and support while planting the seeds for our own efforts. These efforts continue today, driving us toward a more mature and independent culture that assures greater personal and corporate committment and investment.

Our focus remains on the health, safety, and security of our employees, partners, clients, contractors, other stakeholders, and of the communities in which we live and work. We are also committed to protecting the environment in which we

...to look after each other’s safety while delivering on the expectation that ZERO INCIDENTS are achievable.

thrive and which is impacted by the decisions we make and the efforts we pursue.

While 2010 was a year for foundations and groundwork, we look forward to building on these foundations in the years to come, creating an HSES culture that is comprehensive, formalised, engaging, proactive, and an integral part of how we live and work.

As our employees develop this culture and focus on achieving a more interdependent safety culture they are growing more responsible, supprtive, and supported in making self-manage decisions and taking actions that have HSES consequences. They cooperate as teams throughout our business dealings and even across business boundaries to look after each other’s safety while delivering on the expectation that zero incidents are achievable.

ONE TEAM—ONE DREAM

Annual Report 2010

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PPL 260 5° 30' S

Tugu

Swetigin Tobi

5° 45' S

PRL 2 Pureni PDL 9

Puba

PDL 1

Nogoli

Kulu PRL 2

Juni

 Mbelopa

Nogoli

Laiyako Laite

6° 00' S

PRL 1 Habono

Id

Angu

Para PDL 7 Yandalii

Suabi PPL 259-

Edauwi Tandu

PPL 239

TWL SHAREHOLDERS TWL Shareholding Structure by Class

Aijagaiba

6° 15' S

Class A Class B Class C

PPL 296

Class D Class E Class F

PPL 296

KEY

6° 30' S



Town



Camp Oil Pipeline Road PPL 261

Petroleum Licence

13

0

13

26

142° 45' E

PPL 235

142° 30' E

142° 00' E

142° 15' E

6° 45' S

39

Kilometers Scale: 1:650,000

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Trans Wonderland Limited

Overview Map  Lorengau  Vanimo



Wabag

 Kavieng

 Wewak   Rabaul  Madang  Wabag Mt. Hagen  Tari  Goroka Mendi   Kundiawa  Moro

 Tabubil TWL SHAREHOLDERS LOCATION

 Kimbe

 Lae

 Kerema  Popondetta  Daru

 Port Moresby

 Tari

11

Hambuali

 Alotau

Dauli

dauwi

Hogombe

Angore

uale

PDL 8

Ligame Komo

Benaria

Eanda Atare

PPL 233 Yarale

 Mendi

Homa Paua

a

PDL 6

PDL 5

Baguale

Sisibia 2

PPL 219

Sisibia 1

PPL 233

Sisibia 3

Poroma

Inu Tugiri

  Moro

Towairo

Wasami

Yo'obo

Gesege

Hedinia Aiio

Iorogobaiiu

Ulira

Irikai

 Iagifu Ridge PDL 2

Ifigi

Bugi

Hegeso

Waluma

Herebo Fiwaga

Mano Gena'abo Ubogo

Bunu Kawama PPL 287(2) Magi Kafa 1

Hebaiya

PPL 277

Tamenda

Barutage

Kaipu 2 Kaipu 1

Kupipi

Tubage

Agogo



Mato

Yalanda

Kunufalu

Tamadigi Sorotage Humane Kantobo

PPL 190

PDL 4

PPL 287(1)

 Gobe

PPL 317

Annual Report 2010

PDL 4

PRL 14 144° 00' E

143° 45' E

143° 30' E

143° 15' E

143° 00' E

PDL 3

PPL 1

PPL 190

7° 00' S

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Financial Report Trans Wonderland Limited

Trans Wonderland Limited Financial Statements For the Twelve Months Ended 31 December 2010 Directors’ Report Your Directors present their annual report on the affairs of the Company including the financial statements for the twelve months ended 31 December 2010.

Activities The principal activities of the Company during the course of the financial twelve months ended 31 December 2010 were land transport, haulage and logistics.

There were no significant changes in the nature of the activities of the Company during the twelve months ended 31 December 2010.

Results The net profit after taxation for the twelve months ended 31 December 2010 was K8,521,358 (six months ended 31 December 2009:2,607,037).

Dividends During the twelve months ended 31 December 2010 a dividend of K521,407 was paid in respect of the dividend declared for the six months ended 31 December 2009.

Directors The Directors at the date of the report of the Company are listed on page 5. No Director was a shareholder of the Company at 31 December 2010 and none had any material interest in any contract or arrangement with the Company or any related entity during the twelve months ended 31 December 2010.

Remuneration of Directors and Employees In accordance with the provisions of the Companies Act 1997 (section 212(3)), the shareholders of Trans Wonderland Limited have resolved that the Company does not need to disclose Directors and employee remuneration in its annual report.

Interests Register There are no transactions that are recorded in the Interests Register for the twelve months ended 31 December 2010.

For and on behalf of the Board of Directors:

Director

________________________________

Director

________________________________

Date

18 October 2011

Date

18 October 2011

Annual Report 2010

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Independent Auditors’ Report to the Shareholders of Trans Wonderland Limited For the Year Ended 31 December 2010 Scope We have audited the accompanying financial statements of Trans Wonderland Limited (the “Company”) which comprise the statement of financial position as at 31 December 2010, and the statement of comprehensive income, statement of changes in equity and the statement of cash flows for the twelve months then ended, and a summary of significant accounting policies and other explanatory notes as set out on pages 8 to 28.

