TASMAN.ul Tasman Farms Ltd

Chairman's report

Directors are pleased to announce the result for the Tasman Farms Limited Group for the full year ended 31st May 2007. This result reports a sound performance from both the dairy and non-dairy operations in a challenging season. The drought, currency movements, lower milk prices and lower stock values led to a profit reduction from last year.

Group Result

Tasman Farms Limited (TasFarms) generated a net surplus after tax and minority interests of $0.54M. This result reflects the consolidation of the Group’s North West Tasmanian farming operations, all of which are owned by the 97.93% subsidiary, The Van Diemen’s Land Company (VDL). While the result was down on the previous year’s surplus of $2.95M, the number of beef cattle carried have increased significantly.

The deterioration in the result was mainly due to a reduction in sheep and beef cattle year end values compared with the previous year when a significant increase in dairy cow values was reported. The lower year end stock values were attributed to the widespread effects of the mainland Australian drought notwithstanding that these drought conditions have since broken and international beef and milk commodity prices continue at unprecedented levels.

Operating earnings before interest and tax was a surplus of $4.00M down from a surplus of $6.20M for the year ended 31st May 2006. While production was down 7.5% on the previous year to 3.50M kilograms of milk solids, at the half year production was up 10.3% on the previous corresponding period. This reflects not only the strong early season milk flows compared with previous years, but also the severity of the summer/autumn drought that resulted in the lowest ever autumn milk flows from the Company’s Tasmanian operations.

According to Dairy Australia, Australian production to 31st May 2007 was down 4.8% on the same period in the previous year and down 5.6% on the 2004/05 season. This does not acknowledge the considerable increase in feed and water charges incurred by many mainland Australian dairy farmers which resulted in a significant increase in their overhead costs. Climatic conditions in North West Tasmania were favourable through until the end of November 2006. Rainfall was approximately 65% of normal levels increasing early season pasture growth rates and feed utilisation. However, the well below average early season rain led into one of the driest summer/autumn periods since Tasmanian records began.

The farmgate milk price for the year ended 31st May 2007 was AUD$4.11 per kilogram of milk solids, down 2.6% from $AUD4.22 per kilogram of milk solids in the 2005/06 season. The TasFarms dairy units maintained control of farm expenditure despite the drier conditions. This was assisted by three further dairy units operating under the Group’s variable Sharefarming agreement for the 2006/07 season. This is testimony to the Company’s career progression structures where 22 of the Group’s 23 dairy units are now operated under Sharefarming agreements.

The Woolnorth sheep, beef and dairy grazing operations performed well in a challenging season. While the mainland Australian drought enabled the beef cattle operation to continue to expand, the drought conditions reduced beef slaughter prices, notwithstanding the continued strength of manufacturing beef prices in the United States. Bull slaughter weights were marginally better than the previous year offsetting the slight reduction in Australian slaughter prices. The sheep operation continues to be phased out and the opportunities presented by the mainland drought have sped up this process over the past year.

While the non-dairy operations generally performed well, the financial contribution was adversely affected at year end by a reduction in sheep, beef cow and heifer values. This reduction is directly attributable to the mainland drought and is expected to quickly reverse in the next year due to the continued strength of international beef prices.

Net Tangible Assets

After accounting for the performance of VDL for the year ended 31st May 2007, and the 5.7% appreciation of the New Zealand dollar relative to the Australian dollar since 31st May 2006, the net tangible asset value at 31st May 2007 was NZ$72.18M, or $1.08 per share. At 31st May 2007, Tasmanian farms were not revalued in line with the Group’s valuation policy. The farms were previously valued at 31st May 2006. Since the last valuations, international milk commodity prices, and the recently announced Tasmanian farmgate milk price for the 2007/08 season have risen significantly.

While at 31st May 2007, Directors believed the mainland drought had masked any appreciation in Tasmanian dairy farm values, it is likely that the extremely positive outlook will reflect in upward pressure on Tasmanian farm values over the next year.

Outlook

Since the start of the new financial year, weather conditions throughout June and July 2007 have been wetter and slightly colder than average enabling North West Tasmania to continue to recover from the prolonged autumn drought. The 2007 calving is well advanced and early season milk flows are encouraging and slightly up on last year. International dairy commodity prices are continuing to exceed all analysts projections and are maintaining the historical highs as demonstrated by the following table:

$US per Tonne (FAS)

June 2006

January 2007

June 2007

% Increase

since June

2006

Butter 1,610 2,050 2,750 71%

Casein 6,350 7,250 11,000 73%

Cheese (cheddar) 2,625 2,900 3,950 50%

SMP 2,070 3,100 4,900 137%

WMP 2,070 3,050 4,650 125%

The above prices are indicative prices for product sold during the month detailed.

