11 June 2003

Mr Paul Little Managing Director TOLL Group Level 8 380 St Kilda Road MELBOURNE VIC 3004 AUSTRALIA

Dear Mr Little

Thank you for your letter of 10 June 2003, which I received this morning, regarding the Tranz Rail transaction.

I am pleased that you share our view of building a better Tranz Rail for customers and would like to progress a constructive relationship with the Government.

Certainly your reported comments did not assist to that end, as they seemed to run directly counter to the result of the discussion that occurred last week.

The Government has now committed to a course of action with respect to Tranz Rail which achieves a large part of its key objectives. I do not see any realistic possibility of us backing away from that course.

However, the Government would be more than willing to engage in discussions about the shape of Tranz Rail post the shareholders approval of our proposal should that occur. There may be some point in a preliminary discussion with officials prior to the shareholders meeting about Toll’s view in that regard although I believe it would be more appropriate to defer any discussions until after such a meeting.

Such discussions would obviously involve any future role for Toll in relation to Tranz Rail’s ownership, the outlook for increasing rail freight tonnages and other relevant matters, and the position the Government would take as a shareholder with regard to any Toll proposals. As I have made clear, we do not rule out exiting from our own shareholding.

We would, of course, reserve the right to talk to other potentially interested players with respect to Tranz Rail.

It is unfortunate if there has been a misunderstanding but that has now created a new reality. The Government’s objective has been to gain control of the track, ensure future upgrading of the track within reasonable fiscal constraints, and seek a new direction for Tranz Rail. If post the shareholder meeting Toll sees itself able to play a vital role in that last element I would be very happy to meet.

Yours sincerely

Hon Dr Michael Cullen Deputy Prime Minister and Minister of Finance

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