This report is made solely to the Company’s members, as a body, in accordance with section 199 of the Companies Act 1997. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Directors’ Responsibility for the Financial Statements The Directors of Trans Wonderland Limited are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatements, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditors’ Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with relevant ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements.

The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting principles used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We performed procedures to assess whether in all material respects the financial statements presents fairly in accordance with the companies Act 1997 and International Financial Reporting Standards, a true and fair view which is consistent with our understanding of the Company’s financial position and its performance.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Audit Opinion We have obtained all the information and explanations we required for the purposes of our audit. In our opinion: (a) the financial statements of Trans Wonderland Limited is in accordance with Companies Act 1997 including: (i) giving a true and fair view of the Company’s financial position as at 31 December 2010 and of its performance for the twelve months ended on that date; and (ii) complying with International Financial Reporting Standards, and (b) proper accounting records have been kept by the Company as far as appears from our examination of those records.

Other Matters In addition to audit services, KPMG provided permissible taxation services to the Company during the twelve months ended 31 December 2010.

DATED at Port Moresby this 18th day of October 2011.

Chartered Accountants Richard L. Kuna Partner Registered under the Accountants Act 1996 24

Trans Wonderland Limited

Trans Wonderland Limited Financial Statements For the Twelve Months Ended 31 December 2010

Statement of financial position Note

2010

2009

Property, plant and equipment

12

40,236,188

17,976,378

Investment in equity accounted investee

21

242,582

-

Loan to equity accounted investee

21

200,000

-

Deferred tax assets

13

120,974

218,760

ASSETS

Total non-current assets

40,799,744

18,195,138

Inventories (14)

14

793,530

243,800

Trade and other receivables

15

14,211,097

9,163,229

Cash and cash equivalents

26

3,166,738

1,265,360

Total current assets

18,171,365

10,672,389

Total assets

58,971,109

28,867,527

1,703,240

1,080,000

10,607,168

2,607,037

12,310,408

3,687,037

EQUITY Share capital

16

Retained earnings Total equity LIABILITIES Lease liabilities

18

-

408,630

Loans and borrowings

17

20,653,739

9,661,782

Employee benefits

20

686,045

-

21,339,784

10,070,412

Total non-current liabilities Bank overdraft Lease liabilities

18

408,630

437,946

Loans and borrowings

17

10,203,239

6,195,766

Trade and other payables

19

8,338,866

7,166,586

Provision for taxes payable

11

6,237,191

1,217,219

Employee benefits

20

132,991

92,561

Total current liabilities

25,320,917

15,110,078

Total liabilities

46,660,701

25,180,490

Total equity and liabilities

58,971,109

28,867,527

For and on behalf of the Board of Directors:

Director

________________________________

Director

________________________________

Date

18 October 2011

Date

18 October 2011

This statement of financial position is to be read in conjunction with the notes to and forming part of the financial statements set out on pages 23 to 40.

Annual Report 2010

25

Trans Wonderland Limited Financial Statements For the Twelve Months Ended 31 December 2010

Statement of comprehensive income

Note

2010 (12 months)

2009 (6 months)

Revenue

6

81,719,749

27,372,475

Cost of sales

7

(52,785,337)

(16,678,324)

28,934,412

10,694,151

Administrative expenses

(10,200,751)

(3,514,202)

Other operating expenses

(2,829,217)

(2,296,787)

7

15,904,444

4,883,162

10

(1,821,865)

(1,277,666)

(1,821,865)

(1,277,666)

242,582

-

14,325,161

3,605,496

(5,803,803)

(998,459)

8,521,358

2,607,037

Revaluation of property, plant and equipment

-

-

Net change in fair values of available-for-sale financial assets

-

-

Income tax on other comprehensive income

-

-

Other comprehensive income for the period (net of income tax)

-

-

8,521,358

2,607,037

Revenue

Gross profit

Results from operating activities Finance costs Net finance expense Share of profit from equity account investee (net of tax) Profit before tax Income tax expense Profit for the period

11

Other comprehensive income

Total comprehensive income for the period

This statements of comprehensive income is to be read in conjunction with the notes to and forming part of the financial statements set out on pages 23 to 40.

26

Trans Wonderland Limited

Trans Wonderland Limited Financial Statements For the Twelve Months Ended 31 December 2010

Statement of changes in equity Share Capital Retained Earnings

Balance at 1 January 2009 Total comprehensive income for the period (Jul to Dec 2009)

Total

-

-

-

-

2,607,217

2,607,217

Shares issued during the period

1,080,000

-

1,080,000

Balance at 31 December 2009

1,080,000

2,607,217

3,687,217

Balance at 1 January 2010

1,080,000

2,607,217

3,687,217

Total comprehensive income for the period

-

8,521,358

8,521,358

Dividend paid during the period

-

(521,407)

(521,407)

Shares issued during the Period

623,240

-

623,240

1,703,240

10,607,168

12,310,408

Balance at 31 December 2010

Annual Report 2010

27

Trans Wonderland Limited Financial Statements For the Twelve Months Ended 31 December 2010

Statement of cash flows

Note

2010 (12 months)

2009 (6 months)

76,122,151

17,695,200

Cash paid to suppliers and employees

(55,386,118)

(9,363,250)

Cash generated from operating activities

20,736,033

8,331,950

Interest paid

(1,821,865)

(883,958)

-

-

18,914,168

7,447,992

(31,476,107)

(22,456,056)

(200,000)

-

(31,676,107)

(22,456,056)

14,561,484

15,193,425

623,240

1,080,000

Cash flows from operating activities Cash receipts from customers

Income taxes paid Net cash from operating activities

27b

Cash flows from investing activities Acquisition of property, plant and equipment Loan to NLG Limited Net cash from investing activities Cash flows from financing activities Proceeds from loans (net of repayments) Proceeds from issue of share capital Payment of dividend

(521,407)

Net cash from financing activities

14,663,317

16,273,425

Net increase in cash and cash equivalents

1,901,378

1,265,361

Cash and cash equivalents as at January

1,265,360

-

-

-

3,166,738

1,265,361

Effect of exchange fluctuations on cash held Cash and cash equivalents at 31 December

27a

This statement of cash flows is to be read in conjunction with the notes to and forming part of the financial statements set out on pages 23 to 40.