In practice many sales are made at prices outside these ranges. Source: Agrifax Dairy Report

As detailed by the above table, the strength of skim and whole milk powders continues to lead other dairy commodity prices. To date these unprecedented prices appear to have had little or no effect on consumer demand largely due to the very low international stocks. In Europe the continuing high market prices have resulted in limited sales into intervention and international sales of product have been able to take place without any export subsidies.

In the United States, the Department of Agriculture has indicated that June milk production increased 1% on the previous year. This has lifted US milk production for the first half of the year to 41.2 billion litres, 424 million litres above the corresponding period last year. According to Dairy Australia, easing US corn and soybean futures pricing and high farmgate milk prices may see a bounce in US milk production as the season progresses.

The unprecedented rise in international dairy commodity prices continues to be attributed to increased bio fuel production, particularly by the United States, Brazil and Europe. As this bio fuel revolution continues TasFarms will be closely monitoring US milk production levels to provide an indication of when increased international milk production is likely to respond to the recent unprecedented prices. The slow production response to date indicates that strong milk prices could continue for at least another one to two years.

The Australian and New Zealand currencies continue to strengthen against the US dollar as detailed by the following table:

30th June 2006

31st January 2007

30th June 2007

% increase since

30th June 2006

NZD 0.6044 0.6893 0.7691 27%

AUD 0.7386 0.7729 0.8463 15%

SOURCE: Westpac Morning Report

In light of these recent international developments, TasFarms’ major milk processor in Tasmania, Fonterra Australia (Bonlac Supply Company Limited) announced its opening price for the 2007/08 season at approximately AUD$5.10 per kilogram of milk solids, up 44% from AUD$3.53 per kilogram of milk solids announced in July 2006. The Fonterra Australia opening price represents a committed level which may increase further with step-ups throughout the season.

Other Australian milk processors, Murray Goulburn and Warrnambool Cheese & Butter Factory Company Holdings Limited (WCBF) have also recently announced similar increases in their opening prices for the upcoming season. Australian milk production continues to be effected by last year’s drought. It is likely that during the 2007/08 season there will be a small further reduction due to reduced supplementary feed stocks and lower numbers of replacement dairy cattle as farms recover from the devastation.

Given the magnitude of the drought it was surprising that Australian milk production to 31st May 2007 was down by only 4.8% on the previous year and that South Australia and Tasmania States reported production gains. This demonstrates the extra production achieved from feeding large quantities of grain and supplements during the drought which has masked the true financial impact. According to Dairy Australia this increase in supplementary feeding over the drought has resulted in a significant increase in farm debt levels for most Australian dairy farmers.

TasFarms’ did not incur any increase in dairy farm feed expenditure, but rather the full effect of the drought was reflected in autumn milk flows. Accordingly, the TasFarms dairy units are now very well placed to take advantage of the increased milk prices under its lower input feeding systems. Production in the States of Victoria, Queensland and Western Australian may continue to be adversely affected until after the upcoming wheat harvest. The United States manufacturing beef prices have continued to remain strong over the 2006/07 season as the national dairy herd continues to build. This is detailed by the following table:

30th June 2006

31st January 2007

30th June 2007

% increase

since

30th June 2006

US cents/Pounds 130 136 138 6%

Source: Agrifax

While the US manufacturing beef prices remain firm, the continued strength of the Australian currency would be expected to bring about a small drop in beef prices for the upcoming year. However, the drop in the Australian cattle herd due to last year’s drought is likely to result in strong competition amongst beef companies.

Summary

In summary, the Tasmanian operations of TasFarms conducted by VDL remain profitable despite an extremely challenging year effecting autumn milk flows, slaughter prices and closing stock values. This solid result is reported as the Australian dairy industry comes under further pressure to maintain milk flows especially in Northern Victoria, Queensland and Western Australian. With the expansion of beef and dairy cow numbers over the past year combined with the extremely favourable milk price outlook, TasFarms is well placed while the high international commodity prices continue.

(This document and further information is available on the website: www.unlisted.co.nz).