28

Trans Wonderland Limited

Trans Wonderland Limited Financial Statements For the Twelve Months Ended 31 December 2010

Notes to and forming part of the financial statements

1

Reporting entity Trans Wonderland Limited (the “Company”) is a company domiciled in Papua New Guinea. The address of the Company’s registered office is C/o Star Business Consultants, Ground Floor, First Heritage Centre, Waigani Drive, PO Box 1413, Port Moresby, NCD, Papua New Guinea. The financial statements of the Company as at and for the twelve months ended 31 December 2010 comprise the Company and the Company’s interest in associates and jointly controlled entities. The Company primarily is involved in the logistics and transportation business.

2

Basis of Preparation a. Period of account The period covered by the financial statements is from 1 January 2010 to 31 December 2010. The comparative reflect activities from July 2009 to 31 December 2009.

Comparative figures are reclassified according to the current period classifications. b. Statement of compliance The financial statements of the Company have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the Accounting Standards Board of Papua New Guinea (ASB) and the requirements of the Papua New Guinea Companies Act 1997.

The financial statements have been recognised for issue by the Board of Directors on 29 July 2011. c. Basis of preparation The financial statements have been prepared primarily on the historical cost basis except for the following material items in the statement of financial position: - financial instruments at fair value through profit or loss are measured at fair value - available-for-sale financial assets are measured at fair value - investment property is measured at fair value d. Functional currency The financial statements are presented in the Papua New Guinea currency, the Kina which is the Company’s functional currency. e. Use of estimates and judgements The preparation of a financial report in conformity with IFRSs requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in future periods if affected.

3

Significant accounting policies a. Foreign currency i. Foreign currency transactions Transactions in foreign currencies are translated to the respective functional currencies of Company entities at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortised cost in the functional currency at the beginning of the period, adjusted for effective interest and payments during the period, and the amortised cost in foreign currency translated at the exchange rate at the end of the reporting period. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. b. Financial instruments i. Non-derivative financial assets The Company initially recognises loans and receivables and deposits on the date that they are originated. All other financial assets (including assets designated at fair value through profit or loss) are recognised initially

Annual Report 2010

29

Trans Wonderland Limited Financial Statements For the Twelve Months Ended 31 December 2010

Notes to and forming part of the financial statements

on the trade date at which the Company becomes a party to the contractual provisions of the instrument.

The Company derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the Company is recognised as a separate asset or liability.

Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Company has a legal right to offset the amounts and intends either to settle on a net basis or to unrecognise the asset and settle the liability simultaneously.

The Company has the following non-derivative financial assets: financial assets at fair value through profit or loss, held-to-maturity financial assets, loans and receivables and available-for­sale financial assets.

Financial assets at fair value through profit or loss A financial asset is classified at fair value through profit or loss if it is classified as held for trading or is designated as such upon initial recognition. Financial assets are designated at fair value through profit or loss if the Company manages such investments and makes purchase and sale decisions based on their fair value in accordance with the Company’s documented risk management or investment strategy. Upon initial recognition attributable transaction costs are recognised in profit or loss as incurred. Financial assets at fair value through profit or loss are measured at fair value, and changes therein are recognised in profit or loss.

Held-to-maturity financial assets If the Company has the positive intent and ability to hold debt securities to maturity, then such financial assets are classified as held-to-maturity. Held-to-maturity financial assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition held-to-maturity financial assets are measured at amortised cost using the effective interest method, less any impairment losses. Any sale or reclassification of a more than insignificant amount of held-to-maturity investments not close to their maturity would result in the reclassification of all held-to-maturity investments as available-for-sale, and prevent the Company from classifying investment securities as held-to-maturity for the current and the following two financial years.

Loans and receivables Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognised initially at fair value plus any directly attributable transaction costs.

Subsequent to initial recognition loans and receivables are measured at amortised cost using the effective interest method, less any impairment losses.

Loans and receivables comprise trade and other receivables (see note 15) Cash and cash equivalents comprise cash balances and call deposits with original maturities of three months or less. Bank overdrafts that are repayable on demand and form an integral part of the Company’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.

ii. Non-derivative financial liabilities The Company initially recognises debt securities issued and subordinated liabilities on the date that they are originated. All other financial liabilities (including liabilities designated at fair value through profit or loss) are recognised initially on the trade date at which the Company becomes a party to the contractual provisions of the instrument.

The Company derecognises a financial liability when its contractual obligations are discharged or cancelled or expire.

Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Company has a legal right to offset the amounts and intends either to settle on a net basis or to unrecognise the asset and settle the liability simultaneously.

The Company has the following non-derivative financial liabilities: loans and borrowings, bank overdrafts, and trade and other payables. Such financial liabilities are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition these financial liabilities are measured at

30

Trans Wonderland Limited

Trans Wonderland Limited Financial Statements For the Twelve Months Ended 31 December 2010

Notes to and forming part of the financial statements

amortised cost using the effective interest method.

iii. Share Capital Ordinary shares Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share options are recognised as a deduction from equity, net of any tax effects.

c. Property Plant and Equipment i. Recognition and measurement Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses.

Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of selfconstructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the assets to a working condition for their intended use, the costs of dismantling and removing the items and restoring the site on which they are located, and unrecognised borrowing costs. Cost also may include transfers from other comprehensive income of any gain or loss on qualifying cash low hedges of foreign currency purchases of property, plant and equipment. Purchased software that is integral to the functionality of the related equipment is unrecognised as part of that equipment.

When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment, and are recognised net within other income in profit or loss. When revalued assets are sold, the amounts included in the revaluation reserve are transferred to retained earnings. ii. Subsequent costs The cost of replacing a part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will low to the Company, and its cost can be measured reliably. The carrying amount of the replaced part is derecognised.

The costs of the day-to-day servicing of property, plant and equipment are recognised in profit or loss as incurred. iii. Depreciation Depreciation is calculated over the depreciable amount, which is the cost of an asset, or other amount substituted for cost, less its residual value. Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment, since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset.

Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Company will obtain ownership by the end of the lease term. Land is not depreciated.

Depreciation methods, useful lives and residual values are reviewed at each financial year-end and adjusted if appropriate. d. Leased assets Leases in terms of which the Company assumes substantially all the risks and rewards of ownership are classified as finance leases. Upon initial recognition the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset.

Other leases are operating leases and, except for investment property, the leased assets are not recognised in the Company’s statement of financial position. Investment property held under an operating lease is recognised in the Company’s statement of financial position at its fair value e. Inventories Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on the first-in first-out principle, and includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of production overheads based on normal operating capacity. Cost also may include transfers from other comprehensive income of any gain or loss on qualifying cash low hedges of foreign currency purchases of inventories.

Annual Report 2010

31

Trans Wonderland Limited Financial Statements For the Twelve Months Ended 31 December 2010

Notes to and forming part of the financial statements

Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

f.

Impairment i. Financial assets (including receivables) A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine whether there is objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably.

Objective evidence that financial assets (including equity securities) are impaired can include default or delinquency by a debtor, restructuring of an amount due to the Company on terms that the Company would not consider otherwise, indications that a debtor or issuer will enter bankruptcy, the disappearance of an active market for a security. In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below its cost is objective evidence of impairment.

The Company considers evidence of impairment for receivables and held-to-maturity investment securities at both a specific asset and collective level. All individually significant receivables and held-to-maturity investment securities are assessed for specific impairment. All individually significant receivables and heldto-maturity investment securities found not to be specifically impaired are then collectively assessed for any impairment that has been incurred but not yet identified. Receivables and held-to-maturity investment securities that are not individually significant are collectively assessed for impairment by Companying together receivables and held­to-maturity investment securities with similar risk characteristics.

In assessing collective impairment the Company uses historical trends of the probability of default, timing of recoveries and the amount of loss incurred, adjusted for management’s judgement as to whether current economic and credit conditions are such that the actual losses are likely to be greater or less than suggested by historical trends.

An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate. Losses are recognised in profit or loss and reflected in an allowance account against receivables. Interest on the impaired asset continues to be recognised through the unwinding of the discount. When a subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss.

Impairment losses on available-for-sale investment securities are recognised by transferring the cumulative loss that has been recognised in other comprehensive income, and presented in the fair value reserve in equity, to profit or loss. The cumulative loss that is removed from other comprehensive income and recognised in profit or loss is the difference between the acquisition cost, net of any principal repayment and amortisation, and the current fair value, less any impairment loss previously recognised in profit or loss.

Changes in impairment provisions attributable to time value are reflected as a component of interest income.

If, in a subsequent period, the fair value of an impaired available-for-sale debt security increases and the increase can be related objectively to an event occurring after the impairment loss was recognised in profit or loss, then the impairment loss is reversed, with the amount of the reversal recognised in profit or loss.

However, any subsequent recovery in the fair value of an impaired available-for-sale equity security is recognised in other comprehensive income. ii. Non-financial assets The carrying amounts of the Company’s non-financial assets, other than biological assets, investment property, inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. For goodwill, and intangible assets that have indefinite useful lives or that are not yet available for use, the recoverable amount is estimated each year at the same time.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value

32

Trans Wonderland Limited

Trans Wonderland Limited Financial Statements For the Twelve Months Ended 31 December 2010

Notes to and forming part of the financial statements

less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest Company of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or Companies of assets (the “cash-generating unit, or CGU”). Subject to an operating segment ceiling test, for the purposes of goodwill impairment testing, CGUs to which goodwill has been allocated are aggregated so that the level at which impairment is tested reflects the lowest level at which goodwill is monitored for internal reporting purposes. Goodwill acquired in a business combination is allocated to Companies of CGUs that are expected to benefit from the synergies of the combination.

The Company’s corporate assets do not generate separate cash inflows. If there is an indication that a corporate asset may be impaired, then the recoverable amount is determined for the CGU to which the corporate asset belongs.

An impairment loss is recognised if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. Impairment losses are recognised in profit or loss.1 Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the units, and then to reduce the carrying amounts of the other assets in the unit (Company of units) on a pro rata basis.

An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

Goodwill that forms part of the carrying amount of an investment in an associate is not recognised separately, and therefore is not tested for impairment separately. Instead, the entire amount of the investment in an associate is tested for impairment as a single asset when there is objective evidence that the investment in an associate may be impaired. g. Employee benefit plans i. Other long-term employee benefits A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are recognised as an employee benefit expense in profit or loss in the periods during which services are rendered by employees. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available. Contributions to a defined contribution plan that are due more than 12 months after the end of the period in which the employees render the service are discounted to their present value. ii. Short-term employment benefits Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided.

A liability is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the obligation can be estimated reliably. h. Provisions A provision is recognised if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as finance cost. i.

Revenue from goods sold Revenue from the sale of goods in the course of ordinary activities is measured at the fair value of the consideration received or receivable, net of returns, trade discounts and volume rebates. Revenue is recognised

Annual Report 2010

33

Trans Wonderland Limited Financial Statements For the Twelve Months Ended 31 December 2010

Notes to and forming part of the financial statements

when persuasive evidence exists, usually in the form of an executed sales agreement, that the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably. If it is probable that discounts will be granted and the amount can be measured reliably, then the discount is recognised as a reduction of revenue as the sales are recognised.

The timing of the transfers of risks and rewards varies depending on the individual terms of the contract of sale.

For sales of goods, usually transfer occurs when the product is received at the customer’s warehouse; however, for some international shipments transfer occurs upon loading the goods onto the relevant carrier at the port of the seller. Generally for such products the buyer has no right of return. For sales of livestock, transfer occurs upon receipt by the customer.

When two or more revenue generating activities or deliverables are sold under a single arrangement, each deliverable that is considered to be a separate unit of account is accounted for separately. The allocation of consideration from a revenue arrangement to its separate units of account is based on the relative fair values of each unit. If the fair value of the delivered item is not reliably measurable, then revenue is allocated based on the difference between the total arrangement consideration and the fair value of the undelivered item.

j.

Lease payments Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease.

Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.

Contingent lease payments are accounted for by revising the minimum lease payments over the remaining term of the lease when the lease adjustment is confirmed.

k. Finance income and finance costs Finance income comprises interest income on funds invested (including available-for-sale financial assets), dividend income, gains on the disposal of available-for-sale financial assets, changes in the fair value of financial assets at fair value through profit or loss, and gains on hedging instruments that are recognised in profit or loss.

Interest income is recognised as it accrues in profit or loss, using the effective interest method. Dividend income is recognised in profit or loss on the date that the Company’s right to receive payment is established, which in the case of quoted securities is the ex-dividend date.

Finance costs comprise interest expense on borrowings, unwinding of the discount on provisions, dividends on preference shares classified as liabilities, changes in the fair value of financial assets at fair value through profit or loss, impairment losses recognised on financial assets, and losses on hedging instruments that are recognised in profit or loss. Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognised in profit or loss using the effective interest method.

Foreign currency gains and losses are reported on a net basis. l.

Income tax Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognised in profit or loss except to the extent that it relates to a business combination, or items recognised directly in equity or in other comprehensive income.

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous periods.

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following temporary differences: the initial recognition of assets or liabilities in a transaction

34

Trans Wonderland Limited

Trans Wonderland Limited Financial Statements For the Twelve Months Ended 31 December 2010

Notes to and forming part of the financial statements

that is not a business combination and that affects neither accounting nor taxable profit or loss, and differences relating to investments in subsidiaries and jointly controlled entities to the extent that it is probable that they will not reverse in the foreseeable future. In addition, deferred tax is not recognised for taxable temporary differences arising on the initial recognition of goodwill. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously.

A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

4

Determination of fair values A number of the Company’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and / or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability. a. Property plant and equipment The fair value of property, plant and equipment is based on market values. The market value of property is the estimated amount for which a property could be exchanged on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably and willingly. The fair value of items of plant, equipment, fixtures and fittings is based on the market approach and cost approaches using quoted market prices for similar items when available and replacement cost when appropriate. b. Inventories The fair value of inventories is determined based on the estimated selling price in the ordinary course of business less the estimated costs of completion and sale, and a reasonable profit margin based on the effort required to complete and sell the inventories. c. Trade and other receivables The fair value of trade and other receivables, excluding construction work in progress, but including service concession receivables, is estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date. This fair value is determined for disclosure purposes.

5

Financial risk management The Company has exposure to the following risks from its use of financial instruments: • Credit risk • Liquidity risk • Market risk • Operational risk This note presents information about the Company’s exposure to each of the above risks, the Company’s objectives, policies and processes for measuring and managing risk, and the Company’s management of capital. Further quantitative disclosures are included throughout these financial statements.

Risk management framework The Board of Directors has overall responsibility for the establishment and oversight of the Company’s risk management framework. The Board has established the Risk Management Committee, which is responsible for

Annual Report 2010

35

Trans Wonderland Limited Financial Statements For the Twelve Months Ended 31 December 2010

Notes to and forming part of the financial statements

developing and monitoring the Company’s risk management policies. The committee reports regularly to the Board of Directors on its activities.

The Company’s risk management policies are established to identify and analyse the risks faced by the Company, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company’s activities. The Company, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.

The Board of Directors oversees how management monitors compliance with the Company’s risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Company. a. Credit risk Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company’s receivables from customers and investment securities.

Trade and other receivables The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer.

However, management also considers the demographics of the Company’s customer base, including the default risk of the industry and country in which customers operate, as these factors may have an influence on credit risk, particularly in the currently deteriorating economic circumstances. Approximately 90% percent of the Company’s revenue is attributable to sales transactions with a single customer.

Investments The Company limits its exposure to credit risk by investing only in liquid securities. b. Liquidity risk Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation.

Typically the Company ensures that it has sufficient cash on demand to meet expected operational expenses for a period of 60 days, including the servicing of financial obligations; this excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters. c. Market risk Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Company’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while unrecognising the return. d. Operational risk Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the Company’s processes, personnel, technology and infrastructure, and from external factors other than credit, market and liquidity risks such as those arising from legal and regulatory requirements and generally accepted standards of corporate behaviour. Operational risks arise from all of the Company’s operations.