E O Sullivan

Chairman

14th August 2007

v2 Report - Additional Information Supplement TASMAN.ul Tasman Farms Ltd	IPOs and Investment Opportunities
Press releases
Chairman's report Directors are pleased to announce the result for the Tasman Farms Limited Group for the full year ended 31st May 2007. This result reports a sound performance from both the dairy and non-dairy operations in a challenging season. The drought, currency movements, lower milk prices and lower stock values led to a profit reduction from last year. Group Result Tasman Farms Limited (TasFarms) generated a net surplus after tax and minority interests of $0.54M. This result reflects the consolidation of the Group’s North West Tasmanian farming operations, all of which are owned by the 97.93% subsidiary, The Van Diemen’s Land Company (VDL). While the result was down on the previous year’s surplus of $2.95M, the number of beef cattle carried have increased significantly. The deterioration in the result was mainly due to a reduction in sheep and beef cattle year end values compared with the previous year when a significant increase in dairy cow values was reported. The lower year end stock values were attributed to the widespread effects of the mainland Australian drought notwithstanding that these drought conditions have since broken and international beef and milk commodity prices continue at unprecedented levels. Operating earnings before interest and tax was a surplus of $4.00M down from a surplus of $6.20M for the year ended 31st May 2006. While production was down 7.5% on the previous year to 3.50M kilograms of milk solids, at the half year production was up 10.3% on the previous corresponding period. This reflects not only the strong early season milk flows compared with previous years, but also the severity of the summer/autumn drought that resulted in the lowest ever autumn milk flows from the Company’s Tasmanian operations. According to Dairy Australia, Australian production to 31st May 2007 was down 4.8% on the same period in the previous year and down 5.6% on the 2004/05 season. This does not acknowledge the considerable increase in feed and water charges incurred by many mainland Australian dairy farmers which resulted in a significant increase in their overhead costs. Climatic conditions in North West Tasmania were favourable through until the end of November 2006. Rainfall was approximately 65% of normal levels increasing early season pasture growth rates and feed utilisation. However, the well below average early season rain led into one of the driest summer/autumn periods since Tasmanian records began. The farmgate milk price for the year ended 31st May 2007 was AUD$4.11 per kilogram of milk solids, down 2.6% from $AUD4.22 per kilogram of milk solids in the 2005/06 season. The TasFarms dairy units maintained control of farm expenditure despite the drier conditions. This was assisted by three further dairy units operating under the Group’s variable Sharefarming agreement for the 2006/07 season. This is testimony to the Company’s career progression structures where 22 of the Group’s 23 dairy units are now operated under Sharefarming agreements. The Woolnorth sheep, beef and dairy grazing operations performed well in a challenging season. While the mainland Australian drought enabled the beef cattle operation to continue to expand, the drought conditions reduced beef slaughter prices, notwithstanding the continued strength of manufacturing beef prices in the United States. Bull slaughter weights were marginally better than the previous year offsetting the slight reduction in Australian slaughter prices. The sheep operation continues to be phased out and the opportunities presented by the mainland drought have sped up this process over the past year. While the non-dairy operations generally performed well, the financial contribution was adversely affected at year end by a reduction in sheep, beef cow and heifer values. This reduction is directly attributable to the mainland drought and is expected to quickly reverse in the next year due to the continued strength of international beef prices. Net Tangible Assets After accounting for the performance of VDL for the year ended 31st May 2007, and the 5.7% appreciation of the New Zealand dollar relative to the Australian dollar since 31st May 2006, the net tangible asset value at 31st May 2007 was NZ$72.18M, or $1.08 per share. At 31st May 2007, Tasmanian farms were not revalued in line with the Group’s valuation policy. The farms were previously valued at 31st May 2006. Since the last valuations, international milk commodity prices, and the recently announced Tasmanian farmgate milk price for the 2007/08 season have risen significantly. While at 31st May 2007, Directors believed the mainland drought had masked any appreciation in Tasmanian dairy farm values, it is likely that the extremely positive outlook will reflect in upward pressure on Tasmanian farm values over the next year. Outlook Since the start of the new financial year, weather conditions throughout June and July 2007 have been wetter and slightly colder than average enabling North West Tasmania to continue to recover from the prolonged autumn drought. The 2007 calving is well advanced and early season milk flows are encouraging and slightly up on last year. International dairy commodity prices are continuing to exceed all analysts projections and are maintaining the historical highs as demonstrated by the following table: $US per Tonne (FAS) June 2006 January 2007 June 2007 % Increase since June 2006 Butter 1,610 2,050 2,750 71% Casein 6,350 7,250 11,000 73% Cheese (cheddar) 2,625 2,900 3,950 50% SMP 2,070 3,100 4,900 137% WMP 2,070 3,050 4,650 125% The above prices are indicative prices for product sold during the month detailed. In practice many sales are made at prices outside these ranges. Source: Agrifax Dairy Report As detailed by the above table, the strength of skim and whole milk powders continues to lead other dairy commodity prices. To date these unprecedented prices appear to have had little or no effect on consumer demand largely due to the very low international stocks. In Europe the continuing high market prices have resulted in limited sales into intervention and international sales of product have been able to take place without any export subsidies. In the United States, the Department of Agriculture has indicated that June milk production increased 1% on the previous year. This has lifted US milk production for the first half of the year to 41.2 billion litres, 424 million litres above the corresponding period last year. According to Dairy Australia, easing US corn and soybean futures pricing and high farmgate milk prices may see a bounce in US milk production as the season progresses. The unprecedented rise in international dairy commodity prices continues to be attributed to increased bio fuel production, particularly by the United States, Brazil and Europe. As this bio fuel revolution continues TasFarms will be closely monitoring US milk production levels to provide an indication of when increased international milk production is likely to respond to the recent unprecedented prices. The slow production response to date indicates that strong milk prices could continue for at least another one to two years. The Australian and New Zealand currencies continue to strengthen against the US dollar as detailed by the following table: 30th June 2006 31st January 2007 30th June 2007 % increase since 30th June 2006 NZD 0.6044 0.6893 0.7691 27% AUD 0.7386 0.7729 0.8463 15% SOURCE: Westpac Morning Report In light of these recent international developments, TasFarms’ major milk processor in Tasmania, Fonterra Australia (Bonlac Supply Company Limited) announced its opening price for the 2007/08 season at approximately AUD$5.10 per kilogram of milk solids, up 44% from AUD$3.53 per kilogram of milk solids announced in July 2006. The Fonterra Australia opening price represents a committed level which may increase further with step-ups throughout the season. Other Australian milk processors, Murray Goulburn and Warrnambool Cheese & Butter Factory Company Holdings Limited (WCBF) have also recently announced similar increases in their opening prices for the upcoming season. Australian milk production continues to be effected by last year’s drought. It is likely that during the 2007/08 season there will be a small further reduction due to reduced supplementary feed stocks and lower numbers of replacement dairy cattle as farms recover from the devastation. Given the magnitude of the drought it was surprising that Australian milk production to 31st May 2007 was down by only 4.8% on the previous year and that South Australia and Tasmania States reported production gains. This demonstrates the extra production achieved from feeding large quantities of grain and supplements during the drought which has masked the true financial impact. According to Dairy Australia this increase in supplementary feeding over the drought has resulted in a significant increase in farm debt levels for most Australian dairy farmers. TasFarms’ did not incur any increase in dairy farm feed expenditure, but rather the full effect of the drought was reflected in autumn milk flows. Accordingly, the TasFarms dairy units are now very well placed to take advantage of the increased milk prices under its lower input feeding systems. Production in the States of Victoria, Queensland and Western Australian may continue to be adversely affected until after the upcoming wheat harvest. The United States manufacturing beef prices have continued to remain strong over the 2006/07 season as the national dairy herd continues to build. This is detailed by the following table: 30th June 2006 31st January 2007 30th June 2007 % increase since 30th June 2006 US cents/Pounds 130 136 138 6% Source: Agrifax While the US manufacturing beef prices remain firm, the continued strength of the Australian currency would be expected to bring about a small drop in beef prices for the upcoming year. However, the drop in the Australian cattle herd due to last year’s drought is likely to result in strong competition amongst beef companies. Summary In summary, the Tasmanian operations of TasFarms conducted by VDL remain profitable despite an extremely challenging year effecting autumn milk flows, slaughter prices and closing stock values. This solid result is reported as the Australian dairy industry comes under further pressure to maintain milk flows especially in Northern Victoria, Queensland and Western Australian. With the expansion of beef and dairy cow numbers over the past year combined with the extremely favourable milk price outlook, TasFarms is well placed while the high international commodity prices continue. (This document and further information is available on the website: www.unlisted.co.nz). E O Sullivan Chairman 14th August 2007
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