The Company’s objective is to manage operational risk so as to balance the avoidance of financial losses and damage to the Company’s reputation with overall cost effectiveness and to avoid control procedures that restrict initiative and creativity.

36

Trans Wonderland Limited

Trans Wonderland Limited Financial Statements For the Twelve Months Ended 31 December 2010

Notes to and forming part of the financial statements 2010 (12 months)

2009 (6 months)

Transport Service income

49,507,062

25,039,500

Sub contract service income

26,634,885

2,097,497

5,185,935

-

Other income

391,867

235,478

Total revenue

81,719,749

27,372,475

Fuel & Oil

6,469,468

2,630,384

Tyres

2,396,715

697,269

776,072

781,362

2,117,592

516,220

272,178

55,765

3,109,743

1,251,795

25,157,959

6,761,519

Equipment Hire

2,205,599

515,033

Rent

1,063,711

450,665

Depreciation

9,216,300

3,018,312

52,785,337

16,678,324

138,123

39,502

-

-

7,885,893 157,882

2,712,474 30,429

8,043,775

2,742,903

6 Revenue

OSL contract currency fluctuation income

7a Direct Operating Expenses

Parts & Materials Repairs & Maintenance Registration & MVIL Wages to Drivers Sub-Contract

7b Other operating expenses Operating profit / (loss) for the period is stated after charging the following items: i. Auditors remuneration a. audit b. other services 8 Employees The average number of employees for the period was 168 (2009: 108).

9 Personnel expenses Wages and salaries Contributions to defined contribution plans

Annual Report 2010

37

Trans Wonderland Limited Financial Statements For the Twelve Months Ended 31 December 2010

Notes to and forming part of the financial statements

2010 (12 months)

2009 (6 months)

Interest expense on financial liabilities and loans and borrowings

1,821,865

1,277,666

Finance costs

1,821,865

1,277,666

a. Current period

4,241,767

1,217,219

b. Adjustments to prior period

1,178,999

-

5,420,766

1,217,219

383,036

(218,760)

-

-

10 Finance costs

11 Income tax 11a Income tax expense i. Current tax expense

ii. Change in deferred taxes a. Origination and reversal of deferred taxes b. Changes in unrecognised temporary differences c. Recognition of previously unrecognized tax losses Income tax expense

-

-

5,803,802

998,459

The prima facie tax charge on the profit for the period is reconciled to the tax expense as follows: Accounting profit before tax

14,082,579

3,605,496

4,224,774

1,081,649

-

-

16,993

611,623

383,036 1,178,999

(694,813) -

5,803,802

998,459

At 1 January

1,217,219

-

Income tax expense for the period

5,803,802

998,459

-

-

Movement in deferred taxes

(383,036)

218,760

Under/over provision in prior periods

(400,794)

-

-

-

6,237,191

1,217,219

Tax on the profit for the period at 30% Difference in effective rate of equity accounted investees Non deductible items Non taxable items Changes in unrecognised temporary differences Under or over in prior period

11b Provision for income taxes payable

Income tax on comprehensive income

Income taxes paid during the period At 31 December

38

Trans Wonderland Limited

Trans Wonderland Limited Financial Statements For the Twelve Months Ended 31 December 2010

Notes to and forming part of the financial statements Trucks, vehicles and equipment

Furniture and fixtures

Land and buildins

EIP (Camp House)

Total

-

-

-

-

-

Additions

22,311,100

106,288

38,668

-

22,456,056

Disposals

(1,461,364)

-

-

-

(1,461,364)

20,849,736

106,288

38,668

-

20,994,692

20,849,736

106,288

38,668

28,535,528

237,844

146,600

12 Property, plant and equipment Cost 2009 As at 1 January 2009

As at 31 December 2010 Cost 2010 As at 1 January 2010 Additions Disposals

20,994,692 2,556,137

31,476,109

-

-

-

-

-

49,385,264

344,132

185,268

2,556,137

52,470,801

-

-

-

-

-

Charge for the period

3,242,053

10,507

3,492

-

3,256,052

Disposals

(237,740)

-

-

-

(237,740)

3,004,313

10,507

3,492

-

3,018,312

3,004,313

10,507

3,492

-

3,018,312

9,158,503

43,600

14,198

-

9,216,301

-

-

-

-

-

12,162,816

54,107

17,690

-

12,234,613

-

-

-

-

-

As at 31 December 2009

17,845,423

95,781

35,176

-

17,976,380

As at 31 December 2010

37,222,448

290,025

167,578

2,556,137

40,236,188

As at 31 December 2010 Depreciation 2009 As at 1 January 2009

As at 31 December 2010 Depreciation 2010 As at 1 January 2010 Charge for the period Disposals As at 31 December 2010 Carrying Amounts As at 1 January 2009

Leased plant and machinery The Company leases trucks and motor vehicles under a number of finance lease agreements. Some leases provide the Company with the option to purchase the equipment at a beneficial price. At 31 December 2010 the net carrying amount of leased plant and equipment of the Company was K 2,286,815 (2996: 3,563,614).

Annual Report 2010

39

Trans Wonderland Limited Financial Statements For the Twelve Months Ended 31 December 2010

Notes to and forming part of the financial statements 13 Deferred tax assets and liabilities

Deferred tax assets and deferred tax liabilities at 31 December 2009 are attributable to the items detailed in the tables below: Asset

Liability

Net

Leased assets

-

-

-

Inventories

-

-

-

Employee benefits

27,768

-

27,768

Provisions for doubtful debts

81,077

13,811

94,888

Other accruals

96,104

-

96,104

204,949

13,811

218,760

Net tax assets/liabilities

Deferred tax assets and deferred tax liabilities at 31 December 2010 are attributable to the items detailed in the tables below: Asset

Liability

Net

Leased assets

-

(686,045)

(686,045)

Inventories

-

-

-

Employee benefits

39,897

-

39,897

Provisions for doubtful debts

81,077

-

81,077

-

-

-

120,974

(686,045)

(565,071)

Other accruals Net tax assets/liabilities

2010

2009

793,350

243,800

793,350

243,800

Trade debtors

8,465,570

7,682,873

Less: Provision for doubtful debts

(270,256)

(270,256)

Other debtors and prepayments

6,015,783

1,750,612

14,211,097

9,163,229

14,211,097

9,163,229

14 Inventories Stock on hand Total 15 Trade and other receivables

Current Non-Current Total

40

-

-

14,211,097

9,163,229

Trans Wonderland Limited

Trans Wonderland Limited Financial Statements For the Twelve Months Ended 31 December 2010

16 Share capital

Notes to and forming part of the financial statements 2010

2009

1,080,000

-

623,240

1,080,000

1,703,240

1,080,000

Issued ordinary share capital Shares in issue at 1 January Shares issued during the period Shares in issue at 31 December

In accordance with the provisions of the Companies Act 1997 the share capital does not have a par value. All issued shares are fully paid.

In accordance with the provisions of the Companies Act 1997 the board of a company may issue shares as it thinks fit, accordingly there is no limit on the number of shares that may be issued.

The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company.

17 Loans and borrowings Current Loan from Oil Search Limited

2,830,826

2,433,031

Loan from financial institutions

7,372,413

3,762,735

10,203,239

6,195,766

5,683,337

8,066,671

Loan from finanical institutions

14,970,402

1,595,111

Total Non-current

20,653,739

9,661,782

9,671,740

3,795,107

Total Current Non-current Loan from Oil Search Limited

Repayments of non-current debt are scheduled as follows: More than one year, less than two years More than two years, less than three years

9,698,654

2,199,996

More than three years, less than four years

1,283,345

2,199,996

-

1,466,683

20,653,739

9,661,782

More than four years, less than five years

Annual Report 2010

41

Trans Wonderland Limited Financial Statements For the Twelve Months Ended 31 December 2010

Notes to and forming part of the financial statements

2010

2009

408,630

437,946

18 Lease Liabilities Current Non-current

-

408,630

408,630

846,576

408,630

437,946

More than one year, less than five years

-

408,630

More than five years

-

-

(21,917)

(86,595)

386,713

759,981

Trade creditors

2,823,787

4,945,508

Other creditors and accrued expenses

5,515,078

2,221,078

8,338,865

7,166,586

Total Finance leases Minimum future lease payments in respect of finance leases are scheduled as follows: Within one year

Less: future financing charges

19 Trade and other payables

20 Employee benefit plans Balance as at 1 January 2010

92,561

-

Provisions madee during the period

40,430

92,561

Provisions utilised during the period

-

Balance as at 31 December Current Non-current Total

132,991

92,561

132,991

92,561

-

-

132,991

92,561

21a Equity accounted investments: In 2010 Trans Wonderland Limited invested in 50% of the issued shares of Northern Logistics Group Limited, a company incorporated and domiciled in Papua New Guinea. At 31 December 2010, the investment was valued at K242,582 (2009: Nil).

Summary of unaudited financial information, not adjusted for the percentage ownership held by the Company: Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities

8,987,968 13,614 9,001,132 8,308,491 8,308,491

Income

8,090,222

Expense

7,397,131

Profit/Loss

42

693,091 Trans Wonderland Limited

Trans Wonderland Limited Financial Statements For the Twelve Months Ended 31 December 2010

Notes to and forming part of the financial statements

21b Loan to equity accounted investee:

During the twelve months ended 31 December 2010 Trans Wonderland Limited provided K200,000 in unsecured loans to Northern Logistics Group Limited for the purpose of meeting operating expenses.

2010

2009

22 Financial instruments 22a Credit risk The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was: Held-to-maturity investments

-

-

Trade receivables

8,465,570

7,682,873

Other debtors and prepayments

6,015,783

1,750,612

200,000

-

3,166,738

1,265,360

17,848,091

10,698,845

Loan to equity accounted investee Cash and cash equivalents Total

The maximum exposure to credit risk for loans and receivables at the reporting date by geographic region was: Papua New Guinea

17,848,091

10,698,845

17,848,091

10,698,845

Current

6,022,443

5,945,089

Due within 30 days

1,573,371

1,680,493

322,637

30,669

Total Impairment losses The aging of trade receivables at the reporting date was:

Due within 30 to 90 days Due in more than 90 days Total

547,118

26,622

8,465,569

7,682,873

The movement in the allowance for impairment in respect of loans and receivables was a follows: Balance as at 1 January Impairment recognised during the period Impairment reversed during the period Balance as at 31 December

Annual Report 2010

270,256

-

-

270,256

-

-

270,256

270,256

43

Trans Wonderland Limited Financial Statements For the Twelve Months Ended 31 December 2010

Notes to and forming part of the financial statements 22b Liquidity risk

The Company aims to prudently manage liquidity risk by maintaining sufficient cash and other liquid assets or the availability of funding through uncommitted credit facilities.The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting agreements: Non-derivative financial liabilities

Carrying Amount

Contracted cash flows

Less than one 1 - 2 years year

2 - 5 years

More than 5 years

Amounts at 31 December 2010 Secured loans Finance lease liabilities Trade and other payables Total

30,856,978

35,556,594

11,976,423

12,454,483

11,125,688

-

408,630

408,630

408,630

-

-

-

8,338,866

8,338,866

8,338,866

-

-

-

39,604,474

44,304,090

20,723,919

12,454,483

11,125,688

-

15,857,548

17,600,421

6,195,766

5,280,084

6,124,571

-

846,576

846,576

437,946

408,630

-

-

7,166,586

7,166,586

7,166,586

-

-

-

23,870,710

25,613,583

18,950,735

9,879,107

6,124,571

-

Amounts at 31 December 2010 Secured loans Finance lease liabilities Trade and other payables Total 22c Currency risk The Company has no exposure to foreign currency risk as all liabilities and assets are in kina and are payable and receivable in PNG kina.

2010

2009

22d Interest rate risk Profile: At the reporting date the interest rate profile of the Company’s interest-bearing financial instruments was: Fixed rate instruments Financial assets Financial liabilities Total

-

-

15,424,673

13,408,056

15,424,673

13,408,056

15,840,935

3,296,068

15,840,935

3,296,068

Variable rate instruments Financial liabilities Total

Fair value sensitivity analysis for fixed rate instruments The Company does not account for any fixed rate financial assets and liabilities at fair value through profit or loss, and the Company does not designate derivatives (interest rate swaps) as hedging instruments under a fair value hedge accounting model.

Therefore a change in interest rates at the reporting date would not affect profit or loss.

A change of 100 basis points in interest rates would have increased or decreased profit and loss account by K158,409 (2009:32,961)

44

Trans Wonderland Limited

Trans Wonderland Limited Financial Statements For the Twelve Months Ended 31 December 2010

Notes to and forming part of the financial statements

22e Fair value versus carrying values

The fair values of financial assets and liabilities, together with the carrying amounts shown in the balance sheet, are as follows: Carrying Amounts

Fair Values

2010 Receivables

2009

9,163,229

14,211,097

9,163,229

200,000

-

200,000

-

3,166,738

1,265,360

3,166,738

1,265,360

(30,856,978)

(15,857,548)

(30,856,978)

(15,847,548)

(8,338,866)

(7,166,586)

(8,338,866)

(7,166,586)

(21,618,009)

(12,595,545)

(21,618,009)

(12,585,545)

Cash and cash equivalents Trade and other payables Total

2010

14,211,097

Loans to equity account investee Loan liabilties

2009

23 Commitments Capital commitments not otherwise provided for in the financial statements as at 31 December 2009 are as follows: At balance date the Capital Commitment was nil.

24 Contingencies At balance date, there were no litigations against the Company.

25 Related party transactions The Managing Director fee for Mr Larry Andagali (MD) is directly paid to LLA investments Limited. The total amount paid during the twelve months ended 31 December 2010 including expenses reimbursement was K1,416,824 (six months ended 31 December 2009: 850,000). Remuneration paid to key management personnel during the twelve months ended 31 December 2010 was K4,861,900 (six months ended 31 December 2009: 1,923,397).

The Company enters into hiring transactions with its minor shareholders and other related companies in the normal course of business. These transactions are on normal commercial terms and conditions. Following are details of these transactions during the twelve months ended 31 December 2010: Name of related party/ Nature of relationship

Nature of transactions

NLG Limited (Equity accounted investee)

Transport service income

Total

Transactions during Balance outstanding the year as at 31 Dec 2010 2,431,460

1,469,633

2,431,460

1,469,633

26 Subsequent Events There were no events subsequent to balance sheet date that require either a disclosure by way of note or adjustment to the financial statements.

Annual Report 2010

45

Trans Wonderland Limited Financial Statements For the Twelve Months Ended 31 December 2010

Notes to and forming part of the financial statements

2010

2009

27 Notes to the Statement of Cash Flows 27a Reconciliation of cash

For the purpose of the Statement of Cash Flows, cash includes cash on hand and at bank and short-term deposits at call, net of outstanding bank overdrafts. Cash as at the end of the financial period as shown in the Statement of Cash Flows is reconciled to the related items in the balance sheet as follows: Cash and bank balances Total

3,166,738

1,265,360

3,166,738

1,265,360

The Company’s exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities are disclosed in note 27.

27b Reconciliation of operating profit after income tax to net cash provided by operating activities Operating profit (loss) after income tax

8,521,358

2,607,037

-

1,223,624

Depreciation

9,216,298

3,256,053

Share of profit from equity accounted investee

(242.582)

-

-

998,459

17,495,074

8,085,173

(Increase) decrease in inventories

(549,730)

(243,800)

(Increase) decrease in trade debtors

(782,697)

(7,682,873)

(Increase) decrease in prepayments

(4,265,171)

(1,750,602)

Increase (decrease) in trade creditors

(1,121,721)

5,238,981

Increase (decrease) in accruals

2,294,080

2,221,076

Increase (decrease) in tax provisions

5,803,903

1,217,219

40,430

362,817

18,914,168

7,447,991

Add (deduct) items classified as investing/financing activities: (Profit) loss on sale of non-current assets Add (deduct) non-cash items:

Income tax expense Net cash provided by operating activities before changes in assets and liabilities Changes in assets and liabilities

Increase (decrease) in provisions Net cash provided by operating activities

46

Trans Wonderland Limited

Celebrating diversity in our workforce, in our business dealings, and in the communities in which we live and work.

Annual Report 2010

47

48

Trans Wonderland Limited

Annual Report 2010

49